SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
the Securities Exchange Act of 1934
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 240.14a-11(c) or 240.14a-12
CompuMed, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
<PAGE>
COMPUMED, INC.
PRELIMINARY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS COPY
TO BE HELD APRIL 16, 1999
Notice is hereby given that the Annual Meeting of Stockholders (the "Meeting")
of CompuMed, Inc., a Delaware corporation (the "Company"), will be held at 1230
Rosecrans Avenue, Manhattan Beach, California, on Friday, April 16, 1999, at
10:00 a.m., Pacific Standard Time, for the following purposes:
1. To elect five directors to serve for the following year and until
successors have been elected and qualified.
2. To act upon a proposal to approve an amendment to the 1992 Stock Option
Plan increasing the number of shares subject to the Plan from 1,200,000
to 1,800,000.
3. To authorize the Board of Directors to effect a Reverse Stock Split (any
one falling within a range between and including a one-for-three and a
one-for-ten Reverse Stock Split) of the Company's outstanding Common
Stock, depending upon a determination by the Board that a Reverse Stock
Split is in the best interests of the Company and the stockholders.
4. To act upon the ratification of the appointment of Ernst & Young LLP as
the Company's independent auditors for the 1999 fiscal year.
5. To act upon such other matters as may properly come before the Meeting
or any adjournments thereof.
Only stockholders of record at the close of business on March 1, 1999 shall be
entitled to notice of and to vote at the Meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Meeting in person.
By order of the Board of Directors
Phuong Dang
Secretary
March 15, 1999
Manhattan Beach, California
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH YOUR SHARES OF COMMON
STOCK OR PREFERRED STOCK, AS THE CASE MAY BE, TO BE VOTED, YOU ARE REQUESTED TO
SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS. A RETURN ENVELOPE THAT REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
PRELIMINARY
COMPUMED, INC. COPY
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 16, 1999
GENERAL
-------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors and management of CompuMed, Inc., a Delaware corporation (the
"Company"), of proxies for use at the 1999 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held at the Company's executive offices at 1230
Rosecrans Avenue, Manhattan Beach, California, on Friday, April 16, 1999, at
10:00 a.m., local time, and at any and all adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders
("Notice of Meeting").
This Proxy Statement, Notice of Meeting and accompanying Proxy are first being
mailed to stockholders on March 15, 1999.
VOTING SECURITIES AND VOTE REQUIRED
-----------------------------------
Only stockholders of record at the close of business on March 1, 1999 are
entitled to notice of and to vote the shares of common stock, $.01 par value
("Common Stock"), Class A $3.50 Cumulative Convertible Preferred Stock, $.10 par
value ("Class A Preferred Stock") and Class B $3.50 Convertible Preferred Stock,
$.10 par value ("Class B Preferred Stock" and collectively with the Common Stock
and the Class A Preferred Stock the "Voting Stock"), of the Company held by them
on such date at the Meeting or any and all adjournments thereof. As of March 1,
1999, 13,329,756 shares of Common Stock, 8,400 shares of Class A Preferred Stock
and 300 shares of Class B Preferred Stock were outstanding. There was no other
class of voting securities outstanding at that date.
The presence, in person or by proxy, of the holders of majority of the
outstanding shares of Voting Stock is necessary to constitute a quorum at the
Meeting. Assuming that a quorum is present, the affirmative vote of the holders
of a majority of the shares of Voting Stock voting at the Meeting will be
required to approve Proposal No. 2, regarding amending the 1992 Stock Option
Plan and Proposal No. 4, regarding ratification of the appointment of auditors,
and the affirmative vote of the holders of a majority of shares of Voting Stock
outstanding will be required to approve Proposal No. 3, regarding a Reverse
Stock Split. A plurality of votes cast will be required for the election of
directors.
Each share of Voting Stock held by a stockholder entitles such stockholder to
one vote on each matter that is voted upon at the Meeting or any adjournments
thereof.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect except that votes withheld will be counted toward
determining the presence of a quorum for the transaction of business.
1
<PAGE>
Abstentions and broker "non-votes" will be counted toward determining the
presence of a quorum for the transaction of business. Abstentions may be
specified on all proposals except the election of directors. With respect to
proposals other than the election of directors, abstentions will have the effect
of a negative vote. A broker "non-vote" will have no effect on the outcome of
any of the proposals except it will have the effect of a negative vote on
Proposal No. 3.
If the accompanying Proxy is properly signed and returned to the Company and not
revoked, it will be voted in accordance with the instructions contained therein.
