PRELIMINARY COPIES
BIOCONTROL TECHNOLOGY, INC.
300 Indian Springs Road
Indiana, PA 15701
Telephone 412-349-1811
NOTICE OF 1996 SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 11, 1996
The Special Meeting (the "Special Meeting") of Stockholders of
Biocontrol Technology, Inc., a Pennsylvania corporation (the
"Company"), will be held at the Westin William Penn Hotel,
William Penn Way, Pittsburgh, Pennsylvania, on April 11, 1996 at
(9:00 a.m., local time), for the following purpose:
1. To amend the Company's Articles of Incorporation,
as amended, to increase the number of authorized
shares to 60,000,000, as set forth in the Proxy
Statement.
By Order of the Board of Directors
___________________________________
/s/ David E. Staudenmaier, Secretary
Date: March 11, 1996
Those stockholders who are unable to attend the Special Meeting
in person are respectfully urged to indicate their choices,
execute and return the enclosed proxy card at their earliest
convenience to Proxy Tabulation Dept., Chemical Mellon
Shareholder Services, LLC, 450 West 33rd Street, 15th Floor, New
York, New York 10001. Promptness in returning the enclosed proxy
card will be appreciated. Proxies must be returned no later than
April 9, 1996. Proxies may be revoked by the Stockholder before
it is voted at the Special Meeting by either: written notice to
the Secretary, by submission of a Proxy bearing a later date, or
by attending the Special Meeting and voting in person.
<PAGE>
BIOCONTROL TECHNOLOGY, INC.
The approximate mailing date of this Proxy Statement
is March 11, 1996
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
April 11, 1996
The accompanying proxy is furnished by Biocontrol Technology, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors on all matters and may be revoked by the Shareholder at any time
before it is voted by giving written notice to the Secretary of the Company or
by executing and delivering a proxy with a later date. The expense of this
solicitation is to be borne by the Company, and the Company will reimburse
persons holding stock in their name or in the names of their nominees for the
expenses incurred in sending proxies and proxy materials to their principals.
The Company had outstanding *________ shares of common stock, par value $.10
per share, as of February 5, 1996, the date for determining the security
holders of record entitled to vote at the meeting (the "Record Date"). Each
share of common stock is entitled to one vote in all matters brought before
the Shareholders, without cumulative voting. The Company had outstanding
3,790 shares of Series 1 convertible preferred stock, par value $10 per share,
as of the Record Date. Holders of the shares of convertible preferred stock
will not be entitled to vote in the matters set forth in this Proxy Statement.
<PAGE>
DESCRIPTION OF SECURITIES
BICO's authorized capital currently consists of 40,000,000 shares of common
stock, par value $.10 per share and 500,000 shares of cumulative preferred
stock, par value $10.00 per share. As of December 31, 1995, there were
37,021,118 shares of common stock and 3,790 shares of preferred stock
outstanding.
Preferred Stock
The Articles of Incorporation of BICO authorize the issuance of a maximum of
500,000 shares of non-voting cumulative preferred stock, and authorize the
Board of Directors of BICO to divide such class of cumulative preferred stock
into series and to fix and determine the relative rights and preferences of
the shares. (This preferred stock was sold to subscribers pursuant to a
private placement memorandum issued on March 15, 1985.) The preferred stock
does not earn or accrue any dividend. As of December 31, 1995 and February
29, 1996, there were 3,790 shares of preferred stock outstanding.
Common Stock
All outstanding shares of the Company's common stock are fully paid and
nonassessable. All shares of common stock to be received by holders will be
fully paid and nonassessable. All the shares of common stock will be equal to
each other with respect to liquidation rights and dividend rights and there
are no preemptive rights to purchase any additional shares of common stock.
Holders of common stock are entitled to one vote per share on all matters
submitted to a vote of shareholders, but are not entitled to cumulate their
votes in the election of directors. Accordingly, the holders of over 50% of
the outstanding common stock voting for the election of directors, could elect
the entire slate of the Board of Directors of BICO, and the holders of the
remaining common stock would not be able to elect any member to the Board of
Directors. As of February 29, 1996, there were *___________ shares of common
stock outstanding.
In the event of liquidation or dissolution of BICO, holders of the common
stock are entitled to receive on a pro rata basis all assets of BICO remaining
after satisfaction of all liabilities including liquidation preferences
granted to holders of the preferred stock of BICO.
Dividends
The Company has not paid cash dividends on its common stock or preferred stock
(with the exception of a cash dividend on its Preferred Stock in 1983) since
its inception, and cash dividends are not presently contemplated at any time
in the foreseeable future. In March 1988, the Company distributed 9,033
shares of common stock as a dividend to holders of its preferred stock, at the
rate of one share of common stock for every ten shares of preferred stock
held. The Company anticipates that any excess funds generated from operations
in the foreseeable future will be used for working capital and for investment
in research and new product development, rather than to pay dividends.
In accordance with the Company's Articles of Incorporation, cash dividends are
restricted under certain circumstances. Holders of common stock are entitled
to cash dividends only when and if declared by the Board of Directors out of
funds legally available for payment thereof. Any such dividends are subject
to the prior right of holders of the Company's preferred stock to receive any
accrued but unpaid dividends. Further, common stock dividends may be paid
only to the extent the net assets of BICO exceed the liquidation preference of
any outstanding preferred stock.
<PAGE>
Employment Agreement Provisions Related to Changes in Control
BICO has entered into agreements (the "Agreements") with Fred E. Cooper, David
L. Purdy, Anthony J. Feola, Glenn Keeling, and two non-executive officer
employees. The Agreements provide that in the event of a "change of control"
of BICO, BICO is required to issue to Mr. Cooper and Mr. Purdy shares of
common stock equal to five percent (5%), to issue to Mr. Feola four percent
(4%), to issue Mr. Keeling three percent (3%), and to issue the two non-
executive officer employees two percent (2%) each of the outstanding shares of
common stock of the Company immediately after the change in control. In
general, a "change of control" is deemed to occur for purposes of the
Agreement: (i) when 20% or more of BICO's outstanding voting stock is acquired
by any person, (ii) when one-third (1/3) or more of BICO's directors are not
Continuing Directors (as defined in the Agreements), or (iii) when a
controlling influence over the management or policies of BICO is exercised by
any person or by persons acting as a group within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Warrants
As of December 31, 1995 and February 29, 1996, there were outstanding
warrants to purchase 2,415,982 and *_________________ , respectively, shares
of the Company's common stock at exercise prices of between $0.25 and $4.03
per share. These warrants are held by members of the Company's Scientific
Advisory Board, certain employees, officers, directors, loan guarantors,
lenders and consultants.
The holders of warrants are not entitled to vote, to receive dividends or to
exercise any of the rights of the holders of shares of common stock for any
purpose until such warrants have been duly exercised and payment of the
exercise price has been made.
The following table sets forth a summary of the warrants and options
exercisable at December 31, 1995:
Expir- Exercise Number of
ation Price Shares
Warrants to directors, officers, 10/96 .50 350,000
and employees for meritorious 07/97 3.50 25,000
service, employment contracts, 01/98 3.20 25,000
and personal guarantees on 02/98 3.00 25,000
Company indebtedness 04/98 2.125 139,000
04/98 .25 279,500
05/98 .25 1,100,000
06/98 .33 80,000
11/98 .25 100,000
08/99 2.75 85,000
09/99 2.75 20,000
01/00 1.69-2.13 6,000
Warrants issued to individuals 06/98 .33 100,000
for personal guarantees on
Company loan
Warrants issued to consultants
and medical advisers 05/96 .28 20,000
09/96 .45 1,482
<PAGE>
02/98 3.00 10,000
09/98 2.25 10,000
04/99 2.00 25,000
06/00 3.31 5,000
10/00 4.03 10,000
________
TOTAL 2,415,982
Voting Procedures
Each share of common stock outstanding as of the Record Date is entitled to
one vote on each matter submitted to the stockholders for a vote at the
Special Meeting. The matter submitted to a vote at the meeting will be
decided by the vote of a majority of all votes cast in person or by proxy at
the meeting. Abstentions will be treated as shares present and entitled to
vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the stockholders. If a broker or other record holder or nominee indicates on
a proxy that it does not have authority as to certain shares to vote on a
particular matter (commonly referred to as "broker non-votes"), those shares
will not be considered as present and entitled to vote with respect to that
matter.
