SOURCE SCIENTIFIC, INC.
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD
Tuesday, November 26, 1996
TO THE SHAREHOLDERS OF SOURCE SCIENTIFIC, INC:
You are cordially invited to attend the Annual Meeting of Shareholders
of SOURCE SCIENTIFIC, INC. (the "Company"), which will be held at 7390 Lincoln
Way, Garden Grove, California, on Tuesday, November 26, 1996, to consider and
act upon the following matters:
(1) The election of a Board of seven Directors. The persons nominated by
the Board of Directors (Jerry Gallwas, John A. Karsten, Barry D.
Plost, Bruce Popko, Susan L. Preston, Richard A. Sullivan, and Thomas
J. White) are described in the accompanying Proxy Statement.
(2) Such other business as may properly come before the meeting or any
adjournments thereof.
Only Shareholders of record at the close of business on October 11,
1996, (the "Record Date") will be entitled to vote at the Annual Meeting or any
adjournments thereof.
This Proxy Statement and the accompanying Proxy were mailed to
Shareholders by American Stock Transfer and Trust Company, commencing October
24, 1996. The executive offices of the Company are located at 7390 Lincoln Way,
Garden Grove, California 92641.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON,
PLEASE DATE, SIGN AND RETURN THE ACCOMPANYING PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE. YOU ARE CORDIALLY INVITED TO ATTEND AND YOUR
PROXY WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
7390 Lincoln Way Catherine Curtis
Garden Grove, California 92841 Secretary
October 15, 1996
<PAGE>
SOURCE SCIENTIFIC, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held on November 26, 1996
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors of SOURCE SCIENTIFIC, INC., a California
corporation (the "Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at 7390 Lincoln Way, Garden Grove, California, at 3:00
p.m., Pacific time. A Proxy for the Annual Meeting is enclosed, by means of
which you may direct your vote as to each of the proposals described in this
Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted. A Shareholder may revoke his or her Proxy at any time before it is
exercised by filing with the Secretary of the Company at its executive office in
Garden Grove, California, a written notice of revocation or a duly executed
Proxy bearing a later date, or by appearing in person at the Annual Meeting and
expressing a desire to vote his or her shares in person.
The date of October 11, 1996, has been fixed as the record date (the
"Record Date") for the determination of Shareholders entitled to notice of and
to vote at the Annual Meeting or any adjournment of the Annual Meeting. As of
that date, the outstanding voting securities of the Company consisted of
20,152,919 shares of Common Stock (the "Common Stock"). Holders of Common Stock
are entitled to one vote for each share of Common Stock upon all matters to be
considered at the Annual Meeting, including the election of Directors, except if
notice is provided at the Annual Meeting as described in the next paragraph, at
which time the holders of Common Stock would have cumulative voting rights.
Unless the context otherwise requires, the term "Shareholder," when used in this
Proxy Statement, refers to holders of shares of the Common Stock.
If any Shareholder gives notice at the Annual Meeting prior to the
voting for election of Directors that he or she intends to cumulate his or her
votes, each Shareholder may cumulate his or her votes and (a) give any candidate
whose name has been placed in nomination prior to the voting a number of votes
equal to the number of Directors to be elected multiplied by the number of his
or her shares or share equivalents, or (b) distribute his or her votes among as
many candidates so nominated as he or she sees fit. The candidates receiving the
highest number of votes, up to the number of Directors to be elected, will be
elected as Directors.
PRINCIPAL SHAREHOLDERS. The following table sets forth certain information with
respect to beneficial ownership of the Company's outstanding Common Stock as of
January 5, 1996, (i) assuming the exercise of all exerciseable outstanding
warrants and options, and; (ii) assuming the conversion into Common Stock of all
debentures, (a) by each person who is known by the Company to own beneficially
more than five percent of the shares of the Company's Common Stock; (b) by each
director or nominee of the Company; (c) by each of the Company's executive
officers named in the Election of Directors section within this Proxy; and (d)
by all directors and officers as a group.
<PAGE>
Number of Common Shares Beneficially Owned (1)
Assuming Conversion of all
Debentures and Exercise of all
Warrants and Options
------------------------------
Number of
Shareholder Name Shares Percent
----------------- ---------------- -----------
John E McConnaughy Jr (2) 6,316,509 23.86
Rompos Ltd (3) 2,636,792 11.57
Stanley Becker (4) 2,562,916 12.50
Barry Nathanson (5) 2,055,755 9.34
Max Goldring Trust (6) 1,334,000 6.21
Richard Sullivan (7) 375,590 1.83
John Karsten (8) 496,614 2.46
Susan Preston (9) 89,990 *
Thomas White (10) 15,000 *
Bruce Popko (10) 15,000 *
Jerry Gallwas (10) 15,000 *
Barry Plost (10) 15,000 *
All officers and directors as a 1,148,884 5.52
group (7persons) (11)
* Less than one percent
1. Includes all options and warrants which are exerciseable, and all debentures
that are convertible, within 60 days of the date of this Annual Report.
