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 240.14a-11(c) or 240.14a-12
MICROTECH MEDICAL SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[X] 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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MICROTECH MEDICAL SYSTEMS, INC.
Notice of Annual Meeting of Shareholders
To Be Held October 10, 1996
To the Shareholders of MICROTECH MEDICAL SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of MICROTECH MEDICAL SYSTEMS, INC., a Colorado corporation (the
"Company"), will be held at The Holiday Inn Denver Southeast, 3200 S. Parker
Road, Aurora, Colorado, 80814, on Thursday, October 10, 1996, at 10:00 a.m.,
local time, for the following purposes:
1. ELECTION OF DIRECTORS. To elect five (5) Directors of the Company
to serve until the 1997 Annual Meeting of Shareholders or until their respective
successors are elected and qualified;
2. APPROVAL AND RATIFICATION OF ASSET PURCHASE AGREEMENT AND SALE OF
MEDICAL TESTING PRODUCTS MANUFACTURING BUSINESS. To approve and ratify the sale
of the Company's medical testing products manufacturing business to its former
President, Jerry Kilgore;
3. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO CHANGE THE
CORPORATE NAME. To ratify and approve an amendment to the Articles of
Incorporation of the Company to change the name of the Company to "Eclipse
Corporation;"
4. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO AUTHORIZE
UP TO 500,000 SHARES OF PREFERRED STOCK. To ratify and approve an amendment to
the Articles of Incorporation of the Company to authorize the Company to issue
up to 500,000 shares of Preferred Stock, with such designations, powers,
preferences, privileges or other special rights, and qualifications, limitations
or restrictions thereon, as may be determined by the Board of Directors;
5. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO EFFECT A
ONE-FOR-ONE HUNDRED REVERSE STOCK SPLIT. To ratify and approve an amendment to
the Articles of Incorporation of the Company to ratify and approve a one-for-one
hundred (1-for-100) reverse split of the outstanding shares of Common Stock of
the Company; and
6. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement which is attached and made a part hereof.
The Board of Directors has fixed the close of business on August 23, 1996
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
Whether or not you expect to attend the Annual Meeting in person, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope provided to ensure your representation
and the presence of a quorum at the Annual Meeting. If you send in your proxy
card and then decide to attend the Annual Meeting to vote your shares in person,
you may still do so. Your proxy is revocable in accordance with the procedures
set forth in the Proxy Statement.
Colorado Springs, Colorado By Order of the Board of Directors
September 27, 1996
Kenneth M. Cahill
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
Mailed to Shareholders
on or about September 27, 1996
MICROTECH MEDICAL SYSTEMS, INC.
2 North Cascade, Suite 330
Colorado Springs, CO 80903
PROXY STATEMENT
General Information
This Proxy Statement is furnished to shareholders of MICROTECH MEDICAL
SYSTEMS, INC., a Colorado corporation (the "Company"), in connection with the
solicitation by the Board of Directors (the "Board") of the Company of proxies
in the accompanying form for use in voting at the Annual Meeting of Shareholders
of the Company (the "Annual Meeting") to be held on Thursday, October 10, 1996,
at 10:00 a.m., local time, at The Holiday Inn Denver Southeast, 3200 S. Parker
Road, Aurora, Colorado, 80814, and any adjournment or postponement thereof. The
shares represented by the proxies received, properly marked, dated, executed and
not revoked will be voted at the Annual Meeting.
Revocability of Proxy
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by: (i) delivering to the Company
(to the attention of J. Royce Renfrow, the Company's Secretary) a written notice
of revocation or a duly executed proxy bearing a later date; or (ii) attending
the Annual Meeting and voting in person.
Solicitation and Voting Procedures
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its Officers, Directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation.
The close of business on August 23, 1996 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. As of the close
of business on the Record Date, the Company had approximately 66,580,900 shares
of Common Stock outstanding and entitled to vote at the Annual Meeting. The
presence at the Annual Meeting of a majority, or approximately 33,290,451 of
these shares of Common Stock of the Company, either in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting. Each
outstanding share of Common Stock on the Record Date is entitled to one (1) vote
on all matters. Directors shall be elected by a plurality of the votes cast.
