SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CONSUMAT SYSTEMS, 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):
( ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
(X) 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:
<PAGE>
CONSUMAT SYSTEMS, INC.
POST OFFICE BOX 9379 RICHMOND, VIRGINIA 23227
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 14, 1995
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Consumat Systems, Inc. (the "Company")
will be held at the offices of the Company, 8407 Erle Road,
Mechanicsville, Virginia, on Wednesday, June 14, 1995, commencing at 11:00 a.m.
E.D.T., for the following purposes:
1. To elect a board of three directors to serve for the ensuing year.
2. To act upon a proposal, previously approved by the Board of
Directors of the Company, to amend Article III.A of the Articles of
Incorporation to increase the authorized capital stock of the
Company to 10,000,000 shares of Common Stock (see Exhibit A to the
Company's Proxy Statement).
3. To ratify the selection of Parham, P.C. as accountants and
auditors for the Company for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 28,
1995, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof.
The Company's Proxy Statement is submitted herewith. The Annual
Report for the fiscal year ended December 31, 1994, accompanies the Proxy
Statement.
You are requested to complete, sign, date, and return the enclosed
Proxy promptly regardless of whether you expect to attend the meeting. A
self-addressed, stamped envelope is enclosed for your convenience.
If you are present at the meeting, you may vote in person even if you
have already sent in your proxy.
By Order of the Board of Directors
PATRICIA B. BRADLEY,
Corporate Secretary
May 12, 1995
<PAGE>
CONSUMAT SYSTEMS, INC.
Post Office Box 9379
Richmond, Virginia 23227
PROXY STATEMENT
To Be Mailed on or about May 12, 1995, for
Annual Meeting of Shareholders To Be Held June 14, 1995
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Consumat Systems, Inc. (the "Company") for use at the Annual
Meeting of Shareholders of the Company to be held June 14, 1995, or any
adjournments thereof, for the purposes set forth in this Proxy Statement and
the attached Notice of Annual Meeting of Shareholders. If sufficient proxies
are not returned in response to this solicitation, supplementary
solicitations may also be made by mail or by telephone, telegraph or personal
interview by directors, officers and regular employees of the Company, none
of whom will receive additional compensation for these services. The Company
reserves the right to retain an outside proxy solicitation firm to assist in
the solicitation of proxies, but at this time does not have plans to do so.
Costs of solicitation of proxies will be borne by the Company, which will
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for reasonable out-of-pocket expenses incurred by them in
forwarding proxy materials to the beneficial owners of shares held by them.
The shares represented by all properly executed proxies received by the
Corporate Secretary of the Company and not revoked as herein provided will be
voted as set forth herein unless the shareholder directs otherwise in the
proxy, in which event such shares will be voted in accordance with such
directions. Any proxy may be revoked at any time before the shares to which
it relates are voted either by written notice (which may be in the form of a
substitute proxy delivered to the Secretary of the meeting) or by attending the
meeting and voting in person.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed the close of business on April 28,
1995 as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof. Each
holder of record of the Company's Common Stock, $3.00 par value (the "Common
Stock") on the record date will be entitled to one vote for each share then
registered in his name with respect to all matters to be considered at the
meeting. As of the close of business on the record date, 1,557,699 shares
of Common Stock were outstanding and entitled to vote at the meeting. Presence
in person or by proxy of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the meeting will constitute a quorum. Shares
for which the holder has elected to abstain or to withhold the proxies'
authority to vote (including broker non-votes) on a matter will count towards
a quorum, but will have no effect on the action taken with respect to such
matter.
PROPOSAL ONE--ELECTION OF DIRECTORS
Nominees and Vote Required
The Company's Board of Directors presently consists of three
directors, who are named below as nominees. Each nominee was elected at
the last Annual Meeting of Shareholders. Each director is elected to
serve until the next Annual Meeting of Shareholders or the election and
qualification of his successor.
Each of the nominees has consented to his being named as a nominee in
this Proxy Statement, has agreed to serve if elected, and has furnished
to the Company the information set forth in the table below with respect to
his age, his principal occupation or employment and his beneficial ownership of
the Common Stock as of April 28, 1995. The table also sets forth the amount
of shares beneficially owned as of such date by all the executive officers set
forth in the summary compensation table who are not directors, and by all
executive officers and directors as a group and the percentage of
outstanding shares represented by the stated beneficial ownership. To the
best of the Company's information, the persons named in the table, and all
officers and directors as a group, have sole voting and investment power
with respect to shares shown as owned by them, except as may be set forth in
the notes thereto.
