<PAGE>
[CARDIAC CONTROL SYSTEMS, INC. LETTERHEAD APPEARS HERE]
October 25, 1995
Dear Shareholder:
The Board of Directors cordially invites you to attend, on December 14,
1995, Cardiac Control Systems, Inc.'s Annual Meeting of Shareholders, to be held
at the Company's headquarters, 3 Commerce Blvd., Palm Coast, Florida 32164 at
9:00 a.m. local time, for the following purposes:
1. To elect the Board of Directors;
2. To ratify the appointment of independent accountants;
3. To approve a proposed amendment to the Company's Certificate of
Incorporation regarding capital stock; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
To assure a quorum and that your shares will be voted at the meeting in
accordance with your instructions, please sign and return the enclosed proxy
card at your earliest convenience. If you sign and return your proxy card
without specifying your choices, it will be understood that you wish to have
your shares voted in accordance with the directors' recommendations. Mailing
your proxy card will not limit your right to vote in person at the meeting.
If you plan to be present at the meeting, please so indicate on the proxy
card so that we can mail an admission card to you. Please note that attendance
at the meeting will be limited to shareholders as of the record date (or
authorized representative) having an admission card or evidence of their share
ownership, and guests of the Company.
Respectfully yours,
CARDIAC CONTROL SYSTEMS, INC.
Robert R. Brownlee
Senior Executive Vice President and Secretary
Enclosures
<PAGE>
CARDIAC CONTROL SYSTEMS, INC.
3 Commerce Blvd., Palm Coast, Florida 32164
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
Thursday, December 14, 1995
To: The holders of shares of common stock, par value $0.10 per share ("Common
Stock"), of Cardiac Control Systems, Inc.:
NOTICE IS HEREBY GIVEN that pursuant to a call of its directors, the annual
meeting (the "Meeting") of the shareholders of Cardiac Control Systems, Inc., a
Delaware Corporation (the "Company"), will be held at the Company's
headquarters, 3 Commerce Blvd., Palm Coast, Florida on December 14, 1995 at 9:00
a.m. local time, for the following purposes:
1. To elect the directors for the Company to serve until the next annual
meeting of the shareholders and until their successors are elected
and qualify;
2. To ratify the appointment of BDO Seidman, LLP as independent
accountants to audit the Company's books and records for the fiscal
year ending March 31, 1996;
3. To approve a proposed amendment to the Company's Certificate of
Incorporation regarding capital stock; and
4. To transact any other business as may properly come before the Meeting
and any adjournment thereof.
The Company's Proxy Statement, Proxy and Annual Report for the year
-------------------------------------------------------------------
ended March 31, 1995 must accompany this notice.
- ------------------------------------------------
The accompanying Proxy Statement summarizes information concerning the
proposed business to be acted upon at the meeting.
Only holders of record of shares of Common Stock of the Company at the close
of business on October 20, 1995 are entitled to notice of and to vote at the
Meeting and any adjournments thereof.
Shareholders are urged to attend the Meeting; but, whether you plan to attend
or not, PLEASE DATE, MARK, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY to the
Company in the enclosed pre-addressed envelope.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE HOLDERS OF COMMON
STOCK OF THE COMPANY ELECT EACH NOMINEE FOR DIRECTOR, RATIFY THE APPOINTMENT OF
INDEPENDENT ACCOUNTANTS FOR THE COMPANY, AND APPROVE THE PROPOSED AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION; ALL TO BE PRESENTED AT THE MEETING.
By Order of The Board of Directors
_________________________
Robert R. Brownlee
Senior Executive Vice President and Secretary
Palm Coast, Florida
October 25, 1995
<PAGE>
CARDIAC CONTROL SYSTEMS, INC.
3 Commerce Boulevard
Palm Coast, Florida 32164
PROXY STATEMENT
ANNUAL MEETING
December 14, 1995
THE PROXY AND SOLICITATION
The accompanying Proxy is solicited by the Board of Directors of Cardiac
Control Systems, Inc. (The "Company") for use at the Annual Meeting of the
holders of the Company's Common Stock, par value $0.10 per share ("Common
Stock"), to be held at the Company's headquarters, 3 Commerce Blvd., Palm Coast,
Florida on December 14, 1995 at 9:00 a.m. local time, and any adjournment
thereof. When such proxy card is properly executed and returned, the shares it
represents will be voted at the Annual Meeting in accordance with any directions
noted thereon, or, if no direction is indicated, it will be voted by the persons
named in the accompanying proxy card as recommended by the Board of Directors.
Any proxy given pursuant to this solicitation may be revoked by the shareholder
at any time prior to the voting thereof by attending and voting in person at the
meeting, or by giving notice of revocation in writing to the Secretary of the
Company at any time prior to its use, or by delivery to the Secretary of the
Company of a duly executed proxy bearing a later date.
A Notice of Annual Meeting of Shareholders and a proxy card accompany this
Proxy Statement. The approximate date of the first distribution of this Proxy
Statement and the accompanying proxy card and Notice of Annual Meeting to
shareholders is October 25, 1995.
A copy of the Company's Annual Report for the year ended March 31, 1995 has
been mailed to each shareholder of record. Copies of the Company's annual
report on Form 10-K (exclusive of certain exhibits) may be obtained, without
charge, by writing to the Secretary of the Company at 3 Commerce Boulevard, Palm
Coast, Florida 32164.
The Company will bear the costs of solicitation of proxies. Proxies will be
solicited principally through the use of the mails, but directors, officers and
regular employees of the Company may, without additional compensation use their
personal efforts by telephone or otherwise to obtain proxies.
All properly executed, unrevoked proxies received in time for the meeting will
be voted as specified. If no other indication is made, the proxies will be
voted for the election of directors shown as nominees and as recommended by the
Board of Directors with regard to all other matters.
PURPOSES OF ANNUAL MEETING
The Annual Meeting has been called for the purposes of electing the Board of
Directors, ratifying the appointment of the Company's independent accountants,
approving a proposed amendment to the Company's Certificate of Incorporation
regarding capital stock, and transacting such other business as may properly
come before the meeting.
The two persons named in the accompanying proxy card have been selected by the
Board of Directors and will
1
<PAGE>
vote shares represented by valid proxies.
The Board of Directors recommends that the full Board for the ensuing year
shall consist of at least seven directors, recommends the election of the
nominees listed on pages 2-4 as Directors to hold office until the next annual
meeting of shareholders and the election and qualification of their successors,
recommends the ratification of the Company's independent accountants, and
recommends the approval of a proposed amendment to the Company's Certificate of
Incorporation regarding capital stock.
Two of the nominees, presently members of the Board of Directors, were elected
by the shareholders at the last annual meeting of the Company's shareholders.
Five of the nominees, presently members of the Board of Directors, have been
appointed since the last annual meeting of the Company's shareholders as
additions to the Board of Directors or replacements for Directors who resigned.
The Board of Directors has no reason to believe that any of the nominees will be
unable to serve as a Director. If, at the time of the Annual Meeting any of
such nominees should be unable or decline to serve, the discretionary authority
provided in the proxy will be exercised to vote for such other person or persons
as the Board of Directors may recommend.
The Company has no knowledge of any other matters to be presented at the
Annual Meeting. In the event other matters do properly come before the meeting,
the persons named in the proxy will vote in accordance with their judgment on
such matters.
