SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SpectraSCIENCE, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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 Rules 14a-6(i)(4) 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 transactions 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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(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:
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SPECTRASCIENCE, INC.
3650 Annapolis Lane, Suite 101
Minneapolis, MN 55447-5434
Tel: (612) 509-9999 Fax: (612) 509-9805
email: [email protected]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1997
------------------------------
To the Shareholders of SPECTRASCIENCE, Inc.:
The Annual Meeting of Shareholders of SPECTRASCIENCE, Inc. (the
"Company") will be held at the Radisson Plaza Hotel, 35 South Seventh Street,
Minneapolis, Minnesota 55402, Tel: (612) 339-4900, on Wednesday, May 21, 1997,
at 3:30 p.m. local time, for the following purposes:
1. To elect three (3) persons to serve as directors until the next
Annual Meeting of Shareholders or until their respective
successors shall be elected and qualified;
2. To ratify the selection of Ernst & Young LLP as independent
public accountants of the Company for the fiscal year ending
December 31, 1997.
3. To act upon any other matters that may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 26, 1997
are entitled to receive notice of and to vote at the meeting and any adjournment
thereof. A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996, a Proxy Statement and a Proxy accompany this
notice. These materials are first being mailed to shareholders on or about April
11, 1997.
All shareholders are cordially invited to attend the meeting. However,
to ensure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. If you do attend the meeting, you may, if
you prefer, revoke your Proxy and vote your shares in person.
By Order of the Board of Directors
Ching-Meng Chew
VICE PRESIDENT OF FINANCE AND ADMINISTRATION,
CHIEF FINANCIAL OFFICER, TREASURER AND
Dated: April 8, 1997 CORPORATE SECRETARY
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES.
THANK YOU FOR ACTING PROMPTLY
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SPECTRASCIENCE, INC.
3650 ANNAPOLIS LANE, SUITE 101
MINNEAPOLIS, MINNESOTA 55447-5434
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 21, 1997
This Proxy Statement and the accompanying Proxy are being furnished to
shareholders (the "Shareholders") of SPECTRASCIENCE, Inc., a Minnesota
corporation ("SPECTRASCIENCE" or the "Company"), in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Shareholders and at any adjournment(s) thereof (the
"Annual Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders (the "Notice of Meeting"). The Annual Meeting
will be held at the Radisson Plaza Hotel, 35 South Seventh Street, Minneapolis,
Minnesota 55402, Tel: (612) 339-4900, on Wednesday, May 21, 1997, at 3:30 p.m.
local time.
This Proxy Statement, the accompanying Proxy and the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996, are first
being mailed to Shareholders of the Company on or about April 11, 1997. The
Annual Report on Form 10-KSB is not to be considered a part of the Company's
proxy solicitation materials.
SOLICITATION AND REVOCATION OF PROXIES
The costs and expenses of solicitation of proxies will be borne by the
Company. In addition to the use of the mail, proxies may be solicited by
officers, directors and employees of the Company by telephone, facsimile or in
person, but such persons will not be specifically compensated for such services.
The Company may reimburse brokerage firms and others for expenses in forwarding
proxy materials to the beneficial owners of the Company's common stock.
PROXIES IN THE FORM ENCLOSED ARE SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. All proxies delivered pursuant to this solicitation are revocable at
any time at the option of the persons executing them by giving written notice to
the Secretary of the Company, by delivering a later dated proxy or by voting in
person at the Annual Meeting.
QUORUM AND VOTING RIGHTS
Only Shareholders of record at the close of business on March 26, 1997
are entitled to execute proxies or to vote at the Annual Meeting. As of said
date there were 4,480,379 outstanding shares of the Company's common stock, par
value $.25 per share ("Common Stock"), the only outstanding voting securities of
the Company. Each holder of Common Stock is entitled to one vote for each share
held with respect to the matters mentioned in the foregoing Notice of Meeting
and any other matters that may properly come before the meeting. A majority of
the outstanding shares entitled to vote are required to constitute a quorum at
the meeting. The affirmative vote of a majority of the Common Stock present, in
person or by proxy, and entitled to vote at the Annual Meeting is required to
approve the matters mentioned in the foregoing Notice of Meeting. If a
Shareholder abstains from voting as to any proposal, then the shares held by
such Shareholder shall be deemed present at the Annual Meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such proposal but shall not be deemed to have been voted in favor of such
proposal. If a broker returns a "non-vote" proxy, indicating a lack of authority
to vote on a proposal, then the shares covered by such non-vote shall be deemed
present at the Annual Meeting for purposes of determining a quorum, but not
present for purposes of calculating the vote with respect to such proposal.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. If no specific instructions are given with regard to the
matters to be voted upon, the shares represented by a signed Proxy will be voted
"FOR" Proposals 1 and 2 set forth in the Notice of Meeting.