An automated system administered by the Company's transfer agent will
tabulate votes cast by proxy and an employee of the transfer agent will tabulate
votes cast in person at the Annual Meeting. Abstentions and broker non-votes are
each included in the determination of the number of shares present and voting,
and each is tabulated separately. However, broker non-votes are not counted for
purposes of determining the number of votes cast with respect to a particular
proposal. In determining whether a proposal has been approved, abstentions are
counted as votes against the proposal and broker non-votes are not counted as
votes for or against the proposal. If no specific instructions are given with
respect to matters to be acted upon at the Annual Meeting, shares of Common
Stock represented by a properly executed proxy will be voted (i) FOR the
election of management's nominees for Directors listed in Proposal No. 1, (ii)
FOR the ratification and approval of the sale of the medical manufacturing
business as set forth in Proposal No. 2, (iii) FOR ratification of the amendment
to the Articles of Incorporation as set forth in Proposal No. 3; (iv) FOR the
ratification of the amendment to the Articles of Incorporation as set forth in
Proposal No. 4; and (v) FOR the ratification of the amendment to the Articles of
Incorporation as set forth in Proposal No. 5.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation authorize the number of Directors
to be not less than four (4) nor more than nine (9). The exact number of
Directors on the Board is currently fixed in the Bylaws at five (5). The term
for each of the Company's Board of Directors will expire upon the election and
qualification of Directors at the annual meeting of shareholders to be held in
1997.
All of the Directors have served on the Board since June 1996, except Mr.
Dines, who has served as a Director since August 1996. The Board has no reason
to believe that the persons named below will be unable or unwilling to serve as
a nominee or as a Director if elected.
Certain information about each of the nominees is furnished below:
Kenneth M. Cahill, Chairman of the Board, President and Chief Executive
Officer. Mr. Cahill joined the Company as Director, Chief Executive Officer and
President in June 1996. From 1980 to May 1996, Mr. Cahill served as Director of
Operations for Larken, Inc., a hotel operator. Mr. Cahill directed Larken's
day-to-day marketing and training initiatives for over seventy-six (76) hotels.
In 1984, Mr. Cahill formed Arcadia, Inc., where, as its Chief Executive Officer,
he concentrated Arcadia's efforts in the areas of gaming and hospitality. Since
May 1996, Mr. Cahill has also served as a Vice President of InnerCircle Group
Incorporated, a management consulting company. Since May 1996, Mr. Cahill has
also served as a Director and as the President and CEO of Gallery Rodeo
International, a publicly-traded company involved in the real estate and gaming
industries.
Darel A. Tiegs, Director and Vice President. Mr. Tiegs joined the Company
in June 1996 as Vice President and Director. From 1972 to 1975, Mr. Tiegs was
Vice President of Norwest Bank where he gained extensive experience in all
facets of the real estate industry. Mr. Tiegs headed projects including
residential developments, shopping centers, hospitals and casinos. From 1984, to
the present, he has been President and part owner of Superior Homes, a company
specializing in the construction, warranty work and installation of modular
homes. Since May 1996, Mr. Tiegs has also served as a Director and as Vice
President of Gallery Rodeo International, a publicly-traded company involved in
the real estate and gaming industries.
J. Royce Renfrow, Director, Corporate Secretary and General Counsel. Mr.
Renfrow joined the Company as General Counsel, Corporate Secretary and Director
in June 1996. Mr. Renfrow practiced law in a small firm specializing in real
estate and corporate law from 1969, until May 1996. From 1969, to the present,
Mr. Renfrow has served as President and as General Counsel for Speedway Gas and
Oil Co., Inc., a small firm which provides management services for oil and gas
companies. From 1989, to 1992, Mr. Renfrow served as Vice President and General
Counsel of a small, privately-held medical start-up company, Medlogic MedLogic
Global Corporation. From May 1996, until the present, Mr. Renfrow has served as
Corporate Secretary and General Counsel to InnerCircle Group Incorporated, a
management consulting company. Since May 1996, Mr. Renfrow has also served as a
Director, General Counsel and Corporate Secretary of Gallery Rodeo
International, a publicly-traded company involved in the real estate and gaming
industries.
James A. Humpal, Director and Treasurer. Mr. Humpal joined the Company in
June 1996, as Treasurer and Director. From 1989 to 1991, Mr. Humpal served as
General Manager of the Holiday Inn-Columbus in Ohio. From 1991 to 1992, he began
work for Larken Inc. as a General Manager of the Holiday Inn-Tucson in Arizona.
In 1992, and until May 1996, Mr. Humpal served as Vice President of Operations
of Larken Inc. Since May 1996, Mr. Humpal has also served as Director and
Treasurer of Gallery Rodeo International, a publicly-traded company involved in
the real estate and gaming industries.
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Thomas M. Dines, Director. Mr. Dines was appointed as a Director of the
Company in August 1996. For the last five years, Mr. Dines has been a real
estate broker doing business under his own name. He has extensive experience in
real estate, loans, creation, estate settlement, banking and appraisal. He also
has expertise in the areas of income, rental, farm, and ranch property
management. Mr. Dines has served as President of several corporations, including
Mountain Securities Corporation, where he was President from 1995 to 1996. He
has been a Member and Director of Mountain Securities for over 27 years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.