Unless contrary instructions are given, the persons designated as proxy holders
in the accompanying Proxy will vote "FOR" the Board of Directors' slate of
nominees and "FOR" approval of the amendment to the 1992 Stock Option Plan,
"FOR" approval of the Reverse Stock Split and "FOR" ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for the
1999 fiscal year, and as recommended by the Board of Directors with regard to
any other matters or if no such recommendation is given, in their own
discretion. Each such Proxy granted by a stockholder may be revoked by such
stockholder at any time before it is exercised by filing with the Secretary of
the Company a revoking instrument in the form of a duly executed Proxy bearing a
later date. The powers of the Proxy holders will be suspended if the person
executing the Proxy attends the Meeting in person and so requests. Attendance at
the Meeting will not, in itself, constitute revocation of the Proxy.
The cost of soliciting these Proxies, consisting of the printing, handling, and
mailing of the Proxy and related material, and the actual expense incurred by
brokerage houses, custodians, nominees and fiduciaries in forwarding proxy
material to the beneficial owners of stock, will be paid by the Company.
In order to assure that there is a quorum, it may be necessary for certain
officers, directors, regular employees and other representatives of the Company
to solicit Proxies by telephone or telegraph or in person. These persons will
receive no extra compensation for their services.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting five directors will be elected to serve until the next Meeting
and until their successors are elected and qualified. The Board of Directors
will vote all Proxies received by them in the accompanying form for the nominees
listed below. The current size of the Board of Directors of the Company is five.
All of the nominees are presently serving as directors. In the event any nominee
is unable to or declines to serve at the time of the Meeting, the Proxies will
be voted for an alternative nominee who shall be designated by the present Board
of Directors to fill the vacancy. As of the date of this Proxy Statement, the
Board of Directors is not aware of any nominee who is unable or will decline to
serve as a director.
2
<PAGE>
The following are the nominees for election as directors:
Name Position with Company Year Became Director Age
- ---- --------------------- -------------------- ---
Robert Goldberg Chairman of the Board 1994 65
Herbert S. Lightstone Director 1997 65
John Minnick Director 1985 50
John Romm, M.D. Director 1997 68
Robert Stuckelman Director 1973 67
The terms of the Board of Directors will expire at the next annual meeting of
stockholders. The Company's officers are elected by the Board of Directors and
hold office at the will of the Board.
BACKGROUND EXPERIENCE OF DIRECTORS
Mr. Goldberg is a senior partner in the firm of Francis, Goldberg & Powers, a
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certified Public Accounting Firm, and has been associated with such firm since
January 1995. Prior thereto, he was a senior partner in the Los Angeles office
of Bernstein, Fox, Goldberg & Licker Certified Public Accountants. He is
certified in both California and New York and has been a member of the New York
State Bar. Mr. Goldberg attended Lehigh University, Brooklyn Law School and New
York University School of Law and has lectured for the Practicing Law Institute
and The American College of Life Underwriters. He is a member of the Estate
Planning Council, Professional Planners Forum and various accounting societies.
Mr. Lightstone is Vice President, Corporate Development, with ICN
- --------------
Pharmaceuticals. (NYSE:ICN) where he is also responsible for ICN's global public
and investor relations activities. He rejoined ICN in 1994 and also served with
ICN from 1968 until 1981. Prior to ICN, Mr. Lightstone served as a Director, and
subsequently as Chairman & CEO of Immunetech Pharmaceuticals from 1983 through
1986. In 1981 and 1982 he served as President of Revlon Ophthalmic
International. He has been a consultant to numerous emerging companies.
Mr. Minnick is President of Minnick Capital Management, an investment management
- -----------
firm that he founded in 1972. Mr. Minnick is a member of the Kansas and Federal
Bar. He has served as a director on other corporate and non-profit boards and is
a member of the Association for Investment Management and Research (AIMR). Mr.
Minnick is a graduate of Washburn University (BA) and the Washburn University
School of Law (JD).
Dr. Romm has practiced internal medicine and gastroenterology in private
- --------
practice since 1962. He earned his MD at Wayne State College of Medicine and
also holds a BS in biology. He is an associate professor of medicine at the
University of California, Los Angeles and is an attending physician at
Cedars-Sinai Medical Center.
Mr. Stuckelman founded the Company in 1973 and served as its President to 1982.
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From 1982 through 1989, Mr. Stuckelman was a business consultant for small and
medium size companies. In 1989, he rejoined the Company as President and Chief
Executive Officer in which capacities he served until October 1994. Mr.
Stuckelman has been a director of the Company since its incorporation. Since
1994, he has been President of Technical Management Consultants, which provides
business consulting services to many companies. He is also on the Board of
Directors of Medical Resources Management, Inc., a public company that rents
laser surgery equipment to doctors and hospitals. He holds an MSEE from the
University of Southern California and a BEE from Cornell University.