OWNERSHIP OF VOTING SECURITIES BY PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of February 28, 1997, by: (i)
persons known to the Company to be beneficial owners of more than 5% of the
Common Stock; (ii) each of the Company's directors, each nominee for director,
and by each executive officer set forth in the compensation table; and (iii) the
officers and directors of the Company as a group. Except as otherwise indicated,
the beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares.
<TABLE>
<CAPTION>
Amount and
Title of Name and Address of Nature of Beneficial Percent of
Class Beneficial Owner Ownership Class
----- ---------------- --------- -----
<S> <C> <C> <C>
Common Perkins Capital Management, Inc. and 794,488 16.8%
The Perkins Opportunity Fund(1)
730 East Lake Street
Wayzata, MN 55391-1769
Common Nathaniel S. Thayer(2) 487,438 10.8%
Common Brian T. McMahon(3) 416,666 8.5%
Common Reggeborgh Beheer BV(4) 317,000 7.0%
Postbox 319, Industrieweg 12
7460 AH Rijssen,
The Netherlands
Common Henry M. Holterman(5) 11,000 0.2%
Common Officers and Directors as a Group(6) 937,183 18.9%
(5 persons)
</TABLE>
- --------------------------------------------------
(1) Includes 523,045 shares owned by Perkins Capital Management, Inc. ("PCM")
and 271,443 shares owned by The Perkins Opportunity Fund ("POF" and
collectively with PCM, "Perkins"). The shares beneficially owned by Perkins
include 236,556 shares of Common Stock issuable upon exercise of warrants
held by Perkins or their clients.
(2) Includes 454,238 shares of Common Stock, 33,000 shares issuable upon
exercise of options that are exercisable within 60 days of February 28,
1997 and 200 shares held in a joint account in which Mr. Thayer has a 50%
beneficial interest. Mr. Thayer, a non-employee director of the Company, is
a partner of the law firm of Blais Cunningham & Crowe Chester, and his
address is 150 Main Street, P.O. Box 1325, Pawtucket, RI 02862.
(3) Includes 416,666 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 28, 1997. Mr. McMahon is
the President and Chief Executive Officer of the Company, and his address
is 3650 Annapolis Lane, Suite 101, Minneapolis, MN 55345-5434.
(4) Includes 100,000 shares and warrants to purchase 33,333 shares held by Mr.
Dik Wessels, a controlling shareholder of Reggeborgh Beheer BV, that are
exercisable within 60 days of February 28, 1997.
(5) Includes 11,000 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days of February 28, 1997. Mr. Holterman is
a non-employee director of the Company, and his address is the same as the
address of Reggeborgh Beheer BV, where he is the Managing Director.
(6) Includes 454,438 shares of Common Stock and 482,745 shares of Common Stock
issuable upon exercise of options held by all directors and executive
officers (5 persons) that are exercisable within 60 days of February 28,
1997.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has nominated the three persons named below to
serve as directors of the Company until the next annual meeting of Shareholders
or until their earlier death, resignation or removal from office. Each of the
three nominees is presently a member of the Board of Directors and has consented
to serve another term as a director if re-elected. If any of the nominees should
be unavailable to serve for any reason, the Board of Directors may designate a
substitute nominee or nominees (in which case the persons named on the enclosed
Proxy will vote all valid Proxies for the election of such substitute nominee or
nominees), allow the vacancy or vacancies to remain open until a suitable
candidate or candidates are located, or by resolution provide for a lesser
number of directors. The Board of Directors has no reason to believe that any
nominee will be unable or unwilling to serve as a director if elected.
INFORMATION ABOUT NOMINEES
The names of the nominees, their ages, the year in which each first
became a director and their principal occupations are set forth below.
