<PAGE> 1
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 Section 240.14a-11(c) or
Section 240.14a-12
CROSS MEDICAL PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of Securities to which transaction applies:
-------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
-------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
CROSS MEDICAL PRODUCTS, INC.
5160 A Blazer Memorial Parkway
Dublin, Ohio 43017-1339
(614) 718-0530
April 21, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Cross Medical Products, Inc. on Wednesday, May 21, 1997, at 9:00 a.m., at the
Holiday Inn, 2350 Westbelt Drive, Columbus, Ohio (Roberts Road exit from I-270
West). We look forward to greeting those stockholders who are able to attend.
At the meeting, you are being asked to elect Daniel A. Funk, M.D.,
Daniel A. Gregorie, M.D., Joseph A. Mussey and Robert J. Williams to three-year
terms as Class I members of the Board of Directors, to approve and adopt an
amendment to the Company's 1994 Stock Option Plan, to approve and adopt the
Company's Restated Certificate of Incorporation, and to ratify the selection of
Coopers & Lybrand L.L.P. as the Company's independent certified public
accountants for the 1997 fiscal year.
It is very important that your shares are represented and voted at the
meeting, whether or not you plan to attend. Accordingly, please sign, date and
return your proxy in the enclosed envelope at your earliest convenience.
Your interest and participation in the affairs of the Company are
greatly appreciated. Thank you for your continued support.
Sincerely,
Edward R. Funk
Chairman of the Board
<PAGE> 3
CROSS MEDICAL PRODUCTS, INC.
5160 A Blazer Memorial Parkway
Dublin, Ohio 43017-1339
(614) 718-0530
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
April 21, 1997
To the Stockholders of Cross Medical Products, Inc.:
NOTICE is hereby given that the Annual Meeting of Stockholders of Cross
Medical Products, Inc., a Delaware corporation (the "Company"), will be held at
the Holiday Inn, 2350 Westbelt Drive, Columbus, Ohio, on Wednesday, the 21st of
May, 1997, at 9:00 a.m., local time, for the following purposes:
1. To elect four Class I Directors, each for a three-year term
expiring at the annual meeting of stockholders in 2000.
2. To approve and adopt an amendment to the Company's 1994 Stock
Option Plan, to increase the number of shares available for
distribution under such plan from 600,000 to 1,000,000.
3. To approve and adopt the Company's Restated Certificate of
Incorporation, which contains the following amendments:
(A) Increase in Capital Stock Amendment: To authorize a
total of 50,000,000 total shares of capital stock, of
which 40,000,000 are common shares and 10,000,000 are
preferred shares, both at $.01 par value;
(B) Classified Board Amendment: To classify the Board of
Directors into three classes of directors with
staggered three-year terms of office; to provide that
directors may be removed by the stockholders with or
without cause and that such action may be taken only
by the affirmative vote of at least eighty percent
(80%) of the outstanding shares of common stock of
the Company at an annual or special meeting of
stockholders; and to provide that, if a vacancy
occurs in the Board of Directors for any reason,
including by reason of any increase in the number of
directors, it shall be filled only by the affirmative
vote of a majority of the remaining directors in
office even though less than a quorum;
(C) Stockholder Meeting Amendment: To provide that
actions required or permitted to be taken at any
annual or special meeting of the stockholders of the
Company be taken only upon a vote of the stockholders
at a meeting duly called or by written consent signed
by all the holders of outstanding common stock who
would be entitled to notice of such meeting and that
special meetings of stockholders of the Company be
called only by the Board of Directors, the Chairman
of the Board of Directors, or the President of the
Company, or at the request in writing of stockholders
owning at least eighty percent (80%) of the
outstanding Common Stock of the Company;
(D) Acquisition Proposal Amendment: To provide that the
Board of Directors can consider various factors in
consideration of an acquisition proposal, not just
the value of the consideration being offered; and
<PAGE> 4
(E) Supermajority Vote Amendment: To provide that the
affirmative vote of at least eighty percent (80%) of
the outstanding shares of the Company's Common Stock
is required to amend, repeal or adopt certain
provisions in the Certificate of Incorporation.
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent certified public accountants for the
fiscal year 1997.
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Owners of Common Stock of the Company of record at the close of
business on March 25, 1997 will be entitled to vote at the meeting. A copy of
the Annual Report of the Company for the fiscal year ended December 31, 1996 is
enclosed.
Whether or not you plan to attend the meeting, please date, sign and
mail the enclosed proxy in the envelope provided as soon as possible so that
your shares may be voted in accordance with your wishes. Thank you for your
cooperation.
By Order of the Board of Directors
Edward R. Funk
Chairman of the Board
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
<PAGE> 5
CROSS MEDICAL PRODUCTS, INC.
5160 A Blazer Memorial Parkway
Dublin, Ohio 43017-1339
(614) 718-0530
PROXY STATEMENT FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
April 21, 1997
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Cross Medical
Products, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Holiday Inn, 2350 Westbelt Drive, Columbus, Ohio, on Wednesday, May 21, 1997, at
9:00 a.m., local time, and at any adjournment thereof. The Proxy Statement and
the enclosed proxy will be first mailed to the stockholders on or about April
21, 1997.
All shares represented by the accompanying proxy will be voted in
accordance with the stockholder's directions specified thereon if the proxy is
executed properly and received by the Board of Directors prior to the Annual
Meeting. In the absence of specific instructions to the contrary, the proxy will
be voted in accordance with the Board of Director's unanimous recommendations,
which are FOR the election of Daniel A. Funk, M.D., Daniel A. Gregorie, M.D.,
Joseph A. Mussey and Robert J. Williams as Class I directors of the Company; FOR
approval of an amendment to the Company's 1994 Stock Option Plan to increase the
number of shares available for distribution under such plan from 600,000 to
1,000,000; FOR adoption of the Company's Restated Certificate of Incorporation;
FOR the ratification of the selection of Coopers & Lybrand L.L.P. as the
Company's independent certified public accountants for the fiscal year 1997;
and, at the discretion of the persons acting under the proxy, to transact such
other business as properly may come before the meeting or any adjournment
thereof.
A person giving the enclosed proxy has the power to revoke it at any
time before it is exercised by filing prior to the meeting written notice of
revocation with the President of the Company or a duly executed, later dated
proxy, or by attending the meeting and voting in person. Proxies marked as
abstaining will be treated as present for purposes of determining a quorum at
the Annual Meeting, but will not be counted as voting on the election of
directors, the approval of the amendment to the 1994 Stock Option Plan, the
adoption of the Company's Restated Certificate of Incorporation, or for the
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
certified public accountants. Proxies returned by brokers on behalf of shares
held in street name will not be treated as present for purposes of determining a
quorum for the Annual Meeting unless they are voted by the broker on at least
one matter on the agenda. Such non-voted shares will not be counted as voting on
any matter as to which a non-vote is indicated on the broker's proxy.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING RIGHTS
Only stockholders of record at the close of business on March 25, 1997,
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. At March 25, 1997, the Company had outstanding 4,921,298 shares of
common stock, $.01 par value ("Common Stock"). Each stockholder is entitled to
one vote for each share held. There are no cumulative voting rights in the
election of directors.
- 1 -
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the only persons known by the Company to
be the beneficial owners of more than five percent (5%) of the outstanding
shares of Common Stock of the Company on February 28, 1997:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(2)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Edward R. Funk 828,513(3) 16.9%
5160 A Blazer Memorial Parkway
Dublin, Ohio 43017-1339
Ingeborg V. Funk 828,513(3) 16.9%
5160 A Blazer Memorial Parkway
Dublin, Ohio 43017-1339
Curtis A. Loveland 570,378(4) 11.7%
41 S. High Street
Columbus, Ohio 43215
Daniel A. Funk, M.D. 243,728(5) 5.0%
4701 Creek Road
Cincinnati, Ohio 45242
<FN>
(1) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he or she exercises sole or shared
voting or investment power or of which he has the right to acquire the
beneficial ownership within 60 days of February 28, 1997. Except as
otherwise noted, each stockholder named above has sole voting, investment
and dispositive power with respect to all shares listed opposite the
stockholder's name.
(2) "Percentage of Class" is calculated on the basis of the number of
outstanding shares plus the number of shares a person has the right to
acquire within 60 days of February 28, 1997.
(3) Edward R. Funk and Ingeborg V. Funk are husband and wife. Under the rules
of the Securities and Exchange Commission, each may be deemed to
beneficially own the shares of the other; consequently, the number reported
in the table above for each includes 339,416 shares and 471,597 shares held
of record by Dr. Funk and Mrs. Funk, respectively, and 17,500 shares which
could have been acquired by Dr. Funk under stock options exercisable within
60 days of February 28, 1997. Dr. and Mrs. Funk each expressly disclaim
beneficial ownership of shares held by the other.
(4) Includes 33,460 shares held by Mr. Loveland directly or in a self-directed
retirement account; 17,500 shares which could have been acquired by Mr.
Loveland under stock options exercisable within 60 days of February 28,
1997; and 519,418 shares held of record by Mr. Loveland as trustee for
various irrevocable trusts for the benefit of Dr.
and Mrs. Edward R. Funk's children and grandchildren.
(5) Includes 12,414 shares held by Daniel Funk's spouse and 15,000 shares which
could have been acquired by Daniel Funk under stock options exercisable
within 60 days of February 28, 1997. Daniel Funk expressly disclaims
beneficial ownership of shares held by his spouse.
</TABLE>
- 2 -
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors proposes the election of four directors at the
Annual Meeting to serve as Class I Directors. These nominees, Daniel A. Funk,
M.D., Daniel A. Gregorie, M.D., Joseph A. Mussey, and Robert J. Williams, if
elected, will each serve for a three-year term expiring at the 2000 Annual
Meeting of Stockholders and until their successors have been elected and
qualified. The nominees are currently directors of the Company.
It is intended that the shares represented by the enclosed proxy, unless
otherwise directed, will be voted FOR the election of the four nominees named
above. In the event that any of the nominees for director should become
unavailable (which management does not expect), the proxies may be voted for a
substitute nominee at the discretion of those named as proxies. The election of
each nominee requires the favorable vote of a plurality of all votes cast by the
holders of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR CLASS I DIRECTOR.