Transfer Agent
Chemical-Mellon Shareholder Services, LLC in New York, New York acts as the
Company's Registrar and Transfer Agent for its common and preferred stock.
The Company acts as its own warrant transfer agent.
DIRECTORS AND EXECUTIVE OFFICERS
Director
Name Age Since Position
David L. Purdy 67 1972 President, Chairman of
the Board, Treasurer, Director
Fred E. Cooper 50 1989 Chief Executive Officer,
Executive Vice President,
Director
Anthony J. Feola 48 1990 Senior Vice President,
Director
Glenn Keeling 45 1991 Vice President, Director
Raymond F. Carr 69 1993 Director
______________________________
DAVID L. PURDY, 67, is President, Chairman of the Board, Treasurer and a
director of the Company. Mr. Purdy has been a director and Chairman of the
Board since its organization in 1972 and is considered the organizer and
founder of the Company; he devotes 60% of his time to the business of the
Company, and 40% of his time to Diasense. He has also served as President of
the Company from 1972 through December 1990, with the exception of five months
in 1980, when he served as Chairman and full-time Program Director of the
<PAGE>
Company's implantable medicine dispensing device program with St. Jude
Medical, Inc., and from October 1, 1987 through July 15, 1988, when he served
as Chairman and Director of Research and Development for the Company. Prior
to founding the Company, he was employed by various companies in the medical
technology field, including Arco Medical, Inc. Mr. Purdy is also an officer
and director of Diasense, Nu-Insulin and Coraflex, and a director of Petrol
Rem and IDT.
FRED E. COOPER, 50, is the Chief Executive Officer, Executive Vice President
and a director of the Company; he devotes approximately 60% of his time to the
business of the Company, and 40% to Diasense. Prior to joining the Company,
Mr. Cooper co-founded Equitable Financial Management, Inc. of Pittsburgh, PA,
a company in which he served as Executive Vice President until his resignation
and divestiture of ownership in August 1990. In 1972, Mr. Cooper founded
Cooper Leasing Corp., Pittsburgh, Pennsylvania, a company specializing in
equipment and venture financing. Mr. Cooper was appointed Chief Executive
Officer in January 1990. He is also an officer and director of Diasense, Nu-
Insulin and Barnacle Ban, and a director of Petrol Rem, Coraflex and IDT.
ANTHONY J. FEOLA, 48, rejoined the Company as its Senior Vice President in
April, 1994, after serving as Diasense's Vice President of Marketing and Sales
from January, 1992 until April, 1994. Prior to January, 1992, he was the
Company's Vice President of Marketing and Sales. Prior to joining the Company
in November 1989, Mr. Feola was Vice President and Chief Operating Officer
with Gateway Broadcasting in Pittsburgh in 1989, and National Sales Manager
for Westinghouse Corporation, also in Pittsburgh, from 1980 until 1989. He
was elected a director of the Company in February 1990, and also serves as a
director of Diasense, Coraflex and Barnacle Ban. He is also the President,
CEO and a director of Petrol Rem, and the Secretary/Treasurer and a director
of IDT.
GLENN KEELING, 45, became a member of the Board of Directors in April 1991.
Mr. Keeling currently is a full-time employee of BICO in the position of Vice
President of Marketing; his primary responsibilities during 1994 and 1995 have
been the management and operation of IDT's Whole-Body Extracorporeal
Hyperthermia project. From 1976 through 1991, he was a Vice President in
charge of new business development at Equitable Financial Management, Inc., a
regional equipment lessor specializing in export leasing and leasing of income
producing equipment. His responsibilities included initial contacts with
banks and investment firms to open new lines of business referrals in
connection with financing large equipment transactions. He is also President
and a director of IDT.
RAYMOND F. CARR, 69, was appointed to the Company's Board of Directors on
April 19, 1993. Mr. Carr is a retired bank officer. He was employed by
various banks from 1951 to 1960 which merged with PNC Bank and was an officer
at Northside Deposit Bank from 1960 until his retirement in 1985.
Pursuant to the disclosure requirements of Item 405 of Regulation S-K
regarding timely filings required by Section 16(a) of the Securities and
Exchange Act, the Company represents the following. Based solely on its
review of copies of forms received and written representations from certain
reporting persons, the Company believes that all of its officers, directors
and greater than ten percent beneficial owners complied with applicable filing
requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and its affiliates share common officers and directors. In
addition, BICO and Diasense have entered into several intercompany agreements
including a Purchase Agreement, a Research and Development Agreement and a
Manufacturing Agreement, which are summarized herein. Management believes
that it was in the best interest of the Company to enter into such agreements
and that the transactions were based upon terms as fair as those which may
have been available in comparable transactions with third parties. However,
no unaffiliated third party was retained to determine independently the
fairness of such transactions. The Company's policy concerning related party
transactions requires the approval of a majority of the disinterested
directors of both the corporations involved, if applicable.
<PAGE>
In the event that Diasense is combined with BICO, as discussed herein, the
related transactions set forth herein would be materially effected. For
example, separate employment agreements would be unnecessary, as would the
"Intercompany Agreements" described herein. Because the transaction is in a
preliminary stage, and the terms of the transaction have yet to be negotiated
or approved by the shareholders of either corporation, this discussion is set
forth to reflect the relationships which exist as of the date of this
document, when BICO and Diasense remained two different corporations.
Employment Relationships
The Board of Directors of the Company approved employment agreements on
November 1, 1994 for its officers, David L. Purdy, Fred E. Cooper, Anthony J.
Feola and Glenn Keeling. According to the terms of the agreements, Messrs.
Purdy and Cooper receive annual salaries of $250,000 each for initial
five-year terms, renewable for successive three-year terms. Mr. Feola will
receive an annual salary of $200,000 for the initial five-year term, which is
renewable for successive two-year terms, and Mr. Keeling will receive an
annual salary of $150,000 for the initial five-year term, which is renewable
for successive two-year terms (See "Employment Agreements").
David L. Purdy, President, Treasurer and a director of the Company, is a
director of Diasense, Coraflex, IDT, Petrol Rem, and Nu-Insulin. He is also
the chairman and Chief Scientist of Diasense, the President and Treasurer of
Coraflex and the Chairman and Secretary of Nu-Insulin. Mr. Purdy devotes 60%
of his time to BICO, and 40% to Diasense. In addition to his salary paid by
BICO, Mr. Purdy was paid $100,000 by Diasense in 1995. Fred E. Cooper, Chief
Executive Officer, Executive Vice President and a director of the Company, is
a director of Diasense, Coraflex, IDT, Petrol Rem, Nu-Insulin, and Barnacle
Ban. He is also the President of Diasense, Nu-Insulin, Coraflex and Barnacle
Ban. Mr. Cooper devotes approximately 60% of his time to BICO and 40% to
Diasense. In addition to his salary and bonus paid by BICO, he was paid
$150,000 by Diasense in 1995. Anthony J. Feola, Senior Vice President and a
director of the Company, is also a director of Diasense, Coraflex, IDT, Petrol
Rem, and Barnacle Ban. He is also the Secretary/Treasurer of IDT, and the
President and CEO of Petrol Rem. Glenn Keeling, Vice President and a
director of the Company, was employed on January 1, 1992 as BICO's manager of
product development. Mr. Keeling is also the President and a director of
IDT. C. Terry Adkins, a director of the Company until March 1992, is
currently a director and Vice President of Diasense. He is paid an annual
salary of $95,000 by Diasense and has no employment contract with Diasense.