It is expected that each of these nominees will be able to serve, but in
the event that any such nominee is unable to serve for any reason (which
event is not now anticipated), the proxies reserve discretion to vote or
refrain from voting for a substitute nominee or nominees. Shareholders may
withhold authority to vote for any of the nominees on the accompanying proxy.
Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election.
<TABLE>
Name, Age, Positions with
the Company or Principal Amount and Nature
Occupation for the Past Five Director of Beneficial Percent of
Years and Other Information Since Ownership Class
<S> <C> <C> <C>
Howard P. Harper (50) 1993 61,500 (1) 3.7%
President of NEWTEC, Inc.
Robert L. Massey (60) 1971 50,385 (2) 3.0%
President and Chief
Executive Officer
of the Company
Neil F. Vierson, III (52) 1992 56,633 (3) 3.3%
Chairman of the Board
of the Company; President
of Vierson Boiler and
Repair Co., Inc.
All executive officers and directors 169,518 10.0%
as a group (5 persons)
</TABLE>
____________________
(1) Includes 25,000 shares subject to stock options exercisable within 60
days of the record date.
(2) Includes 50,000 shares subject to stock options exercisable within 60
days of the record date.
(3) Includes 50,000 shares subject to stock options exercisable within 60
days of the record date.
Attendance
The Board of Directors held 15 meetings during the fiscal year ended
December 31, 1994 and 16 meetings during the fiscal year ended December
31, 1993. All directors attended seventy-five percent or more of the
meetings, including regularly scheduled and special meetings, and the meetings
of any committees of the Board on which they served, in each case that were
held in the past fiscal year during the periods in which they were directors or
served on such committees.
Committees of the Board of Directors
The Board generally acts as a whole, rather than through committees.
The only standing committees of the Board are the Compensation Committee,
Audit Committee, and Nominating Committee, described below.
The Compensation Committee, comprised of Messrs. Vierson and Harper, met
once during the fiscal year ended December 31, 1994. The primary functions of
the Committee are to review and make recommendations to the Board
concerning the direct and indirect compensation of officers elected by the
Board; to administer and make awards under the Company's employee stock
option and performance share programs; to review and report to the Board
concerning annual salaries and year-end bonuses recommended by management for
all officers and certain other executives; and to recommend special
benefits and perquisites for management.
The Audit Committee, comprised of Messrs. Vierson and Harper, met once
during the fiscal year ended December 31, 1994. The primary functions of the
Committee are to make recommendations to the Board concerning engagement and
discharge of the independent auditors; to review the overall scope and
results of the annual audit; to review the independence of the independent
auditors; and to review the functions and performance of the Company's internal
accounting controls.
The Company has a standing Nominating Committee, comprised of Messrs.
Harper and Massey. The Nominating Committee did not meet as a separate
entity during the fiscal years ended December 31, 1994 or 1993, and in
practice the functions of the Nominating Committee have been assumed and
performed by the Board as a whole during that period.
Executive Compensation
Summary Compensation Table. The table below sets forth for the years
ended December 31, 1994, 1993 and 1992 the annual and long-term
compensation for services in all capacities to the Company and its
subsidiaries of those persons who at December 31, 1994 were the Company's
executive officers whose salary and bonus exceeded $100,000 for the year
ended December 31, 1994 (the "Named Executives").
<TABLE>
Long-Term
Name and Principal Position Annual Compensation Awards
Compensation
Securities Underlying
Salary Bonus Options/SARs(#) All Other Compensation
<S> <C> <C> <C> <C> <C>
Robert L. Massey, 1994 112,500 -0- -0- (1)
President and Chief 1993 122,115 -0- 50,000
Executive Officer 1992 120,251 -0- -0-
</TABLE>
(1) Substantially less than 10% of salary. See Contracts with Executives.
Options/SAR Grants in Fiscal Years 1994 and 1993
The table below sets forth for the years ended December 31, 1994 and
December 31, 1993, certain information concerning options/SARS granted to the
Named Executives.
<TABLE>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
Number of % of total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Year Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
1994 0 -- -- -- -- --
Robert L. Massey
1993 50,000 (1) 100% $0.8125 1/20/03 $25,548 $64,746
</TABLE>
(1) At December 31, 1994, Mr. Massey had aggregate options to purchase 50,000
shares of the Company's Common Stock, and in no case did the fair
market value of the underlying securities exceed the exercise or base
price of the option.