<TABLE>
<CAPTION>
Name Age Title Director Since
- ---- --- ----- --------------
<S> <C> <C>
Brian T. McMahon 43 President, Chief Executive Officer and 1993
Director
Henry M. Holterman 42 Director 1992
Nathaniel S. Thayer 72 Director 1992
</TABLE>
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BRIAN T. MCMAHON was elected Director, President and Chief Executive
Officer in May 1993, and assumed the position of Acting Chairman of the Board in
May 1994. Mr. McMahon joined the Company in the capacity of Executive Vice
President and Chief Operating Officer in July 1992, and prior to that, served as
an independent consultant to the Company since May 1992. Prior to joining the
Company, Mr. McMahon held a succession of marketing, business development and
sales management positions with SCIMED Life Systems, Inc., a wholly-owned
subsidiary of Boston Scientific Corporation (NYSE: BSX), culminating in the
position of Director of Marketing and Business Development.
HENRY M. HOLTERMAN is the Managing Director of Reggeborgh Beheer BV, a
company located in the Netherlands that invests in companies and owns property
projects generally located in the Netherlands. Mr. Holterman is a chartered
accountant and, from 1987 to 1991, was group controller for Transport
Development Group PLC and the Dutch Holding Company ETOM NV. From 1984 to 1988,
Mr. Holterman was the President of the Board of Directors of LETO Recycling, a
Swedish-Dutch company involved in recycling chemical waste.
NATHANIEL S. THAYER has been a partner in the law firm of Blais
Cunningham & Crowe Chester, located in Pawtucket, Rhode Island, since 1969.
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE THREE
NOMINEES LISTED ABOVE AS DIRECTORS OF THE COMPANY.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors
held four meetings and adopted resolutions by unanimous written action on three
occasions (as permitted under Minnesota Statutes Section 302A.239). Each of the
directors attended all of the meetings of the Board of Directors and applicable
committees held while each was a director during such fiscal year. The Board of
Directors has an Audit Committee and a Compensation Committee.
The members of the Audit Committee during the fiscal year ended
December 31, 1996 were Messrs. Holterman and Thayer. The functions of the Audit
Committee are (i) to review the internal and external financial reporting of the
Company, (ii) to review the scope of the independent audit, and (iii) to
consider comments by the auditors regarding internal controls and accounting
procedures and management's response to those comments. The Audit Committee met
three times during the fiscal year ended December 31, 1996, primarily to review
the Company's internal and external financial reporting practices, risk
management practices and cash investment policy.
The members of the Compensation Committee during the fiscal year ended
December 31, 1996 were Messrs. Holterman and Thayer. The functions of the
Compensation Committee are (i) to recommend the compensation for those officers
who are also directors and for senior management, (ii) to review senior
management's objectives, and (iii) to make recommendations to the Board of
Directors regarding the administration of, and the grant of options under, the
Company's Amended and Restated 1991 Stock Plan (the "Plan"). The Compensation
Committee met four times and adopted one written action during the fiscal year
ended December 31, 1996.
The Company does not have a nominating committee of the Board of
Directors.
REMUNERATION OF MEMBERS OF THE BOARD OF DIRECTORS
DIRECTORS' FEES. The Company pays each non-employee director $500 for
each Board of Directors meeting and committee meeting attended and reimburses
each such director for reasonable travel and out-of-pocket expenses for
attendance at these meetings.
AUTOMATIC OPTION GRANT. Pursuant to the Plan, as amended, each
non-employee director is entitled to receive an option to purchase 10,000 shares
of Common Stock when first elected to the Board of Directors. Prior to October
1996, non-employee directors were entitled to receive an initial option grant of
25,000 shares of Common Stock. Additionally, each non-employee director is
entitled to receive an automatic grant of options to purchase 5,000 shares of
Common Stock upon re-election to the Board each year the Plan is in effect. The
exercise price of the option is based on the greater of (a) the prevailing
market price (defined as the closing price) of the Common Stock on the date of
grant or (b) the average of the closing prices of the Common Stock for the ten
trading days immediately prior to the date of grant.
The options granted to non-employee directors under the Plan expire ten
years from the date of grant (subject to earlier termination in the event of
death), are not transferable (except by will or the laws of descent and
distribution), and become fully exercisable one year after the date of grant.
EXECUTIVE OFFICERS
In addition to the President and Chief Executive Officer, who is an
employee director, the table below lists the names of the other executive
officers, their ages, the year in which each first became an executive officer
of the Company and their executive positions.