The following table sets forth certain information concerning each nominee,
each continuing director of the Company and all of the nominees, directors and
officers of the Company as a group, including beneficial ownership of the
Company's Common Stock as of February 28, 1997.
CLASS I DIRECTORS
(NOMINEES FOR TERMS EXPIRING IN 2000)
<TABLE>
<CAPTION>
DIRECTOR COMMON STOCK
CONTINUOUSLY BENEFICIALLY PERCENTAGE
NAME AND PRINCIPAL OCCUPATION AGE SINCE OWNED (1) OF CLASS (2)
- ------------------------------------------ --------------- ------------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
Daniel A. Funk, M.D. 41 1985 243,728(3)(4) 5.0%
Orthopedic Surgeon
Daniel A. Gregorie, M.D. 47 1993 5,000 *
President and Chief Executive Officer
of ChoiceCare
Joseph A. Mussey 48 1991 171,500(3) 3.5%
President, Treasurer and Chief
Executive Officer of the Company
Robert J. Williams 64 1994 5,000 *
Chairman, Chief Executive Officer and
President of ARTEC, Inc.
</TABLE>
- 3 -
<PAGE> 8
CLASS II DIRECTORS
(TERMS EXPIRE IN 1998)
<TABLE>
<CAPTION>
DIRECTOR COMMON STOCK
CONTINUOUSLY BENEFICIALLY PERCENTAGE
NAME AND PRINCIPAL OCCUPATION AGE SINCE OWNED (1) OF CLASS (2)
- ------------------------------------------ --------------- ------------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
Edward R. Funk 71 1980 828,513(3)(5) 16.9%
Chairman of the Board of the
Company and of Cross Medical
Products, Inc.; President of
Superconductive Components, Inc.
Herbert J. Kahn 56 1983 53,600(3) 1.1%
Executive Vice President
of CompuServe, Inc.
Curtis A. Loveland 50 1983 570,378(3)(6) 11.7%
Partner, Porter, Wright, Morris &
Arthur
</TABLE>
<TABLE>
<CAPTION>
CLASS III DIRECTORS
(TERMS EXPIRE IN 1999)
DIRECTOR COMMON STOCK
CONTINUOUSLY BENEFICIALLY PERCENTAGE
NAME AND PRINCIPAL OCCUPATION AGE SINCE OWNED (1) OF CLASS (2)
- ------------------------------------------ --------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
C. Craig Waldbillig 71 1983 94,100(3)(7) 1.9%
Retired
Peter H. Williams 46 1983 50,100(3) 1.0%
Senior Vice President of Sena, Weller,
Rohs and Williams, Inc.
All directors and officers, as a group 2,093,319(3)(4)(5) 40.1%
(12 in group) (6)(7)(8)
</TABLE>
- ----------
*Less than one percent
(1) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he exercises sole or shared voting or
investment power or of which he has the right to acquire the beneficial
ownership within 60 days of February 28, 1997. Except as otherwise noted,
each stockholder named above has sole voting, investment and dispositive
power with respect to all shares listed opposite the stockholder's name.
(2) "Percentage of Class" is calculated on the basis of the number of
outstanding shares plus the number of shares a person has the right to
acquire within 60 days of February 28, 1997.
- 4 -
<PAGE> 9
(3) Includes 17,500 shares, 17,500 shares, 17,500 shares, 17,500 shares, 17,500
shares, 57,435 shares, 15,000 shares, 5,000 shares, 5,000 shares and
231,059 shares which could have been acquired by Dr. Edward R. Funk,
Messrs. Kahn, Loveland, Waldbillig, P. Williams, Mussey, Gregorie, R.
Williams and Dr. Daniel A. Funk and by all directors and officers as a
group, respectively, under stock options exercisable within 60 days of
February 28, 1997.
(4) Includes 471,597 shares held of record by Mrs. Funk, as to which Dr. Edward
R. Funk expressly disclaims beneficial ownership.
(5) Includes 33,460 shares held by Mr. Loveland directly or in a self-directed
retirement account; 519,418 shares held of record by Mr. Loveland as
trustee for various irrevocable trusts for the benefit of Dr. and Mrs.
Edward R. Funk's children and grandchildren.
(6) Includes 12,414 shares owned by Dr. Daniel A. Funk's spouse, as to which he
expressly disclaims beneficial ownership.
(7) Includes 70,600 shares held in a revocable trust created by Mr. Waldbillig.
(8) Includes an additional 71,400 shares owned by officers.
EDWARD R. FUNK, SC.D., is a founder and director of the Company and has
previously served as President, Chief Executive Officer, and Treasurer of the
Company. Additionally, Dr. Funk has served as Chairman of the Board of the
Company since its inception. Dr. Funk is also a founder of Superconductive
Components, Inc., Columbus, Ohio, and has been a director and President thereof
since its inception in April 1987. Dr. Funk is the father of Dr. Daniel A. Funk,
also a director of the Company.
JOSEPH A. MUSSEY, President, Treasurer, and Chief Executive Officer, joined
the Company in August 1990 as the Company's Vice President and Chief Financial
Officer. Mr. Mussey was named President of the Company in April 1991 and Chief
Executive Officer in November 1991. Mr. Mussey was previously Executive Vice
President of the Process Automation Business of Combustion Engineering, Inc., a
division of Asea Brown Boveri from 1987 until joining the Company in August
1990. From 1984 to 1987, he was Vice President, Operations of the Engineered
Systems and Controls Group of Combustion Engineering.
HERBERT J. KAHN joined CompuServe, Inc. in September 1991 as Vice President
of Administration and is currently an Executive Vice President of that company.
Previously, Mr. Kahn had been the Executive Vice President of ABB Process
Automation Inc., a division of Asea Brown Boveri, from December 1990 to
September 1991. Asea Brown Boveri acquired Combustion Engineering, Inc., in
January 1990, including its Process Automation Business where Mr. Kahn served as
President of the Pulp and Paper Systems Group.
CURTIS A. LOVELAND, Secretary of the Company since January 1984, has been a
practicing attorney for 24 years and has been a partner in the law firm of
Porter, Wright, Morris & Arthur, Columbus, Ohio since 1979. Mr. Loveland is also
a director of Rocky Shoes & Boots, Inc. and Applied Innovation Inc., both
companies which have a class of equity securities registered pursuant to Section
12 of the Securities Exchange Act of 1934.
C. CRAIG WALDBILLIG retired from his position as Chairman of the Board of
Medex, Inc., in January 1997. Mr. Waldbillig served as the Chairman of the Board
of Medex for more than five years. Medex, was a manufacturer of disposable
medical supplies and equipment that was sold to Furon Company in January 1997.
PETER H. WILLIAMS has been Senior Vice President of Sena, Weller, Rohs and
Williams, Inc., a registered investment advisory firm in Cincinnati, Ohio, since
March 1989.
- 5 -
<PAGE> 10
DANIEL A. FUNK, M.D. has been an orthopedic surgeon in private practice in
Cincinnati, Ohio since September 1989 and is a partner with Orthopedic
Consultants of Cincinnati, Inc. Dr. Funk completed a five-year residency in
orthopedic surgery at the Mayo Clinic, Rochester, Minnesota in June 1986. From
April 1988 to June 1989, Dr. Funk was Assistant Professor of The Ohio State
University School of Medicine, Department of Orthopedic Surgery. Dr. Funk served
as a member of the Company's Technical Advisory Board from 1984 until he was
named the Company's Medical Advisor in 1990. He is the son of Dr. Edward R.
Funk, Chairman of the Board of the Company.
DANIEL A. GREGORIE, M.D. has been the President and Chief Executive Officer
of ChoiceCare, a managed health care company, in Cincinnati, Ohio since June
1989.
ROBERT J. WILLIAMS has been the Chairman of the Board, President and Chief
Executive Officer of ARTEC, Inc. since 1988. ARTEC is an Indianapolis based
manufacturer of disposable anesthesia and respiratory products.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company had a total of four regular meetings
during 1996. The Board of Directors has standing Audit and Stock Option and
Compensation Committees. The members of the Audit Committee are Messrs.
Loveland, D. Funk, and P. Williams. The Audit Committee oversees the work of the
internal accounting staff and external auditors and met four times during 1996.
The Stock Option and Compensation Committee, whose members are Messrs.
Waldbillig, Kahn, and R. Williams, reviews officer compensation and administers
the stock option plans. The Stock Option and Compensation Committee met once and
took action by unanimous written consent once during 1996. With the exception of
Mr. Williams, who missed the Stock Option and Compensation Committee meeting, no
director attended fewer than seventy-five (75%) percent of the board or
committee meetings.
MEDICAL ADVISOR
Dr. Daniel A. Funk, M.D., is the Company's Medical Advisor. Dr. Funk
receives an $18,000 annual retainer and is paid a per diem fee when asked to
perform a function requiring time beyond the retainer consideration, at the rate
of $600 per half day and $1,200 per day, plus reimbursement of reasonable
expenses.
OFFICERS AND SIGNIFICANT EMPLOYEES
The officers of the Company are elected annually by the Board of Directors
and serve at the pleasure of the Board. In addition to Dr. Edward R. Funk,
Chairman of the Board; Joseph A. Mussey, President, Treasurer, and Chief
Executive Officer; Dr. Daniel A. Funk, M.D., Medical Advisor; and Curtis A.
Loveland, Secretary, the following persons are officers of the Company:
IRA BENSON, age 41, was named Vice President, Sales and Marketing for Cross
Medical Products, Inc., the Company's wholly owned subsidiary, in June 1992.
From November 1988 until he joined the Company in June 1992, Mr. Benson was Vice
President, Marketing and Director of Marketing of Orthomet, Inc., Minneapolis,
Minnesota, a manufacturer and distributor of reconstructive hip and knee
orthopaedic implants.
THOMAS E. ZIMMER, age 55, was named Vice President, Manufacturing in August
1993 and served as the Company's Director of Manufacturing from May 1991 to
August 1993. From May 1988 until joining the Company, Mr. Zimmer was Director of
Manufacturing, Electronic Transmitter Group for ABB Kent-Taylor, a division of
Asea Brown Boveri in Rochester, New York.