Compensation Committee Report on Executive Compensation
The Company's executive compensation program is administered
by the Compensation Committee of the Board of Directors, which is
composed of two independent, non-employee directors. The Compensation
Committee has structured the executive compensation program (subject to
the Company's financial condition) (i) to attract and retain a skillful,
dedicated, and motivated executive group and (ii) to align individual
rewards with the Company's operating performance in order to provide
strong incentives for the achievement of the Company's short-term and
long- term goals. It is the Company's policy, subject to the above
considerations and to the Company's financial circumstances, that the
variable portion of executive compensation should be directly
contingent on Company performance. The key elements of the executive
compensation program include: the payment of a base salary and, if the
Company's financial condition permits, a bonus, and the issuance of Common
Stock and other stock-related incentive awards pursuant to the 1993 Stock
Option Plan (see below).
Base Salaries
Base salaries for all salaried employees, including executive
officers, are established by reference to defined salary ranges which
have been assigned to each position based upon the need to provide
similar salary opportunities as those provided by competitors, as well
as to maintain equity among positions within the Company. Individual
base salaries within these ranges are determined periodically based upon
the individual's performance against defined objectives, as well as the
individual's level of skill development such as leadership,
planning, and development of subordinates.
The Company's Chief Executive Officer, Mr. Massey, was entitled
under his employment contract to receive a base salary of $125,000
during each of the fiscal years ending December 31, 1994, 1993 and 1992.
The amounts set forth in the Summary Compensation Table reflect salary
reductions applicable to Mr. Massey in each of those years.
Stock Incentives
Long-term incentives are provided through the granting of stock
and stock options under the 1993 Stock Option Plan (the "1993 Plan"),
which is currently administered by the Compensation Committee. The 1993
Plan was adopted by the Board of Directors on January 21, 1993 and
approved by the shareholders on October 21, 1993, and became effective
retroactive to January 21, 1993. The 1993 Plan reserves 200,000 shares
of Common Stock for issuance pursuant to incentive awards. Such
incentive awards may be in the form of stock options, stock
appreciation rights, restricted stock, incentive stock or tax offset
rights.
The Compensation Committee believes that having a significant
percentage of total management compensation in the form of stock-based
compensation serves to motivate executives to maximize the Company's
performance, and thereby its stock price, and to more closely align
executive interests with those of the shareholders. The number and kind
of incentive awards granted to each management employee is determined
by the Compensation Committee with reference to the executive's level of
responsibility, his performance as measured against defined objectives,
and the Company's financial condition. The actual value realized by an
executive related to incentive awards depends upon his continued
employment and the Company's stock performance. To achieve the
greatest benefit from the executive compensation program, executive
officers and all present and future employees of the Company who hold
positions with management responsibilities are eligible to receive
incentive awards under the 1993 Plan.
Executive officers also participate in other Company benefit
plans that are generally available to all salaried employees, such as
group life and health insurance plans.
Neil F. Vierson, III
Howard P. Harper
Performance Graph
The Company is subject to the Securities and Exchange Commission rules
requiring all public companies to present a corporate performance graph
comparing the Company's five- year cumulative shareholder return on its Common
Stock with two indices or other relevant measures. The graph below compares
such data for the Company to the NASDAQ Composite Index and to the Dow Jones
Pollution Control Industrial Group Index Weighted for the five- year period
ended December 31, 1994, assuming that investments of $100 were made on
December 31, 1989.
(PERFORMANCE GRAPH)
<TABLE>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Consumat Systems, Inc. $100.00 $58.82 $64.71 $24.51 $9.80 $3.92
NASDAQ Composite Index $100.00 $82.20 $128.92 $148.84 $170.79 $165.33
Dow Jones Pollution $100.00 $87.07 $103.15 $96.70 $70.01 $70.59
Industrial Group Index
Weighted
</TABLE>
Bonus Plan
The Company has a bonus plan which provides for the payment of periodic
bonuses to employees. Aggregate bonuses may not exceed 20% of annual pre-tax
earnings. For 1994 and 1993, the Company did not pay cash bonuses to its
officers.
Contracts with Executives
The Company has an employment agreement with Mr. Massey, which was
executed on February 12, 1991, with an initial term of two years.