Gary Keeling, the brother of Glenn Keeling, is an officer and director of
Diasense. He has an employment contract with Diasense and was paid $143,750
in 1995.
Property
Four of the Company's current executive officers and/or directors and one
former director of the Company are members of the eight-member 300 Indian
Springs Road Real Estate Partnership (the "Partnership") which in July 1990,
purchased the Company's real estate in Indiana, Pennsylvania, and each has
personally guaranteed the payment of lease obligations to the bank providing
the funding. The business purpose of the real estate transaction was to raise
funds for the Company. The cost of the property to the Company was
$1,084,852. The property was sold to the Partnership subject to a leaseback
provision and outstanding liens for approximately $800,000; the Company
received approximately $403,000 in cash as a result of the sale-leaseback.
The sale price was determined by First West Virginia Bank. Each member of the
Partnership received warrants in consideration of their personal guarantees.
The five members of the Partnership who are also current or former officers
and/or directors of the Company, David L. Purdy, Fred E. Cooper, Glenn
Keeling, Jack H. Onorato and C. Terry Adkins, each received warrants on June
29, 1990 to purchase 100,000 shares of the Company's common stock at an
exercise price of $.33 per share until June 29, 1995 (those warrants still
outstanding as of the original expiration date were extended until June 29,
1998). Mr. Adkins, who was a director at the time of the transaction,
resigned from the Board of Directors on March 30, 1992. Mr. Keeling, who was
not a director at the time of the transaction, joined the Board of Directors
<PAGE>
on May 3, 1991; Mr. Onorato, who was not a director at the time of the
transaction, was a BICO director from September 1992 until April 1994. On
April 24, 1990, Equitable Financial Management ("EFM") received warrants to
purchase 200,000 shares of the Company's common stock at $.25 per share until
April 24, 1995, and $16,000 in cash, representing a two percent (2%) fee for
arranging the sale of the Company's real estate. Warrants were also issued on
April 24, 1990 to Charles Dixon, the President of EFM, to purchase 200,000
shares of the Company's common stock at $.25 per share until April 24, 1995.
In all instances where warrants were issued in connection with the
transactions set forth above, the exercise price of the warrants was equal to
or above the current quoted market price of the Company's common stock on the
date of issuance.
In April 1992, Diasense purchased an office condominium located at the Bourse
Office Park, Virginia Manor, Building 2500, Second Floor, Pittsburgh,
Pennsylvania 15220 for $190,000. The Company has entered into a lease with
Diasense and pays rent in the amount of $3,225 per month, plus one-half of the
utilities.
Warrants
The following paragraphs, along with the notes to the financial statements,
include disclosure of the warrants which were granted to certain officers,
directors, and employees of the Company from 1989 through 1995. These
warrants were accounted for in accordance with Accounting Principles Board
Opinion 25 (based on the spread, if any, between the exercise price and the
quoted market price of the stock on the date that the warrants were granted).
No value was recorded for these warrants since they were all granted at
exercise prices which were equal to or above the current quoted market price
of the stock on the date issued (See, Annual Report - Note H to the Financial
Statements). In 1995, the Company extended warrants granted in 1990 and 1991,
which were scheduled to expire in 1995, until 1998. Because the exercise
price of the warrants, which remained unchanged, was less than the market
price of the common stock on the dates of the extensions, charges were made
against operations (See, Annual Report - "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS").
On April 7, 1989, the Board of Directors approved the granting of warrants to
David L. Purdy, the President, Treasurer and Chairman of the Board of the
Company, to purchase 200,000 shares of common stock at $.20 per share in
return for his personal guarantee on Company leases.
On June 22, 1989, the Board of Directors approved the granting of warrants to
Fred E. Cooper, the current CEO, Executive Vice President and a director of
the Company to purchase 200,000 shares of common stock at $.25 per share until
June 21, 1994. The warrants were granted to Mr. Cooper, who was not an
officer or employee of the Company at the time, in return for his services as
a financial advisor.
During 1990 through December 31, 1995, the Company granted the warrants
described in the following paragraphs in addition to those granted to
debentureholders. Warrants granted to debentureholders are described in
"Management's Discussion and Analysis" Section of this Report.
On April 24, 1990, the Board of Directors approved the granting of warrants to
the following officers and directors in return for their personal guarantees
of loans for the Company, for meritorious service, and as incentives for
future performance:
Recipient Shares Price Expiration
Fred E. Cooper (1) 250,000 .25 04/24/95
Anthony J. Feola (2) 100,000 .25 04/24/95
David L. Purdy (3) 250,000 .25 04/24/95
<PAGE>
______________________
(1) Mr. Cooper is the Chief Executive Officer, Executive Vice President and
a director of the Company. Those warrants still outstanding as of
4/24/95 were extended until 4/24/98.
(2) Mr. Feola, a current director and Senior Vice President of the Company,
was the Company's Vice President of Marketing and Sales until December
31, 1991. Those warrants still outstanding as of 4/24/95 were extended
until 4/24/98.
(3) Mr. Purdy is the President, Treasurer, Chairman of the Board and a
director of the Company. Those warrants still outstanding as of 4/24/95
were extended until 4/24/98.
On November 26, 1990, the Board of Directors approved the granting of warrants
to purchase 100,000 shares of common stock at $.25 per share until November
26, 1995 to Anthony J. Feola, a current director and Senior Vice President of
the Company, who was the Company's Vice President of Marketing and Sales until
December 31, 1991. The warrants were awarded to Mr. Feola in return for his
agreement to accept and maintain employment with the Company for one year at a
substantially lower salary than with his previous employer. The warrants were
extended in November, 1995 until November 26, 1998.
On March 6, 1991, the Board of Directors approved the granting of warrants to
the following officers pursuant to their employment agreements:
Recipient Shares Price Expiration
David L. Purdy (1) 500,000 .25 05/01/95
Fred E. Cooper (2) 500,000 .25 05/01/95
Anthony J. Feola (3) 250,000 .25 05/01/95
______________________
(1) Mr. Purdy is the President, Treasurer, Chairman of the Board and a
director of the Company. Those warrants still outstanding as of 5/1/95
were extended until 5/1/98.
(2) Mr. Cooper is the Chief Executive Officer, Executive Vice President and
a director of the Company. Those warrants still outstanding as of
5/1/95 were extended until 5/1/98.
(3) Mr. Feola, a current director and Senior Vice President of the Company,
was the Company's Vice President of Marketing and Sales until December
31, 1991. Those warrants still outstanding as of 5/1/95 were extended
until 5/1/98.
On August 1, 1992, the Board of Directors approved the granting of warrants to
purchase 25,000 shares of common stock at $3.50 per share until July 31, 1997
to Richard Hansen as an incentive to accept employment with the Company.
On January 4, 1993, the Board of Directors approved the granting of warrants
to purchase 25,000 shares of common stock at $3.20 per share until January 4,
1998 to Daniel Sullivan, a consultant to the Company.
On February 18, 1993, the Board of Directors approved the granting of warrants
to purchase 25,000 shares of common stock at $3.00 per share until February
18, 1998 to David E. Staudenmaier, the Company's Secretary and Vice President
in return for his meritorious service to the Company. The Board of Directors
also approved the granting of warrants to purchase 10,000 shares of common
stock at $3.00 per share until February 18, 1998 to Victor A. Fishman, Ph.D.,
in return for his consulting services for Petrol Rem.