VOTING SECURITIES
As of September 30, 1995, the Company had outstanding and entitled to vote at
the Annual Meeting 1,343,619 shares of Common Stock. The Board of Directors has
fixed the close of business on October 20,1995 as the record date for
determining shareholders entitled to notice of the Annual Meeting and to vote.
Each share of Common Stock entitles the holder thereof to one vote on each
matter presented for action at the Annual Meeting. The presence at the Annual
Meeting, in person, or by proxy, of a majority of the outstanding shares of
Common Stock will constitute a quorum. Although the Company has not polled its
Directors and Executive Officers, management of the Company expects that its
Directors and Executive Officers who are shareholders will vote for all of the
proposals and nominees presented herein.
ELECTION OF DIRECTORS
For each nominee and director, the following sets forth his or her name and
age, as of September 30, 1995, as well as information respecting any positions
he or she has held with the Company, and his or her principal occupation or
employment currently and for at least the past five years. In addition, the
following sets forth the year each nominee and director was first elected or
appointed as a Director. There are no family relationships among the nominee(s)
and/or director(s). There are no arrangements or understandings between any
nominee(s) and/or director(s) and any other person(s) pursuant to which he or
she was or is to be selected as a director or nominee.
Robert R. Brownlee, age 64, is one of the founders of the Company and
presently serves the Company as Senior Executive Vice President of Research and
Technical Matters and as a Director and Secretary to the Board of Directors.
From June 1982 to May 1988, he served the Company as Senior Executive Vice
President and Chairman of the Board of Directors. He has been a member of the
Board of Directors since 1980. During 1980 and 1981, Mr. Brownlee served the
Company as Vice President of Product Research and Executive Vice President of
Engineering, respectively. He was a faculty member of The Pennsylvania State
University (the "University") from 1960 to 1980 and served as Adjunct Associate
Professor of Comparative Medicine, Milton S. Hershey Medical Center of the
University from 1981 to 1985. Prior to 1980, Mr. Brownlee served as a consultant
to Intermedics Inc., a major competitor in the cardiac pacing industry.
2
<PAGE>
William H. Burns Jr., age 46, was appointed to the Board of Directors in
August 1995. He is presently President of Biosight Inc., a health care
consulting firm, and Vector Inc., a medical product design and distribution
company. Until June 1994, Mr. Burns was President and CEO of Matrx Medical Inc.
which he cofounded in 1988. In this capacity, Mr. Burns was recognized as
Entrepreneur of the Year in Upstate New York in 1993. Prior to starting Matrx,
Mr. Burns spent 13 years with the BOC Group in progressively responsible
management positions including Vice President and General Manager, Ohmeda and
Vice President of Marketing, Anaquest. Mr. Burns started his career with Ford
Motor Company in Dearborn, Michigan where his final position was Supervisor of
Conventional and Luxury Car Pricing in the North American Sales
Bart C. Gutekunst, age 44, was appointed to the Board of Directors in July
1994 and became Chairman of the Board in October 1994. Since 1990 he has been
an independent financial advisor. From 1988 to 1990, he was a senior member of
an investment firm, Entrecanales, Inc., funded by a major European family,
making equity investments and leveraged buyouts. From 1981 to 1987, he was
Executive Vice President and a member of the Board of Directors, as well as the
Management and Investment Committees of Laidlaw, Adams & Peck Inc., where he
supervised the investment banking department. From 1976 to 1981, he was a
member of Chemical Bank's Merchant Banking Group. Mr. Gutekunst has been a
member of the Board of Directors or advisor to the Board for many companies.
From September 1992 to September 1994, he was Vice Chairman and Chief Financial
Officer of R-2 Medical Systems, Inc., a cardiac care device company, with
responsibility for corporate development as well as overseeing the financial
functions of the company. Since 1994, Mr. Gutekunst has served as Chairman of
the Board of Directors of United Education and Software, Inc., a multi-state
operator of nursing and vocational schools operating under Chapter 11 of the
United States Bankruptcy Code where he is overseeing the voluntary liquidation
of the company's assets. Previously he had been a director of that company for
approximately ten years.
Larry Haimovitch, age 48, was appointed to the Board of Directors in November
1994. He is President of Haimovitch Medical Technology Consultants, a San
Francisco, California based healthcare consulting firm which specializes in the
medical device and technology industry with a particular emphasis on cardiology
related areas and whose clients have included a major hospital chain, numerous
medical device companies, venture capital firms, investment groups, and
investment bankers. Prior to forming his firm in 1991, Mr. Haimovitch spent
over 20 years as a healthcare industry analyst for a number of leading research
firms and financial institutions such as Furman Selz, Sutro & Co., and Wells
Fargo Investment Advisors. He also currently serves as a director of Electro-
Pharmacology, Inc.
Alan J. Rabin, age 45, joined the Company in October 1994, in connection with
the Debenture financing. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
At that time, he was appointed to the Board and appointed the Company's
President and Chief Executive Officer. Until September 1994, Mr. Rabin was
President and Chief Executive Officer of R-2 Medical Systems, Inc, a
manufacturer of cardiac care devices, including disposables used in cardiac
pacing. R-2 Medical Systems, Inc. was sold to Cardiotronics, Inc. in 1994. From
1987 to 1992, Mr. Rabin was Vice President of Marketing and Sales for Stereo
Optical Company, a manufacturer and distributor of disposable and ophthalmic
diagnostic devices. From 1985 to 1986, he was Director of Marketing and Sales at
Tycos Life Services, Inc., a manufacturer of cardiovascular diagnostic and
monitoring devices. From 1980 to 1985, Mr. Rabin held various marketing, new
business development, and product management positions with surgical and
cardiovascular equipment divisions of C.R. Bard. Prior to assuming those
positions, Mr. Rabin was employed in marketing and sales in the critical care
and anesthesia market.
Robert T. Rylee, age 64, was appointed to the Board of Directors in November
1988 pursuant to the terms of an Investment Agreement between the Company and
Dow Corning Enterprises, Inc. He practiced law from 1958 to 1969 and was a
partner in the firm of Wood, Boykin, Rylee, and Walter from 1965 to 1969. In
1969, Mr. Rylee became the President and CEO of Wright Manufacturing Company, a
manufacturer of orthopedic implants and instruments, a
3
<PAGE>
position he held until 1981 when he became a Dow Corning U.S. Area Vice
President and the General Manager of Health Care Business. On May 31, 1993, he
retired as Vice President and Chairman of Health Care Business, a position he
had held since 1986. Mr. Rylee therefore also retired as Director of the Company
representing Dow Corning Enterprises, Inc. effective May 31, 1993. However, on
June 11, 1993, the Company re-appointed Mr. Rylee to the Company's Board of
Directors as an independent Director, in which capacity he does not represent
Dow Corning Enterprises, Inc. He is currently the Chief Executive Officer and a
director of Clarus Medical Systems, which position he has held since September
1993.
Tracey E. Young, age 40, was appointed to the Board of Directors in September
1995. She is President of Elliot Young and Associates, Inc., a Ridgefield,
Connecticut based healthcare consulting firm which specializes in the medical
devices, biotechnology and pharmaceutical industries assisting clients with
financings, mergers, acquisitions, due diligence, technology transfers, and
corporate start-ups. Prior to forming Elliot Young and Associates in 1987, Ms.