Thereafter it is automatically renewed annually for an additional one year
term, unless notice of non-renewal is given by one of the parties. The
agreement provides for a base salary and additional benefits. See discussion
of Base Salaries in the Compensation Committee Report on Executive
Compensation.
As of December 31, 1994, Mr. Massey was indebted to the Company in the
amount of $38,000 as a result of a loan made to him in December 1985. The
loan does not bear interest and is to be repaid on demand out of future
bonuses, when declared, or otherwise one year following termination of
employment with the Company. No repayments were made against this loan in
1994 or 1993.
Director Compensation
Until August 1993, Directors of the Company were not entitled to be paid.
However, direct travel expenses associated with Board activities were
reimbursable. Three directors received reimbursement during 1994 and 1993:
$12,282 in total reimbursements were paid in 1994, and $15,620 in total
reimbursements were paid in 1993. In August 1993, the Board of Directors
resolved that non-employee directors should be paid a fee (payable only in
shares of the Company's Common Stock) having a Market Value (as defined) of
$500 per meeting attended, subject to a maximum of 500 shares per meeting.
Issuance of shares is subject to customary limitations and restrictions under
the securities laws.
On January 21, 1993, the Board of Directors adopted, subject to
shareholder approval, the 1993 Non-Employee Directors Stock Option Plan (the
"1993 Outside Directors Plan"). The shareholders approved the 1993 Outside
Directors Plan on October 21, 1993, effective retroactive to January 21, 1993.
The 1993 Outside Directors Plan authorizes the granting of stock options to
purchase an aggregate maximum of 200,000 shares of the Company's Common
Stock to eligible members of the Company's Board of Directors.
The purpose of the 1993 Outside Directors Plan is to encourage
ownership in the Company by non-employee members of the Board of Directors,
in order to promote long-term shareholder value and to provide non-employee
members of the Board of Directors with an incentive to continue as directors
of the Company. Only directors of the Company who are not also employees of
the Company and who do not own or control, directly or indirectly, more than
5% of the outstanding shares of the Company's Common Stock, may be granted
options under the Plan.
Each eligible director of the Company on the effective date of the
1993 Outside Directors Plan received an option to purchase 25,000 shares of the
Company's Common Stock. Each eligible director newly elected by the Company's
stockholders or directors after the effective date of the 1993 Outside
Directors Plan will automatically receive an option to receive 25,000 shares on
the date of such initial election. A director who serves as chairman of the
Board is entitled to a one-time grant of an option for 25,000 shares of
stock. An option may be exercised in full six months from the date of
grant of the option. No option may be exercised after the expiration of ten
years from the date the option is granted, and unless such optionee is a
director of the Company or within twelve months after the date he ceases to be a
director.
Common Stock Options
At December 31, 1994, there were outstanding options under the 1993
Employee Stock Option Plan and the 1993 Non-Employee Directors Stock Option
Plan for the purchase of 175,000 shares at prices ranging from $0.8125 to
$0.9375 per share, with options for the purchase of 50,000 of those shares
expiring on April 3, 1995. No further options will be granted under the
Company's previous plans and all previously outstanding options were canceled
or expired during 1993.
Compensation Committee Interlocks and Insider Participation
There are no Compensation Committee interlocks.
Messrs. Harper and Vierson, the members of the Compensation
Committee, are not employees of the Company. In June 1992, the Board elected
Mr. Vierson a director. Mr. Vierson is president and part owner of Vierson
Boiler and Repair Co., Inc., which acts as a dealer for the Company. In May,
1993, the Board elected Mr. Harper a director. He is president of NEWTEC,
Inc., which also acts as a dealer for the Company. All the Company's dealings
with such companies are conducted on an arms-length basis.
Certain Transactions
In July 1993, the Company entered into an agreement with Lighthouse
Investments, L.L.C. pursuant to which the Company borrowed $170,000 during 1993,
at an annual interest rate of 10%. The borrowings are secured by an
interest in the Company's intellectual properties. At December 1, 1993, all
amounts then outstanding and any accrued but unpaid interest were converted
to an installment debt obligation, due quarterly beginning March 1, 1994
and ending on December 1, 1995. None of such quarterly payments has been
made. At March 31, 1995, $197,223, including accrued interest, was outstanding
under this agreement. Messrs. Vierson and Harper are substantial
investors in Lighthouse Investments, L.L.C. The terms of the agreement were
negotiated at arms-length.