There is no family relationship among the directors or executive
officers of the Company.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during the
fiscal year ended September 30, 1998. No director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing reports of the
Company's internal and external auditors regarding the Company's accounting
practices and systems of internal accounting controls. This Committee currently
consists of Mr. Stuckelman and Mr. Goldberg. The Audit Committee met once during
the fiscal year ended September 30, 1998.
The Compensation Committee reviews and approves the Company's compensation
policy and has assumed responsibility for administration of the Company's 1992
Stock Option Plan. This Committee currently consists of Mr. Minnick and Dr.
Romm. The Compensation Committee met once during the fiscal year ended September
30, 1998.
The Executive Committee is comprised of Mr. Goldberg, Mr. Minnick, and Mr.
Lightstone. The Executive Committee meets monthly.
4
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of its Common
Stock, to file reports of ownership and changes of ownership with the Securities
and Exchange Commission ("SEC") and each exchange [or market quotation system]
on which the Company's securities are registered. Officers, directors and
greater than ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all ownership forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations that no Form 5 was required, the Company believes that,
during the year ended September 30, 1998, its officers, directors, and greater
than ten-percent beneficial owners complied with all applicable filing
requirements.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation for the fiscal year
ended September 30, 1998 for the Company's chief executive officer and all
executive officers whose compensation exceeded $100,000 for such fiscal year.
<TABLE>
<CAPTION>
===============================================================================
Name and Principal Fiscal Year Annual Salary Compensation Long-Term
Position Bonus Compensation
Stock Options
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James Linesch 1998 $117,000 0 0
President and CEO 1997 $98,077 $5,000 25,000
1996 $32,308* 0 63,750
=============================================================================================
* Reflects actual salary from June 1996 to fiscal year end 1996
</TABLE>
EMPLOYMENT AGREEMENTS
None
EMPLOYEE STOCK OPTION PLANS
Under the 1992 Stock Option Plan (the "1992 Plan"), the Company may grant
qualified or non-qualified options for the purchase of up to 1,200,000 shares of
Common Stock. At the year ended September 30, 1998, there were 490,399 shares
reserved for exercise of options granted, of which 277,996 were exercisable, and
554,924 were available for grant. The average exercise price of options granted
under the Plan is $1.15 per share. On January 8, 1999, the Board of Directors
granted 435,000 options to employees, officer and directors at an exercise price
of $0.67 per share. One proposal at the Meeting is an amendment to the 1992 Plan
to increase to 1,800,000 the number of underlying shares.
For a fuller description of the 1992 Plan, and the proposed amendment, see
PROPOSAL 2, below.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
None
5
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding the exercise of
stock options during the fiscal year ended September 30, 1998 and the fiscal
year-end value of unexercised options for the Company's named executive
officers.
<TABLE>
<CAPTION>
Number of Securities
(shares of Common Stock) Value of Unexercised
Shares Underlying Unexercised In-the-money Options at
Acquired Value Options at Fiscal Year End Fiscal Year End (1)
Name On Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J. Linesch - - 50,834 / 37,916 $ 0 / $ 0
</TABLE>
(1) Based upon the closing market price of the Company's Common Stock as
reported on the Nasdaq Small Cap market on September 30, 1998 minus
the respective option exercise prices.
NON PLAN STOCK OPTIONS
Between February 1992 and July 1998, a total of 1,152,890 stock options were
granted to directors, officers and consultants outside either the 1992 Plan and
the prior 1982 Stock Option Plan. The exercise prices of these non-plan stock
options are at an average price of $1.50 per share which were equal to the fair
market value of the Common Stock on the respective dates of grant, and they
expire between 1996 and 2001. As of September 30, 1998, 258,393 of these
non-qualified stock options had been exercised, including 56,563 during fiscal
1998, and 799,026 were still outstanding.
SAVINGS AND RETIREMENT PLANS
In July 1987 the Company instituted a Savings and Retirement Plan (the "S&R
Plan"). Under the S&R Plan, every full-time salaried employee who is 18 years of
age or older may contribute up to 15% of his or her annual salary to the S&R
Plan. The Company will make a matching contribution of $.25 for every $1.00 of
the employee's contribution for an employee contribution of up to but not
exceeding 6 percent of the employee's annual salary. Company contributions are
100% vested after 36 months of contributions to the S&R Plan. Benefits are
payable under the S&R Plan upon termination of a participant's employment with
the Company or at retirement. The S&R Plan meets the requirements of Section
401(k) of the Internal Revenue Code. Internal Revenue Service regulations limit
the percentage of tax-deferred contributions that can be made by
higher-compensated participants. There are restrictions upon withdrawal of tax
deferred contributions, but participants are permitted to borrow against the
value of their tax deferred accounts.