Young held key consulting positions with The Wilkerson Group, first as the
founding Associate Director of their Cardiovascular Market Intelligence Service,
and then as an independent consultant to the firm. During a seven-year tenure
in the pacemaker industry, Ms. Young held senior positions in product
management, strategic planning and market development at Telectronics, a major
competitor in the cardiac pacing industry; coordinated one of the largest
pacemaker centers in the country; pioneered the role of the Pacemaker Nurse
Specialist with Intermedics, Inc.; and won several international awards in
clinical research.
The Company formed audit and compensation committees to the Board of Directors
in November 1994. The audit committee consists of Larry Haimovitch as Chairman,
Bart C. Gutekunst and William H. Burns, Jr. The compensation committee consists
of Robert T. Rylee as Chairman, Bart C. Gutekunst and Tracey E. Young. There
were no committee meetings held in fiscal 1995. The Company does not have a
nomination committee.
None of the Directors or Executive Officers of the Company is a director in
any company, other than the Company, with a class of equity securities
registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as
amended, or subject to the requirements of Section 15(d) of such Act or any
company registered as an investment company under the Investment Company Act of
1940, as amended except for Bart C. Gutekunst who is Chairman of the Board of
United Education Software, Inc., and Larry Haimovitch who is a director of
Electro-Pharmacology, Inc.
The Board of Directors held a total of nine meetings during fiscal year 1995.
All Directors attended at least 75% of the total number of meetings of the
Board. The Company compensates Directors for services to the Company in their
capacity as Directors. See "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS -
Executive Remuneration." The Company also reimburses certain Directors for
their out-of-pocket expenses for attending meetings.
The affirmative vote of a majority of the votes cast at the Annual Meeting, if
a quorum is present, will be sufficient to elect a Director.
THE BOARD RECOMMENDS THAT THE NOMINEES FOR ELECTION BE APPROVED. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY
TO THE CONTRARY IN THEIR PROXIES.
EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth the names and ages of the Executive Officers of the
Company as of September 30, 1995, in addition to information respecting their
positions and offices with the Company, their periods of service in such
capacities, and their business experience for at least the past five years.
There are no family relationships among the
4
<PAGE>
Executive Officers of the Company. There are no arrangements or understandings
between any nominee(s) and/or director(s) and any other person(s) pursuant to
which he or she was or is to be selected as a director or nominee.
Robert R. Brownlee, age 64, is one of the founders of the Company and
presently serves the Company as Senior Executive Vice President of Research and
Technical Matters and as a Director and Secretary to the Board of Directors.
From June 1982 to May 1988, he served the Company as Senior Executive Vice
President and Chairman of the Board of Directors. He has been a member of the
Board of Directors since 1980. During 1980 and 1981, Mr. Brownlee served the
Company as Vice President of Product Research and Executive Vice President of
Engineering, respectively. He was a faculty member of The Pennsylvania State
University (the "University") from 1960 to 1980 and served as Adjunct Associate
Professor of Comparative Medicine, Milton S. Hershey Medical Center of the
University from 1981 to 1985. Prior to 1980, Mr. Brownlee served as a consultant
to Intermedius Inc., a major competitor in the cardiac pacing industry.
Alan J. Rabin, age 45, joined the Company in October 1994, in connection with
the Debenture financing. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
At that time, he was appointed to the Board and appointed the Company's
President and Chief Executive Officer. Until September 1994, Mr. Rabin was
President and Chief Executive Officer of R-2 Medical Systems, Inc, a
manufacturer of cardiac care devices, including disposables used in cardiac
pacing. R-2 Medical Systems, Inc. was sold to Cardiotronics, Inc. in 1994. From
1987 to 1992, Mr. Rabin was Vice President of Marketing and Sales for Stereo
Optical Company, a manufacturer and distributor of disposable and ophthalmic
diagnostic devices. From 1985 to 1986, he was Director of Marketing and Sales at
Tycos Life Services, Inc., a manufacturer of cardiovascular diagnostic and
monitoring devices. From 1980 to 1985, Mr. Rabin held various marketing, new
business development, and product management positions with surgical and
cardiovascular equipment divisions of C.R. Bard. Prior to assuming those
positions, Mr. Rabin was employed in marketing and sales in the critical care
and anesthesia market.
Terry McMahon, age 46, joined the Company in November 1994 as its Vice
President of Regulatory Affairs and Quality Assurance. Prior to joining the
Company, Mr. McMahon was employed as the Manager for Clinical Affairs with
Xomed-Treace, Inc. from 1990 to December 1994, where he managed clinical and
pre-clinical (animal) studies to demonstrate the safety and efficacy of devices
for head and neck injury. Additional responsibilities included the preparation
of all regulatory filings for establishing and maintaining market clearance for
the company's product line. Prior to his employment with Xomed-Treace, he served
in a variety of managerial positions in Regulatory and Technical Affairs for
companies involved in medical device implants.
Robert S. Miller, age 47, joined the Company in December 1994 as the
Company's Vice President of Sales and Marketing. From 1992 to December 1994,
he was the Manager of Field Sales Education with Telectronics Pacing Systems,
Inc., one of the leading pacemaker manufacturers in the industry, concentrating
on sales, sales management and training. Prior to joining Telectronics in 1992,
he was the managing partner of an organization that represented Telectronics
Pacing Systems, Inc. as an independent sales distributor. Prior to his
association with Telectronics, Mr. Miller also spent several years as a
representative of Cardiac Pacemakers, Inc., another leader in the pacemaker
industry.
Lauri Mitchell, age 34, has served the Company as Controller since 1990. She
joined the Company as Assistant Controller in 1989. Ms. Mitchell was employed by
Illinois Consolidated Telephone Company as a tax accountant and accounting
analyst for one year and by Central Illinois Public Service Company in financial
reporting for four years.
Paul H. Neff, age 58, has served the Company as Vice President of Research and
Development since 1985. He has served the Company in various capacities since
1981, including Vice President of Operations and Manager of Linear Systems. From
1978 to 1980, he served as an Electronics Designer for The Pennsylvania State
University, and he served as a consultant to Intermedius Inc., a major
competitor in the cardiac pacing industry, from 1977 to 1979.
5
<PAGE>
William Wharton, age 48, was appointed Vice President of Operations in
February 1994. Prior to that appointment, he had served the Company as Vice
President of Quality Assurance since 1985. Mr. Wharton joined the Company in
1982 as Director of Quality Assurance. Before joining the Company, he was
employed as a Quality Assurance Supervisor for at least five years by Medtronic,
Inc., a major competitor in the cardiac pacing industry.
The Company's directors and officers, and persons who own beneficially more
than 10% of a registered class of the Company's equity securities are required
to file with the Securities and Exchange Commission reports of ownership and
changes in ownership of such equity securities. To the Company's knowledge,
based solely on a review of reports on Form 3, Form 4 and Form 5, and amendments
thereto, furnished to the Company by its directors, officers and more than 10%
beneficial owners and written representations that no other reports were
required, during the fiscal year ended March 31, 1995 all filing requirements
applicable to the Company's directors, officers, and more than 10% beneficial
owners have been complied with, with the exception of the initial reports of
ownership on Form 3 by Mr. Gutekunst, Mr. Rabin and Mr. McMahon, and a change of
ownership on Form 4 with respect to one transaction by Mr. Brownlee, which were
inadvertently filed late.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of September 30, 1995, nine (9) stockholders were known by the Company to
beneficially own five percent (5%) or more of the outstanding voting securities
of the Company. The following table sets forth the indicated information as of
September 30, 1995 with respect to each person known by the Company to own
beneficially more than five percent (5%) (calculated in accordance with the
guidelines promulgated by the Securities and Exchange Commission) of the
1,343,619 issued and outstanding shares of common stock of the Company on that
date.