2. Includes 2,641,509 shares reserved for the conversion of 1996 A Debentures;
1,875,000 shares reserved for the conversion of 1996 B Debentures; 1,800,000
shares reserved for the exercise of 1996 Debenture Warrants. Mr.
McConnaughy's address is 1011 High Ridge Road, Stanford, CT 06905.
3. Includes 1,886,792 shares reserved for the conversion of 1996 A Debentures
and 750,000 shares reserved for the exercise of 1996 Debenture Warrants.
Rompos Ltd.'s address is Chateau Routaf, Rouvier Place, SARL Chateau Vert,
83149 BRAS, France.
4. Includes 2,215,416 shares owned of record by such individual; 250,000
shares reserved for the conversion of 1996 B Debentures and 97,500 shares
reserved for the exer-cise of 1995 Debenture Warrants. Mr. Becker's
address is 55 East End Avenue, Apt. 7, New York, New York 10028.
5. Includes 210,000 shares owned of record by such individual; 1,320,755 shares
reserved for the conversion of 1996 A Debentures and 525,000 shares reserved
for the exercise of 1996 Debenture Warrants. Mr. Nathanson's address is 6
Shore Cliff Place, Great Neck, NY 11023.
6. Max Goldring Trust's address is c/o Paul Garrett, Trustee, 11920 Curri-
tuck Drive, Los Angeles, California 90049.
7. Includes 27,430 shares of stock owned of record by Mr. Sullivan, 11,830 of
which resulted from the exercise of options granted under the ISO Plan; and
348,160 shares reserved for the exercise of additional options granted to
such individual under the ISO Plan. Mr. Sullivan's address is c/o the
Company at 7390 Lincoln Way, Garden Grove, CA 92641.
8. Includes 451,614 shares of Common Stock owned of record by such individual;
and 45,000 shares reserved for the exercise of options that have vested
pursuant to the July 1994 and July 1995 grants to such individual, each such
grant consisting of 30,000 Directors Options. Mr. Karsten's address is c/o
the Company at 7390 Lincoln Way, Garden Grove, CA 92641.
9. Includes shares reserved for the exercise of options granted to such indi-
vidual under the ISO Plan. Ms. Preston's address is c/o the Company at 7390
Lincoln Way, Garden Grove, California 92641.
10. Includes shares reserved for the exercise of options that have vested
pursuant to grants of Directors Options to each such individual. The address
of each such individual is c/o the Company at 7390 Lincoln Way, Garden
Grove, California 92641.
11. Includes all shares referenced in notes 7 through 10, inclusive, and shares
reserved for the exercise of options granted under the ISO Plan to two
individuals who are executive officers, but not directors, of the Company.
<PAGE>
ELECTION OF DIRECTORS
A Board of seven Directors is to be elected at the Annual Meeting, to
hold office until the next Annual Shareholders Meeting. The Board of Directors
of the Company proposes the seven nominees named below. The accompanying Proxy
may only be voted in order of preference and with such cumulation, if
appropriate, as the persons appointed as proxies in the accompanying Proxy may
in their discretion determine. All nominees have advised the Company that they
are able and willing to serve as Directors; however, if any nominee refuses or
is unable to serve, the persons appointed as proxies in the accompanying Proxy
will vote for another person nominated by the Board of Directors. UNLESS
OTHERWISE DIRECTED IN THE ACCOMPANYING PROXY, THE PERSONS APPOINTED AS PROXIES
THEREIN WILL VOTE FOR THE ELECTION OF THE SEVEN DIRECTORS LISTED BELOW.
The following information, which is as of October 1, 1996, has been
furnished to the Company by the nominees:
Name Age Elected Director
Since
- ---- --- -----------------
Jerry Gallwas 59 1996
John A. Karsten 63 1975
Barry Plost 50 1988
Bruce Popko 51 1996
Susan L. Preston 42 1994
Richard A. Sullivan 55 1994
Thomas J. White 37 1996
All directors serve from their date of election until the next Annual
Shareholders Meeting. Executive officers are appointed by the Board of
Directors. No current director or executive officer has any arrangement or
understanding whereby he or she has been or will be selected as a director.
Further, no nominee for director is related to any other director or executive
officer.