On April 14, 1993, the Board of Directors approved the granting of warrants to
purchase common stock at $2.125 per share until April 14, 1998 to the
<PAGE>
following employees in return for their meritorious service:
Keith Albee 10,000 shares
Jennifer Bennett 3,000 shares
Adele Bobbish 10,000 shares
Marsha Corbett 5,000 shares
Pat Cooper 10,000 shares
Jessica Curry 8,000 shares
Joseph DeBoth 15,000 shares
Roberta Dudas 5,000 shares
Dean Grinch 15,000 shares
Rebecca Grose 8,000 shares
Valeri Lazor 10,000 shares
Diane McQuaide 10,000 shares
John Sukaly 15,000 shares
Susan Taylor 10,000 shares
Richard Wiggins 20,000 shares
On September 21, 1993, the Board of Directors approved the granting of
warrants to purchase 10,000 shares of common stock at $2.25 per share until
September 21, 1998 to Donald A. Uhlmeyer, R.N. in return for his meritorious
service.
On December 8, 1993, the Board of Directors approved the granting of warrants
to purchase 50,000 shares of common stock at $2.09 per share until December 8,
1998 to Joseph A. Guzman, a director of IDT, in return for his meritorious
service.
On April 26, 1994, the Board of Directors approved the granting of warrants to
purchase 25,000 shares of common stock at $2.00 per share until April 26, 1999
to Dr. William Keck, a scientific advisor to the Company, in return for his
service to the Company.
On August 25, 1994, the Board of Directors approved the granting of warrants
to purchase common stock at $2.75 per share until August 25, 1999 to the
following employees and director in return for their meritorious service:
Carr, Raymond 15,000
DeBoth, Joseph 15,000
McQuaide, Diane 20,000
Staudenmaier, David 25,000
Sukaly, John 10,000
On September 23, 1994, the Board of Directors approved the granting of
warrants to purchase 20,000 shares of common stock at $2.75 per share until
September 23, 1999 to Susan Taylor, the Company's public relations consultant,
in return for her meritorious service.
On January 4, 1995, the Board of Directors approved the granting of warrants
to purchase 2,000 shares of common stock at $2.09 per share until January 4,
2000 to Peter Raber as an employment incentive.
On January 23, 1995, the Board of Directors approved the granting of warrants
to purchase 2,000 shares each of common stock until January 23, 2000 to
Douglas Burton at $1.69 per share and to Kathleen Meehan at $2.13 per share as
employment incentives.
On June 22, 1995, the Board of Directors approved the granting of warrants to
purchase 5,000 shares of common stock at $3.31 per share until June 22, 2000
to Glenn Cunningham in return for his services performed for the Company.
<PAGE>
On October 25, 1995, the Board of Directors approved the granting of warrants
to purchase 10,000 shares of common stock at $4.03 per share until October 25,
2000 to Michael Gardner in return for his services rendered to the Company.
Loans
On October 1, 1990, the Board of Directors approved a $75,000 loan from the
Company to Fred E. Cooper. Mr. Cooper signed a Promissory Note promising to
pay the principal amount plus twelve percent (12%) simple interest. Mr.
Cooper repaid $66,500 of the $75,000 principal balance during 1991. During
1991, the Company granted loans to Fred E. Cooper in the aggregate amount of
$57,400. Mr. Cooper signed Promissory Notes promising to pay the principal
amounts upon demand plus ten percent (10%) simple interest. In January 1992,
the Company granted a loan to Fred E. Cooper in the amount of $25,000. Mr.
Cooper signed a Promissory Note promising to pay the principal amount upon
demand plus ten percent (10%) simple interest. The aggregate balance of the
loans as of December 31, 1995, including accrued interest, was $131,097.
In December 1991, the Company granted a loan to Glenn Keeling in the amount of
$5,000. Mr. Keeling signed a Promissory Note promising to pay the principal
amount upon demand plus ten percent (10%) simple interest. The balance of the
loan as of December 31, 1995, including accrued interest, was $7,008.
In January 1995, the Company granted a loan in the amount of $62,500 to
Anthony J. Feola. Mr. Feola signed a Promissory Note promising to pay the
principal amount upon demand plus nine percent (9%) simple interest. The
balance of the loan (including accrued interest) of $68,125 was paid on
December 29, 1995.
In September 1995, the Company granted a loan in the amount of $250,000 to
Allegheny Food Services in the form of a one-year note bearing interest at
prime rate as reported by the Wall Street Journal plus one percent (1%).
Interest payments have been made on the note, and as of December 31, 1995, the
balance was $250,000. Joseph Kondisko, a former director of Diasense, is a
principal owner of Allegheny Food Services.
During 1995, the Company granted loans to HemoCleanse, an Indiana
Corporation, aggregating $1,050,000 in the form of one-year notes accruing
interest at prime rate as reported by the Wall Street Journal. The notes are
convertible, at the Company's option, into shares of HemoCleanse common stock
at $3.50 per share. As of December 31, 1995, the balance of the loans,
including accrued interest, was $1,093,326. HemoCleanse is working with IDT
on the Whole-Body Extracorporeal Hyperthermia project, and BICO owns
approximately seven (7%) of HemoCleanse's outstanding common stock; funds from
BICO's purchases of common stock were used by HemoCleanse to fund the
hyperthermia project.
Each of the loans made to officers or directors and their affiliates was made
for a bona fide business purpose. All future loans to officers, directors and
their affiliates will be made for bona fide business purposes only.
Intercompany Agreements
Management of the Company believes that the agreements between BICO and
Diasense, which are summarized below, were based upon terms which were as
favorable as those which may have been available in comparable transactions
with third parties. However no unaffiliated third party was retained to
determine independently the fairness of such transactions.
License and Marketing Agreement. Diasense acquired the exclusive marketing
rights for the Noninvasive Glucose Sensor and related products and services
from BICO in August 1989 in exchange for 8,000,000 shares of its common stock.
That agreement was canceled pursuant to a Cancellation Agreement dated
<PAGE>
November 18, 1991, and superseded by a Purchase Agreement dated November 18,
1991. The Cancellation Agreement provides that BICO will retain the 8,000,000
shares of Diasense common stock which BICO received pursuant to the License
and Marketing Agreement.
Purchase Agreement. BICO and Diasense entered into a Purchase Agreement dated
November 18, 1991 whereby BICO conveyed to Diasense its entire right, title
and interest in the Noninvasive Glucose Sensor and its development, including
its extensive knowledge, technology and proprietary information. Such
conveyance includes BICO's patent received in December 1991 (See, Annual
Report - "Business").
In consideration of the conveyance of its entire right in the Noninvasive
Glucose Sensor and its development, BICO received $2,000,000. In addition,
Diasense may endeavor, at its own expense, to obtain patents on other
inventions relating to the Noninvasive Glucose Sensor. Diasense also
guaranteed BICO the right to use such patented technology in the development
of BICO's proposed implantable closed-loop system, a related system in the
early stages of development.
In December 1992, BICO and Diasense executed an amendment to the Purchase
Agreement which clarified terms of the Purchase Agreement. The amendment
defines "Sensors" to include all devices for the noninvasive detection of
analytes in mammals or in other biological materials. In addition, the
amendment provides for a royalty to be paid to Diasense in connection with any
sales by BICO of its proposed closed-loop system.
Research and Development ("R&D") Agreement. Diasense and BICO entered into an
agreement dated January 20, 1992 in connection with the research and
development of the Noninvasive Glucose Sensor. Pursuant to the agreement,
BICO will continue the development of the Noninvasive Glucose Sensor,
including the fabrication of prototypes, the performance of clinical trials,
and the submission to the FDA of all necessary applications in order to obtain
market approval for the Noninvasive Glucose Sensor. BICO will also
manufacture the models of the Noninvasive Glucose Sensor to be delivered to
Diasense for sale (See, "Manufacturing Agreement"). Upon the delivery of the
completed models, the research and development phase of the Noninvasive
Glucose Sensor will be deemed complete.