In accordance with Rule 13d-3, promulgated under the Exchange Act, shares
that are not outstanding but that are issuable upon exercise of outstanding
options, warrants, rights or conversion privileges have been deemed to be
outstanding for the purpose of computing the percentage of outstanding shares
owned by the person owning such right, but have not been deemed outstanding for
the purpose of computing the percentage for any other person.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership (1) of Class (2)
-----------------------------------------------------------------------
<S> <C> <C>
Philip R. Beutel 305,724 (3) 20.97%
3 Chase Lane
Colorado Springs, CO 80906
LEM Biomedica, s.r.l. 71,428 5.32%
Loc. Spedaletto
50030 Cavallina di Magill
Florence, Italy
Special Situations Fund III, L.P. 285,714 (4) 17.54%
153 East 53rd St. Rm 5101
New York, New York 10022
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
Special Situations Cayman Fund 107,142 (4) 7.39%
153 East 53rd St. Rm 5101
New York, New York 10022
Bradley Resources 173,214 (4) 11.42%
107 John Street
Southport, CT 06490
Penfield Partners 178,571 (4) 11.73%
c/o William D. Witter, Inc.
150 E. 53rd Street
New York, NY 10022
ROI Partners 125,000 (4) 8.51%
353 Sacramento Street
San Francisco, CA 94111
Dow Corning Enterprises, Inc. 235,714 (5) 15.27%
2200 West Salzburg Road
Auburn, MI 48611
Sirrom Capital Corporation 100,000 (5) 6.93%
511 Union Street
Suite 2310
Nashville, TN 37219
-------------------------------------------------------------------
</TABLE>
(1) Except as otherwise indicated, each person is the record owner of the
shares indicated and possesses the sole voting and investment power with
respect to such shares of common stock.
(2) Computations of percentage ownership of each individual treat debentures
convertible to common stock and warrants and options to purchase common
stock exercisable within the next 60 days as though the shares subject
thereto were issued and outstanding.
(3) Includes options to purchase 25,000 shares of common stock granted pursuant
to the Company's 1992 Non-Qualified Stock Option Plan that are exercisable
within the next 60 days. Also, includes a debenture convertible to 89,285
shares of common stock issued pursuant to the Company's 5% Convertible
Debentures issued in the last quarter of calendar 1994.
(4) These amounts represent common stock issuable upon conversion of the
Company's 5% Convertible Debentures issued in the last quarter of calendar
1994.
(5) These amounts represent redeemable warrants covering the purchase of
shares of common stock issued
7
<PAGE>
pursuant to the retirement of the Company's mortgage with Dow Corning
Enterprises, Inc. and the execution of a new mortgage with Sirrom Capital
Corporation. Dow Corning Enterprises, Inc. also includes 35,714 shares of common
stock held of record.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth the number of shares of common stock
beneficially owned by each Director of the Company as of September 30, 1995 and
the percentage of the outstanding shares such ownership represented at the close
of business on September 30, 1995 (according to information received by the
Company), together with information as to stock ownership of all Directors and
Executive Officers of the Company as a group as of September 30, 1995.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Name of Individual or Amount and Nature of Percent
Number of Persons in Group Beneficial Ownership(1)(3)(4) of Class (2)
-----------------------------------------------------------------------------
<S> <C> <C>
Robert R. Brownlee 58,908 4.27%
Bart C. Gutekunst 28,214 2.06%
Larry G. Haimovitch 12,238 .91%
Alan J. Rabin 29,881 2.18%
Robert T. Rylee 17,810 1.31%
All Directors and Executive Officers
as a group (12 persons) 203,823 (5) 13.57%
------------------------------------------------------------------------------
</TABLE>
(1) Except as otherwise indicated, each person is the record owner of the
shares indicated and possesses the sole voting and investment power with
respect to such shares of common stock.
(2) Computations of percentage ownership of each individual and of the group
treat convertible debentures and options to purchase common stock
exercisable within the next 60 days as though the shares subject thereto
were issued and outstanding.
(3) Includes options exercisable within the next 60 days to purchase shares of
common stock granted pursuant to the Company's Non-Qualified Stock Option
Plans as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Name of Individual or Number
Number of Persons in Group of Shares
-----------------------------------------------------------------
<S> <C>
Robert R. Brownlee....................................... 37,571
Bart C. Gutekunst........................................ 19,286
Larry G. Haimovitch...................................... 667
Alan J. Rabin............................................ 20,953
Robert T. Rylee.......................................... 17,810
All Directors and Executive Officers
as a group (12 persons)................................ 140,047
------------------------------------------------------------------
</TABLE>
(4) Represents common stock issuable upon conversion of the Company's 5%
Convertible Debentures issued in the last quarter of calendar 1994 as
follows:
8
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Name of Individual or Number
Number of Persons in Group of Shares
------------------------------------------------------------------
<S> <C>
Robert R. Brownlee................... .................. -
Bart C. Gutekunst....................................... 8,928
Larry G. Haimovitch..................................... -
Alan J. Rabin........................................... 8,928
Robert T. Rylee......................................... -
All Directors and Executive Officers
as a group (12 persons)............................... 17,856
-------------------------------------------------------------------
</TABLE>
(5) Includes shares owned by family members and shares subject to debentures,
options and warrants as described in notes (3) and (4), above. Includes 513
shares owned by a spouse of an officer as to which the officer disclaims
beneficial ownership.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE REMUNERATION. The following table sets forth information about
the compensation paid or accrued by the Company during the fiscal years ended
March 31, 1995, 1994, and 1993, to the Company's Chief Executive Officers and
any other Executive Officer whose aggregate compensation exceeded $100,000 in
fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
LONG-TERM
FISCAL YEAR RESTRICTED SECURITIES INCENTIVE PLAN
NAME AND PRINCIPAL ENDED OTHER ANNUAL STOCK UNDERLYING ("LTIP") ALL OTHER
POSITION MARCH 31, SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Simon J Fuger/(1)/ 1995 - - - - - - $ 3,425/(2)/
(Chairman, President, 1994 $73,556/(3)/ - $11,100/(4)/ - - - $54,758/(5)/
CEO) 1993 $80,055/(3)/ - $11,100/(4)/ - 8,571/(6)/ - $ 3,119/(2)/
- ----------------------------------------------------------------------------------------------------------------------------------
Phillip T. Beutel/(7)/ 1995 - - $ 1,500/(8)/ - - - -
(Chairman, President, 1994 - - - - 21,429/(9)/ - -
CEO) 1993 - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Alan J. Rabin/(10)/ 1995 $55,000 - $ 1,250/(11)/ - 28,571/(12)/ - $64,451/(13)/
President, CEO, 1994 - - - - - - -
Director) 1993 - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Bart C. Gutekunst/(14)/ 1995 $24,000 - $ 1,250/(15)/ - 21,429/(12)/ - $95,050/(16)/
(Chairman of the 1994 - - - - - - -
Board) 1993 - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Fuger stepped down as President in February 1994 and subsequently
resigned from the Board in March 1994. He was succeeded by Mr. Beutel on
an interim basis while the Company searched for a new chief executive
officer.