PAUL A. MILLER, age 40, was named Vice President and Chief Financial
Officer in July 1994. From July 1991 until joining the Company, Mr. Miller was
Chief Financial Officer and General Counsel for Litter Industries, Inc., a
diversified, family owned distributor in Chillicothe, Ohio. From 1983 until
joining Litter Industries, Inc., Mr. Miller was with Coopers & Lybrand L.L.P.
- 6 -
<PAGE> 11
COMPENSATION OF OFFICERS AND DIRECTORS
The aggregate compensation of the Chief Executive Officer, and other
executive officers of the Company with compensation exceeding $100,000 in the
1996 fiscal year, for the Company's fiscal years ended December 31, 1996, 1995
and December 31, 1994, is set forth in the following table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------------ (g)
(e) Securities (i)
(c) (d) Other Annual Underlying All Other
(a) (b) Salary Bonus Compensation Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($) (1)
- ----------------------------- ---------- -------------- -------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Joseph A. Mussey, 1996 $163,642 $25,643 -- 30,000(2) $1,222
Chief Executive Officer, 1995 $125,005 8,020 -- 15,000(2) $ 970
President, and Treasurer 1994 $103,713 6,537 -- 17,500(3) $2,285
Ira Benson, 1996 $103,577 $8,826 -- 5,000(2) $1,084
Vice President of Sales and 1995 $94,700 2,926 -- 5,000(2) 1,438
Marketing 1994 $93,600 4,068 -- 7,500(4) 1,789
Paul A. Miller, 1996 $94,232 $14,617 -- 2,000(2) $1,051
Vice President and Chief 1995 $82,501 5,833 -- 30,000(2) 867
Financial Officer 1994 $42,413(5) -- -- -- --
<FN>
- ----------
(1) Amount of Company contributions to Company's Retirement Express Master Savings Plan and Trust.
(2) All shares are subject to an option granted under the 1994 Stock Option Plan.
(3) 12,500 shares are subject to an option granted under the 1984 Non-Statutory Stock Option Plan. 5,000 shares are
subject to an option granted under the 1994 Stock Option Plan.
(4) All shares subject to an option granted under the 1984 Incentive Stock Option Plan.
(5) Mr. Miller began employment with the Company in July 1994.
</TABLE>
EMPLOYMENT CONTRACTS
On January 1, 1994, the Company entered into an employment contract with
Dr. Edward R. Funk. Dr. Funk's employment contract with the Company has a term
of ten (10) years. It may be terminated by Dr. Funk upon thirty (30) days
written notice, immediately upon written notice if his compensation is reduced,
upon his death or upon termination for cause by the Company. Dr. Funk is to be
compensated for the first three (3) years of the agreement at the rate of
$90,000 per year, subject to adjustment based on the Consumer Price Index.
Thereafter, Dr. Funk's compensation will be determined by the Company's Stock
Option and Compensation Committee. The employment agreement contains
restrictions on Dr. Funk regarding the Company's confidential information and
inventions created by Dr. Funk. Additionally, Dr. Funk is restricted from
competing with the Company during the term of the agreement and for three (3)
years after its termination.
- 7 -
<PAGE> 12
On November 7, 1996, the Company entered into employment agreements (the
"Agreements") with Messrs. Mussey, Miller, and Benson to provide for employment
of the executives in their current capacities. Messrs. Mussey's, Miller's, and
Benson's Agreements with the Company are "at will" and may be terminated: (i) by
the executive or the Company without cause upon thirty (30) days' advance
written notice; (ii) by the Company upon a determination of "good cause" for
termination; or (iii) upon the executive's death or permanent disability. Under
the Agreements, Messrs. Mussey's, Miller's, and Benson's minimum base salaries
are $160,000, $95,000, and $108,000 per year, respectively. The minimum base
salary may be increased, but not decreased, from time to time by the Board of
Directors. For up to one (1) year following a "change in control" of the
Company, Messrs. Mussey, Miller, and Benson, if terminated during that period,
are entitled to certain benefits, including unpaid annual salary plus payment of
twice the executive's base salary (including any performance bonuses earned in
the prior twelve months) and all outstanding stock options shall become 100%
vested and exercisable in accordance with the stock option agreements and plans.
Agreements contain restrictions on Messrs. Mussey, Miller, and Benson regarding
the Company's confidential information and inventions. In addition, Messrs.
Mussey, Miller, and Benson are restricted from competing with the Company for a
period of twelve (12) months after termination of employment with the Company.
STOCK OPTIONS
The Company had a 1984 Incentive Stock Option Plan which terminated on
January 27, 1994, and had a 1984 Non-Statutory Plan which terminated on April
26, 1994. Stock options granted prior to the termination of these plans remain
outstanding until they are exercised in full, expire or terminate under the
terms of the stock option agreement. On May 19, 1994, the shareholders of the
Company approved the Company's 1994 Stock Option Plan. The following tables
contain information concerning the grant of stock options to the Company's Chief
Executive Officer, Joseph A. Mussey, and the executive officers named in the
Summary Compensation Table under the Company's 1994 Stock Option Plan:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of
Securities % of Total
Underlying Options Granted
Options to Employees Exercise Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date
---- ----------- -------------- ------------ ----
<S> <C> <C> <C> <C> <C>
Joseph A. Mussey 30,000(1) 35% $6.625 01/01/02
Ira Benson 5,000(1) 6% $6.625 01/01/02
Paul A. Miller 2,000(1) 2% $6.625 01/01/02
<FN>
(1) Shares subject to option granted under 1994 Stock Option Plan, which option first became exercisable on January
1, 1997.
</TABLE>
- 8 -
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C> <C>
Joseph A. Mussey 57,435/40,000 $293,147/$127,050
Ira Benson 31,500/26,000 $178,900/$72,650
Paul A. Miller 12,400/19,600 $48,650/$74,600
</TABLE>
COMPENSATION OF DIRECTORS
In 1996, each member of the Board of Directors was paid $200 for each
Board or Board Committee meeting attended plus $100 per quarter. Beginning in
1997, each member of the Board of Directors will receive $500 for each Board
meeting attended and $250 for each Board Committee Meeting attended. Directors
who are also employees of the Company do not receive additional compensation for
serving as directors. Directors are also reimbursed for reasonable expenses
incurred in connection with attendance at Board meetings.
The Company has granted stock options to Board members each fiscal year
since 1986. Under the 1994 Stock Option Plan, each nonemployee director is
automatically granted an option to purchase 5,000 shares on June 30 each year,
exercisable at the fair market value at the date of grant, and exercisable for a
five year period commencing one year after the date of grant. Each nonemployee
director of the Company was automatically granted an option to purchase 5,000
shares at an exercise price of $7.25 per share on June 30, 1996. These options
first become exercisable on June 30, 1997, and expire June 30, 2002.
RETIREMENT EXPRESS MASTER SAVINGS PLAN AND TRUST
The Company's Retirement Express Master Savings Plan and Trust (the
"Master Savings Plan"), as adopted by the Board of Directors on November 14,
1991, effective January 1, 1992, is a qualified defined contribution plan which
contains a cash or deferred arrangement pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended. Participation is available to any
employee of the Company or its subsidiary on or following the date on which such
employee has both reached the age of 21 and has been credited with 1,000 hours
of service, provided that the 1,000 hours of service are credited during such
employee's first year of employment or during a single calendar year. Employees
who satisfied these requirements on the effective date of the Master Savings
Plan were eligible to participate on the effective date. Employees may elect to
participate by requesting a pre-tax reduction of compensation. Twenty-five
percent of an employee's pre-tax contributions are matched by the Company;
however, the maximum percent of compensation subject to the match is 4% of the
employee's annual compensation. Pre-tax contributions for an individual cannot
exceed 10% of the individual's gross compensation each year or $9,254 in 1996.
Participants are 100% vested in their individual contributions to the Master
Savings Plan at all times. A participant's vested percentage of the Company's
matching contributions will be 20% once the participant has been credited with
two vesting years, and an additional 20% for each additional vesting year
thereafter until 100% vested. Messrs. Mussey, Zimmer, Benson, Miller and
Mellinger are the only officers and directors currently participating in the
Master Savings Plan.
RELATED PARTY TRANSACTIONS
Mr. Loveland, Secretary, a director and stockholder of the Company, is
a partner in the law firm of Porter, Wright, Morris & Arthur, Columbus, Ohio,
which firm serves as general counsel to the Company.
- 9 -
<PAGE> 14
AMENDMENT TO THE COMPANY'S
1994 STOCK OPTION PLAN
The proposed amendment to the 1994 Stock Option Plan would increase the
number of shares of the Company's common stock subject to the plan from 600,000
shares to 1,000,000 shares. Approval of this amendment requires the affirmative
vote of the holders of a majority of the shares of the Company's common stock
represented at the Annual Meeting.
1994 STOCK OPTION PLAN
The Company's Board of Directors believes that providing selected
persons with an opportunity to invest in the Company will give them additional
incentive to increase their efforts on behalf of the Company and will enable the
Company to attract and retain the best available associates, officers,
directors, consultants and advisors. The description in this Proxy Statement of
the 1994 Stock Option Plan is included solely as a summary, does not purport to
be complete and is qualified in its entirety by the Amended and Restated 1994
Stock Option Plan. The Company's Board of Directors has approved an amendment to
the 1994 Stock Option Plan to increase the number of shares of the Company's
common stock reserved for issuance upon the exercise of options granted under
the 1994 Stock Option Plan from 600,000 shares to 1,000,000 shares. The
Company's Board of Directors has approved the increase of the shares of the
Company's common stock subject to the 1994 Stock Option Plan.
The 1994 Stock Option Plan was adopted by the Board of Directors on
February 10, 1994, and approved by stockholders on April 15, 1994. The amendment
increasing the number of shares of the Company's common stock issuable under the
1994 Stock Option Plan was adopted by the Company's Board of Directors on
February 7, 1997. The options may either meet the requirements of Section 422
("Incentive Options") of the Internal Revenue Code of 1986, as amended (the
"Code") or not meet such requirements ("Nonqualified Options"). Key employees,
officers, and directors of, and consultants and advisors who render services to,
the Company are eligible to receive options under the 1994 Stock Option Plan.