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Directors and Executive Officers
The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company:
Directors and Executive Officers
Name Age Position
---- --- --------
Kenneth M. Cahill 60 Chairman of the Board of Directors,
President and Chief Executive Officer
J. Royce Renfrow 53 General Counsel, Secretary and Director
Darel A. Tiegs 52 Vice President and Director
James A. Humpal 41 Treasurer and Director
Thomas M. Dines 49 Director
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Relationships Among Directors or Executive Officers
There are no family relationships among any of the Directors or Executive
Officers of the Company.
Meetings and Committees of the Board of Directors
During 1995, the Board met three (3) times and acted by written consent three
(3) times. No Director attended fewer than 75% of the aggregate of the total
number of meetings of the Board, plus the total number of all meetings of
committees of the Board on which he served.
The Audit Committee, which was formed in August 1996, consists of Messrs.
Renfrow, Humpal and Dines. The Audit Committee recommends engagement of the
Company's independent auditors and is primarily responsible for approving the
services performed by the Company's independent auditors and for reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee is currently conducting a search for
independent auditors for the Company.
There is no Compensation Committee of the Board.
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Compensation of Directors
Directors who are employees of the Company do not receive any compensation
for their services as Directors. Directors are reimbursed for expenses incurred
in connection with attending Board and committee meetings.
On February 28, 1996, Directors who were not employees of the Company
received stock option grants as set forth below:
Charles Diehl 1.5 million shares at an exercise price of $0.02 per share
Kenneth McClatchy 1.5 million shares at an exercise price of $0.02 per share
These options have a term of five years and became fully exercisable on
February 28, 1996, the date of grant.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership as
of August 23, 1996 of the Company's Common Stock, by any person who is known to
the Company to be the beneficial owner of more than 5% of the Company's voting
securities, by each of the Named Executive Officers set forth in "Executive
Compensation" below, by each Director, and by the Officers and Directors of the
Company as a group. The Company has only one class of stock.
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Name and Address Number of Shares Percentage of Class
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Kenneth M. Cahill 12,880,800 19.35%
2 N. Cascade Ave., Suite 330
Colorado Springs, CO 80903
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Darel A. Tiegs 6,708,750 10.08%
2 N. Cascade Ave., Suite 330 (1)
Colorado Springs, CO 80903
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J. Royce Renfrow 6,708,750 10.08%
2 N. Cascade Ave., Suite 330 (2)
Colorado Springs, CO 80903
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James A. Humpal 536,700 *
2 N. Cascade Ave., Suite 330
Colorado Springs, CO 80903
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Thomas M. Dines 0 *
16 Heather Drive
Colorado Springs, CO 80906
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All Officers and Directors as 26,835,000 40.3%
a Group (5 persons).
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* Represents less than 1% of the Company's outstanding Common Stock.
(1) Includes 6,708,750 shares held by the Tiegs Family Trust, of which Mr. Tiegs
is Trustee. The beneficiaries under the Tiegs Family Trust are members of the
Tiegs family.
(2) Includes 6,708,750 shares held by R. Lazy J Trust, of which Mr. Renfrow is
Trustee, and of which the beneficiaries are members of the Renfrow family.
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PROPOSAL NO. 2
APPROVAL AND RATIFICATION OF PURCHASE AGREEMENT AND
SALE OF MEDICAL TESTING PRODUCTS MANUFACTURING BUSINESS
The Company's shareholders are being asked to act upon a proposal to ratify
and approve the sale of the Company's medical testing products business to its
former President, Jerry Kilgore, pursuant to the terms of an Asset Purchase
Agreement (the "Purchase Agreement") dated June 27, 1996, between the Company
and Mr. Kilgore. The terms of the Purchase Agreement are described below under
the caption "Description of Purchase Agreement."
Background and Reasons for the Proposed Transaction
Since its organization in December 1981, the Company has been engaged in
developing, assembling and marketing MIC-CONCEPT(TM) microdilution test panels
used by microbiology laboratories, clinics and doctors' offices in performing
antibiotic susceptability testing and identification of bacteria procedures. In
1985, the Company obtained permission from the Food and Drug Administration to
begin marketing several of its products.