9
<PAGE>
(2) This represents interest on previously accrued and unpaid wages.
(3) The decline in salary for fiscal 1994 and 1993 represents a salary cut
implemented in February 1993. Salary cuts were incurred by all employees
of the Company in February 1993. Full salaries were not reinstated until
September 1993.
(4) Other annual compensation represents a monthly fee of $625 paid or
accrued to Mr. Fuger for his services to the Company as a Director. It
also includes a monthly fee of $300 paid or accrued to Mr. Fuger as a
vehicle allowance.
(5) This represents payments and accruals of Mr. Fuger's executive employment
agreement which expired September 18, 1994; 240 hours of accrued vacation
payable to Mr. Fuger at the time of his resignation as president; and
interest on previously accrued and unpaid wages.
(6) These options represent options originally granted to Mr. Fuger on
September 9, 1987 with an expiration date of September 9, 1992. On
September 9, 1992, they were extended to September 9, 1997. These options
have been adjusted to give effect to the Company's one for seven reverse
stock split effected December 13, 1994. Also, these options expired upon
termination of Mr. Fuger's employment agreement on September 18, 1994.
(7) Mr. Beutel was succeeded by Alan J. Rabin as President and Chief
Executive Officer on October 13, 1994.
(8) This represents a monthly fee of $750 accrued to Mr. Beutel beginning in
February 1995 for his services to the Company as a Director. Mr. Beutel
retired from the Board of Directors on July 18, 1995.
(9) These options represent options granted to Mr. Beutel, in his capacity as
a director and officer, under the Company's 1992 Non-Qualified Stock
Option Plan. These options have been adjusted to give effect to the
Company's one for seven reverse stock split effected December 13, 1994.
(10) Mr. Rabin was employed as President and Chief Executive Officer on
October 13, 1994. Mr. Rabin's annual salary is $110,000 and in addition to
his salary, he is entitled to a performance bonus.
(11) This represents a monthly fee of $625 paid to Mr. Rabin in October and
November 1994 for his services to the Company as a Director. Director fees
to employees serving as Directors were suspended at that time.
(12) Upon execution of their employment agreements with the Company, Mr.
Rabin was granted stock options for 28,571 shares of the Company's common
stock and Mr. Gutekunst was granted stock options for 21,429 shares of the
Company's common stock.
(13) This includes $12,751 for reimbursement of relocation expenses paid to
Mr. Rabin pursuant to his employment agreement. It also includes $51,700
for consulting services rendered the Company in connection with the
development of its new business plan and its financing efforts prior to
his employment with the Company.
(14) Mr. Gutekunst was appointed to the Board of Directors in July 1994, and
was employed as Chairman of the Board on October 13, 1994. Mr. Gutekunst's
annual salary is $48,000.
(15) This represents a monthly fee of $625 paid to Mr. Gutekunst in August
and September 1994 for his
10
<PAGE>
services to the Company as a Director prior to his employment as Chairman.
(16) This includes $79,050 for consulting services rendered the Company in
connection with the development of its new business plan and its financing
efforts prior to his employment with the Company. It also includes $16,000
in connection with his facilitating the refinancing of the mortgage on the
Company's property.
The following table sets forth information concerning options granted
during the fiscal year ended March 31, 1995 to those persons named in the
preceding Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted
Options to Employees in Exercise Price Expiration
Name Granted Fiscal Year ($/share) Date
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan J. Rabin 28,571/(1)/ 22% $3.50 9/30/99
Bart C. Gutekunst 21,429/(2)/ 17% $3.50 9/30/99
-----------------------------------------------------------------------------
</TABLE>
(1) 14,286 shares are subject to immediate exercise. The balance of the
shares become exercisable in annual increments of one-third over a three
year period which commenced October 1, 1995. Under the terms of the option
agreement between Mr. Rabin and the Company, any non-exercisable portion of
the option shall become immediately exercisable upon a change in control of
the Company.
(2) 10,715 shares are subject to immediate exercise. The balance of the
shares become exercisable in annual increments of one-third over a three
year period which commenced October 1, 1995. Under the terms of the option
agreement between Mr. Gutekunst and the Company, any non-exercisable
portion of the option shall become immediately exercisable upon a change in
control of the Company.
The following table sets forth information concerning the value of
unexercised stock options at March 31, 1995 for those persons named in the
Summary Compensation Table.
AGGREGATED OPTIONS IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised In-
Shares Underlying Unexercised The-Money Options at
Acquired on Value Options at Fiscal Year End Fiscal Year End
Name Exercise Realized Exercisable/Unexercisable/(1)/ Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan J. Rabin - - 14,286/14,285 $8,036/$ 8,035
Bart C. Gutekunst - - 10,715/10,714 $ 6,027/$6,027
Phillip R. Beutel - - 25,000/ 7,143 $32,812/$4,018
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These options have been adjusted to give effect to the Company's one for
seven reverse stock split effected December 13, 1994.
11
<PAGE>
COMPENSATION OF DIRECTORS. Until January 31, 1995, the Company paid fees of
$625 per month to members of the Board of Directors for their services as
directors; however, such fees were not paid to Phillip Beutel or Larry
Haimovitch. In February 1995, the Company initiated new fees for outside
directors for 1995 to attract and retain qualified directors and to maximize the
Company's working capital. For their service on the Board, each outside
director will be entitled to receive in January 1996, the sum of $3,000 and such
number of shares of the Company's common stock that have a total value of $6,000
based on the average of the bid and ask prices of the Company's common stock on
the NASD OTC Bulletin Board Service as quoted on January 19, 1995 (2,400
shares). Directors appointed to the Board of Directors subsequent to February
1995 will be paid in January 1996 on a pro-rata basis according to the number of
months served.
EMPLOYMENT AGREEMENTS. Mr. Alan J. Rabin is employed as the President and
Chief Executive Officer of the Company pursuant to a three year employment
agreement dated as of October 13, 1994. As compensation thereunder, Mr. Rabin
receives an annual salary of $110,000; reimbursement for business travel and
other business expenses; and an annual bonus in an amount equal to up to 25% of
his annual salary based on the performance of the Company. The employment
agreement also provides reimbursement for Mr. Rabin's relocation and temporary
living expenses, not to exceed $38,000 plus the cost associated with the moving
of personal possessions and his family. His employment agreement provides a
severance package under certain defined circumstances equal to the balance of
the salary due under the employment agreement (payable in accordance with the
Company's payroll practices) and a lump sum payment equal to nine months of his
annual base salary then in effect, plus maintenance by the Company (to the
extent permitted under plan documents) for nine months from the date of
termination of all benefit plans in which he was entitled to participate while
an employee, or the equivalent. The nine month lump sum severance payment is
also payable to Mr. Rabin in the event his employment agreement is not renewed
by the Company at the end of its term. Pursuant to his employment agreement,
the Company awarded to Mr. Rabin a stock option for 28,571 shares of the
Company's common stock at an exercise price of $3.50 per share, 14,286 of which
vested and became exercisable immediately and the remaining 14,285 shares are
subject to exercise incrementally over the term of his employment agreement.