Diasense has agreed to pay BICO $100,000 per month for indirect costs
beginning April 1, 1992, during the 15 year term of the agreement, plus all
direct costs, including labor. BICO also received a first right of refusal
for any program undertaken to develop, refine or improve the Noninvasive
Glucose Sensor, and for the development of other related products. In July
1995, BICO and Diasense agreed to suspend billings, accruals of amounts due
and payments pursuant to the R&D Agreement pending the FDA's review of the
510(k) Notification.
Manufacturing Agreement. BICO and Diasense entered into an agreement dated
January 20, 1992, whereby BICO will act as the exclusive manufacturer of the
Noninvasive Glucose Sensor and other related products. Diasense will provide
BICO with purchase orders for the products and will endeavor to provide
projections of future quantities needed. The original Manufacturing Agreement
called for the products to be manufactured and sold at a price to be
determined in accordance with the following formula: Cost of Goods (including
actual or 275% of overhead, whichever is lower) plus a fee of 30% of Cost of
Goods. In July 1994, the formula was amended to be as follows: Costs of Goods
Sold (defined as BICO's aggregate cost of materials, labor and associated
manufacturing overhead) + a fee equal to one third (1/3) of the difference
between the Cost of Goods Sold and Diasense's sales price of each Sensor.
Diasense's sales price of each Sensor is defined as the price paid by any
purchaser, whether retail or wholesale, directly to Diasense for each Sensor.
Subject to certain restrictions, BICO may assign its manufacturing rights to a
subcontractor with Diasense's written approval. The term of the agreement is
fifteen years.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-term
<PAGE>
compensation for services in all capacities to the Company for the fiscal
years ended December 31, 1995, 1994 and 1993, of those persons who were, at
December 31, 1995 (i) the Chief Executive Officer, and (ii) the other most
highly compensated executive officers of the Company whose remuneration
exceeded $100,000 (the "Named Executives").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation (1)Long Term Compensation
Name and Year Salary ($) Bonus($) (2)Other Awards (2)All Other
Principal ($) Securities Compensation
Position Underlying
Warrants(#)
<S> <C> <C> <C> <C> <C> <C>
David L. Purdy 1995 $300,000 $ 0 $ 0 820,000 (3) $ 0
President, 1994 $250,000 $ 0 $ 0 -0- $ 0
Treasurer(4) 1993 $200,000 $10,000 $ 0 -0- $ 0
Fred E. Cooper 1995 $330,000 $ 0 $ 0 575,000 (3) $ 0
CEO(5) 1994 $260,000 $ 0 $ 0 -0- $ 0
1993 $200,000 $ 0 $ 0 -0- $ 0
Anthony J. Feola 1995 $200,000 $ 93,125 $ 0 200,000 (3) $ 0
Sr. Vice 1994 $133,333 $ 0 $ 0 -0- $ 0
President(6)
Glenn Keeling 1995 $175,000 $ 0 $ 0 -0- $ 0
VP(7) 1994 $150,000 $ 0 $ 0 -0- $ 0
1993 $100,000 $ 10,000 $ 0 -0- $ 0
</TABLE>
(1) The Company does not currently have a Long-Term Incentive Plan ("LTIP"),
and no payouts were made pursuant to any LTIP during the years 1995,
1994, or 1993. The Company did not award any restricted stock to the
Named Executives during any year, including the years 1995, 1994 or
1993. The Company did not award any warrants, options or Stock
Appreciation Rights ("SARs") to the Named Executives during the years
ended December 31, 1995, 1994 or 1993; however, the Company did extend
warrants owned by the Named Executives, which would have expired during
1995 (See Note 3, below). The Company has no retirement, pension or
profit-sharing programs for the benefit of its directors, officers or
other employees. The Company currently has key-man life insurance for
David L. Purdy and Fred E. Cooper in the amount of $1,000,000 each.
(2) During the year ended December 31, 1995, the Named Executives received
medical benefits under the Company's group insurance policy, including
disability and life insurance benefits. The aggregate amount of all
perquisite compensation was less than 10% of the total annual salary and
bonus reported for each Named Executive.
(3) During 1995, the Company extended warrants previously issued to the
Named Executives which would have otherwise expired. Although the
extensions were in connection with warrants already held by the Named
Executives, they are shown in the table set forth above as "awards" for
<PAGE>
executive compensation disclosure purposes because at the time of the
extension, the exercise price of the warrants (which remained unchanged)
was less than the "market price" of the common stock (See,
"Option/Warrant/SAR Grants in Fiscal 1995" Table).
(4) In November, 1994, Mr. Purdy's employment agreement was renegotiated to
provide for an annual salary of $250,000 effective November 1, 1994
through October 31, 1999. All other terms of the contract remained
substantially the same (See, "Employment Agreements"). During 1995, Mr.
Purdy's salary was increased by $50,000. In 1995, 1994 and 1993, Mr.
Purdy was paid $100,000, $72,727 and $50,000 by Diasense.
(5) In November, 1994, Mr. Cooper's employment agreement was renegotiated
to provide for an annual salary of $250,000 effective November 1, 1994
through October 31, 1999. All other terms of the contract remained
substantially the same (See, "Employment Agreements"). In addition, in
1995 and 1994, Mr. Cooper was paid $40,000 and $30,000, respectively by
both Petrol Rem and IDT, both of which are subsidiaries of BICO. In
1995, 1994, and 1993, Mr. Cooper was paid $150,000, $130,454, and
$10,000 in salary and bonuses by Diasense, respectively.
(6) In April, 1994, Mr. Feola's employment agreement with Diasense was
assigned to BICO when he left Diasense to rejoin BICO as its Senior Vice
President. In November, 1994, Mr. Feola's employment agreement was
renegotiated, provides for an annual salary of $200,000 and is
effective November 1, 1994 through October 31, 1999. All other terms
of the contract remained substantially the same (See, "Employment
Agreements"). During 1995, Mr. Feola's salary was increased by $50,000.
In 1994, Mr. Feola was paid $116,667 by Diasense.
(7) In November, 1994, Mr. Keeling entered into an employment agreement with
the Company which provides for an annual salary of $150,000 effective
November 1, 1994 through October 31, 1999 (See, "Employment
Agreements"). During 1995, Mr. Keeling's salary was increased by
$25,000.
<TABLE>
Option/Warrant/SAR Grants in Last Fiscal Year
<CAPTION>
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year(2) ($/Sh) Date 5%($) 10%($) 0%($)
<S> <C> <C> <C> <C> <C> <C> <C>
Fred E. 70,000 3.3% $0.25 4/24/98 $ 218,500 $ 253,750 $ 179,200
Cooper 500,000 24.0% $0.25 5/01/98 $2,190,000 $2,527,000 $1,875,000
5,000 0.3% $0.33 6/29/98 $ 23,285 $ 27,110 $ 18,500
David L. 240,000 11.5% $0.25 4/24/98 $ 747,600 $ 870,000 $ 614,400
Purdy 500,000 24.0% $0.25 5/01/98 $2,190,000 $2,537,000 $1,875,000
80,000 3.8% $0.33 6/29/98 $ 372,560 $ 433,760 $ 296,000
Anthony J. 100,000 4.8% $0.25 5/01/98 $ 438,000 $ 507,400 $ 375,000
Feola 100,000 4.8% $0.25 11/26/98 $ 641,900 $ 744,300 $ 512,500
__________________________________________
</TABLE>
<PAGE>
(1) The warrants set forth in this table represent the warrants already held
by the Named Executives which were extended by the Company during 1995.