The 1994 Stock Option Plan is administered by the Compensation
Committee which consists of directors who are not employees of the Company. The
members of the Compensation Committee and all other independent members of the
Board of Directors are only eligible to receive options under the 1994 Stock
Option Plan pursuant to a formula set forth in the 1994 Stock Option Plan which
provides that, on June 30 of each year, each director who is not an employee of
the Company will be granted a Nonqualified Option to purchase 5,000 shares of
the Company's common stock. See "Compensation of Directors." There are currently
seven independent directors eligible to receive options pursuant to the 1994
Stock Option Plan on June 30, 1997. Directors who are not employees of the
Company are not eligible to receive any other options under the 1994 Stock
Option Plan.
With respect to all other eligible persons, the Compensation Committee
is authorized to determine to whom and at what time options may be granted. The
Compensation Committee determines the number of shares subject to option, the
duration of the option, the per share exercise price, the rate and manner of
exercise, and whether the option is intended to be a Nonqualified Option or an
Incentive Option. An Incentive Option may not have an exercise price less than
fair market value of the common stock on the date of grant or an exercise period
that exceeds ten years from the date of grant and is subject to certain other
limitations which allow the option holder to qualify for favorable tax
treatment. None of these restrictions applied to the grant of Nonqualified
Options, which may have an exercise price less than the fair market value of the
underlying common stock on the date of grant and may be exercisable for an
indeterminate period of time. The Compensation Committee also has the discretion
under the 1994 Stock Option Plan to make cash grants to option holders that are
intended to offset a portion of the taxes payable upon exercise of Nonqualified
Options or on certain dispositions of shares acquired under Incentive Options.
The exercise price of the option may be paid in cash or, with the
consent of the Compensation Committee, (i) with previously acquired shares of
common stock valued at their fair market value on the date they are tendered,
(ii) delivery of a full recourse promissory note, the terms and conditions of
which will be determined by the Compensation
- 10 -
<PAGE> 15
Committee, or (iii) by delivery of written instructions to forward the notice of
exercise to a broker or dealer and to deliver to a specified account a
certificate for the shares purchased upon exercise of the option and a copy of
irrevocable instructions to the broker or dealer to deliver the purchase price
of the shares to the Company.
Any option granted under the 1994 Stock Option Plan will terminate
automatically (i) 30 days after an employee's termination of employment with the
Company (other than by reason of death or disability or for cause), and (ii) one
year after the employee's death or termination of employment by reason of
disability, unless the option expires earlier by its terms. Options not
exercisable as of the date of a change in control of the Company will become
exercisable immediately as of such date. Options granted under the 1994 Stock
Option Plan are not transferable except by will or the laws of descent and
distributions. The 1994 Stock Option Plan terminates on February 10, 2004,
unless earlier terminated by the Board of Directors.
The Board of Directors may terminate, amend or modify the 1994 Stock
Option Plan at any time provided that (a) no amendment may be made to the 1994
Stock Option Plan which would cause the Incentive Options granted thereunder to
fail to qualify as incentive stock options under the Code; and (b) any amendment
which requires the approval of the shareholders of the Company under the Code or
Section 16 of the Securities Exchange Act of 1934, as amended, or the
regulations promulgated thereunder, will be subject to such approval in
accordance with the applicable law or regulations. No amendment, modification or
termination of the 1994 Stock Option Plan may in any manner adversely affect any
option previously granted under the 1994 Stock Option Plan without the consent
of the option holder or a permitted transferee of such option holder.
As of February 28, 1997, options to purchase an aggregate of 487,400
shares of the Company's common stock (net of options canceled) had been granted
pursuant to the 1994 Stock Option Plan, options to purchase 17,000 shares had
been exercised, options to purchase 460,400 shares remained outstanding, and
only 112,600 shares remained available for future grant. As of February 28,
1997, the market value of all shares of the Company's common stock subject to
outstanding options under the 1994 Stock Option Plan and all of the Company's
stock option plans were approximately $3,740,750 and $5,864,625, respectively
(based upon the closing sale price per share of the Company's common stock as
reported on the Nasdaq SmallCap Market on February 28, 1997). During the 1996
fiscal year, options covering 89,000 shares of the Company's common stock were
granted to employees of the Company under the 1994 Stock Option Plan. Shares
underlying presently exercisable, but unexercised, options will constitute
outstanding shares of the Company's common stock for purposes of calculating the
Company's net income per share. The market value of the 1,000,000 shares of the
Company's common stock to be subject to the 1994 Stock Option Plan was
approximately $8,125,000 as of February 28, 1997.
As of February 28, 1997, the following current directors and executive
officers named in the Company's Proxy Statement had been granted options under
the 1994 Stock Option Plan as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AVERAGE EXERCISE PRICE
----------------- ----------------------
NAME GRANTED PER SHARE
---- ------- ---------
<S> <C> <C>
Daniel A. Funk, M.D 22,000 $6.94
Daniel A. Gregorie, M.D. 15,000 $6.54
Edward R. Funk 15,000 $6.54
Herbert J. Kahn 15,000 $6.54
Curtis A. Loveland 15,000 $6.54
C. Craig Waldbillig 15,000 $6.54
Peter H. Williams 15,000 $6.54
</TABLE>
- 11 -
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AVERAGE EXERCISE PRICE
----------------- ----------------------
NAME GRANTED PER SHARE
---- ------- ---------
<S> <C> <C>
Joseph A. Mussey 70,000 $6.69
Ira Benson 20,000 $6.84
Paul A. Miller 32,000 $4.39
</TABLE>
Since adoption of the 1994 Stock Option Plan: (i) all current executive
officers, as a group, have been granted options under the 1994 Stock Option Plan
covering 142,600 shares of the Company's common stock which represents
approximately 29% of the total number of options granted pursuant to the 1994
Stock Option Plan; and (iii) all current employees, excluding executive
officers, as a group, have been granted options under the 1994 Stock Option Plan
covering 95,200 shares of the Company's common stock which represents
approximately 20% of the total number of options granted pursuant to the 1994
Stock Option Plan.
The grant of an Incentive Option or a Nonqualified Option has no
immediate tax consequence to the option holder or to the Company. The exercise
of an Incentive Option will generally have no immediate tax consequence to the
option holder (except to the extent it is an adjustment in computing alternative
minimum taxable income) or to the Company; however, the exercise of a
Nonqualified Option will cause the option holder to recognize ordinary income,
and permit the Company to take a deduction if applicable withholding
requirements are satisfied, and in an amount equal to the excess of the fair
market value on the date of the exercise of the shares of common stock acquired
pursuant to the exercise of the Nonqualified Option ("Nonqualified Shares") over
the exercise price.
Upon the sale of shares acquired pursuant to the exercise of an
Incentive Option ("Incentive Shares") after the required holding period, no
deduction will be allowable to the Company and the option holder will generally
realize long-term capital gain or loss in an amount equal to the difference
between amount realized upon the sale and the exercise price of the Incentive
Shares. If, however, an option holder disposes of the Incentive Shares prior the
expiration of the required holding period (a "disqualifying disposition"), the
option holder will recognize ordinary income, and the Company will be entitled
to a deduction, provided that applicable withholding requirements are satisfied,
equal to the excess of the fair market value of the Incentive Shares on the date
of exercise (or the proceeds of the disposition, if less) over the exercise
price. If the amount realized upon the disqualifying disposition exceeds the
fair market value of the Incentive Shares on the date of exercise, such excess
is taxable to the option holder as capital gain income. Upon the sale of
Nonqualified Shares, the option holder will generally realize long or short term
capital gain or loss (depending upon the holding period of the shares) in an
amount equal to the difference between the option holder's tax basis in the
Nonqualified Shares and the amount realized on the sale.
The option holder's tax basis in the Incentive Shares and Nonqualified
Shares will be the exercise price plus the amount of any ordinary income
recognized by the option holder. The option holder's holding period will
commence on the date that the Incentive Shares or Nonqualified Shares are
transferred to him or her.
The affirmative vote of a majority of the votes entitled to be cast by
the holders of the Company's common stock present in person or represented by
proxy at the Annual Meeting is required to adopt the amendment to the 1994 Stock
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO THE 1994 STOCK OPTION PLAN. UNLESS A CONTRARY
CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR APPROVAL OF THE PLAN.
- 12 -
<PAGE> 17
RESTATED CERTIFICATE OF INCORPORATION
APPROVAL OF AMENDMENTS TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Board of Directors has observed that certain tactics, including
proxy fights, hostile tender offers, and "green mail," have become relatively
common in modern takeover practice. The Board of Directors considers such
tactics to be highly disruptive to a corporation and often contrary to the
overall best interests of its stockholders. In particular, such tactics
frequently represent an attempt to acquire a corporation in the marketplace at
an unfairly low price. In light of such developments, the Board of Directors has
approved a number of amendments to the Company's Certificate of Incorporation
(the "Amendments") and has directed that the Amendments be submitted to a vote
of the stockholders at the Annual Meeting.
The Amendments are intended to encourage persons seeking to acquire
control of the Company to initiate such efforts through negotiations with the
Board of Directors of the Company. The Board of Directors believes the
Amendments will help give it the time necessary to evaluate unsolicited offers,
as well as appropriate alternatives, in a manner which assures fair treatment of
the Company's stockholders.
The Amendments are also intended to increase the bargaining leverage of
the Board of Directors, on behalf of the Company's stockholders, in any
negotiations concerning a potential change of control of the Company. The
Amendments will, however, make more difficult or discourage a proxy contest or
the assumption of control by a substantial stockholder and this could increase
the likelihood that incumbent directors will retain their positions. The
Amendments, if adopted, could also have the effect of discouraging a third party
from making a tender offer or otherwise attempting to obtain control of the
Company, even though such attempt might be beneficial to the Company's
stockholders.
The Amendments are to some extent interrelated, and the purpose of some
of the Amendments is to prevent the circumvention of the desired protection
afforded by other Amendments. Thus, the Board of Directors believes it is
appropriate to present the Amendments as one related group that the stockholders
must vote for or against as a single proposal.