<TABLE>
<CAPTION>
Served as Executive
Name Age Title Officer Since
- ---- --- ----- -------------------
<S> <C> <C>
Ching-Meng Chew 40 Vice President of Finance and Administration, Chief 1995
Financial Officer, Treasurer, and Corporate
Secretary
Chester E. Sievert, Jr. 45 Vice President of Development 1996
</TABLE>
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CHING-MENG CHEW joined the Company in August 1995 as the Vice President
of Finance and Administration, Chief Financial Officer, Treasurer and Corporate
Secretary. Prior to joining the Company, Mr. Chew was employed by SCIMED in
various capacities from 1992 to 1995, culminating in the position of Treasurer.
Prior to that, he was employed by Norwest Bank Minnesota, N.A. in various
capacities from 1984 to 1992, culminating in the position of Vice President,
International Banking. Mr. Chew has a Master of Business Administration Degree
from The Wharton School, University of Pennsylvania.
CHESTER E. SIEVERT, JR. joined the Company in November 1996 as Vice
President of Development. Prior to joining the Company, Mr. Sievert founded and
worked at two medical product companies, ReTech, Inc. from 1980 to 1986, and
FlexMedics Corporation from 1986 to 1995. As a former academic scientist on
staff at the University of Minnesota College of Medicine and the Veterans
Administration Medical Center, Mr. Sievert published extensively in the fields
of gastroenterology, urology and fiber optics. Mr. Sievert currently serves on
the Board of Directors of National Engineering Resource, Inc. Mr. Sievert has a
Bachelor of Science Degree in Comparative Physiology from the University of
Minnesota.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
The following information is given with respect to remuneration of
Brian T. McMahon, who serves as President and Chief Executive Officer of the
Company (the "Named Executive Officer"). No other executive officer of the
Company received a total annual salary and bonus in excess of $100,000 for the
fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------- ----------------------- ---------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Compen- Award(s) Options/ Payments Compen-
Principal Position Year Salary($) Bonus($) sation($) ($) SAR's(#) ($) sation($)
- ------------------ ---- --------- -------- ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Brian T. McMahon, 1996 $137,496 $27,500 $8,279(2) - 50,000(4,5) - -
President, Chief 1995 $146,490 N/A $8,580(2) - 150,000(4) - -
Executive Officer 1994 $110,000 N/A $20,976(3) - 350,000(6) - -
and Director (1)
</TABLE>
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(1) Mr. McMahon was elected President, Chief Executive Officer and Director of
the Company on May 13, 1993, and assumed the position of Acting Chairman of
the Board on May 27, 1994. Prior to his election, Mr. McMahon was the
Company's Executive Vice President and Chief Operating Officer since July
1992.
(2) Includes a $5,850 automobile allowance, a $2,129 medical benefit, and other
fringe benefits in 1996, and a $5,400 automobile allowance, $2,838 medical
benefit, and other fringe benefits in 1995.
(3) On June 30, 1994, the Company had a 1-for-5 reverse stock split, which had
the effect of reducing the number of stock options granted while increasing
the exercise price by a factor of five. On October 14, 1994, Mr. McMahon's
50,000 pre-split options were canceled and reissued for 50,000 post-split
options at $2.50 per share. The fair market value at the date of
re-issuance was $2.75 per share which resulted in $12,500 (50,000 shares x
$.25 per share) of compensation expense. Additional perquisites include a
$5,400 automobile allowance.
(4) In 1995, Mr. McMahon received stock options for 150,000 shares. On January
24, 1996, Mr. McMahon received an additional stock option for 50,000
shares, expiring in ten years, vesting one-third per year over three years,
at an exercise price of $7.00 per share. The total number of stock options
that Mr. McMahon held on December 31, 1996 was 550,000.
(5) On January 31, 1997, Mr. McMahon received an additional stock option for
50,000 shares, expiring in ten years, vesting one-third per year over three
years, at an exercise price of $4.7625 per share. On February 3, 1997,
stock options for 50,000 shares held by Mr. McMahon expired without being
exercised. The total number of stock options that Mr. McMahon held on
February 28, 1997 was 550,000.