These warrants to purchase the Company's common stock were originally
granted to the Named Executives in 1990 and 1991 (See, "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS"). Although the warrants were
not actually awarded during 1995, they are included in this Executive
Compensation disclosure section because the exercise price of the
warrants, which was not changed at the time of the extension, was less
than the "market price" of the common stock at the time of the
extension.
(2) For purposes of calculating these percentages, the total number of
warrants granted or extended during 1995 was 2,090,500, which included
21,000 new grants in 1995, and extensions of 2,069,500 warrants
originally granted in 1990 and 1991.
(3) Potential realizable values reflect the difference between the warrant
exercise price at the end of 1995 and the fair value of the Company's
common stock price from the date of the extension until the expiration
of the warrant. The 5% and 10% appreciation rates, compounded annually,
are assumed pursuant to the rules promulgated by the SEC and do not
reflect actual historical or projected rates of appreciation of the
common stock. Assuming such appreciation, the following illustrates the
per share value on the dates set forth (the expiration dates for the
warrants), assuming the values set forth (the closing bid price on the
date of the extension as reported by NASDAQ):
STOCK PRICE ON EXPIRATION
DATE OF EXTENSION DATE 5% 10%
04/12/95: $2.81 4/24/98 $3.365 $3.875
05/01/95: $4.00 5/1/98 $4.630 $5.324
06/05/95: $4.03 6/29/98 $4.987 $5.752
11/01/95: $5.375 11/26/98 $6.669 $7.693
The foregoing values do not reflect appreciation actually realized by
the Named Executives (See, "Option/Warrant/SAR Exercises in Last Fiscal
Year and Fiscal Year-End Option/Warrant/SAR Value" Table, Below).
AGGREGATED OPTION/WARRANT/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/WARRANT/SAR VALUE TABLE
Number of Value of
Securities Unexercised In-
Underlying the-Money
Unexercised Options/SARs at
Options/SARs FY-End ($)
at FY-End(#)
Name Shares Value Exercisable/ Exercisable/
Acquired on Realized($) Unexercisable Unexercisable
Exercise (2) (3) (4)
(#)(1)
David L. 20,000 $ 44,960 820,000 $2,709,440
Purdy (5) (6) (7)
<PAGE>
Fred E. 65,000 $333,930 505,000 $1,656,000
Cooper (8) (9) (10)
Anthony J. 250,000 $347,750 550,000 $1,734,100
Feola (11) (12) (13)
Glenn 0 $ 0 0 $ 0
Keeling
__________________
(1) This figure represents the number of shares of common stock acquired by
each named executive officer upon the exercise of warrants.
(2) The value realized of the warrants exercised was computed by determining
the spread between the market value of the underlying securities at the
time of exercise minus the exercise price of the warrant.
(3) All warrants held by the Named Executives are currently exercisable.
(4) The value of unexercised warrants was computed by subtracting the
exercise price of the outstanding warrants from the average of the
closing bid and ask prices of the Company's common stock on December 29,
1995 as reported by NASDAQ ($3.562).
(5) During the fiscal year ended December 31, 1995, Mr. Purdy exercised
warrants to purchase 20,000 shares of common stock at $.33 per share.
(6) On the date of the exercise set forth in note (5), the average of the
closing bid and ask prices as reported by NASDAQ was $2.578 per share.
(7) Includes warrants to purchase: 240,000 shares of common stock at $.25
per share until April 24, 1995 (extended until April 24, 1998); 500,000
shares of common stock at $.25 per share until May 1, 1995 (extended
until May 1, 1998); and 80,000 shares of common stock at $.33 per share
until June 29, 1995 (extended until June 29, 1998) (See, "Warrants").
(8) During the fiscal year ended December 31, 1995, Mr. Cooper exercised
warrants to purchase the following: 10,000 shares of common stock at
$.25 per share; 55,000 shares of common stock at $.25 per share; and
5,000 shares of common stock at $.33 per share.
(9) The average of the closing bid and ask prices as reported by NASDAQ were
as follows on the dates of the warrant exercises set forth in note (8),
respectively: $2.969; $5.469 and $5.469.
(10) Includes warrants to purchase: 500,000 shares of common stock at $.25
per share until May 1, 1995 (extended until May 1, 1998) (See,
"Warrants").
(11) During the fiscal year ended December 31, 1995, Mr. Feola exercised
warrants to purchase the following: 250,000 shares of common stock at
$.25 per share.
(12) On the date of the exercise set forth in note (11), the average of the
closing bid and ask prices as reported by NASDAQ was $1.641 per share.
(13) Includes warrants to purchase: 100,000 shares of common stock at $.25
per share until May 1, 1995 (extended until May 1, 1998); 100,000 shares
of common stock at $.25 per share until November 26, 1995 (extended
until November 26, 1998); and 350,000 shares of common stock at $.50 per
share until October 11, 1996 (See, "Warrants").
<PAGE>
Employment Agreements
BICO has entered into employment agreements (the "Agreements") with its Named
Executives Fred E. Cooper, David L. Purdy, Anthony J. Feola and Glenn Keeling
effective November 1, 1994, pursuant to which they are entitled to receive
annual salaries of $250,000, $250,000, $200,000 and $150,000 respectively,
which are subject to review and adjustment. The initial term of the
Agreements with Messrs. Cooper and Purdy expires on October 31, 1999, and
continues thereafter for additional three-year terms unless any of the parties
give proper notice of non-renewal. The initial term of the Agreements with
Messrs. Feola and Keeling expires on October 31, 1999, and continues
thereafter for additional two-year terms unless either of the parties give
proper notice of non-renewal. The Agreements also provide that in the event
of a "change of control" of BICO, BICO is required to issue to Messrs. Cooper
and Purdy shares of common stock equal to five percent (5%), to issue Mr.
Feola shares of common stock equal to four percent (4%), and to issue Mr.
Keeling shares of common stock equal to three percent (3%), of the outstanding
shares of the common stock of the Company immediately after the change in
control. In general, a "change of control" is deemed to occur for purposes of
the Agreements (i) when 20% or more of BICO's outstanding voting stock is
acquired by any person, (ii) when one-third (1/3) or more of Diasense's
directors are not Continuing Directors (as defined in the Agreement), or (iii)
when a controlling influence over the management or policies of Diasense is
exercised by any person or by persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
In addition, in the event of a change in control within the term of the
Agreements or within one year thereafter, Messrs. Cooper, Purdy, Feola and
Keeling are entitled to receive severance payments in amounts equal to: 100%
of their most recent annual salary for the first three years following
termination; 50% of their most recent annual salary for the next two years;
and 25% of their most recent salary for the next five years. BICO is also
required to continue medical insurance coverage for Messrs. Cooper, Purdy,
Feola and Keeling and their families during such periods. Such severance
payments will terminate in the event of the employee's death.
In the event that either Mr. Purdy or Mr. Cooper becomes disabled, as defined
in their Agreements, he will be entitled to the following payments, in lieu of
salary, such payments to be reduced by any amount paid directly to him
pursuant to a disability insurance policy provided by the Company or its
affiliates: 100% of his most recent annual salary for the first three years;
and 70% of his most recent salary for the next two years. In the event that
either Mr. Feola or Mr. Keeling becomes disabled, as defined in their
Agreements, he will be entitled to the following payments, in lieu of salary,
such payments to be reduced by any amount paid directly to him pursuant to a
disability insurance policy provided by the Company or its affiliates: 100% of
his most recent annual salary for the first year; and 70% of his most recent
salary for the second year.
The Agreements also generally restrict the disclosure of certain confidential
information obtained by Messrs. Cooper, Purdy, Feola and Keeling during the
term of the Agreements and restricts them from competing with BICO for a
period of one year in specified states following the expiration or termination
of the Agreements.