Existing Defenses. The Company's current Certificate of Incorporation
does not contain provisions intended by the Company to have, or to the knowledge
of the Board of Directors having, an anti-takeover effect. However, the
Certificate of Incorporation currently authorizes the issuance of 10,000,000
shares of Common Stock. The authorized available Common Stock could (within the
limits imposed by applicable law and the rules of the Nasdaq SmallCap Market, on
which the Company's Common Stock is traded) be issued by the Company and used to
discourage a change in control of the Company.
The Company's current Bylaws provide that the Board of Directors is
classified into three classes of directors with staggered three-year terms.
Additional time is required to change control of a staggered board of directors,
because a majority of stockholder vote cannot change the composure of a majority
of the board in any given year. Thus, the classified board tends to perpetuate
present management and discourage takeover bids, because the acquiror does not
have the ability to obtain immediate control of the Board of Directors.
The Company's Bylaws provide that directors may be removed with or
without cause by the affirmative vote of the holders of at least eighty percent
(80%) of all outstanding shares of capital stock. This provision makes it
impossible for someone who acquires voting control of the Company to
immediately remove the incumbent directors and replace them with more friendly
directors, and requires such a person to replace incumbent directors as their
terms expire over a period of up to three years.
The Board of Directors has adopted certain change in control agreements
and has included change in control provisions in the Company's 1994 Stock Option
Plan. The change in control agreements provide for the payment of
- 13 -
<PAGE> 18
severance benefits to certain executive officers of the Company in the event
that their employment with the Company is terminated in connection with a change
in control of the Company. The Company's 1994 Stock Option Plan contains a
provision that accelerates the vesting of stock options granted under the plan
in the event of a change in control of the Company. The agreements and
provisions in the compensatory plans are designed to attract and retain valued
employees of the Company and to insure that such employees' performance is not
undermined by the possibility, threat or occurrence of a change in control.
While these measures were not adopted to deter takeovers, they may have an
incidental anti-takeover effect by making it more expensive for a bidder to
acquire control of the Company.
All directors and officers of the Company as a group beneficially
owned, as of February 28, 1997, 2,093,319 shares of Common Stock (which include
shares issuable pursuant to options exercisable within sixty (60) days of the
date hereof) (See "ELECTION OF DIRECTORS"). These shares represent 40.1% of the
outstanding Common Stock of the Company. The officers and directors are,
therefore, able to prevent any action requiring a supermajority stockholder
vote under the Amendments from becoming effective. However, no existing single
stockholder of the Company currently holds sufficient shares alone to prevent
an action requiring such a supermajority stockholder vote from becoming
effective.
Description of Amendments. The proposal being submitted to the
stockholders consists of the following five (5) Amendments to the Company's
Certificate of Incorporation:
(A) Increase in Capital Stock Amendment: To authorize a total of
50,000,000 total shares of capital stock, of which 40,000,000
are common shares and 10,000,000 are preferred shares, both at
$.01 par value;
(B) Classified Board Amendment: To classify the Board of Directors
into three classes of directors with staggered three-year
terms of office; to provide that directors may be removed by
the stockholders with or without cause and that such action
may be taken only by the affirmative vote of at least eighty
percent (80%) of the outstanding shares of common stock of the
Company at an annual or special meeting of stockholders; and
to provide that, if a vacancy occurs in the Board of Directors
for any reason, including by reason of any increase in the
number of directors, it shall be filled only by the
affirmative vote of a majority of the remaining directors in
office even though less than a quorum;
(C) Stockholder Meeting Amendment: To provide that actions
required or permitted to be taken at any annual or special
meeting of the stockholders of the Company be taken only upon
a vote of the stockholders at a meeting duly called or by
written consent signed by the holders of outstanding common
stock who would be entitled to notice of such meeting and that
special meetings of stockholders of the Company be called only
by the Board of Directors, the Chairman of the Board of
Directors, or the President of the Company, or at the request
in writing of stockholders owning at least eighty percent
(80%) of the outstanding Common Stock of the Company;
(D) Acquisition Proposal Amendment: To provide that the Board of
Directors can consider various factors in consideration of an
acquisition proposal, not just the value of the consideration
being offered; and
(E) Supermajority Vote Amendment: To provide that the affirmative
vote of a least eighty percent (80%) of the outstanding
shares of the Company's Common Stock is required to amend,
repeal or adopt certain provisions in the Certificate of
Incorporation.
Annex I to this Proxy Statement contains the text of the Amendments and
the Restated Certificate of Incorporation of the Company and the following
discussion is qualified in its entirety by reference to Annex I. If the
Amendments are approved by the stockholders, certain conforming amendments will
be made to the Bylaws of the Company, and the Bylaws will be amended by the
Board of Directors in substantially the form attached to this Proxy Statement as
Annex II.
- 14 -
<PAGE> 19
The Amendments are permitted by Delaware law and are consistent with
the rules of the Nasdaq SmallCap Market on which the Company's Common Stock is
traded. The Amendments are not the result of any specific efforts of which the
Company is aware to obtain control of the Company.
The Board of Directors does not contemplate recommending the adoption
of any further amendments to the Certificate of Incorporation or the Bylaws of
the Company that would affect the ability of third parties to effect a change in
control of the Company. However, the Board of Directors may in the future
determine to review the advisability of adopting other measures that may affect
takeover attempts in the context of applicable law and judicial decisions.
INCREASE IN CAPITAL STOCK AMENDMENT
The proposed amendment to Article Four of the Company's Certificate of
Incorporation would effect an increase in the number of authorized shares of the
Company's capital stock from 10,000,000 shares to 50,000,000 shares, consisting
of an increase in the number of authorized shares of common stock from
10,000,000 shares to 40,000,000 shares and the creation of authorized preferred
stock consisting of 10,000,000 shares.
On the record date, the Company had 4,921,298 shares of common stock
outstanding and had reserved for issuance an additional 916,340 shares pursuant
to the exercise of outstanding options, for a total of 5,837,638 shares
outstanding and reserved.
The Company has been required to issue or authorize additional shares
of common stock as a result of its acquisition activities and to attract and
keep qualified consultants, product inventors, executives and directors in lieu
of cash payments. The Company anticipates being required to issue a significant
number of additional shares in the financing of its continued activities.
If approved, the increased number of authorized shares of common stock
and preferred stock will be available for issue from time to time for such
purposes and consideration as the Board of Directors may approve and no further
vote of stockholders of the Company will be required, except as provided under
Delaware law.
The proposed amendment would enable the Board of Directors to authorize
the issuance, without further stockholder action (unless required in a specific
case by applicable laws, regulations or stock exchange rules), of up to
10,000,000 shares of preferred stock, in one or more series, with such terms and
at such times and for such consideration as the Board of Directors may
determine. With respect to any such series of preferred stock, the Board of
Directors will be authorized to determine, among other things: the number of
shares to be included in each such series and to fix the designation, powers,
preferences, and relative participating, optional, conversion, and other special
rights of the shares of each such series and the qualifications, limitations, or
restrictions thereof, including but not limited to the fixing of dividend
rights, rates, preferences, and other terms; redemption rights, prices, and
other terms (including any sinking fund provisions); conversion rights, prices
or rates of exchange, and other terms; liquidation preferences and other terms;
and voting rights in addition to any voting rights provided by law, and other
terms, which may be general or limited; all to the fullest extent now or
hereafter permitted by the General Corporation Law of the State of Delaware; and
to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In the event the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
The Board of Directors believes that the proposed amendment is in the
best interests of the Company and its stockholders. The authorization of the
preferred stock will give the Company greater flexibility in equity financing by
permitting the Board of Directors to issue shares of preferred stock without the
delay and expense of a special meeting of stockholders. For example, the Board
of Directors may deem it appropriate to make a private or public offering of the
Company's preferred stock in order to raise funds for working capital or other
purposes or the preferred stock could be issued to finance possible future
acquisitions.
- 15 -
<PAGE> 20
The flexibility to issue the "blank check" preferred stock could also
enhance the Board of Directors' bargaining capability in a takeover situation.
For example, the Board of Directors could issue a series of preferred stock with
the right as a separate class to approve any merger or sale of the Company. This
could have the effect of delaying, deferring or preventing a change in control
of the Company. In addition, the Board of Directors could forestall or prevent a
change in control by means of a private placement of the preferred stock with a
person or entity friendly to management, whose vote would be required to approve
the proposed takeover. Preferred stock could also be issued in conjunction with
the adoption of a stockholder purchase rights plan, commonly known as a "poison
pill."
The additional shares of common stock for which authorization is sought
would be identical to the shares of common stock of the Company now authorized.
Holders of common stock do not have preemptive rights to subscribe for
additional securities which may be issued by the Company.
CLASSIFIED BOARD AMENDMENT
The Board of Directors recommends that the Company's Certificate of
Incorporation be amended to add an article, which provides that (i) the Board of
Directors shall be classified into three classes of directors with staggered
three-year terms of office; (ii) directors of the Company may be removed from
office by the stockholders with or without cause and that such action may be
taken only by the affirmative vote of at least eighty percent (80%) of the
outstanding shares of Common Stock of the Company at an annual or special
meeting of stockholders, except that if the Board of Directors, by an
affirmative vote of at least two-thirds of the entire Board of Directors,
recommends removal of a director to stockholders, such removal may be effected
by the affirmative vote of a majority of the outstanding Common Stock entitled
to vote; and (iii) if a vacancy occurs in the Board of Directors for any reason,
including by reason of any increase in the number of directors, it shall be
filled only by the affirmative vote of a majority of the remaining directors in
office, even though less than a quorum (the "Classified Board Amendment").
Classified Board of Directors. The Classified Board Amendment provides
that the Board of Directors shall be classified into three classes of directors
with staggered three-year terms of office. The Company's Bylaws now provide for
a classified Board of Directors. Delaware law permits provisions in a
certificate of incorporation or bylaw approved by stockholders that provide for
a classified board of directors. The Classified Board Amendment to the
Certificate of Incorporation, set forth in Annex I to this Proxy Statement,
would provide that directors will be classified into three classes, as nearly
equal in number as possible. One class would hold office initially for a term
expiring at the 1998 annual meeting; another class would hold office initially
for a term expiring at the 1999 annual meeting; and another class would hold
office initially for a term expiring at the 2000 annual meeting.