Mr. Rabin's stock option agreement contains a change of control provision
whereby in the event of a change in control of the Company, all outstanding
options become immediately exercisable.
Mr. Bart C. Gutekunst is employed as the Chairman of the Board of the Company
pursuant to a three year employment agreement dated as of October 13, 1994. As
compensation thereunder, Mr. Gutekunst receives an annual salary of $48,000;
reimbursement for business travel and other business expenses; and a bonus
related to the Company's financial, capital raising and corporate development
and acquisition activities in the form of the following transactional fees: 1%
for debt and equity source, and 1% of the gross consideration for asset
acquisitions or sales, which fees are payable to Mr. Gutekunst upon closing by
the Company or its successor-in-interest of the applicable transaction. Pursuant
to the employment agreement, Mr. Gutekunst received an option for 21,429 shares
of the common stock of the Company at an exercise price of $3.50 per share,
10,715 of which vested and became exercisable immediately and the remaining
10,714 shares are exercisable incrementally over the term of the agreement.
His employment agreement contains the same severance provisions as Mr. Rabin's
employment agreement and his stock option contains the same change of control
provision as Mr. Rabin's stock option agreement.
Mr. Simon J. Fuger, the former President and Chairman of the Company,
resigned from the office of President in February 1994 and from the Board in
March 1994. Pursuant to the severance provisions of his employment agreement
with the Company, Mr. Fuger was entitled to receive his monthly salary in the
amount of $7,767 until the termination date of the agreement (September 18,
1994). The Company also gave Mr. Fuger a promissory note for $87,671
representing prior deferred and unpaid salary. See, "Certain Relationships and
Related Transactions". In the last quarter of 1994, the Company retired its
obligations to Mr. Fuger.
12
<PAGE>
STOCK OPTIONS. On September 9, 1987, the Board of Directors of the Company
adopted the 1987 Non-Qualified Stock Option Plan (the "1987 Plan"). The 1987
Plan provided the Board of Directors with the authority to grant to employees,
officers and directors, and employees of the Company non-qualified options to
purchase up to a maximum of 142,857 shares of the Company's common stock.
On February 7, 1992, the Company's Board of Directors adopted the 1992
Non-Qualified Stock Option Plan (the "1992 Plan"). The 1992 Plan provided the
Board of Directors with the authority to grant officers, directors, and
employees of the Company non-qualified options to purchase up to a maximum of
42,857 shares of the Company's common stock. On March 17, 1994, the Board of
Directors amended and restated the 1992 Plan and provided therein authorization
to issue options for up to a maximum of 157,143 shares of the Company's common
stock.
On January 19, 1995, the Board of Directors of the Company authorized the
combination of the 1987 Plan and the 1992 Plan into one plan now known as the
Combined 1987-1992 Non-Qualified Stock Option Plan ("Combined Plan"). The
Combined Plan provides that all issued and outstanding stock option agreements
under the previous plans shall be governed by the Combined Plan. Under the
Combined Plan, the Company is authorized to issue options to employees, officers
and directors to purchase up to a maximum of 400,000 shares of the Company's
common stock. As of March 31, 1995, there were outstanding options for 242,710
shares under the Combined Plan, of which 207,569 shares were subject to options
held by officers and directors at exercise prices ranging from $3.50 to $5.25
per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Employment Agreements" for a description of certain compensation
arrangements.
In October, 1994, the Company sought to raise up to $3.5 million through
a private placement of 5% Convertible Debentures (the "Debentures") and raised
$2,885,000 in the last quarter of calendar 1994. Interest is payable on March
31 and October 31 of each year, commencing March 31, 1995. The Debentures'
maturity date is October 31, 1999. The Debentures contain provisions giving
Debentureholders certain veto power regarding the merger, acquisition or sale of
the Company or substantially all of its assets, rights to additional shares, and
the right to designate an individual for election to the Company's Board of
Directors. Pursuant to the terms of the 5% Convertible Debentures, the Company
filed with the SEC a registration statement on Form S-1 registering the common
stock underlying the Debentures, which registration statement was declared
effective by the SEC on April 27, 1995. The Company is obligated to maintain
the effectiveness of the registration statement for a maximum of three years
from the effective date.
Upon the closing of the minimum offering of the Debentures, Alan J. Rabin and
Bart C. Gutekunst entered into employment agreements with the Company on October
13, 1994. Previously, Mr. Gutekunst and Mr. Rabin had been consulting with and
assisting the Company in preparing its business plan and obtaining additional
financing. On July 31, 1994, Mr. Gutekunst was appointed to the Board of
Directors to fill a vacancy. On October 13, 1994, Mr. Gutekunst was appointed
Chairman of the Board and Mr. Rabin was appointed the Company's President and
Chief Executive Officer pursuant to their respective employment agreements. For
consulting services rendered the Company in connection with the development of
the Company's new business plan and the Company's financing, Mr. Rabin and Mr.
Gutekunst were paid consulting fees in the aggregate amount of $130,750. Mr.
Gutekunst and Mr. Rabin also participated in the debenture financing discussed
above, and each acquired a Debenture in the amount of $25,000.
On October 11, 1994, Phillip R. Beutel, a founding stockholder and
Director until his resignation on July 18, 1995, canceled $615,630 (representing
the outstanding principal balance and accrued interest thereon to October 4,
1994) in secured indebtedness owed to him by the Company in exchange for a
Debenture in the aggregate amount of $250,000 and 130,582 shares of the
Company's common stock (at $2.80 per share). Such indebtedness arose from loans
13
<PAGE>
to the Company made by Mr. Beutel, which were secured by certain assets of the
Company, which security interest was released upon conversion of the debt into a
Debenture. Also, Mr. Beutel had advanced funds to the Company pursuant to a
factoring agreement under which he was granted a security interest in $250,000
of the Company's accounts receivable from which the obligation was paid. All
such funds have been repaid to Mr. Beutel and his security interest has been
released.
On October 1, 1994, the Company issued to Robert R. Brownlee, Senior
Executive Vice President of the Company, an option to purchase 14,286 shares for
the Company's common stock at an exercise price of $3.50 per share. The option
agreement contains certain piggyback registration rights pursuant to which the
shares underlying the option were registered under a Registration Statement
filed with the SEC, effective April 27, 1995.
On October 7, 1994, the Company executed an employment agreement with Robert
R. Brownlee. The agreement is a three year agreement whereby Mr. Brownlee will
receive an annual salary of $96,800 for 1995; reimbursement for business travel
and other business expenses; and may receive from time to time such bonus
compensation as the Board of Directors of the Company in its sole discretion
shall authorize. The employment agreement provides that should Mr. Brownlee
decide to commit less time to the Company subsequent to October 1, 1995, his
base salary shall be reduced proportionately. Further, any options exercisable
at the termination of Mr. Brownlee's employment shall be retained by him. His
employment agreement provides a severance package under certain defined
circumstances equal to the balance of the salary due under the employment
agreement (payable in accordance with the Company's payroll practices) and a
lump sum payment equal to nine months of his annual base salary then in effect,
plus maintenance by the Company (to the extent permitted under plan documents)
for nine months from the date of termination of all benefit plans in which he
was entitled to participate while an employee, or the equivalent.