In addition to the Employment Agreements described above, BICO also entered
into employment agreements with two of its non-executive officer employees
effective November 1, 1994. The terms of such agreements are similar to those
described for Messrs. Feola and Keeling above, with the following amendments:
the term of one agreement is from November 1, 1994 through October 31, 2002,
and is renewable for successive two-year terms; the term of the other
agreement is from November 1, 1994 through October 31, 1999, and is renewable
for successive two-year terms; the annual salaries are $100,000 and $75,000
respectively; and, in the event of a "change in control", BICO is required to
issue both employees shares of common stock equal to two percent (2%) of the
outstanding shares of the common stock of the Company immediately after the
change in control.
<PAGE>
In the event that Diasense is combined with BICO, as discussed herein, it is
uncertain as to how BICO's existing Employment Agreements will be treated, or
whether they will be amended as part of the terms of the transaction. The
Companies anticipate that, unless unforeseen additional entities become
involved in the transaction, all parties to the Companies' Employment
Agreements will stipulate that such combination does not constitute a "change
in control" pursuant to the Employment Agreements.
REPORT ON EXECUTIVE OFFICER COMPENSATION
The Company has no Compensation Committee which determines executive
compensation. The Named Executive Officers' salaries are determined by their
employment contracts, which are negotiated and approved by the Board of
Directors. Raises in salaries and bonuses are recommended by the CEO and
approved by the Board of Directors. The CEO bases his recommendations on a
number of subjective factors which include each executive officer's scope of
responsibility and accountability within the Company, and each individual's
performance and service to the Company.
Deductibility of Executive Compensation Expense Under Federal Tax Laws
When awarding compensation to its executives, the Board of Directors has
considered the impact of recently enacted provisions of the Internal Revenue
Code of 1986, as amended, that in certain circumstances disallow compensation
deductions in excess of $1 million for any year with respect to the Company's
Named Executives ("Section 162(m)"). While the Company does not expect that
these provisions will limit its tax deductions for executive compensation in
the near term, in the future, the Board may determine to adopt a compensation
program which does not satisfy the conditions of Section 162(m) if in the
Board's judgment, after considering the additional costs of not satisfying
Section 162(m), such program is appropriate.
Submitted by the Board of Directors
David L. Purdy
Fred E. Cooper
Anthony J. Feola
Glenn Keeling
Raymond Carr
<PAGE>
- -----------------------------------
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COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG BIOCONTROL
TECHNOLOGY (BICO), NASDAQ MARKET AND SIC CODE INDEX
1991 1992 1993 1994 1995
BICO 1,733.03 1,155.35 933.17 599.89 1,277.57
SIC Code Index 172.14 143.22 104.58 120.34 205.3
NASDAQ Market Index 128.38 129.64 120.34 205.3 211.77
Assumes $100 Invested on January 1, 1991
Assumes Dividend Reinvestment
Fiscal Year Ending December 31, 1995
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the indicated information as of December 31,
1995 with respect to each person who is known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding common
stock, each director of the Company, and all directors and executive officers
of the Company as a group. The table excludes disclosure of entities such as
Cede & Co. and other companies which would reflect the ownership of entities
who hold stock on behalf of shareholders.
As of December 31, 1995, there were 37,021,118 shares of the Company's common
stock outstanding. The first column sets forth the common stock currently
owned by each person or group, excluding currently exercisable warrants for
the purchase of common stock. The second column sets forth the percentage of
the total number of shares of common stock outstanding as of December 31, 1995
owned by each person or group, excluding exercisable warrants. The third
column sets forth the total number of shares of common stock which each named
person or group has the right to acquire, through the exercise of warrants,
within sixty (60) days, plus common stock currently owned. The fourth column
sets forth the percentage of the total number of shares of common stock
outstanding as of December 31, 1995 which would be owned by each named person
or group upon the exercise of all of the warrants held by such person or group
together with common stock currently owned, as set forth in the third column.
Except as otherwise indicated, each person has the sole power to vote and
dispose of each of the shares listed in the columns opposite his name.
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature Percent of
Name and Address of of Beneficial Percent of Ownership with Class with
Beneficial Owner Ownership(1) Class(2) Warrants (3) Warrants(4)
<S> <C> <C> <C> <C>
David L. Purdy (5) 187,340 * 1,007,340(6) 2.7%
300 Indian Springs Road
Indiana, PA 15701
Fred E. Cooper 576,200 1.5% 1,076,200(7) 2.9%
Building 2500, 2nd Floor
2275 Swallow Hill Rd.
Pittsburgh, PA 15220
Anthony J. Feola 354,000 * 904,000(8) 2.4%
Building 2500, 2nd Floor
2275 Swallow Hill Rd.
Pittsburgh, PA 15220
Glenn Keeling 138,500 * 138,500(9) *
200 Julrich Drive
McMurray, PA 15317
Raymond Carr 0 * 15,000(10) *
2120 Greentree Road
Apt. 306E
Pittsburgh, PA 15220
All directors and 1,256,040 3.4% 3,141,040(11) 8.1%
executive officers
as a group (5 persons)
* Less than one percent
________________________
</TABLE>
(1) Excludes currently exercisable warrants set forth in the third column
and detailed in the footnotes below.
(2) Represents current common stock owned by each person, as set forth in
the first column, excluding currently exercisable warrants, as a
percentage of the total number of shares of common stock outstanding as
of December 31, 1995.
(3) Includes ownership of all shares of common stock which each named person
or group has the right to acquire, through the exercise of warrants,
within sixty (60) days, together with the common stock currently owned.
(4) Represents total number of shares of common stock owned by each person,
as set forth in the third column, which each named person or group has
the right to acquire, through the exercise of warrants within sixty (60)
days, together with common stock currently owned, as a percentage of the
total number of shares of common stock outstanding as of December 31,
1995. For computation purposes, the total number of shares of common
stock outstanding as of December 31, 1995 has been increased by the
number of additional shares which would be outstanding if the person or
group owned the number of shares set forth in the third column.
<PAGE>
(5) Does not include shares held by Mr. Purdy's spouse or adult children.
Mr. Purdy disclaims any beneficial interest to shares held by members of
his family.
(6) Includes currently exercisable warrants to purchase the following:
240,000 shares of common stock at $.25 per share until April 24, 1995
(extended until April 24, 1998); 80,000 shares of common stock at $.33
per share until June 29, 1995 (extended until June 29, 1998); and
500,000 shares of common stock at $.25 per share until May 1, 1995
(extended until May 1, 1998) pursuant to Mr. Purdy's previous employment
agreement. In addition, Mr. Purdy is entitled to certain shares of
Common Stock upon a change of control of BICO as defined in his
employment agreement (See, "Employment Agreements").
(7) Includes currently exercisable warrants to purchase the following:
500,000 shares of common stock at $.25 per share until May 1, 1995
(extended until May 1, 1998) pursuant to Mr. Cooper's previous
employment agreement. In addition, Mr. Cooper is entitled to certain
shares of Common Stock upon a change of control of BICO as defined in
his employment agreement (See, "Employment Agreements").
(8) Includes currently exercisable warrants to purchase the following:
100,000 shares of common stock at $.25 per share until November 26, 1995
(extended until November 26, 1998); 100,000 shares of common stock at
$.25 per share until May 1, 1995 (extended until May 1, 1998) pursuant
to Mr. Feola's previous employment agreement; and 350,000 shares of
common stock at $.50 per share until October 11, 1996. In addition, Mr.
Feola is entitled to certain shares of Common Stock upon a change of
control of BICO as defined in his employment agreement (See, "Employment
Agreements").
(9) In addition, Mr. Keeling is entitled to certain shares of Common Stock
upon a change of control of BICO as defined in his employment agreement
(See, "Employment Agreements").