At each annual meeting following this initial classification and
election, the successors to the class of directors whose terms expire at that
meeting would be elected for a term of office to expire at the third succeeding
annual meeting after their election and until their successors have been duly
elected and qualified.
The Classified Board Amendment is designed to assure continuity and
stability in the Board of Directors' leadership and policies. While management
has not experienced any problems with such continuity in the past, it wishes to
ensure that this experience will continue. The Board of Directors also believes
that the Classified Board Amendment will assist the Board of Directors in
protecting the interests of the Company's stockholders in the event of an
unsolicited offer for the Company.
Because of the additional time required to change control of the Board
of Directors, the Classified Board Amendment will tend to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of the Company. The Classified Board Amendment
will tend to discourage certain tender offers, perhaps including some tender
offers that stockholders may feel would be in their best interests.
Removal of Directors. The Classified Board Amendment further provides
that directors of the Company may be removed from office at any time, with
or without cause and only by the affirmative vote of the holders of at
least eighty
- 16 -
<PAGE> 21
percent (80%) of all of the outstanding shares of capital stock of the Company
entitled to vote on the election of directors at a meeting of stockholders
called for that purpose, except that if the Board of Directors, by an
affirmative vote of at least two-thirds of the entire Board of Directors,
recommends removal of a director to the stockholders, such removal may be
effected by the affirmative vote of the holders of at least a majority of the
outstanding shares of capital stock of the Corporation present in person or
represented by proxy and entitled to vote on the election of directors at a
meeting of stockholders called for that purpose.
Under Delaware law, directors chosen to fill vacancies on a classified
board shall hold office until the next election of the class for which such
directors shall have been chosen, and until their successors are elected and
qualified.
Presently, directors of the Company are divided into classes pursuant
to the Bylaws and may be removed by the stockholders, with or without cause, by
the affirmative vote of at least eighty percent (80%) of the outstanding shares
of common stock of the Company.
The Classified Board Amendment does not materially change the
provisions currently existing in the Bylaws of the Company relating to the
removal of directors of the Company. The Classified Board Amendment moves all
provisions relating to the removal of directors to the Certificate of
Incorporation, where they will be subject to alteration or repeal only by
supermajority stockholder action.
Filling of Vacancies. The Classified Board Amendment further provides
that if a vacancy occurs on the Board of Directors for any reason, including by
reason of any increase in the number of directors, it shall be filled only by
the affirmative vote of a majority of the remaining directors in office, even
though less than a quorum, if such vacancy occurs prior to the expiration of the
term of office of the class in which such vacancy occurs. Directors so elected
will hold office for the remainder of the full term of the class of directors in
which the new directorship was created or in which the vacancy occurred, and
until such director's successor shall have been elected and qualified.
Any decrease in the number of directors constituting the Board of
Directors shall not shorten the term of any incumbent director.
The Classified Board Amendment eliminates any stockholder power to fill
vacancies or newly created positions on the Board of Directors. The Classified
Board Amendment is intended to provide stability within the management and
organization of the Company by vesting the power to fill vacant positions solely
in the elected representatives of the stockholders. It will prevent a third
party seeking majority representation on the Board of Directors from obtaining
such representation simply by enlarging the Board of Directors and then filling
the new directorships with its own nominees.
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<PAGE> 22
The Classified Board Amendment does not materially change the
provisions currently existing in the Bylaws of the Company relating to the
filling of vacancies on the Board of Directors. The Classified Board Amendment
moves all provisions relating to the filling of vacancies on the Board of
Directors to the Certificate of Incorporation, where they will be subject to
alteration or repeal only by supermajority stockholder action.
The Classified Board Amendment is in accordance with the General
Corporation Law of the State of Delaware which provides that vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, although
less than a quorum, unless the Certificate of Incorporation or Bylaws provide
otherwise.
STOCKHOLDER MEETING AMENDMENT
The Board of Directors recommends that the Company's Certificate of
Incorporation be amended to add an article, which provides that actions required
or permitted to be taken at any annual or special meeting of the stockholders be
taken only upon the vote of the stockholders at a meeting duly called or by
written consent signed by all of the holders of oustanding stock who would be
entitled to notice of such meeting of the stockholders (the "Stockholder
Meeting Amendment").
Stockholder Action to be Taken Only at a Stockholder Meeting. Under the
General Corporation Law of the State of Delaware, unless otherwise provided in
the Certificate of Incorporation, any action required or permitted to be taken
by stockholders of a corporation may be taken without a meeting, without prior
notice and without a stockholder vote if a written consent setting forth the
action to be taken is signed by the holders of shares of outstanding stock
having the requisite number of votes that would be necessary to authorize such
action at a meeting of stockholders at which all shares entitled to vote thereon
were present and voted. Neither the Company's Certificate of Incorporation nor
its Bylaws currently contain a provision restricting or regulating stockholder
action by written consent.
The adoption of the Stockholder Meeting Amendment would eliminate the
ability of the Company's stockholders to act by written consent in lieu of a
meeting, unless consent of all stockholders is obtained. It is intended to
prevent solicitation of consents by stockholders seeking to effect changes
without giving all of the Company's stockholders entitled to vote on a proposed
action an adequate opportunity to participate at a meeting where such proposed
action is considered. The Stockholder Meeting Amendment would prevent a
takeover bidder holding or controlling a large block of the Company's voting
stock from using the written consent procedure to take stockholder action
unilaterally.
The Board of Directors does not believe that the elimination of
stockholder action by written consent will create a significant impediment to a
tender offer or other effort to take control of the Company. Nevertheless, the
effect of the Stockholder Meeting Amendment may be to make more difficult, or
delay, certain actions by a person or a group acquiring a substantial percentage
of the Company's stock, even though such actions might be desired by, or
beneficial to, the holders of a majority of the Company's stock.
The Stockholder Meeting Amendment will ensure that all stockholders
will have advance notice of any attempted major corporate action by
stockholders, and that all stockholders will have an equal opportunity to
participate when such action is being considered. It will enable the Company to
reduce the possibility of disputes or confusion regarding the validity of
purported stockholder action. The Stockholder Meeting Amendment could also
provide some encouragement to a potential acquiror to negotiate directly with
the Board of Directors.
ACQUISITION PROPOSAL AMENDMENT
The Board of Directors recommends that the Company's Certificate of
Incorporation be amended to add an article which provides that the Board of
Directors can consider various factors in consideration of an acquisition
proposal, not just the value of the consideration being offered (the
"Acquisition Proposal Amendment").
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<PAGE> 23
Under Delaware law, the Board of Directors, in reviewing a takeover
bid, may review the impact a takeover would have on constituencies other than
stockholders. In a takeover bid situation, the Board of Directors can review
alternatives available and their effect on various constituencies, particularly
the stockholders. One of the relevant factors that the Board of Directors may
look at is the Company's long term plans. Also, the Board of Directors may
consider any special factors bearing on stockholder and public interests.
The Acquisition Proposal Amendment provides that the Board of Directors
would base the response of the Company to any "Acquisition Proposal" on the
Board of Directors' evaluation of what is in the best interest of the Company.
In evaluating what is in the best interest of the Company, the Board of
Directors would consider all relevant factors including, without limitation:
(1) The best interest of the stockholders which, for this
purpose, requires the Board of Directors to consider, among other
factors, not only the consideration offered in the Acquisition Proposal
in relation to the then current market price of the Company's stock,
but also in relation to the current value of the Company in a freely
negotiated transaction and in relation to the Board of Directors' then
estimate of the future value of the Company as an independent entity or
as the subject of a future Acquisition Proposal; and
(2) Such other factors as the Board of Directors determines to
be relevant, including, among other factors, the long-term and
short-term interests of the Company and its subsidiaries and their
businesses and properties and the social, legal, and economic effects
upon the employees, suppliers, customers, creditors, and other affected
persons, firms, and corporations and on the communities and
geographical areas in which the Company and its subsidiaries operate or
are located.
"Acquisition Proposal" means any proposal for the consolidation or
merger of the Company with another corporation, any share exchange involving the
Company's outstanding capital stock, any liquidation or dissolution of the
Company, any transfer of all or a material portion of the assets of the Company,
and any tender offer or exchange offer for any of the Company's outstanding
stock.
The Board of Directors believes the Acquisition Proposal Amendment
would give comfort to the Company's employees, customers, suppliers, and other
constituencies that the Board of Directors would consider their interests in
deciding whether to recommend such a tender or exchange offer. Additionally,
expansion of the Board of Directors' discretion to assess the Company's value
from various perspectives will give the directors more latitude in determining
whether a premium bid is inadequate.
If the Acquisition Proposal Amendment is approved by stockholders it
may make it more difficult, and may discourage, an attempt to acquire the
Company.
SUPERMAJORITY VOTE AMENDMENT
The Board of Directors recommends that the Company's Certificate of
Incorporation be amended to add an article, which requires that in order to
amend, repeal or adopt any provision inconsistent with Articles Fifth, Sixth,
Seventh, Eighth and Tenth of the Company's Certificate of Incorporation, the
affirmative vote of at least eighty percent (80%) of the outstanding shares of
Common Stock of the Company shall be required (the "Supermajority Vote
Amendment").
Under the General Corporation Law of the State of Delaware, amendments
to the Certificate of Incorporation require the approval of the holders of a
majority of the outstanding stock entitled to vote thereon, but the law also
permits a corporation to include provisions in its Certificate of Incorporation
which require a greater vote than the vote otherwise required by law for any
corporate action. With respect to such supermajority vote provisions, Delaware
law requires that any alteration, amendment or repeal thereof be approved by an
equally large stockholder vote.
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<PAGE> 24
The requirement of an increased stockholder vote is designed to prevent
a person holding or controlling a majority, but less than eighty precent (80%),
of the shares of the Company from avoiding the anti-takeover provisions of the
Certificate of Incorporation by simply repealing them.