In November 1988, the Company entered into a series of agreements with
Dow Corning Wright and Dow Corning Enterprises, Inc. ("DCE"), wholly-owned
subsidiaries of Dow Corning Corporation. One of the agreements gave DCE the
right to appoint a director to the Company's Board of Directors. Mr. Robert T.
Rylee at that time was an executive officer of Dow Corning Corporation. On
November 9, 1988, DCE appointed Mr. Rylee to serve as a Director of the Company.
Mr. Rylee retired from Dow Corning Corporation on May 31, 1993 and therefore
also retired as Director of the Company representing DCE. However, on June 11,
1993, the Company re-appointed Mr. Rylee to the Company's Board of Directors as
an independent Director, in which capacity he does not represent Dow Corning
Enterprises, Inc.
In 1994, the Company paid its obligations in full to Simon J. Fuger,
the former President and Chairman of the Company who resigned in March 1994.
The obligations that were retired represented $87,671 in historically deferred
salary expense and $7,767 in monthly salary paid to Mr. Fuger as severance from
the date of his resignation to September 18, 1994, the expiration date of his
employment agreement.
The foregoing transactions between the Company and its affiliates have been
negotiated on behalf of the Company by its management. The Company believes that
such transactions are in compliance with the Company's policy that transactions
with affiliates be on terms at least as favorable as could be reasonably
obtained from an unaffiliated third party.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected BDO Seidman, LLP to be the Company's
independent accountants for the
14
<PAGE>
fiscal year ending March 31, 1996 and recommends that such appointment be
ratified by the stockholders at the Annual Meeting.
BDO Seidman, LLP audited the Company's financial statement in fiscal 1995,
subsequent to the resignation of Price Waterhouse, LLP in January 1995. Their
representatives are expected to be present at the Annual Meeting with
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT ACCOUNTANTS, BDO SEIDMAN, LLP. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY TO THE CONTRARY
IN THEIR PROXIES.
While ratification by shareholders of this appointment is not required by law
or the Company's Certificate of Incorporation or Bylaws, management of the
Company believes that such ratification is desirable. In the event this
appointment is not ratified by a majority vote of shareholders, the Board of
Directors of the Company will consider that fact when it appoints independent
accountants for the next fiscal year.
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION REGARDING CAPITAL STOCK
The Board of Directors of the Company proposes and recommends that the
Company's Certificate of Incorporation be amended to authorize a class of
Preferred Stock having rights, privileges, preferences and restrictions as may
be determined by the Board of Directors. Approval of the amendment will not
require that the amendment be implemented by the Board of Directors, which will
maintain discretion as to whether the approved amendment remains in the best
interest of the Company. The Delaware General Corporate Law does not provide
shareholders with dissenter's rights of appraisal in connection with the
proposed amendment. The proposed amendment is discussed below.
AUTHORIZE A CLASS OF PREFERRED STOCK
The Board of Directors proposes and recommends that Section 4 of Article 4 of
the Company's Certificate of Incorporation be amended to authorize 3,000,000
shares of preferred stock, $.001 par value per share, which would have such
voting powers, designations, preferences, and relative, participating, optional
and conversion or other special rights, and such qualifications, limitations or
restrictions, as the Board of Directors may designate for each series issued
from time to time. These would include, but not be limited to: (A) the
designation of each series and the number of shares that will constitute each
such series; (B) the dividend rate for such series; (C) the price of which, and
the terms and conditions on which, the shares of such series may be redeemed, if
such shares are redeemable; (D) the voting rights, if any, of shares of such
series; and (E) the terms and conditions, if any, upon which shares of such
series may be converted into shares of other classes or series of shares of the
Company, or other securities.
Approval of the amendment by shareholders will not require the Board of
Directors to file the amendment with the Delaware Secretary of State to amend
the Certificate of Incorporation. The Board of Directors will maintain
discretion as to whether the approved amendment remains in the best interest of
the Company and may choose not to file the amendment. The Delaware General
Corporate Law does not provide shareholders with dissenters' rights of appraisal
in connection with the proposed amendment. The proposed amendment is discussed
below.
The Company currently does not have any shares of preferred stock authorized.
All 3,000,000 shares of preferred stock would be available for issuance without
further action by the shareholders of the Company. The Board of Directors has
no present plans for issuance of any shares of preferred stock, nor does it have
any present plans to apply
15
<PAGE>
for the listing of the preferred stock on a national securities exchange or
quotation on a securities quotation system.
The proposed authorization of preferred stock is deemed desirable in that it
would enhance the Company's flexibility in connection with possible future
actions, such as stock splits, stock dividends, financings, mergers,
acquisitions, or other purposes. Having such authorized shares available for
issuance in the future would allow shares to be issued without the expense and
delay of a special shareholders' meeting. There are no present commitments
arrangements or plans to issue any of the preferred stock that would be
authorized by the proposed amendment.
The authorized but unissued shares of preferred stock also could be used to
impede a change in control of the Company. Under certain circumstances, such
shares could be used to deter persons seeking to effect a takeover or otherwise
gain control of the Company. For example, a series of preferred stock could be
designated that would be convertible into common stock upon the happening of a
triggering event such as an acquisition of a certain percentage of the Company's
voting stock. The conversion of the preferred stock would dilute the voting
power of the acquiror, and would make subsequent transactions the acquiror may
wish to effect more difficult or costly. Use of the preferred stock in the
foregoing manner may be disadvantageous to shareholders who would deem the
attempted takeover efforts as desirable. The Board of Directors is not aware of
any planned takeover efforts. Further, this proposal may be disadvantageous to
shareholders in that preferred stock with disproportionate voting rights may be
used to entrench management, making it more difficult to remove directors at a
time when the shareholders would prefer to do so. Preferred stock also may be
used to prevent or discourage offers to purchase blocks of the Company's common
stock, the results of which purchases may cause uncharacteristic or artificial
changes in the market price of the common stock.
The following is the proposed resolution to be voted on at the Annual Meeting
to amend Section 4 of Article 4 of the Company's Certificate of Incorporation:
RESOLUTION
RESOLVED, that in order to authorize a class of preferred stock, par
value $.001 per share, of the Corporation, Section 4 of Article 4 of the
Corporation's Certificate of Incorporation is hereby amended to read in its
entirety as follows:
This Corporation is authorized to issue two classes of shares to be
designated, respectively, "common stock" and "preferred stock". The
total number of shares of common stock which the Corporation shall have
authority to issue is Thirty Million (30,000,000) shares of common
stock, par value $0.10 per share ("Common Stock"). The total number
of shares of preferred stock authorized to be issued shall be Three
Million (3,000,000), $.001 par value per share ("Preferred Stock").
4.1 Common Stock
------------
The designations and the powers, preferences and rights, and the
qualifications, limitations, or restrictions of the Common Stock are as
follows:
4.1(a) Dividend Rights. Subject to provisions of law and the
---------------
preference of any stock ranking prior to the Common Stock as to
dividends, the holders of Common Stock will be entitled to receive
dividends when, as and if declared by the Board of Directors.
4.1(b) Voting Rights. Except as provided by law and pursuant to this
-------------
Article 4, the holders of Common Stock will have one vote for each
share on each matter submitted to a vote of the stockholders of the
Corporation. Except as otherwise provided by law or by the Certificate
of Incorporation, the holders of Common Stock will
16
<PAGE>
have sole voting power.