6
<PAGE>
PRINCIPAL STOCKHOLDERS
(a) Management
The following table sets forth information concerning beneficial ownership of
the Company's Common Stock as of March 1, 1999 by: (a) each director of the
Company; and (b) all executive officers and directors of the Company as a group.
Name and Address* of Beneficial Amount and Nature of Beneficial Ownership(1)
- ------------------------------- --------------------------------------------
Owner
-----
Robert Stuckelman 284,414 (2) 2%
John Minnick 264,707 (3) 2%
Robert Goldberg 181,476 (4) 1%
Herbert S. Lightstone 58,334 (5) **
John Romm, M.D. 16,667 (6) **
All officers and
directors as a group (6 persons) 864,765 (7) 6%
- ----------------------------
(1) Includes options exercisable within sixty days of March 1, 1999.
(2) Includes 129,899 shares subject to non-qualified and qualified stock
options.
(3) Includes 195,422 shares subject to non-qualified stock options.
(4) Includes 171,476 shares subject to non-qualified stock options.
(5) Includes 58,334 shares subject to non-qualified stock options.
(6) Includes 16,667 shares subject to non-qualified stock options. See notes
(2) through (6)
(*) c/o CompuMed, Inc, 1230 Rosecrans Avenue, Manhattan Beach, California
90206.
(**) Less than 1%.
(b) Five Percent Stockholders
- -----------------------------
None
7
<PAGE>
PROPOSAL 2
PROPOSAL TO APPROVE AN AMENDMENT TO THE 1992 STOCK
OPTION PLAN INCREASING THE NUMBER OF SHARES
ISSUABLE UNDER THE PLAN TO 1,800,000 SHARES
In March 1992, the Board of Directors of the Company and its stockholders
approved the 1992 Stock Option Plan (the "1992 Plan") to issue 120,000 options
to purchase shares of Common Stock. In March 1993, March 1994 and March 1995 the
Board of Directors of the Company and its stockholders amended the 1992 Plan to
add 120,000 options in each of the three years, and in March of 1996 and 1997 to
add an additional 400,000 options in each year. As of March 1, 1999, 925,399
shares of Common Stock were reserved for issuance upon exercise of outstanding
options granted under the 1992 Plan and 119,924 shares were reserved for the
grant of future options.
On March 1, 1999, the Board of Directors approved an amendment to the 1992 Plan,
subject to stockholder approval, to increase the number of shares reserved for
issuance by an additional 600,000 shares, thereby increasing the number of
shares of Common Stock available for future option grants to 719,924 shares. The
Board adopted this amendment to ensure that the Company will continue to be able
to grant stock options to employees and officers and directors of the Company.
Management has found the 1992 Plan to be useful in the hiring and retention of
qualified officers and key personnel.
At the Meeting, the stockholders are being requested to consider and approve the
amendment to the 1992 Plan. The affirmative vote of the holders of a majority of
the shares of the Common Stock voting at the Meeting will be required to approve
the amendment.
The essential features of the 1992 Plan are outlined below:
Shares Subject to Option. Up to 1,200,000 shares of Common Stock may be issued
- ------------------------
under the 1992 Plan, as amended to date. If Proposal 2 is approved, then up to
1,800,000 shares will be available for issuance under the 1992 Plan. The number
of shares available for options and subject to option, and the option exercise
price, is to be adjusted upward or downward, as the case may be, in the event of
any stock dividend, recapitalization, merger, consolidation, split up or similar
transaction affecting shares of the Company's Common Stock. If any option
granted under the 1992 Plan terminates or expires without having been exercised
in full, the shares not purchased under such options will again be available for
grant for purposes of the 1992 Plan.
Administration. The 1992 Plan is administered by the Company's Compensation
- --------------
Committee (the "Committee") consisting of not less than two members of the Board
of Directors. The Committee is presently composed of Mr. Minnick and Dr. Romm.
The Committee has sole authority to determine which eligible employees of the
Company and its subsidiaries shall receive options under the 1992 Plan, the
times when they are to receive them, the number of shares to be optioned in each
case, the provisions of the option agreements and the terms and conditions of
exercise. However, options granted to any member of the Stock Option Committee
require the approval of an independent majority of the Board of Directors.
Exercise Price. The exercise price in each incentive stock option granted under
- --------------
the 1992 Plan may be not less than 100 percent of the fair market value of the
shares of the optioned stock on the date the option is granted and 110 percent
of such fair market value if the optionee owns more than ten percent of the
voting rights of the Company's outstanding capital stock. The exercise price of
"non-qualified options" granted under the 1992 Plan may be established at any
price determined by the Committee. The exercise price must be paid to the
Company in cash or, in the sole discretion of the Committee, with Common Stock
on the date of exercise.