On July 13, 1994, the Company sold all of the stock of its wholly owned
subsidiary Consumat Sanco, Inc. ("Sanco"), which owned and operated a permitted
landfill and related equipment in New Hampshire. The sale of the Sanco stock,
as discussed in Note 21 of the Audited Consolidated Financial Statements,
generated proceeds of $3,050,000 in cash and notes. The Company used the
entire proceeds to satisfy outstanding claims of certain unsecured creditors
and Environmental Systems Company ("ENSCO"), which, as of the record date,
owned 36.4% of the issued and outstanding shares of the Company's Common Stock.
The Company received releases from the unsecured creditors and ENSCO with
respect to such claims. The aggregate amount of the claims satisfied by the
sale proceeds was $3,520,000. The proceeds were distributed pursuant to a
Consent and Acknowledgment Agreement dated as of July 15, 1994, among the
Company, ENSCO, and the Informal Committee of Unsecured Creditors. The
terms of the agreement were negotiated at arms-length and approved by the Board
on July 12, 1994. Pursuant to the agreement, ENSCO also received an unsecured
note from the Company in the amount of $110,000, due in July 1995.
Beginning in 1994 and continuing into 1995, the Company entered into
negotiations with Samsung Heavy Industries ("SHI") for a project in Korea. SHI
would not proceed with the project unless the Company secured a guarantee.
Over a period of several months, management unsuccessfully attempted to secure
such a guarantee through several independent financing sources, and finally
concluded that if any financing could be acquired, it would be so expensive as
to make the project unprofitable. In the face of no other apparent options,
Mr. Vierson offered to arrange a letter of credit through his bank (Old Kent
Bank and Trust Company, Grand Rapids, Michigan) at a cost to the Company of
$35,000. On March 3, 1995, the Board approved financing to be arranged by
Mr. Vierson, subject to arms- length negotiation of timing and terms by the
Company's management.
The Company has had discussions with a number of potential investors
who have indicated a willingness to consider providing debt or equity
financing to the Company, subject to certain conditions. All negotiations
have been and will be conducted on an arms-length basis.
Principal Shareholders
The following table lists the only persons known by the Company to be the
beneficial owners of more than five percent of the Common Stock of the Company
as of March 31, 1995, unless otherwise indicated:
Amount
Name and Address of of Beneficial Percent
Beneficial Owner Ownership of Class
Environmental Systems Company 566,450 36.4%
333 Executive Court
Little Rock, Arkansas 72205
Yankee Engineering Company, Inc. 299,952 19.3%
1901 Lansdowne Road
Baltimore, Maryland 21227
Harris Mechanical Corp. 83,333 5.3%
2300 Territorial Road
St. Paul, Minnesota 55114-1699
To the best of the Company's knowledge, each of the above shareholders
owns all such shares directly.
PROPOSAL TWO--AMENDMENT TO ARTICLES
TO INCREASE AUTHORIZED COMMON STOCK
On April 6, 1995, the Board of Directors of the Company approved for
submission to a vote of the shareholders at the next annual meeting a proposal
to amend Article III of the Articles of Incorporation to increase the number of
authorized shares of Common Stock to 10,000,000 shares, par value $3.00,
from 3,333,333 shares. A copy of the proposed amendment is attached to
this proxy statement as Exhibit A. On April 28, 1995, there were 1,557,699
shares issued and outstanding.
The Board believes that the increase in the number of authorized but
unissued shares is necessary to provide flexibility to permit the Company to
issue additional Common Stock to meet future equity capital requirements. The
sale or issuance of these shares will be determined from time to time by the
Board as needed for the best interests of the Company. The amount and timing of
sales will depend upon varying factors such as market conditions, capital needs,
and the cost of other forms of capital. In addition, the Company may
periodically issue shares of Common Stock under its 1993 Stock Option Plan and
its 1993 Non-Employee Directors Stock Option Plan.
At December 31, 1994, the Company had a working capital deficiency of
approximately $775,000 and a net capital deficiency of approximately
$717,000. Although the Company does not have any specific plans to issue or
sell additional shares of Common Stock for any purpose except as set forth
above, the Board believes that the flexibility to issue the additional Common
Stock authorized by the proposed amendment will position the Company to take
advantage of opportunities to acquire additional capital investment and
thereby enhance its long-term prospects.