CONCLUSION
The affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock represented and entitled to vote at the
Annual Meeting or any adjournment(s) thereof is necessary for the approval of
the Amendments to the Company's Certificate of Incorporation. The Amendments
will become effective upon the filing of a Certificate of Amendment with the
Secretary of State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as
independent certified public accountants to examine and report on the Company's
financial statements for the current fiscal year, and to perform other
appropriate audit, accounting and consulting services. Coopers & Lybrand L.L.P.
also acted in this capacity for the fiscal year ended December 31, 1996.
Although the Delaware General Corporation Law does not require the
selection of independent certified public accountants to be submitted to a vote
by stockholders, the Board continues to believe it appropriate as a matter of
policy to request that the stockholders ratify the appointment of Coopers &
Lybrand L.L.P. as independent auditors for the 1997 fiscal year.
It is expected that a representative of Coopers & Lybrand L.L.P. will
be present at the Annual Meeting, will have the opportunity to make a statement
if he desires to do so, and will be available to respond to appropriate
questions.
The affirmative vote of a majority of the votes entitled to be cast by
the holders of the Company's Common Stock present in person or represented by
proxy at the Annual Meeting is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. UNLESS A
CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THE PROPOSAL.
COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and greater than 10% stockholders, to file
reports of ownership and changes in ownership of the Company's securities with
the Securities and Exchange Commission. Copies of the reports are required by
SEC regulation to be furnished to the Company. Based on its review of such
reports and written representations from reporting persons, the Company believes
that, with the exception of one late report on Form 5 to report the grant of
stock options to each of Daniel A. Funk, Edward R. Funk, Herbert J. Kahn, Curtis
A. Loveland, Paul A. Miller, C. Craig Waldbillig, Peter H. Williams, and Robert
J. Williams, all officers, directors and greater than 10% stockholders complied
with all filing requirements during fiscal 1996.
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<PAGE> 25
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1996, containing financial statements for such year and the signed
opinion of Coopers & Lybrand L.L.P., independent public accountants, with
respect to such financial statements, is being sent to stockholders concurrently
with this Proxy Statement. The Annual Report is not to be regarded as proxy
soliciting material, and the management does not intend to ask, suggest or
solicit any action from the stockholders with respect to such report.
COST OF SOLICITATION
The cost of this solicitation will be paid by the Company. In addition
to the solicitation of proxies by mail, the directors, officers and employees of
the Company may solicit proxies personally or by telephone. The Company may
request persons holding shares in their names for others to forward soliciting
materials to their principals to obtain authorization for the execution of
proxies, and the Company may reimburse such persons for their expenses in doing
so.
STOCKHOLDER PROPOSALS
Each year the Board of Directors submits its nominations for election
of directors at the annual meeting of stockholders. Other proposals may be
submitted by the Board of Directors or the stockholders for inclusion in the
Proxy Statement for action at the annual meeting of stockholders. Any proposal
submitted by a stockholder for inclusion in the Proxy Statement for the annual
meeting of stockholders to be held in 1998 must be received by the Company
(addressed to the attention of the Secretary) on or before December 5, 1997. To
be submitted at the meeting, any such proposal must be a proper subject for
stockholder action under the laws of the State of Delaware.
OTHER MATTERS
The only business which the management intends to present at the
meeting consists of the matters set forth in this statement. The management
knows of no other matters to be brought before the meeting by any other person
or group. If any other matter should properly come before the meeting, the proxy
holders will vote thereon in their discretion.
All duly executed proxies received will be voted. You are requested to
sign and date the enclosed proxy and mail it promptly in the enclosed envelope.
If you later desire to vote in person, you may revoke your proxy, either by
written notice to the Company or in person at the meeting, without affecting any
vote previously taken.
BY ORDER OF THE BOARD OF DIRECTORS
EDWARD R. FUNK
CHAIRMAN OF THE BOARD
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<PAGE> 26
ANNEX I
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CROSS MEDICAL PRODUCTS, INC.
* * * * * * * * * * * * * * * * * *
The above corporation, Cross Medical Products, Inc. (the
"Corporation"), existing pursuant to the General Corporation Law of the State of
Delaware, desiring to give notice of corporate action effectuating the
restatement and amendment of its Certificate of Incorporation, sets forth the
following facts:
(i) The date of filing of the Corporation's original certificate of
incorporation was October 27, 1986;
(ii) The Corporation's present name is Cross Medical Products, Inc.;
(iii) This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware; and
(iv) The exact text of the Restated Certificate of Incorporation is
amended to read as follows:
FIRST: The name of the Corporation is Cross Medical Products, Inc.
SECOND: The address of its registered office in the State of Delaware is No.
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: (A) The aggregate number of shares of stock which the Corporation shall
have authority to issue is 50,000,000 shares, consisting of 40,000,000 shares of
common stock, $.01 par value (the "Common Stock"), and 10,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock").
<PAGE> 27
(B) Each holder of Common Stock shall be entitled to one vote
for each share of Common Stock held of record on all matters presented for vote
of the stockholders. Subject to the provisions of the General Corporation Law of
the State of Delaware and the rights of the Preferred Stock then outstanding,
dividends may be paid on the Common Stock at such times and in such amounts as
the Board of Directors shall determine. Upon the dissolution, liquidation, or
winding of the Corporation, after any preferential amounts to be distributed to
the holders of the Preferred Stock then outstanding have been paid or declared
and set apart for payment, the holders of Common Stock shall be entitled to
receive all remaining assets of the Corporation available for distribution to
its stockholders ratably and proportioned to the number of shares held by them.
(C) The shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors of the Corporation is hereby
authorized to establish from time to time by resolution or resolutions the
number of shares to be included in each such series and to fix the designation,
powers, preferences, and relative participating, optional, conversion, and other
special rights of the shares of each such series and the qualifications,
limitations, or restrictions thereof, including but not limited to the fixing of
dividend rights, rates, preferences, and other terms; redemption rights, prices,
and other terms (including any sinking fund provisions); conversion rights,
prices or rates of exchange, and other terms; liquidation preferences and other
terms; and voting rights in addition to any voting rights provided by law, and
other terms, which may be general or limited; all to the fullest extent now or
hereafter permitted by the General Corporation Law of the State of Delaware; and
to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In the event the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
FIFTH: (A) Nominations for election of directors shall be made in the
manner provided by the By-Laws of the Corporation. The number of directors of
the Corporation shall be fixed by or pursuant to the By-Laws of the Corporation.
(B) The directors shall be divided into three classes, Class
I, Class II, and Class III. Each such class shall consist, as nearly as
possible, of one-third of the total number of directors and any remaining
directors shall be included within each such class or classes as the Board of
Directors shall designate, and the term of office for the directors in one class
shall expire at each annual meeting of stockholders. Class I directors shall
hold office initially for a term expiring at the 2000 annual meeting of
stockholders, Class II directors shall hold office initially for a term expiring
at the 1998 annual meeting of stockholders; and Class III directors shall hold
office initially for a term expiring at the 1999 annual meeting of stockholders.
At each annual meeting of stockholders, successors to the class of directors
whose term expires at that annual meeting shall be elected to hold office for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible. A director shall hold office, subject
to any removal, death, resignation, or retirement
2
<PAGE> 28
until the annual meeting for the year in which his term expires and until his
successor shall be elected and qualify.
(C) Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by the General Corporation Law of
the State of Delaware, this Certificate of Incorporation or the By-Laws of the
Corporation), any director or the entire board of directors of the Corporation
may be removed from office at any time, with or without cause and only by
the affirmative vote of the holders of at least eighty percent (80%) of all of
the outstanding shares of capital stock of the Corporation entitled to vote on
the election of directors at a meeting of stockholders called for that purpose,
except that if the Board of Directors, by an affirmative vote of at least
two-thirds of the entire Board of Directors, recommends removal of a
director to the stockholders, such removal may be effected by the affirmative
vote of the holders of at least a majority of the outstanding shares of capital
stock of the Corporation present in person or represented by proxy and entitled
to vote on the election of directors at a meeting of stockholders called for
that purpose.
(D) Vacancies and newly-created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of the class to
which they have been elected expires and until their successors are duly elected
and qualified. If there are no directors in office, then an election of
directors may be held in the manner provided by the General Corporation Law of
the State of Delaware.
(E) Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by this Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election, term of office,
filling of vacancies, terms of removal, and other features of such directorships
shall be governed by the terms of Article FOURTH and the resolution or
resolutions establishing such class or series adopted pursuant thereto and such
directors so elected shall not be divided into classes pursuant to this Article
FIFTH unless expressly provided by such terms.
(F) Elections of directors need not be by written ballot
unless the By-Laws of the Corporation shall so provide.
SIXTH: In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, or repeal the
By-Laws of the Corporation.
SEVENTH: The Board of Directors shall base the response of the Corporation to
any "Acquisition Proposal" on the Board of Directors' evaluation of what is in
the best interest of the Corporation. In evaluating what is in the best interest
of the Corporation, the Board of Directors shall consider all relevant factors
including, without limitation:
3
<PAGE> 29
(1) The best interest of the stockholders which, for this
purpose, requires the Board of Directors to consider, among other
factors, not only the consideration offered in the Acquisition Proposal
in relation to the then current market price of the Corporation's
stock, but also in relation to the current value of the Corporation in
a freely negotiated transaction and in relation to the Board of
Directors' then estimate of the future value of the Corporation as an
independent entity or as the subject of a future Acquisition Proposal;
(2) Such other factors as the Board of Directors determines to
be relevant, including, among other factors, the long-term and
short-term interests of the Corporation and its subsidiaries and their
businesses and properties and the social, legal, and economic effects
upon the employees, suppliers, customers, creditors, and other affected
persons, firms, and corporations and on the communities and
geographical areas in which the Corporation and its subsidiaries
operate or are located.
"Acquisition Proposal" means any proposal for the consolidation or
merger of the Corporation with another corporation, any share exchange involving
the Corporation's outstanding capital stock, any liquidation or dissolution of
the Corporation, any transfer of all or a material portion of the assets of the
Corporation, and any tender offer or exchange offer for any of the Corporation's
outstanding stock.