The new management of the Company believes that the risks of the high level
of regulation, rapidly changing technology, high level of competition, and
potential liability associated with the Company's medical testing products
business outweigh the benefits of continuing in this industry, since the market
for the Company's medical testing products is an extremely limited niche market,
and management believes that the Company will not likely be able to realize
significant operating revenues or profits from the medical testing products
business in the foreseeable future. In addition, the development and manufacture
of the Company's medical testing products involves a unique process that relies
on the continued participation of Mr. Kilgore. Therefore, after reviewing the
status of the Company's medical testing products business, and the capital
requirements and future prospects of the business, management determined that
the sale of this business on the terms and conditions set forth in the Purchase
Agreement would be in the best interest of the Company and its shareholders.
Furthermore, based on the experience of the Company's management and its
Board members in the real estate industry, new management believes that it would
be in the best interest of the Company and its shareholders to redirect the
Company's efforts to focus on the real estate industry, especially in Colorado,
and to concentrate the Company's efforts on activities that may enhance the
valuation of the Company. Shareholders should note, however, that in order to
enter and continue in the real estate market, the Company will need to raise
substantial additional capital, and there can be no assurance that the Company
will be successful in doing so. In addition, there can be no assurance that the
Company's real estate investments will be successful.
For these reasons, the Company entered into the Purchase Agreement with Mr.
Kilgore dated as of June 27, 1996. The Board believes that the price to be paid
by Mr. Kilgore for the Company's medical testing products operations is fair in
view of the current circumstances of the Company. In making its determination to
sell the medical testing products business to Mr. Kilgore and in determining the
sales price, the Board conducted a review of the assets, operations, and
projections of the business, and had discussions with previous management
relating to the value of the business. The assets of the Company comprising the
medical testing products business to be sold to Mr. Kilgore (which excludes
accounts receivable of such business existing prior to June 12, 1996) were
reflected on the Company's balance sheet as of June 30, 1996 were at
approximately $129,000, out of total assets of approximately $1,373,000.
Shareholders should note that this ratio may not, however, be the same as the
ratio of the fair market value of the medical business assets to the fair market
value of all of the Company's assets. Based on the above factors and on its due
diligence review, the Board believes that the purchase price established for the
medical business assets is fair and reasonable to the Company.
The Board of Directors of the Company has unanimously approved the
transaction, and recommends that shareholders vote in favor of the sale pursuant
to the terms of the Purchase Agreement. Failure to consummate
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the sale of the medical testing products business may result in the Company
being unable to pursue its real estate business and would require the Company to
continue to operate the medical testing products business, which management
believes would not be in the best interests of the Company.
There are no federal or state regulatory requirements or approvals which must
be complied with or obtained in connection with the transaction. The Company
expects that the federal income tax consequences of the transaction will consist
of gain to the Company in an amount approximately equal to the amount received
pursuant to the Purchase Agreement, ($251,000), less the tax basis of the assets
sold (estimated to be approximately $85,000), which amount will be deferred and
will be recognized and taxable at such time as the Note (as defined below) from
Mr. Kilgore is repaid.
Description of the Purchase Agreement
The following description of the Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to the Purchase
Agreement, a copy of which was filed with the Securities and Exchange Commission
as Exhibit 10.6 to the Company's Current Report on Form 8-K dated June 27, 1996
(Commission File No. 2-94117-D) and is hereby incorporated in this Proxy
Statement by reference.
The Sale; Purchase Price. The Purchase Agreement contemplates that Mr.
Kilgore will purchase all of the Company's medical testing products operations,
including all licenses, contracts, inventories, operating assets, personal and
real property, and any other assets related to such operations (the "Assets")
and assume all liabilities of the Company related to the medical testing
products operations. In payment for the Assets, Kilgore will deliver to the
Company (i) $1,000 in cash, and (ii) a promissory note in the principal amount
of $250,000 (the "Note"). The Note will bear interest at 9.25% per annum.
Interest accrued under the Note will be payable monthly commencing immediately
following approval of the Purchase Agreement by the shareholders, and the
principal amount of $250,000 will be due and payable in full on June 1, 2001.
The Note will be secured by (i) an option held by Mr. Kilgore to purchase
3,000,000 shares of the Company's common stock, (ii) 16,000 shares of Valley of
the Sun Wireless TV, Inc., an Arizona corporation, and (iii) a promissory note
issued by Carolina Multi-Communications Corp., a Nevada corporation, to Kilgore,
in the principal amount of $235,000.
The Assets. The Assets consist of inventory, laboratory equipment, the lease
for the laboratory in Aurora, Colorado, and intangibles such as goodwill. Mr.
Kilgore has also agreed to assume liability for the accounts payable existing
prior to the date of sale. The Company will retain accounts receivable existing
before June 12, 1996. As noted above, the book value of the Assets has been
reported on the Company's balance sheet as of June 30, 1996 as being equal to
approximately $161,000 $129,000.