4.1(c) Liquidation Rights. In the event of any liquidation,
------------------
dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts or
liabilities of the Corporation and the preferential amounts to which the
holders of any stock ranking prior to Common Stock in the distribution
of assets are entitled upon liquidation, the holders of Common Stock and
the holders of any other stock ranking on a parity with Common Stock in
the distribution of assets upon liquidation will be entitled to share in
the remaining assets of the Corporation according to their respective
interests.
4.2 Preferred Stock
---------------
4.2(a) Rights, Preferences and Authority. Preferred Stock may be
---------------------------------
issued from time to time in one or more series. All shares of any one
series of Preferred Stock will be identical except as to the dates of
issue and the dates from which dividends on shares of the series issued
on different dates will cumulate, if cumulative. Authority is hereby
expressly granted to the Board of Directors to authorize the issue of
one or more series of Preferred Stock and to fix by resolution or
resolutions providing for the issue of each such series the voting
powers, designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, of such series, to the full extent now or hereafter permitted
by law, including, but not limited to, the following:
(i)The number of shares of such series, which may subsequently be
increased, except as otherwise provided by the resolution or resolutions
of the Board of Directors providing for the issue of such series, or
decreased, to a number not less than the number of shares then
outstanding, by resolution or resolutions of the Board of Directors, and
the distinctive designation thereof;
(ii) The dividend rights of such series, the preferences, if any, over
any other class or series of stock, or of any other class or series of
stock over such series, as to dividends, the extent, if any, to which
shares of such series will be entitled to participate in dividends with
shares of any other series or class of stock, whether dividends on
shares of such series will be fully, partially or conditionally
cumulative, or a combination thereof, and any limitations, restrictions
or conditions on the payment of such dividends;
(iii) The rights of such series, and the preferences, if any, over any
other class or series of stock, or of any other class or series of stock
over such series, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and the
extent, if any, to which shares of any such series will be entitled to
participate in such event with any other series or class of stock;
(iv) The time or times during which the price or prices at which, and
the terms and conditions on which, the shares of such series may be
redeemed;
(v) The terms of any purchase, retirement or sinking fund which may be
provided for the shares of such series;
(vi) The terms and conditions, if any, upon which the shares of such
series will be convertible into or exchangeable for shares of any other
series, class or classes, or any other securities, to the full extent
now or hereafter permitted by law;
(vii) The voting powers, if any, of such series in addition to the
voting powers provided by law.
17
<PAGE>
4.2(b) Limitation on Dividends. No holders of any series of Preferred
-----------------------
Stock will be entitled to receive any dividends thereon other than those
specifically provided for by the Certificate of Incorporation or the
resolution or resolutions of the Board of Directors providing for the
issue of such series of Preferred Stock, nor will any accumulated
dividends on Preferred Stock bear any interest.
4.2(c) Limitation on Liquidation Distributions. In the event of any
---------------------------------------
liquidation, dissolution or winding up of the Corporation, whether
voluntary of involuntary, the holders of Preferred Stock of each series
will be entitled to receive only such amount or amounts as will have
been fixed by the Certificate of Incorporation or by the resolution or
resolutions of the Board of Directors providing for the issue of such
series. A consolidation or merger of the Corporation with or into one or
more other corporations or a sale, lease or exchange of all or
substantially all of the assets of the Corporation will not be deemed to
be a voluntary or involuntary liquidation, dissolution or winding up,
within the meaning of this Section 4 of Article 4.
Under Delaware General Corporation Law, and pursuant to the Company's
Certificate of Incorporation, the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote is required to adopt the
proposed amendment to the Company's Certificate of Incorporation.
It is intended that in the absence of contrary direction, the shares
represented by each properly executed, unrevoked Proxy received in time for the
meeting will be voted "For" the Amendment to the Certificate of Incorporation
which would authorize the issuance of Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION AUTHORIZING THE PREFERRED STOCK BE APPROVED.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS
SPECIFY TO THE CONTRARY IN THEIR PROXIES. None of the Directors or Executive
Officers of the Company, or their associates, has any interest, direct of
indirect, in the adoption of the proposed amendment other than the benefit which
will be realized by the Company as a whole.
SHAREHOLDER PROPOSALS
Proposals of the shareholders intended to be presented at the next
Annual Meeting of Shareholders must be received by the Company for possible
inclusion in the Company's Proxy Statement and Form of Proxy relating to the
meeting not later than May 31, 1996, unless the month and date of the next
Annual Meeting are advanced by more than thirty calendar days, or delayed by
more than ninety calendar days from September 25, 1996, the month and day
contemplated for the next Annual Meeting. If such a change occurs, the Company
will inform shareholders in a timely manner of the change and date by which
shareholder proposals must be received. In such event, shareholder proposals
must be received by the Company a reasonable time before the solicitation of
proxies is made. Such shareholder proposals should be made in compliance with
applicable legal requirements and be furnished to the President by certified
mail, return receipt requested.
ANNUAL REPORT
The Annual Report of the Company for the year ended March 31, 1995
accompanies this Proxy Statement.
18
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters, other than the
foregoing, that will be presented for consideration at the Annual Meeting.
However, if other matters properly come before the Annual Meeting, or any
adjournment thereof, the persons named in the accompanying Proxy will vote in
accordance with their judgement with respect to such matters.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT R. BROWNLEE
SENIOR EXECUTIVE VICE PRESIDENT AND SECRETARY
Palm Coast, Florida
October 25, 1995
19
<PAGE>
[CARDIAC CONTROL SYSTEMS LOGO APPEARS HERE]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 THROUGH 3.
The undersigned appoints Alan J. Rabin and Robert R. Brownlee, or either one
of them, with power of substitution, as Proxies, and hereby authorizes them to
represent and to vote, as indicated below, all shares of common stock, par value
$0.10 per share, of Cardiac Control Systems, Inc. that the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at the
Company's headquarters, 3 Commerce Blvd., Palm Coast, Florida 32164 on December
14, 1995 at 9:00 a.m. local time, or any adjournments thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
Robert R. Brownlee, William H. Burns, Jr., Bart C. Gutekunst, Larry Haimovitch,
Alan J. Rabin, Robert T. Rylee and Tracey E. Young
(INSTRUCTION: To withhold authority to vote for any individual nominee, cross
out that nominee's name above.)
2. RESOLUTION TO RATIFY THE APPOINTMENT OF BDO SEIDMAN, LLP as independent
accountants of Cardiac Control Systems, Inc.
for the fiscal year ending March 31, 1996. [_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
authorizing the issuance of to 3,000,000 shares of Preferred Stock.
[_] FOR [_] AGAINST [_] ABSTAIN
4. The Proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
<PAGE>
WHEN PROPERLY EXECUTED AND RETURNED, THIS PROXY WILL BE VOTED IN A MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED "FOR" ALL DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer, giving
full title. If a partnership, please sign in partnership name by authorized
person, giving full title.
Dated: ____________, 1995 --------------------------------------
Signature
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Signature if held jointly
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| PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD |
| PROMPTLY USING THE ENCLOSED ENVELOPE |
+---------------------------------------------------+
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Address Corrections
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