The Nominees for the Board of Directors:
Richard A. Sullivan was appointed Member of the Board, President and Chief
Executive Officer on April 28, 1994, and Chairman of the Board in April 1996. He
is responsible for full operations of Source Scientific, Inc. He held the
position of Executive Vice President and General Manager of Source since April
1993, and was Vice President Sales & Marketing for MicroProbe Corporation and
Source from May 1989. Previously, he was President of LAB2000 in Florida, a
company specialized in import and export of clinical and industrial products
worldwide. Mr. Sullivan holds a BS in Medical Technology from the University of
Buffalo, New York and an MBA from Pace University, New York.
<PAGE>
John A. Karsten was the Vice President and Chief Financial Officer of the
Company from 1990 through Fiscal 1994. He was instrumental in directing the
Company's reorganization from computer peripheral manufacturer to analytic
instrumentation manufacturer in 1991. He has served as a Member of the Board of
Directors of the Corporation since its inception in 1975, participating in the
Initial Public Offering of the Company.
Susan L. Preston is a part-time employee of the Company for corporate legal
issues involving contracts, intellectual property, employment and regulatory
compliance. She also has her own law practice in the State of Washington.
Previously, she was Vice President and General Counsel for MicroProbe
Corporation from 1992 to 1994, where she handled all legal issues of the
corporation. From 1991 to 1992, as Regional General Counsel, she provided legal
and technical background to EMCON Northwest, a national environmental consulting
firm involved in hydrogeology, remediation and analytical services.
Thomas J. White is CEO of VLSystems, Inc., of Irvine, California, a software
systems integration firm, a position he has held since 1992. As a CPA, he has
held Senior Tax Specialist positions with Coopers & Lybrand in Denver, and with
Peat Marwick in Decatur, Illinois. Mr. White has been a certified public
accountant since 1981, and holds a B.S. in Accounting from Illinois State
University.
Jerry Gallwas is a retired Director of Program Management for Beckman
Instruments. His career with Beckman was from 1964 to 1994. As a member of the
original team that founded and managed Beckman's diagnostic business from the
mid-1960's, Mr. Gallwas contributed to the definition, design and development of
Beckman's clinical laboratory systems. Mr. Gallwas holds a BS from San Diego
State College.
Bruce Popko is Chairman/CEO of ARRISystems, Inc., a publication, telecom and
design consulting company located in Irvine, California, a position he has held
since 1993. Previously, he held executive management positions a Scitex American
Corp, and at Dymo Industries/Photon in Boston, Massachusetts. Mr. Popko has a BS
from Akron University and has attended the Accelerated MBA series at Harvard
Business School - Advanced Studies.
Barry D. Plost is currently Chairman, President/CEO of SeraCare, Inc., in Los
Anageles. He was formerly with David Barrett, Inc. as a management consultant,
and President/CEO of Country Wide Transport Services, Inc., a NASDAQ listed
company. He holds a BA degree from University of Illinois and an MBA from Loyola
University in Chicago.
<PAGE>
Executive Compensation
The following table sets forth information regarding compensation paid
by the Company to its Chief Executive Officer (the "Named Officer") during each
of the Company's last three fiscal years. No executive officer of the Company
received salary and bonus payments in excess of $100,000 during the fiscal year
ended June 30, 1996.
<TABLE>
<CAPTION>
Long Term Compensation
Awards (2)
Name and Principal Position (1) Annual Compensation Securities Underlying
- ------------------------------- ------------------- Options (#)
Year Salary ($)
<S> <C> <C> <C>
Richard A. Sullivan 1996 97,428(3) 330,000
President and Chief Executive Officer 1995 103,021 0
and Chairman of the Board 1994 103,021 200,000
<FN>
(1) Mr. Sullivan became President and Chief Executive Officer on May 1, 1994.
(2) The Company has no stock appreciation rights plan. The Company has an
incentive stock option plan which was amended by a vote of the shareholders
in December 1994, to include options to directors and advisors.
(3) Mr. Sullivan's compensation for fiscal 1996 reflects a salary reduction
of 12 1/2% which was implemented throughout the Company on August 1, 1995.
</FN>
</TABLE>
Options Exercises and Year-End Value Table
The table below sets forth information regarding stock options of the Chief
Executive Officer including (i) the exercise of stock options during the fiscal
year ended June 30, 1996, (ii) the number of unexercised options as of June 30,
1996, and (iii) the value as of June 30, 1996, of unexercised in-the-money
options.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Acquired Value at Year-End (#) at Year-End ($)
Name on Exercise (#) Realized ($) Exerciseable/Unexerciseable Exerciseable/Unexerciseable (1)
---- --------------- ---------- ------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Richard A. Sullivan 11,830 1,656 348,170/170,000 - / -
<FN>
(1) Value per share is based on the difference between the option exercise
price per share and the then current market price per share of Common Stock
as of June 30, 1996.