Other Terms. Management has also agreed to effect a corporate name change of
the Company following the sale of the Assets, and to transfer use of the name
"Microtech Medical Systems" and "Microtech Medical" to Mr. Kilgore. The Company
intends to change the Company's name to "Eclipse Corporation", as described in
Proposal No. 3 of this Proxy Statement.
Prior Relationship with Jerry Kilgore
Until April 1995, Jerry Kilgore was the President, the Treasurer and a
Director of the Company. As a result of certain unauthorized transactions
effected by Mr. Kilgore using the Company's funds, Mr. Kilgore resigned as
President and Director of the Company in April 1995. Mr Kilgore also owned 40.3%
of the outstanding Common Stock of the Company, until his shares were purchased
by Messrs. Cahill, Tiegs, Renfrow and Humpal,
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each of whom are currently officers and Directors of the Company, in June 1996.
Mr. Kilgore has remained as an employee of the Company to manage the medical
test products operations until such time as the sale of such operations is
effected pursuant to the Purchase Agreement. See "Certain Relationships and
Related Transactions" for a description of Mr. Kilgore's relationship with the
Company and the transactions effected between Mr. Kilgore and the Company. Mr.
Kilgore's address is 401 Laredo Street, Unit 1, Aurora, CO 80011.
Dissenters' Rights
The Company's shareholders are not entitled, under Colorado law, to
dissenters' rights of appraisal with respect to the approval of the Purchase
Agreement and the sale of the Assets to Mr. Kilgore.
Approval by Shareholders
Approval of this proposal requires the affirmative vote of the holders of a
majority of the shares of Common Stock of the Company present at the Annual
Meeting in person or represented by proxy. Members of management of the Company
hold approximately 40% of the outstanding Common Stock and have indicated their
intention of vote in favor of the proposal, and management therefore believes
that this proposal will be likely approved by the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND
RATIFICATION OF THE PURCHASE AGREEMENT AND THE SALE OF THE COMPANY'S
MEDICAL MANUFACTURING BUSINESS TO JERRY KILGORE.
AN ABSTENTION WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
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PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Company's shareholders are being asked to act upon a proposal to ratify
and approve an amendment to the Articles of Incorporation of the Company to
effect a change of the name of the Company to "Eclipse Corporation."
The Company's Board has adopted, and is recommending to the shareholders for
their approval at the Annual Meeting, a resolution to amend Article FIRST of the
Company's Articles of Incorporation to change the corporate name. The applicable
text of the Board's resolution is as follows:
RESOLVED: That Article FIRST of the Company's Articles of Incorporation be
amended to read in its entirety as follows:
"FIRST: The name of the corporation is ECLIPSE CORPORATION."
In the judgment of the Board of Directors, the change of corporate name is
desirable in view of the significant change in the character and strategic focus
of the business of the Company resulting from the proposed disposition of the
Company's medical testing products manufacturing business. This proposed
disposition is part of a strategic corporate program to refocus the Company's
business operations into the real estate industry, primarily in Colorado, which
industry the Company's new management believes has higher growth potential than
the medical testing products business. The Company has also agreed to assign its
rights to the name "Microtech Medical Systems" to Jerry Kilgore in connection
with the sale of the Company's medical testing products business to Mr. Kilgore.
See Proposal No. 2 of this Proxy Statement.
If the proposed name change is adopted, it is the intent of the Company to use
the trade name Eclipse Corporation in its communications with shareholders and
the investment community, and in its operations.
If the amendment is adopted, shareholders will not be required to exchange
outstanding stock certificates for new certificates.
Approval by Shareholders
Approval of this proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company entitled to vote at the Annual
Meeting. If approved by the shareholders, the amendment to Article FIRST will
become effective upon filing with the Secretary of State of Colorado, a
Certificate of Amendment to the Company's Articles of Incorporation, which
filing is expected to take place shortly after the Annual Meeting. However, the
Board of Directors will be authorized, without a further vote of the
shareholders, to abandon the name change and determine not to file the
Certificate of Amendment if the Board concludes that such action would be in the
best interest of the Company and its shareholders. If this proposal is not
approved by the shareholders, then the Certificate of Amendment will not be
filed. A failure to change the name of the Company will potentially result in a
breach of the agreement with Mr. Kilgore.