8
<PAGE>
Eligible Employees. Subject to selection by the Committee, any full-time or
- ------------------
part-time employee of, or consultant to, the Company is eligible to be granted
one or more options pursuant to the 1992 Plan. All officers, directors, and
nominees for election as directors are eligible to participate in the 1992 Plan.
Maximum Option Term. No option under the 1992 Plan may be made exercisable after
- -------------------
the expiration of ten years from the date it is granted.
Non-Transferability. No option is transferable by the optionee except by will or
- -------------------
the laws of descent or distribution.
Exercise of Options. Options are exercisable in whole or in part at such times
- -------------------
after the date of grant as are set forth in an option agreement as determined by
the Committee. An option is exercisable by the optionee only during his or her
lifetime and only while he or she is an employee of the Company, or within three
months after termination of employment. In the event of an optionee's death or
disability, the option, to the extent exercisable at the date of termination of
employment and unexercised, may be exercised by the optionee or his or her
estate within one year from date of death or disability, but in no event may the
option be exercised after its expiration.
Termination of Options. An option, to the extent not validly exercised, will
- ----------------------
terminate automatically upon the termination of employment with the Company,
except by death or disability. All options that are exercisable on the date of
such termination of employment may be exercised during a three-month period
beginning on the date of termination except when the employment is terminated
for cause.
Restrictions on Options. Each option granted under the 1992 Plan will be for a
- -----------------------
term, and exercisable only in accordance with, option agreements approved by the
Committee. The term of stock options granted under the 1992 Plan is limited to a
period of ten years from the date of grant. Although the Committee reserves the
right to establish other terms and conditions as to any option granted under the
1992 Plan, it is currently anticipated that the Committee will continue to
follow this policy as to options granted under the 1992 Plan. The exercisability
of an option under the 1992 Plan may be determined upon an individual basis by
the Committee at the time of grant.
The 1992 Plan contains provisions which authorize the Committee, in the event of
a sale or merger of all or substantially all of the Company's assets, or a
merger or consolidation in which the Company is not the surviving corporation,
to take certain action in its discretion. In the event of such a transaction the
Committee may accelerate the exercisability of any option to permit its exercise
in full during such period as the Committee may prescribe following the public
announcement of a sale of assets, merger or consolidation. The Committee may
also require an optionee in the event of such a transaction to surrender his
option in return for a substitute option issued by a surviving corporation that
is determined by the Committee to have a value substantially equal to the value
of the surrendered option.
Under the terms of the 1992 Plan, the aggregate fair market value (determined at
the time an option is granted, which will normally be equal to the option
exercise price per share) of Common Stock exercisable under an incentive stock
option for the first time in any calendar year may not exceed $100,000.
The 1992 Plan provides that shares of Common Stock acquired upon exercise of
options will be paid for in cash or, in the sole discretion of the Committee,
through the delivery of shares of Common Stock with a market value equal to the
option exercise price. The ability to pay the exercise price in shares of Common
Stock would, if permitted by the Committee, enable an optionee to engage in a
series of successive stock for stock exercises of an option (sometimes referred
to as "pyramiding") and thereby fully exercise an option with little or no cash
investment by the optionee.
Amendment. The Board of Directors may amend the 1992 Plan without the approval
- ---------
of stockholders, except that stockholder approval will be required for any
amendment which would (i) increase the total number of shares obtainable under
the 1992 Plan, or (ii) change the class of persons eligible to participate in
9
<PAGE>
the 1992 Plan, or (iii) extend the period during which options may be granted or
exercised. Adjustments in the total number of shares optionable under the 1992
Plan and adjustments of the exercise price may be made, however, without
stockholder approval pursuant to the adjustment provisions mentioned under the
subcaption "Shares Subject to Option" above.
Duration. No option may be granted under the 1992 Plan after March 22, 2002 but
- --------
options granted on or before that date will remain valid in accordance with
respective terms.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE 1992 STOCK OPTION PLAN.
PROPOSAL 3
AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT (ANY ONE
FALLING WITHIN A RANGE BETWEEN AND INCLUDING A ONE-FOR-THREE UP TO A ONE-FOR-TEN
REVERSE STOCK SPLIT) OF THE COMPANY'S OUTSTANDINGING COMMON STOCK, DEPENDING
UPON A DETERMINATION BY THE BOARD THAT A REVERSE STOCK SPLIT IS IN THE BEST
INTERESTS OF THE COMPANY AND THE STOCKHOLDERS.
On February 25, 1999, the Board of Directors authorized the option of a
Reverse Stock Split (any ratio falling within a range between and including a
one-for-three and one-for-ten Reverse Stock Split), subject to stockholder
approval, of the Company's outstanding Common Stock that may be effected by the
Board depending on market conditions. The intent of the Reverse Stock Split is
to increase the marketability and liquidity of the Common Stock and to effect an
increase in the market price of the Common Stock in order to maintain the
listing of the Common Stock on the Nasdaq SmallCap Market.