EIGHTH: No director of the Corporation shall be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or to its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) for the payment of a dividend or the payment for the purchase or
redemption of the Corporation's stock in violation of Section 174 of the General
Corporation Law of the State of Delaware; or (iv) for any transaction from which
the director derived an improper personal benefit.
NINTH: The Corporation is to have perpetual existence.
TENTH: (A) Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by all of the holders of outstanding stock who
would be entitled to notice of such meeting.
(B) Meetings of stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the General Corporation Law of the
State of Delaware) outside the State of Delaware at such place or places as may
be designated from time to time by the Board of Directors or in the By-Laws of
the Corporation.
4
<PAGE> 30
ELEVENTH: (A) The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by the General Corporation Law of the
State of Delaware, and all rights conferred upon stockholders herein are granted
subject to this reservation and subject to paragraph (B) below.
(B) The provisions set forth in this Article ELEVENTH and in Article
FIFTH, SIXTH, SEVENTH, EIGHTH, and TENTH (A) of this Certificate of
Incorporation may not be altered, amended or repealed in any respect, and new
provisions inconsistent therewith may not be adopted unless such action is
approved by the affirmative vote of the holders of at least eighty percent
(80%) of all of the outstanding shares of capital stock of the Corporation
entitled to vote on such matter at a meeting of stockholders called for that
purpose, except that if the Board of Directors, by an affirmative vote of at
least eighty percent (80%) of the entire Board of Directors, recommends
approval of such amendment to this Certificate of Incorporation to the
stockholders, such approval may be effected by the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of
the Corporation present in person or represented by proxy and entitled to vote
on such matter at a meeting of stockholders called for that purpose.
IN WITNESS WHEREOF, Cross Medical Products, Inc. has caused this
Restated Certificate of Incorporation to be signed by Joseph A. Mussey, its
President, and attested by Curtis A. Loveland, its Secretary, this ____ day of
May, 1997.
-----------------------------------
Joseph A. Mussey, President
Attest:
- -------------------------------
Curtis A. Loveland, Secretary
5
<PAGE> 31
ANNEX II
AMENDED AND RESTATED
BY-LAWS
OF
CROSS MEDICAL PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1. The registered office of the corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held at such place
either within or without the State of Delaware as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
Section 2. Annual meetings of stockholders shall be held on such date
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect a Board of
Directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
<PAGE> 32
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the corporation's principal office. The
list shall also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of two-thirds of the board of
directors or of the holders of a majority of the stock issued and outstanding
and entitled to vote on the date such request was received by the corporation.
Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders, present in person or represented by proxy, of a
majority of the stock issued and outstanding and entitled to vote thereat shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation or by-laws a different vote is required in
which case such express provision shall govern and control the decision of such
question.
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<PAGE> 33
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after eleven months from its date, unless the proxy provides for a longer
period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by all of the holders of outstanding stock
who would be entitled to notice of such meeting.
ARTICLE III
DIRECTORS
Section 1. The number of directors of the corporation shall be not less
than three (3) nor more than fifteen (15). Initially there shall be Eight (8)
directors and thereafter the number of directors shall be as provided from time
to time in the by-laws, provided that no amendment to the by-laws decreasing the
number of directors shall have the effect of shortening the term of any
incumbent director, and provided further that no action shall be taken by the
directors (whether through amendment of the by-laws or otherwise) to increase
the number of directors as provided in the by-laws from time to time unless at
least two-thirds of the directors then in office shall concur in said
action. Directors need not be stockholders.
Commencing with the election of directors at the 1987 annual
meeting of stockholders, the board of directors shall be divided into three
classes, designated class I, class II and class III, as nearly equal in number
as possible, and the term of office of directors in one class shall expire at
each annual meeting of stockholders, and in all cases as to each director until
a successor shall be elected and shall qualify, or until his earlier
resignation, removal from office, death or incapacity. Additional directorships
resulting from an increase in number of directors shall be apportioned among the
classes as equally as possible. The initial term of office of directors of class
I shall expire at the annual meeting of stockholders in 1988, that of class II
shall expire at the annual meeting of stockholders in 1989, and that of class
III shall expire at the annual meeting of stockholders in 1990, and in all cases
as to each director until a successor shall be elected and shall qualify, or
until his earlier resignation, removal from office, death or incapacity. At each
annual meeting of stockholders the number of directors equal to the number of
directors of the class whose term expires at the time of such meeting (or, if
less, the number of directors properly nominated and qualified for election)
shall be elected to hold office until the third succeeding annual meeting of
stockholders after their election.
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<PAGE> 34
Section 2. Vacancies and newly-created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, or by a sole remaining director, and the directors
so chosen shall hold office until the next election and until their successors
are duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held immediately after the annual meeting of stockholders at the same
place as such annual meeting is held and no notice of such meeting shall be
necessary to the newly elected directors in order to legally constitute the
meeting, provided a quorum shall be present. In the event such meeting is not
held at the time and place provided herein, the meeting may be held at such time
and place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board of directors may be called by
the chairman of the board on three days' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
chairman of the board or the secretary in like manner and on like notice on the
written request of three directors.
Section 8. At all meetings of the board of directors a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any
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<PAGE> 35
committee thereof may be taken without a meeting, if all members of the board of
directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board of
directors or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of not less than three directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the board of directors, shall have and may exercise all the powers and
authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution; and, unless the
resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
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<PAGE> 36
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Notwithstanding any other provisions of the certificate of
incorporation or the by-laws of the corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, the certificate of
incorporation or the by-laws of the corporation), any director or the entire
board of directors of the corporation may be removed from office at any time,
with or without cause, but only by the affirmative vote of the holders of at
least eighty percent (80%) of all of the outstanding shares of capital stock of
the corporation entitled to vote on the election of directors at a meeting of
stockholders called for that purpose, except that if the board of directors, by
an affirmative vote of at least two-thirds (66 2/3%) of the entire board of
directors, recommends removal of a director to the stockholders, such removal
may be effected by the affirmative vote of the holders of at least a majority of
the outstanding shares of capital stock of the corporation entitled to vote on
the election of directors at a meeting of stockholders for that purpose.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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<PAGE> 37
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a chairman of the board, a president, a
vice-president, a secretary and a treasurer. The board of directors may also
choose additional vice-presidents, (including senior, executive or assistant
vice-presidents), and one or more assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provides.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a chairman, a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 6. The chairman of the board of directors shall be the chief
executive officer of the corporation and shall have general control and
management of the business affairs and policies of the corporation. He shall be
generally responsible for the proper conduct of the business of the corporation.
During the absence or disability of the president, he shall exercise all the
powers and discharge all the duties of the president. He shall preside at all
meetings of the stockholders and of the board of directors at which he is
present; and, in his absence, the president shall preside at such meetings. He
shall have such other powers and perform such other duties as from time to time
may be conferred or imposed upon him by the board of directors.
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<PAGE> 38
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the
Corporation and shall have such other duties as from time to time may be
conferred or imposed upon him by the board of directors. He shall be the
principal operating and administrative officer of the corporation. If there is
no chairman of the board or during the absence or disability of the chairman of
the board, he shall exercise all of the powers and discharge all of the duties
of the chairman of the board. He shall, in the absence of the chairman of the
board, possess power to sign all certificates, contracts and other instruments
of the corporation. He shall, in the absence of the chairman of the board,
preside at all meetings of the stockholders and of the board of directors. He
shall perform all such other duties as are incident to his office or are
properly required of him by the board of directors.
Section 8. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
chief executive officer, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 11. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
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<PAGE> 39
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 13. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the chief executive officer and the board of
directors, at its regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the corporation.
Section 14. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed each year) in such sum and with such
surety or sureties as shall be satisfactory to the, board of directors for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 15. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman of the board of directors, or the president or a vice-president and the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the corporation, certifying the number of shares owned by him in the
corporation.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
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<PAGE> 40
LOST CERTIFICATES
Section 3. The board of directors (through the corporation's duly
authorized officers) may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors (through the corporation's duly authorized
officers) may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on
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<PAGE> 41
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, deem proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall deem conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
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<PAGE> 42
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the fullest extent permitted by the General Corporation
Law of Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be amended or repealed by affirmative vote
of the holders of record of shares entitling them to exercise a majority of the
voting power on such proposal or by the board of directors when such power is
conferred upon the board of directors by certificate of incorporation; provided,
however, that the provisions set forth in this Article VIII, in Article II,
Sections 5 and 8 and in Article III, Sections 1 and 14, herein may not be
repealed or amended in any respect unless such action is approved by the
affirmative vote of the holders of eighty percent (80%) of the stock issued and
outstanding and entitled to vote thereon.
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<PAGE> 43
PROXY -- CROSS MEDICAL PRODUCTS, INC.
The undersigned stockholder of Cross Medical Products, Inc. (the
"Company") hereby appoints Edward R. Funk, Curtis A. Loveland and Joseph A.
Mussey, or any one of them, as attorneys and proxies with full power of
substitution to vote all shares of Common Stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on May 21, 1997, and at any adjournment or adjournments
thereof as follows:
1. THE ELECTION OF CLASS III DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name below.)
<TABLE>
<CAPTION>
Daniel A. Funk, M.D. - Daniel A. Gregorie, M.D. - Joseph A. Mussey - Robert J. Williams
<S> <C>
2. TO APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR DISTRIBUTION UNDER SUCH PLAN FROM 600,000 TO 1,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE AND ADOPT THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION FOR THE SELECTION OF COOPERS & LYBRAND L.L.P. TO SERVE AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2,3,4, and 5.
</TABLE>
(Continued and to be signed on other side.)
<PAGE> 44
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders, dated April 21, 1997, the Proxy Statement, and the
Annual Report of the Company furnished therewith. Any proxy heretofore given to
vote said shares hereby is revoked.
Please sign and date this Proxy below and return in the enclosed
envelope.
Dated:_________________________, 1997
NUMBER OF SHARES
------------------------------------
(Signature)
------------------------------------
(Signature)
Signature(s) must agree with the
name(s) printed on this Proxy. If
shares are registered in two names,
both stockholders should sign this
Proxy. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full
title.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