(6) In 1992, Mr. McMahon received stock options for 200,000 shares (including
the 50,000 options described in footnote 3 above) under the Plan expiring
in five years. In 1993, Mr. McMahon received stock options for an
additional 150,000 shares expiring in five years. On June 30, 1994, the
Company had a 1-for-5 reverse stock split. On October 14, 1994, these stock
options were canceled and replaced with stock options for 350,000 shares.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information concerning individual grants
of stock options made to the executive officer named in the Summary Compensation
Table having cash compensation in excess of $100,000 during the year ended
December 31, 1996. No stock appreciation rights ("SARs") were granted or
exercised during the year ended December 31, 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------------------------------------------------
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
% of Total Appreciation
Options Granted Exercise for Option Term(3)
Options to Employees or Base Price Expiration -------------------------
Name Granted # in Fiscal Year ($/Sh)(2) Date 5% 10%
- ---- --------- -------------- ------ ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Brian T. McMahon 50,000(1) 37.7% $7.00 1/24/06 $220,113 $557,810
</TABLE>
- -----------------------
(1) The ten-year incentive stock options were granted pursuant to the Plan. One
third of the options vest on each anniversary date from the date of grant,
so that all the options are vested by the third anniversary date.
(2) The exercise price was determined based on the greater of (a) the
prevailing market price (defined as the closing price) of the Common Stock
on the date of grant or (b) the average of the closing prices of the Common
Stock for the ten trading days immediately prior to the date of grant.
(3) Potential realizable value is net of exercise price, but before taxes
associated with exercise. Potential realizable value is based on an
assumption that the market price of the stock appreciates at the stated
rate, compounded annually, from the date of grant until the end of the
ten-year option term, multiplied by the number of options granted. These
values are calculated based on regulations promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate of future
stock price appreciation. There is no assurance that the actual stock price
appreciation over the ten year option term will be at the assumed 5% or 10%
levels, or at any other defined level.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information concerning
individual exercises of stock options during the year ended December 31, 1996
and the value of unexercised stock options as of December 31, 1996 for the Named
Executive Officer. No shares were acquired through the exercise of options by
the Named Executive Officer during 1996.
<TABLE>
<CAPTION>
Number of Value of unexercised
unexercised in-the-money
options/SARs options/SARs
at FY-end (#) at FY-end ($)
Shares
acquired on Value realized Exercisable/ Exercisable/
Name exercise(#)(1) ($) Unexercisable Unexercisable(1,2)
- ---- ----------- -------------- ------------- -------------------
<S> <C> <C> <C> <C>
Brian T. McMahon - - 450,000/ $643,750/
100,000 $68,750
</TABLE>
- -------------------------------------
(1) Upon the exercise of an option, the optionee must pay the exercise price in
cash or stock. Stock options are "in-the-money" if the closing price for
the Common Stock is greater than the exercise price of the stock options.
The closing price for the Common Stock on December 31, 1996 was $4.375 per
share. The value of the options is calculated by taking the difference
between the exercise price and the closing price, and multiplying this
difference by the number of option shares. The option issued on January 24,
1996 for 50,000 shares at $7.00 per share was unexercisable as of December
31, 1996, and since the exercise price was higher than the market value of
the Common Stock, the option was not "in-the-money."
(2) Does not include the number or value of unexercisable options granted
subsequent to December 31, 1996, included in the Option Grant table above.
CHANGE-IN-CONTROL ARRANGEMENTS
On November 26, 1996, the Company entered into a Severance Agreement
with each of Messrs. McMahon and Chew providing for severance pay in the event
of a "Change in Control" (as defined in each Severance Agreement). Each
Severance Agreement provides for severance pay to Messrs. McMahon and Chew,
respectively, if such officer's employment is terminated, either voluntarily or
involuntarily, during the three-year period following a Change in Control. The
severance payment shall be equal to full compensation for two years (in the case
of Mr. McMahon) and full compensation for one year (in the case of Mr. Chew),
and payment will be made in a lump sum upon termination. In addition to the
severance payment, each of Mr. McMahon and Mr. Chew will be entitled to the
following benefits upon a Change in Control: (i) eighteen months of life,
accident and health and dental insurance benefits; (ii) twelve months of
out-placement services; (iii) complete coverage for fiduciary liability and
directors' and officers' insurance for a period of six years after a Change in
Control; (iv) indemnification for any losses that might result from actions
taken in good faith before the "Date of Termination" (as defined in each
Severance Agreement); (v) reimbursement for all legal fees and expenses incurred
as a result of termination, except to the extent such payment would constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended; (vi) all benefits under the Company's Savings
and Retirement Plan, or any successor to such Plan and any other plan or
arrangement relating to retirement benefits; (vii) all benefits and rights under
any and all Company stock purchase, restricted stock grant and stock option
plans or programs, or any successor to any such plan or programs, which shall be
in addition to, and not reduced by, any other amounts payable to Messrs. McMahon
and Chew under each officer's Severance Agreement; and (viii) immediate vesting
of all outstanding but unvested options.