A copy of the proposed amendment to the Articles of Incorporation
incorporating this Proposal No. 3 is set forth in Exhibit A attached to this
Proxy Statement, and is incorporated herein by this reference; provided,
however, that the text of the amendment is subject to change as may be required
by the Colorado Secretary of State, and the Board may make any and all changes
to the amendment that it deems necessary to file the document with the Colorado
Secretary of State, and give effect to the amendment described in this Proposal
No. 3, assuming approval of such proposal by the shareholders. In the event this
Proposal No. 3 is approved by the shareholders and the amendments to the
Articles of Incorporation described in Proposals No. 4 and No. 5 (below) are
also approved, the Company's Articles of Incorporation will be restated to
include each of the Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY
AN ABSTENTION WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
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PROPOSAL NO. 4
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO AUTHORIZE UP TO 500,000 SHARES
OF PREFERRED STOCK
The Company's shareholders are being asked to act upon a proposal to ratify
and approve an Amendment to Articles of Incorporation of the Company to
authorize the Company to issue up to five hundred thousand (500,000) shares of
Preferred Stock with such designations, powers, preferences, privileges or and
other special rights, and the qualifications, limitations or restrictions
thereon as may be determined by the Board of Directors.
The Board of Directors has adopted and submitted to the shareholders for
approval an amendment to the Articles of Incorporation (the "Preferred Stock
Amendment") to authorize the issuance by the Company of up to five hundred
thousand (500,000) shares of Preferred Stock. The text of the Preferred Stock
Amendment is attached hereto as Exhibit B, and is incorporated herein by
reference.
The Board of Directors believes that it is advisable to authorize such shares
and have them available in connection with possible future transactions, such as
financings, strategic alliances, corporate mergers, acquisitions, possible
funding of new product programs or businesses and other uses not presently
determinable and as may be deemed to be feasible and in the best interest of the
Company. In addition, the Board of Directors believes that it is desirable that
the Company have the flexibility to issue shares of Preferred Stock without
further shareholder action, except as otherwise provided by law.
The Preferred Stock will have such designations, preferences, conversion
rights, cumulative, relative, participating, optional or and other rights,
including voting rights, qualifications, limitations or restrictions thereof as
are determined by the Board of Directors. Thus, if the Preferred Stock Amendment
is approved, the Board of Directors would be entitled to authorize the creation
and issuance of up to five hundred thousand (500,000) shares of Preferred Stock
in one (1) or more series with such limitations and restrictions as may be
determined in the Board's sole discretion, without further authorization by the
Company's shareholders. Shareholders will not have preemptive rights to
subscribe for shares of Preferred Stock.
It is not possible to determine the actual effect of the Preferred Stock on
the rights of the shareholders of the Company until the Board of Directors
determines the rights of the holders of a series of the Preferred Stock.
However, such effects might include (i) restrictions on the payment of dividends
to holders of the Common Stock; (ii) dilution of voting power to the extent that
the holders of shares of Preferred Stock are given voting rights; (iii) dilution
of the equity interests and voting power if the Preferred Stock is convertible
into Common Stock; and (iv) restrictions upon any distribution of assets to the
holders of the Common Stock upon liquidation or dissolution and until the
satisfaction of any liquidation preference granted to the holders of Preferred
Stock.
Although the Board of Directors has no present intention of doing so, it could
issue shares of Preferred Stock (within the limits imposed by applicable law)
that could, depending on the terms of such series, make more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or other means. When in the judgment of the Board of
Directors such action would be in the best interests of the shareholders and the
Company, the issuance of shares of Preferred Stock could be used to create
voting or other impediments or to discourage persons seeking to gain control of
the Company, for example, by the sale of Preferred Stock to purchasers favorable
to the Board of Directors. In addition, the Board of Directors could authorize
holders of a series of Preferred Stock to vote either separately as a class or
with the holders of Common Stock, on any merger, sale or exchange of assets by
the Company or any other extraordinary corporate transaction. The existence of
the additional authorized shares
13
<PAGE>
could have the effect of discouraging unsolicited takeover attempts. The
issuance of new shares could also be used to dilute the stock ownership of a
person or entity seeking to obtain control of the Company should the Board of
Directors consider the action of such entity or person not to be in the best
interests of the shareholders and the Company. Such issuance of Preferred Stock
could also have the effect of diluting the earnings per share and book value per
share of the Common Stock held by the holders of Common Stock.
While the Company may consider effecting an equity offering of Preferred Stock
in the future for the purposes of raising additional working capital or
otherwise, the Company, as of the date hereof, has no agreements or
understanding with any third party to effect any such offering and not no
assurances are given that any offering will, in fact, be effected.
Dissenters' Rights
The Company's shareholders are not entitled, under Colorado law, to
dissenters' rights of appraisal with respect to the Preferred Stock Amendment.
