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:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) 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):
(X) $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:
( ) 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.
<PAGE>
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.
Amount of Shares
Name, Age, Positions with Beneficially Owned
the Company or Principal and Percent of Class
Occupation for the Past Five Director Outstanding as of
Years and Other Information Since April 28, 1995
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)
____________________
(1) Includes 25,000 shares subject to stock options execisable within 60 days
of the record date.
(2) Includes 50,000 shares subject to stock options execisable within 60 days
of the record date.
(3) Includes 50,000 shares subject to stock options execisable 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 75 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 $100,000 for the year
ended December 31, 1994 (the "Named Executives").
<TABLE>
<CAPTION>
Annual Long-Term
Name and Principal Position Compensation Compensation Awards
Securities Underlying
Salary Bonus Options/SARs(#) All Other Compensation
<S> <C> <C> <C> <C> <C>
Robert L. Massey, 1994 112,500 -0- -0- (1)
President and Chief 1993 122,115 -0- 50,000
Executive Officer 1992 120,251 -0- -0-
</TABLE>
_____________
(1) Substantially less than 10%
of salary. See Contracts
with Executives.
Options/SAR Grants in Fiscal Years 1994 and 1993
The table below sets forth for the years ended December 31, 1994 and
December 31, 1993, certain information concerning options/SARS granted to
the Named Executives.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
Number of % of total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Year Granted (#) Fiscal Year ($/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 Chart)
1989 1990 1991 1992 1993 1994
Consumat Systems, Inc. $100 $58.82 $64.71 $24.51 $9.80 $3.92
NASDAQ Composite Index $100 $82.20 $128.92 $148.84 $170.79 $165.33
Dow Jones Pollution $100 $87.07 $103.15 $96.70 $70.01 $70.59
Industrial Group Index
Weighted
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.
<PAGE>
ROPOSAL 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 constructed 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 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 recommend 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. 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 last two fiscal years ended December 31,
1993 and December 31, 1992 and during the subsequent interim period preceding
Coopers & Lybrand's resignation, 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.
<PAGE>
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.