The Company has certain other compensatory arrangements with its
executive officers relating to a change in control of the Company. All stock
option agreements outstanding under the Company's Amended and Restated 1991
Stock Plan provide for the acceleration of exercisability of options immediately
prior to a Change in Control (except in certain cases where the optionee is
terminated for "cause" or resigns without "good reason").
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who are beneficial owners of more than 10% of the
Common Stock ("10% Shareholders") to file initial reports of ownership and
reports of changes in Common Stock with the Securities and Exchange Commission
and to furnish the Company with copies of all Section 16(a) reports they file.
To the best of the Company's knowledge, based upon a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1996, all Section
16(a) filing requirements applicable to its officers, directors, and 10%
Shareholders were satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no material transactions between the Company and its
directors or executive officers for the fiscal year ended December 31, 1996.
PROPOSAL 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, based upon the recommendation of its Audit
Committee, has appointed Ernst & Young LLP as independent auditors to audit the
financial statements of the Company for the current fiscal year ending December
31, 1997 and to provide other appropriate accounting services. Ernst & Young LLP
has audited the financial statements of the Company for the fiscal years ended
December 31, 1991 through 1996. Representatives of Ernst & Young LLP will be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions
from Shareholders.
In the event that Shareholders do not ratify the appointment of Ernst &
Young LLP, the selection of other independent auditors will be considered by the
Board of Directors.
BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF
THE COMPANY.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
The rules of the Securities and Exchange Commission permit shareholders
of a company, after timely notice to the company, to present proposals for
shareholder action in the company's proxy statement where such proposals are
consistent with applicable law, pertain to matter appropriate for shareholder
action and are not properly omitted by company action in accordance with the
proxy rules. Any shareholder proposals that may properly be presented at the
1998 Annual Meeting of Shareholders must be prepared in accordance with all
applicable rules of the Securities and Exchange Commission and must be received
by the Secretary of SpectraScience, Inc. at the Company's executive offices in
Minneapolis, Minnesota, no later than December 22, 1997 for inclusion in the
Company's proxy statement for the 1998 Annual Meeting of Shareholders.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than
those referred to in the accompanying Notice of Meeting which properly may come
before the Annual Meeting. However, if any other matter should be properly
presented for consideration and voting at the Annual Meeting or any adjournments
thereof, it is the intention of the persons named as proxies on the enclosed
form of Proxy to vote the proxies in accordance with their judgment regarding
the best interests of the Company.
It is important that Proxies be returned promptly with instructions as
to voting. Shareholders who do not expect to attend the meeting in person are
urged to mark, sign, date and send in the Proxies by return mail.
By Order of the Board of Directors
Ching-Meng Chew
VICE PRESIDENT OF FINANCE AND ADMINISTRATION,
CHIEF FINANCIAL OFFICER, TREASURER AND
CORPORATE SECRETARY
Dated: April 8, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE
PROXY BOARD OF DIRECTORS
- -----
SPECTRASCIENCE, INC. The undersigned, having received a
3650 Annapolis Lane, Suite 101 notice of Annual Meeting of Shareholders
Minneapolis, MN 55447-5434 and accompanying Proxy Statement, hereby
USA appoints Brian T. McMahon and Ching-Meng
Chew as proxies, each with the power of
substitution, and hereby authorizes each
of them to represent and to vote as
designated below, all the shares of
Common Stock of SPECTRASCIENCE, Inc.
which the undersigned is entitled to
vote at the Annual Meeting of
Shareholders to be held on May 21, 1997,
or any adjournment thereof.
- ------------------------------------
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
(EXCEPT AS MARKED TO THE CONTRARY all nominees listed below
BELOW)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
BRIAN T. MCMAHON HENRY M. HOLTERMAN NATHANIEL S. THAYER
2. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
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 full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
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DATED:___________________________, 1997 SIGNATURE
PLEASE VOTE, SIGN, DATE AND RETURN THE
PROXY CARD USING THE ENCLOSED ENVELOPE
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SIGNATURE IF HELD JOINTLY