Approval by Shareholders
Approval of this proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company entitled to vote at the Annual
Meeting. If approved by the shareholders, the amendment to Article FOURTH will
become effective upon filing with the Secretary of State of Colorado, a
Certificate of Amendment to the Company's Articles of Incorporation, which
filing is expected to take place shortly after the Annual Meeting. However, the
Board of Directors will be authorized, without a further vote of the
shareholders, to abandon the Preferred Stock authorization and determine not to
file the Certificate of Amendment if the Board concludes that such action would
be in the best interest of the Company and its shareholders. If this proposal is
not approved by the shareholders, then the Certificate of Amendment will not be
filed.
A copy of the proposed Preferred Stock Amendment incorporating this Proposal
No. 4 is set forth in Exhibit B attached to this Proxy Statement, and is
incorporated herein by this reference; provided, however, that the text of the
Preferred Stock Amendment is subject to change as may be required by the
Colorado Secretary of State, and the Board may make any and all changes to the
Preferred Stock Amendment that it deems necessary to file the document with the
Colorado Secretary of State, and give effect to the Preferred Stock Amendment
described in this Proposal No. 4, assuming approval of such proposal by the
shareholders. In the event this Proposal No. 4 is approved by the shareholders
and the amendments to the Articles of Incorporation described in Proposals No. 3
(above) and No. 5 (below) are also approved, the Company's Articles of
Incorporation will be restated to include each of the amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION TO AUTHORIZE
UP TO 500,000 SHARES OF PREFERRED STOCK
AN ABSTENTION WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
14
<PAGE>
PROPOSAL NO. 5
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO
EFFECT A REVERSE SPLIT OF THE COMMON STOCK IN A RATIO OF 1-FOR-100
The Company's shareholders are being asked to act upon a proposal to ratify
and approve an Amendment to the Articles of Incorporation of the Company to
effect a 1-for-100 reverse split of the shares of Common Stock of the Company
(the "Reverse Stock Split").
If the Reverse Stock Split is approved by the shareholders of the Company at
the Annual Meeting, the Reverse Stock Split will be effected only upon a
determination by the Board of Directors that the Reverse Stock Split is in the
best interests of the Company and the shareholders. In connection with any
determination by the Board of Directors to such effect, the Board will also
determine at that time whether shareholders will receive cash in lieu of
fractional shares resulting from the Reverse Stock Split, or whether they will
receive an additional share for any such fractional shares.
If approved by the shareholders of the Company, a Reverse Stock Split would
become effective on a date that is as soon as practicable after the Annual
Meeting (the "Effective Date") selected by the Board of Directors.
The complete text of the form of amendment to the Articles (the "Amendment
to the Articles") for the Reverse Stock Split is set forth in Exhibit C to this
Proxy Statement; however, such text is subject to amendment (i) to provide
whether cash or an additional share will be received by shareholders for
fractional shares, and (ii) to include such changes as may be required by the
Colorado Secretary of State. The Board may make any and all changes to the
Amendment to the Articles that it deems necessary to file the Amendment to the
Articles with the Colorado Secretary of State and give effect to the Reverse
Stock Split. If the Reverse Stock Split is approved by the requisite vote of the
Company's shareholders, upon filing of the Amendment to the Articles with the
Colorado Secretary of State on the Effective Date, the Reverse Stock Split
selected by the Board will be effective, and each share of the Common Stock
issued and outstanding immediately prior thereto (the "Old Common Stock"), will
be, automatically and without any action on the part of the shareholders,
converted into and reconstituted as one-one hundredth (1/100) of a share of the
Company's Common Stock (the "New Common Stock"); provided, however, that no
fractional shares of New Common Stock will be issued as a result of the Reverse
Stock Split. In lieu of any such fractional share interest, each holder of Old
Common Stock who would otherwise be entitled to receive a fractional share of
New Common Stock will receive, as determined by the Board prior to the Effective
Date, either (i) one additional share of New Common Stock for such fractional
share of New Common Stock, or (ii) cash in lieu of such fractional share of New
Common Stock in an amount equal to the product obtained by multiplying (a) the
average of the high bid and low asked per share prices of the Common Stock as
reported on the Nasdaq electronic "Bulletin Board" on the Effective Date
(adjusted if necessary to reflect the per share price of the Old Common Stock
without giving effect to the Reverse Stock Split) by (b) the number of shares of
Old Common Stock held by such holder that would otherwise have been exchanged
for such fractional share interest.