</FN>
</TABLE>
Director Compensation
Commencing April 1, 1996, the Members of the Board of Directors who qualify
as outside directors receive cash compensation of $500 for each meeting
attended, plus reimbursement for expenses incurred in meetings of the Board of
Directors of the Company.
<PAGE>
Consulting and Related Agreements
The Company has employment agreements with the following directors:
<TABLE>
<CAPTION>
Dates of Agreement/
Name of Director Working Relationship Compensation Scope of Services Provided
<S> <C> <C> <C>
Richard A. Sullivan July 1, 1995 to $103,021 President and Chief Executive Officer
June 30, 1998 per annum
Susan L. Preston July 1, 1995 to $54,340 General Counsel and
June 30, 1997 per annum (1) Director of Legal Affairs
<FN>
(1) Ms. Preston is employed by the Company on a part-time basis.
</FN>
</TABLE>
The Company has employment agreements with Susan Preston, a director; Richard A.
Sullivan, an officer and director; with Mokhtar A. Shawky and Catherine Curtis,
who are officers of the Company; and with three senior key employees who are not
directors or officers of the Company.
CONFIRMATION OF INDEPENDENT ACCOUNTANCY FIRM
The Board of Directors appointed Corbin & Wertz, Certified Public
Accountants, to audit the books of account and other records of the Company and
its consolidated operating subsidiaries for the fiscal year ending June 30,
1996. The Board of Directors has appointed Corbin & Wertz as the Company's
independent accountants for the fiscal year ending June 30, 1997, subject to
shareholder approval and negotiation of the fee and the engagement agreement.
The Board of Directors recommends the Shareholders approve the Board's
appointment of Corbin & Wertz as the Company's independent accountants for the
fiscal year ending June 30, 1997, subject to negotiation of the fee and the
engagement agreement. By voting FOR the confirmation of the Company's
independent accountant, Corbin & Wertz, shareholders will confirm the
appointment of Corbin & Wertz for the fiscal year ending June 30, 1996, and will
approve the appointment of Corbin & Wertz for the fiscal year ending June 30,
1997. The Board expects that representatives of Corbin & Wertz will be present
at the Annual Meeting to respond to appropriate questions from Shareholders, and
the Board will provide these representatives with an opportunity to make a
statement if they desire to do so.
Confirmation requires the affirmative vote of a majority of the shares
represented and voted at the Annual Meeting. If the appointment of Corbin &
Wertz is not approved by the shareholders, the Board of Directors will consider
the appointment of other auditors for the fiscal year ending June 30, 1997.
OTHER MATTERS
The Board of Directors is not aware of any business which may be
properly presented for action at the Annual Meeting and which is required to be
disclosed in this Proxy Statement except the matters set forth in the Notice and
described in this Proxy Statement. Unless otherwise directed, all shares
represented by the persons named in the accompanying Proxy will be voted in
favor of the proposals described in this Proxy Statement. If any other matters
come before the Annual Meeting, including matters incident to the
<PAGE>
conduct of the meeting and any Shareholder proposal omitted from the Proxy
Statement and Proxy pursuant to the Proxy rules of the Securities and Exchange
Commission, the persons named in the accompanying Proxy will vote on those
matters according to their best judgment.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this
Proxy Statement and the enclosed form of Proxy and the cost of soliciting
Proxies with respect to the Annual Meeting will be borne by the Company. The
Company will request banks and brokers to solicit their customers who
beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for their reasonable out-of-pocket expenses of
such solicitations. The original solicitation of Proxies by mail may be
supplemented by telephone, telegram and personal solicitation by officers and
other regular employees of the Company, but no additional compensation will be
paid to such individuals.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders which includes financial
statements for the fiscal years ended June 30, 1995 and 1996, is being sent to
the Shareholders concurrently with mailing of this Proxy Statement. The Annual
Report is not to be considered as part of the soliciting material.
SHAREHOLDERS' PROPOSALS
It is presently anticipated that the 1997 Annual Meeting of
Shareholders will be held on Wednesday, November 5, 1997. Shareholders desiring
to exercise their rights under the proxy rules of the Securities and Exchange
Commission to submit proposals for consideration by the Shareholders at the 1997
Annual Meeting are advised that their proposals must be received by the Company
no later than June 1, 1997 in order to be eligible for inclusion in the
Company's Proxy Statement and form of Proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Garden Grove, California Catherine Curtis
October 15, 1996 Secretary
Copies of the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission, including financial statements, can be obtained without
charge by holders (including beneficial owners) of the Company's Common Stock,
from Catherine Curtis, Corporate Secretary, 7390 Lincoln Way, Garden
Grove, California 92641.