(10) Includes currently exercisable warrants to purchase 15,000 shares of
common stock at $2.75 per share until August 25, 1999.
(11) Includes shares of common stock, including stock currently owned,
available under currently exercisable warrants as set forth above.
FINANCIAL AND OTHER INFORMATION
For additional information, including Financial Information, Financial
Statements and corresponding notes, and Management's Discussion and Analysis
of Financial Condition and Results of Operations, please review the Company's
Annual Report which accompanies this Proxy Statement.
INCREASE IN NUMBER OF AUTHORIZED SHARES
The Company's Articles of Incorporation, as amended, authorize the issuance of
40,000,000 shares of common stock, par value $.10 per share. As of February
29, 1996, there were *____________ shares outstanding, currently exercisable
warrants to purchase *____________ shares of common stock and 37,900 shares
reserved for the conversion of preferred stock.
All outstanding shares of the Company's common stock are issued fully paid and
nonassessable. All additional shares of common stock will be fully paid and
nonassessable. All the shares of common stock will be equal to each other with
respect to liquidation rights and dividend rights and there are no preemptive
<PAGE>
rights to purchase any additional shares of common stock. Holders of common
stock are entitled to one vote per share on all matters submitted to a vote of
shareholders, but are not entitled to cumulate their votes in the election of
directors. Accordingly, the holders of over 50% of the outstanding common
stock voting for the increase in the number of authorized shares of common
stock could determine the outcome of such vote, and the holders of the
remaining common stock would not be able to change the outcome of the vote.
In the event of liquidation, dissolution or winding up of the Company, holders
of the common stock are entitled to receive on a pro rata basis all assets
remaining after satisfaction of all liabilities including liquidation
preferences granted to holders of the preferred stock of the Company.
Holders of common stock are entitled to cash dividends only when and if
declared by the Board of Directors out of funds legally available for payment
thereof, and subject to the prior right of holders of the Company's preferred
stock to receive any accrued but unpaid dividends. Further, common stock
dividends may be paid only to the extent the net assets exceed the liquidation
preference of any outstanding preferred stock. The Company has not paid any
cash dividends on its common stock since its inception and no cash dividends
on the common stock are contemplated at any time in the foreseeable future.
The Board of Directors of the Company unanimously approved a resolution to
propose that the shareholders increase the number of authorized shares of
common stock to 60,000,000 by amending the Company's Articles of Incorporation.
If such an increase is approved, the Board of Directors may, without additional
shareholder approval, authorize the sale of such additional shares in order to
raise additional capital to fund the Company's operations and research and
development projects. The Board will authorize management to use any such
funds raised to fund existing or new research and development projects as
management determines is in the best interest of the Company.
The Company has current plans to register and sell five million shares of the
additional common stock which the shareholders are requested to authorize, but
the Company is not currently involved in any negotiations with any potential
buyer; the Company anticipates that a new public offering, like those it has
conducted in recent years, will be self-underwritten. Management does not
believe that, until full-scale manufacturing of the Noninvasive Glucose Sensor
begins, the Company presently has alternative means to raise additional funds.
The proposal to increase the number of authorized shares is part of
management's long-term plan to continue funding the Company's existing and
future research and development projects, and to fund manufacturing start-up
of the Noninvasive Glucose Sensor. Any future sale of additional shares,
whether in a public or private offering, will dilute the holdings of existing
shareholders. The Company has no current specific plans for any proceeds
received from the future sale of the additional shares, but may use any such
proceeds to continue funding existing research and development projects,
manufacturing, and future projects which are deemed by management to be in
the best interest of the Company. Such projects are subject to risks, and
there can be no assurances that any current or future project will be
successful or result in commercially viable products.
The Board of Directors recommends shareholder approval of the proposal to
amend the Company's Articles of Incorporation to increase the number of
authorized shares of common stock to 60,000,000. The affirmative vote of
the holders of a majority of the common stock entitled to vote at the Special
Meeting is necessary to approve the amendment. If not otherwise specified,
properly executed proxies will be voted in favor of the amendment.
CHANGES IN THE COMPANY'S INDEPENDENT AUDITORS
Effective January 25, 1995, upon a determination by the Board of Directors, the
Company engaged Thompson Dugan as its independent auditors and accountants to
replace Grant Thornton LLP. Thompson Dugan also serves as the independent
auditors and accountants for Diasense, replacing Grant Thornton LLP. Neither
company had any disagreements with Thompson Dugan or Grant Thornton LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. A representative of Thompson Dugan will not be
present at the Special Meeting to answer questions.
<PAGE>
SHAREHOLDER PROPOSALS
All shareholder proposals to be presented at the next Annual Meeting of the
Company must be received by the Company at its principal executive offices by
November 30, 1996 for inclusion in the proxy materials relating to the next
Annual Meeting.
OTHER MATTERS
The management of the Company does not know of any other matters that are to be
presented for action at the meeting. Should any other matter come before the
meeting, however, the person named in the enclosed Proxy shall have
discretionary authority to vote all shares represented by valid proxies with
respect to such matter in accordance with his judgement.
The enclosed Proxy is solicited on behalf of the Board of Directors. The
expenses of solicitation, including the cost of preparing, handling, printing
and mailing the Notice of Annual Meeting, Proxy and Proxy Statement, the
aggregate of which is estimated to be approximately $30,000, has been or will
be paid by the Company. The Company will pay Chemical Bank, its Registrar and
Transfer Agent, for its assistance in the solicitation of proxies and will
reimburse brokers and other persons holding shares in their names or those of
their nominees for their expenses for sending Proxy materials to principals and
obtaining their proxies.
Shareholders are urged to specify their choice, date, sign and return the
enclosed proxy in the enclosed envelope. Prompt response is helpful and your
cooperation will be appreciated.
By Order of the Board of Directors
______________________________
/s/ David E. Staudenmaier, Secretary
<PAGE>
PRELIMINARY COPIES
BIOCONTROL TECHNOLOGY, INC. PROXY
300 Indian Springs Road THIS PROXY IS SOLICITED ON
Indiana, PA 15701 BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the 1995 Annual Report,
Notice of the Special Meeting of Shareholders and the Biocontrol
Technology, Inc. Proxy Statement, hereby appoint(s) David E.
Staudenmaier proxy of the undersigned (with full power of
substitution) to attend the above Special Meeting and all
adjournments thereof (the "Special Meeting") and there vote all
shares of Common Stock of Biocontrol Technology, Inc. (the
"Company") that the undersigned would be entitled to vote, if
personally present with regard to all matters which may come
before the Special Meeting, including the items set forth below.
To cast a vote in connection with the following items, please
check the box next to the appropriate response.
1. Approval of an amendment to the Company's Articles of
Incorporation to increase the number of authorized
shares of common stock to 60,000,000.
| | FOR | | AGAINST | | ABSTAIN
2. In his discretion upon the transaction of other
business as may properly come before the Special
Meeting.
| | FOR | | AGAINST | | ABSTAIN
The undersigned hereby revokes all previous proxies for the
Special Meeting, acknowledges receipt of the 1995 Annual Report,
Notice of the Special Meeting and Proxy Statement furnished
therewith and ratifies all that the said proxies may do by virtue
hereof.
This proxy when properly executed will be voted in the
manner specified herein. If no specification is made, this proxy
will be voted in favor of Item 1 and the authority provided by
Item 2 will be deemed granted.
Please sign exactly as name appears below. Joint owners
should each sign personally. If signing in any fiduciary or
representative capacity, give full title as such. For shares
held by a corporation, please affix corporate seal.
Date:____________________________________
_________________________________________
Signature
_________________________________________
Sign, date and return this proxy
immediately in the enclosed
envelope to Chemical-Mellon
Shareholder Services, LLC.