The proposal to increase the number of authorized shares is not intended
as an anti- takeover measure but could be construed as having an
anti-takeover effect, since authorized but unissued shares would be available
for issuance as an appropriate response to an actual or threatened attempt to
acquire control of the Company or as a strategic measure to deal with
potential takeover activity. Article III.B of the Articles of
Incorporation currently prohibits all preemptive rights in connection with
any of the Company's stock.
If the proposed amendment to Article III is adopted, the Company would be
permitted to issue the additional authorized shares without further stockholder
approval, upon such terms and for such consideration as determined by the
Board of Directors in its discretion, except to the extent otherwise
required by law or a securities exchange on which the Common Stock is listed
for trading. Such issuance could effectively dilute the currently existing
issued and outstanding Common Stock.
Adoption of the proposed amendment to Article III of the Articles of
Incorporation requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock of the Company entitled to vote at
the meeting. The Board of Directors recommends a vote "FOR" the proposed
amendment to the Articles of Incorporation.
PROPOSAL THREE--RATIFICATION OF SELECTION OF AUDITORS
Introduction and Proposal
Parham, P.C., independent certified public accountants, has been
selected by the Board of Directors as accountants and auditors for the
Company for the current fiscal year, subject to ratification by the
shareholders. The firm has no relationship with the Company except that it
has served as its independent accountants and auditors since December 1,
1994. Representatives of Parham, P.C. are expected to be present at the
Annual Meeting of Shareholders and will have an opportunity to make a statement
if they so desire and are expected to be available to respond to
appropriate questions from shareholders. In the event the shareholders do
not ratify the selection of Parham, P.C., the selection of other accountants
and auditors will be considered by the Board of Directors.
Action by shareholders is not required by law in the selection of
independent auditors, but their selection is submitted by the Board of
Directors in order to give shareholders the final choice in the designation of
independent auditors.
The Board of Directors recommends a vote "FOR" the selection of
Parham, P.C. Ratification of the selection requires the affirmative vote of a
majority of shares of Common Stock voting at the meeting.
The Company's Audited Consolidated Financial Statements
The Company's Consolidated Financial Statements are included in the
accompanying Annual Report to Shareholders, and are filed as part of the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
The Board of Directors accepted the resignation of Coopers &
Lybrand as the Company's auditors effective December 1, 1994. Effective
December 1, 1994, the Company's Audit Committee recommended and the Board of
Directors approved the engagement of Parham, P.C. as independent auditors of the
Company for the fiscal years ending December 31, 1994 and 1993.
Such Consolidated Financial Statements include the audit report of
Parham, P.C. on the financial statements for the fiscal years ended December
31, 1994 and 1993. The report of Coopers & Lybrand, the predecessor
auditors, covering the year ended December 31, 1992 was included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992, and has not been withdrawn. Such report for 1992 did not contain an
adverse opinion, disclaimer of opinion or a qualification or modification
as to uncertainty, audit scope or accounting principles, except that the
report contained explanatory paragraphs which (i) questioned the ability of
the Company to continue as a going concern, and (ii) called attention to
certain contingent liabilities. Nevertheless, because Coopers & Lybrand has
declined to deliver a newly signed copy of its report, no report of Coopers &
Lybrand is included or incorporated by reference in either the Annual Report to
Shareholders or its Annual Report on Form 10-K.
Coopers & Lybrand has informed the Company that the firm will not
manually sign its reissued report until the Company pays in full such firm's
previously rendered bills for services provided through November 1994. The
Company is not aware of any subsequent events, transactions or other matters
that might have affected the previous report. In the course of Parham, P.C.'s
audit in respect of the financials for the fiscal years ended December 31, 1994
and 1993, nothing has come to their attention that in their judgment would
have a material effect on or require disclosure in the Company's
Consolidated Financial Statements covered by Coopers & Lybrand's report.
Nevertheless, there can be no assurance that Coopers & Lybrand would reissue the
report in its original form and without additional qualifications if the fee
matter described above were resolved.
Parham, P.C.'s report on the financial statements of the Company for the
years ended December 31, 1994 and 1993 did not contain an adverse opinion,
disclaimer of opinion or a qualification or modification as to uncertainty,
audit scope or accounting principles, except that the report contained an
explanatory paragraph which questioned the ability of the Company to continue
as a going concern. During the Company's fiscal year ended December 31,
1992 and during the subsequent period preceding Coopers & Lybrand's
resignation effective December 1, 1994, there were no disagreements between
the Company and Coopers & Lybrand on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Coopers & Lybrand,
would have caused Coopers & Lybrand to make reference to the subject matter of
the disagreement(s) in connection with its reports, and there have been no
"reportable events" during such period as such term is defined in Item 304(a)
of Regulation S-K promulgated by the Securities and Exchange Commission.