If the Reverse Stock Split is approved by the stockholders at
the Meeting, it will be effected only upon a determination by the Board of
Directors that the Reverse Stock Split is in the best interests of the Company
and the stockholders. In connection with any determination by the Board of
Directors to such effect, the Board will select in its discretion the ratio for
the Reverse Stock Split which falls within a range between and including a
one-for-three and a one-for-ten Reverse Stock Split which, in the Board's
judgment, would result in the greatest marketability and liquidity of the Common
Stock, based upon prevailing market conditions, on the likely effect on the
market price of the Common Stock and other relevant factors.
If approved by the stockholders, the Reverse Stock Split would become
effective on any date (the "Effective Date") selected by the Board of Directors
on or prior to the Company's next Annual Meeting of Stockholders. If no Reverse
Stock Split is effected by such date, the Board of Directors will take action
to abandon the Reverse Stock Split pursuant to Section 242(c) of the Delaware
General Corporation Law (the "DGCL"). The procedures for consummation of the
Reverse Stock Split are attached hereto as Exhibit A.
Purposes and Effects of a Reverse Stock Split
- ---------------------------------------------
Consummation of the Reverse Stock Split will not alter the number of
authorized shares of Common Stock, which will remain 50,000,000 shares.
Consummation of the Reverse Stock Split will not have any federal tax
consequences to stockholders.
The Common Stock is listed for trading on the Nasdaq SmallCap System
under the symbol CMPD. On the Record Date, the reported closing price' of the
Common Stock on NASDAQ SmallCap exchange was $0.60 per share. The primary
purpose of the Reverse Stock Split is to maintain trading of the Common Stock on
the Nasdaq SmallCap System which requires, among other things, a minimum market
price of $1.00 per share. In November 1998, the Nasdaq gave notice to the
Company of a
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deficiency in maintaining a minimum bid price of $1.00 per share of its Common
Stock and has indicated that the Company's securities will be subject to
delisting if it cannot demonstrate compliance. A delisting would result in the
Company's Common Stock being traded on the OTC Bulletin Board. Historically,
securities traded on the OTC Bulletin Board do not have the market following as
those on the SmallCap, and are subject to the initial listing requirements upon
reapplying for listing on the Nasdaq SmallCap Market. In February 1999, the
Company requested a hearing with the Nasdaq regarding this matter.
The Board believes that a decrease in the number of shares of Common
Stock outstanding without any material alteration of the proportionate economic
interest in the Company represented by individual shareholdings may increase the
trading price of such shares to a price which meets the minimum bid requirement
for continued listing on the Nasdaq Small Cap System. However, no assurance can
be given that the market price of the Common Stock will rise in proportion to
the reduction in the number of outstanding shares resulting from any Reverse
Stock Split or that the Company would meet the other maintenance standards for
such trading market.
Additionally, the Board believes that the current per share price of the
Common Stock may limit the effective marketability of the Common Stock because
of the reluctance of many brokerage firms and institutional investors to
recommend lower-priced stocks to their clients or to hold them in their own
portfolios. Certain policies and practices of the securities industry may tend
to discourage individual brokers within those firms from dealing in lower-priced
stocks. Some of those policies and practices involve time-consuming procedures
that make the handling of lower-priced stocks economically unattractive, The
brokerage commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue. Any reduction in brokerage commissions resulting from the Reverse Stock
Split may be offset, however, in whole or in part, by increased brokerage
commissions required to be paid by stockholders selling "odd lots" created by
such Reverse Stock Split.
The par value of the Common Stock will remain at $.01 per share
following any Reverse Stock Split, and the number of shares of Common Stock
outstanding will be reduced. As a consequence, the aggregate par value of the
outstanding Common Stock will be reduced while the aggregate capital in excess
of par value attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The resolutions approving
the Reverse Stock Split provide that this increase in capital in excess of par
value will be treated as capital for statutory purposes. However, under Delaware
law, the Board of Directors of the Company will have the authority, subject to
various limitations, to transfer some or all of such increased capital in excess
of par value from capital to surplus, which additional surplus could be
distributed to stockholders as dividends or used by the Company to repurchase
outstanding stock. The Company currently has no plans to use any surplus so
created to pay any such dividend or to repurchase stock in the foreseeable
future. The number of record holders of the Common Stock on the Record Date was
528. The Company does not anticipate that any Reverse Stock Split would result
in a significant reduction in the number of such holders, and does not currently
intend to effect any Reverse Stock Split that would result in a reduction in the
number of holders large enough to jeopardize continued listing of the Common
Stock on the Nasdaq SmallCap System or being subject to the periodic reporting
requirements of the Securities and Exchange Commission.
The Board of Directors considered the importance to stockholders of
having their shares continue to be quoted on the Nasdaq SmallCap System in
comparison to the OTC Bulletin Board in relation to the potential adverse
affect on the future shareholder value for current shareholders, due to the
increase in the market price probably being less than the proportionate
decrease in the outstanding shares. Assuming stockholder approval of this
Proposal, the Board of Directors will not implement the Reverse Stock Split
if, prior to the Meeting, the Nasdaq staff delists the Common Stock from the
Nasdaq SmallCap System or the market price increases to a range, and for a
duration, to maintain the listing on such System.
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The Reverse Stock Split would have the following effects upon the number
of shares of Common Stock outstanding (13,329,756 shares as of the Record Date)
and the number of authorized and unissued shares of Common Stock (assuming that
no additional shares of Common Stock are issued by the Company after the Record
Date). The following examples are not exhaustive of all possible Reverse Stock
Splits that fall within the Board approved range, and are only intended for
illustrative purposes.
Reverse Common Stock Authorized and
Stock Split Outstanding Unissued Common Stock
----------- ----------- ---------------------
1 for 3 4,443,252 45,556,748
1 for 5 2,665,951 47,334,049
1 for 10 1,332,976 48,667,024
At the Effective Date, each share of the Common Stock issued and
outstanding immediately prior thereto (the "Old Common Stock"), will be
reclassified as and changed into the appropriate fraction of a share of the
Company's Common Stock, par value $.01 per share (the "New Common Stock"),
subject to the treatment of fractional share interests as described below,
Shortly after the Effective Date, the Company will send transmittal forms to the
holders of the Old Common Stock to be used in forwarding their certificates
formerly representing shares of Old Common Stock for surrender and exchange for
certificates representing whole shares of New Common Stock. No certificates or
scrip representing fractional share interests in the New Common Stock will be
issued, and so such fractional share interest will entitle the holder thereof to
vote, or to any rights of a stockholder of the Company. Any fractional share
interest will result in the adjustment of the number of shares either upward or
downward to the nearest whole share.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE
AUTHORIZATION OFTHE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has appointed Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending September 30, 1999. Ernst & Young LLP has
served as the Company's independent auditors since 1981.
Services provided to the Company and its subsidiaries by Ernst & Young LLP with
respect to Fiscal 1998 included the examination of the Company's consolidated
financial statements, limited reviews of quarterly reports, services related to
filings with the Securities and Exchange Commission and consultations on various
tax and information services matters.
Representatives of Ernst & Young LLP will be present at the Meeting to respond
to appropriate questions and to make such statements as they may desire.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
1998 FISCAL YEAR.
ANNUAL REPORT
All stockholders of record as of March 1, 1999 have or are currently being sent
a copy of the Company's Annual Report for the fiscal year ended September 30,
1998 (the "Annual Report") which contains
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<PAGE>
audited financial statements of the Company. The Annual Report is deemed to be
part of the material for the solicitation of proxies.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL HOLDER OF ITS COMMON
STOCK ON MARCH 1, 1999, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1998 AS FILED WITH THE SEC. ANY SUCH REQUEST SHOULD BE MADE IN WRITING TO THE
SECRETARY, COMPUMED, INC., 1230 ROSECRANS AVENUE, MANHATTAN BEACH, CALIFORNIA
90266.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no business that
will be presented for consideration at the Meeting other than that which has
been referred to above. As to other business, if any, that may come before the
Meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
the proxies.
13
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Stockholder proposals must be received by the Secretary of the Company, for
inclusion in the Company's proxy materials relating to the 2000 Annual Meeting
of Stockholders, by December 1, 1999.
By order of the Board of Directors
Phuong Dang
Secretary
March 15, 1999
STOCKHOLDERS ARE ASKED TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED AS SOON AS POSSIBLE. YOUR PROMPT RESPONSE WILL BE GREATLY
APPRECIATED.