The Company furnished each of Coopers & Lybrand and Parham, P.C. with a
copy of the disclosure contained in this Proxy Statement, and advised each of
the accountants that if it believed that the statements made by the Company
in response to Item 304(a) of Regulation S-K were incomplete or incorrect,
the accountant could present its views in a brief statement to be included in
this Proxy Statement. Neither Coopers & Lybrand nor Parham, P.C. submitted
such statement of views to the Company.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the meeting. However, if any other matters are properly presented, or
if any question arises as to whether any matter has been properly
presented and is a proper subject for shareholder action, the persons named
as proxies in the accompanying proxy intend to vote the shares represented by
such proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 1996 MEETING
Proposals of shareholders intended to be presented at the 1996 annual
meeting must be received by the Company at its principal executive offices no
later than January 12, 1996 for inclusion in the Company's 1996 proxy
materials. Such proposals should meet the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
FURTHER INFORMATION
The Company will provide without charge to each person from whom a
proxy is solicited by the Board of Directors, upon the written request of any
such person, a copy of the Company's Annual Report on Form 10-K, including
the financial statements thereto, as filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, for the
Company's fiscal year ended December 31, 1994. Such written requests should
be sent to the Corporate Secretary, Consumat Systems, Inc., Post Office Box
9379, Richmond, Virginia 23227.
By Order of the Board of Directors
PATRICIA B. BRADLEY
Corporate Secretary
May 12, 1995
PLEASE FILL IN, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY. IF YOU
ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN
SHARES.
<PAGE>
Exhibit A
Set forth below is the text of Article III.A. of the Company's
Articles of Incorporation, showing the proposed amendment:
A. Authorized Shares. The designation and aggregate number of shares
that the Corporation shall have authority to issue and the par value per
share are as follows:
Class Number of Shares Par Value
Common Stock 10,000,000 $3.00
Preferred Stock 1,000,000 $1.00
<PAGE>
CONSUMAT SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
June 14, 1995
The undersigned, having received the 1994 Annual Report to
Shareholders and the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement dated May 12, 1995, hereby appoints William R. Davis and
William O. Wiley and each of them, proxies, with full power of substitution,
and hereby authorizes them to represent and vote the shares of Common Stock
of Consumat Systems, Inc., (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders
of the Company to be held on June 14, 1995 at 11:00 a.m., Eastern Daylight
Time and any adjournments thereof, and especially to vote:
1. ITEM ONE - ELECTION OF DIRECTORS
( ) FOR all nominees listed below for the terms set
forth in the Proxy Statement
( ) WITHHOLD AUTHORITY to vote for all nominees listed below
( ) ABSTAIN from voting
Howard P. Harper, Robert L. Massey, and Neil F. Vierson, III
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.
Any proxy executed in such manner as not to withhold authority to
vote for the election of any nominee shall be deemed to grant such
authority.
2. ITEM TWO - To consider and vote upon a proposal to amend the
Articles of Incorporation to increase the authorized capital stock of the
Company to 10,000,000 shares of Common Stock.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. ITEM THREE - To ratify the selection of Parham, P.C. as the Company's
independent accountants for the fiscal year ending December 31, 1995.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. IN THEIR DISCRETION the proxies are authorized to vote such other
business as may properly come before the meeting and any adjournments
thereof.
( ) FOR ( ) AGAINST ( ) ABSTAIN
In the ballot provided for that purpose, if you specify a choice as to the
action to be taken, this proxy will be voted in accordance with such choice. If
you do not specify a choice, it will be voted: FOR Item One, the election of
the nominees named in the Proxy Statement as directors; FOR Item Two, the
approval of the amendment to the Articles of Incorporation to increase the
authorized shares of the Company's Common Stock to 10,000,000; and FOR
Item Three, the ratification of the selection of Parham, P.C. as auditors
for fiscal 1995, and as described in the Proxy Statement.
Any proxy or proxies previously given for the meeting are revoked.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
I do ( ) do not ( ) plan to attend the meeting.
Date: _______________________, 1995
________________________________
(Signature)
________________________________
(Signature if held jointly)
Please sign exactly as the name appears
hereon.