<PAGE>
EXHIBIT A:
THE REVERSE STOCK SPLIT
RESOLVED, that, prior to the Company's next Annual Meeting of Stockholders, on
the condition that no other amendment to the Company's Restated Certificate of
Incorporation shall have been filed subsequent to April 16, 1999 effecting a
reverse stock split of the Common Stock, Article 4 of the Company's Restated
Certificate of incorporation be amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the "Effective
Date"), each share of the Company's Common Stock, par value $.01 per share,
issued and outstanding immediately prior to the Effective Date (the "Old
Common Stock") shall automatically and without any action on the part of the
holder thereof be reclassified as and changed, pursuant to a reverse stock
split, into any fraction thereof falling within a range between and
including one-third (1/3) and one-tenth (1/10) of a share of the Company's
outstanding Common Stock, par value $.01 per share (the "New Common Stock"),
depending upon a determination by the Board that a Reverse Stock Split is in
the best interests of the Company and the stockholders, subject to the
treatment of fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective Date
represented outstanding shares of Old Common Stack (the "Old Certificates,"
whether one or more) shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for cancellation, a certificate
or certificates (the "New Certificates", whether one or more) representing
the number of whole shares of the New Common Stock into which and for which
the shares, of the Old Common Stock formerly represented by such Old
Certificates so surrendered, are reclassified under the terms hereof. From
and after the Effective Date, Old Certificates shall represent only the
right to receive New Certificates pursuant to the provisions hereof. No
certificate or scrip representing fractional share interests in New Common
Stock will be issued, and no such fractional share interest will entitle the
holder thereof to vote, or to any rights of a stockholder of the Company.
Any fraction of a share of New Common Stock to which the holder would
otherwise be entitled will be adjusted upward or downward to the nearest
whole share. If more than one Old Certificate shall be surrendered at one
time for the account of the same shareholder, the number of full shares of
New Common Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares represented by the
Old Certificates so surrendered. In the event that the Company's Transfer
Agent determines that a holder of Old Certificates has not tendered all his
certificates for exchange, the Transfer Agent shall carry forward any
fractional share until all certificates of that holder have been presented
for exchange such that payment for fractional shares to any one person shall
not exceed the value of one share. If any New Certificate is to be issued in
a name other than that in which the Old Certificates surrendered for
exchange are issued, the Old Certificates so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the person or
persons requesting such exchange shall affix any requisite stock transfer
tax stamps to the Old Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the Transfer Agent that such
taxes are not payable. From and after the Effective Date the amount of
capital represented by the shares of the New Common Stock into which and for
which the shares of the Old Common Stock are reclassified under the terms
hereof shall be the same as the amount of capital represented by the shares
of Old Common Stock so reclassified, until thereafter reduced or increased
in accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the foregoing
amendment to the Company's Restated Certificate of Incorporation effecting a
Reverse Stock Split, notwithstanding authorization of the proposed amendment by
the stockholders of the Company, the Board of Directors may abandon such
proposed amendment without further action by the stockholders.
<PAGE>
COMPUMED, INC. PRELIMINARY
ANNUAL MEETING OF STOCKHOLDERS COPY
APRIL 16, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of COMPUMED, INC., a Delaware corporation
(the "Company"), acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, dated March 15, 1999, and hereby constitutes
and appoints JAMES LINESCH or PHUONG DANG, or either of them acting singly in
the absence of the other, with the power of substitution in either of them, the
proxies of the undersigned to vote all shares of Voting Stock of the Company
which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders, and at any adjournment or adjournments thereof, hereby revoking
any proxy or proxies heretofore given and ratifying and confirming all that said
proxies may do or cause to be done by virtue thereof with respect to the
following matters:
1. The election of five directors nominated by the Board of Directors:
[] FOR all nominees listed below [] WITHHOLD AUTHORITY to vote for
(except as indicated) all nominees listed below
Robert Goldberg, Herbert S. Lightstone, John Minnick,
John Romm, M.D. and Robert Stuckelman
(Instruction: To withhold authority to vote for any individual nominee
or nominees write such nominee's or nominees, names in the space
provided below)
- --------------------------------------------------------------------------------
2. The amendment to the 1992 Stock Option Plan increasing the number of
shares subject to the Plan to 1,800,000:
[] FOR [] AGAINST [] ABSTAIN
3. The Reverse Stock Split (any one falling within a range between and
including a one-for-three and a one-for-ten Reverse Stock Split) of the
Company's outstanding Common Stock, depending upon a determination by
the Board that a Reverse Stock Split is in the best interests of the
Company and the stockholders.
[] FOR [] AGAINST [] ABSTAIN
4. The ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the 1999 fiscal year:
[] FOR [] AGAINST [] ABSTAIN
5. Other matters as may properly come before the meeting or any adjournment
or adjournments thereof.
This Proxy, when properly executed, will be voted as directed. If no
direction is indicated, the Proxy will be voted FOR each of the above
proposals.
Dated: , 1999
----------------------------
(L.S.)
----------------------------
Please sign your name exactly as it appears hereon. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title as it appears hereon.
When signing as joint tenants, all parties in the joint
tenancy must sign. When a proxy is given by a corporation, an
authorized officer should sign it and the corporate seal
affixed. No postage is required if returned in the enclosed
envelope and mailed in the United States.
PLEASE SIGN AND DATE, THEN IMMEDIATELY MAIL THIS PROXY IN THE
ENCLOSED ENVELOPE.