Shortly after the Effective Date, shareholders will be asked to surrender
certificates representing shares of Old Common Stock in accordance with the
procedures set forth in a letter of transmittal to be sent by the Company. Upon
such surrender, a certificate representing shares of New Common Stock will be
issued and forwarded to the shareholders (and, if applicable, cash in lieu of
any fractional share interest); however, each certificate representing shares of
Old Common Stock will continue to be valid and represent the number of shares of
New Common Stock equal to one-one hundredth (1/100) of the number of shares of
Old Common Stock (and, where applicable, either (i) one additional share of New
Common Stock where the Reverse Stock Split results in a fractional share of New
Common Stock, or (ii) cash in lieu of such fractional share, as described
above).
16
<PAGE>
Purposes of the Reverse Stock Split
The Board of Directors believes the Reverse Stock Split is desirable for
several reasons. A Reverse Stock Split should enhance the acceptability of the
Common Stock by the financial community and the investing public. The reduction
in the number of issued and outstanding shares of Common Stock caused by a
Reverse Stock Split is anticipated initially to increase proportionally the per
share market price of the Common Stock to approximately one hundred times the
then-current market price. The Board of Directors also believes that the
proposed Reverse Stock Split may result in a broader market for the Common Stock
than that which currently exists. The expected increased price level may
encourage interest and trading in the Common Stock and possibly promote greater
liquidity for the Company's shareholders, although such liquidity could be
adversely affected by the reduced number of shares of Common Stock outstanding
after the Reverse Stock Split Effective Date. Additionally, a variety of
brokerage house policies and practices tend to discourage individual brokers
within those firms from dealing with lower priced stocks. Some of those policies
and practices pertain to the payment of broker's commissions and to time
consuming procedures that function to make the handling of lower priced stocks
economically unattractive to brokers. In addition, the structure of trading
commissions also tends to have an adverse impact upon holders of lower priced
stock because the brokerage commission on a sale of lower priced stock generally
represents a higher percentage of the sales price than the commission on a
relatively higher priced issue. The proposed Reverse Stock Split could result in
a price level for the Common Stock that will reduce, to some extent, the effect
of the above-referenced policies and practices of brokerage firms and diminish
the adverse impact of trading commissions on the market for the Common Stock.
Any reduction in brokerage commissions resulting from the Reverse Stock Split
may be offset, however, in whole or in part, by increased brokerage commissions
required to be paid by shareholders selling "odd lots" created by such Reverse
Stock Split.
However, there can be no assurance that any or all of these effects will
occur; including, without limitation, that the market price per share of New
Common Stock after the Reverse Stock Split will be equal to one hundred times
the market price per share of Old Common Stock before the Reverse Stock Split,
or that such price will either exceed or remain in excess of the current market
price. Further, there is no assurance that the market for the Common Stock will
be improved. Shareholders should note that the Board of Directors cannot predict
what effect the Reverse Stock Split will have on the market price of the Common
Stock.
Effects of the Reverse Stock Split
The Reverse Stock Split selected by the Board will be effected by means of
filing the Amendment to the Articles with the Colorado Secretary of State.
Assuming approval of the Reverse Stock Split by the requisite vote of the
shareholders at the meeting, the Certificate of Amendment to the Articles will
be filed with the Colorado Secretary of State at such time, if any, prior to the
next annual shareholders meeting, after a determination by the Board of
Directors to proceed with the Reverse Stock Split, and the Reverse Stock Split
will become effective on the date of such filing. Without any further action on
the part of the Company or the shareholders, after the Reverse Stock Split, each
share of Old Common Stock will be converted into and reconstituted as one-one
hundredth (1/100) of a share of New Common Stock (and, where applicable, either
(i) one additional share of New Common Stock where the Reverse Stock Split
results in a fractional share of New Common Stock, or (ii) cash in lieu of such
fractional share, as described above).
As of the date of this Proxy Statement, the records of the Company's transfer
agent indicate that no shareholder of record holds fewer than one hundred (100)
shares of Common Stock. Therefore, if the Company elects to pay cash in lieu of
fractional shares resulting from a Reverse Stock Split, the Company estimates
that the entire interest of no shareholders (those holding fewer than one
hundred (100) shares) will be eliminated pursuant to the Reverse Stock Split.
Because such transaction would be mandatory, any shareholders holding fewer than
one hundred (100) shares who wish to retain their existing equity interest
17
<PAGE>
in the Company would be adversely affected. The Company expects that a
negligible number of the currently outstanding shares would result in fractional
share interests for which cash would be paid in the Reverse Stock Split. Shares
no longer outstanding as a result of the fractional share settlement procedure
will be returned to authorized but unissued shares of the Company.
After giving effect to the settlement of fractional shares of Common Stock,
there will be no material differences between the rights of the shares of Common
Stock outstanding prior to the Reverse Stock Split and those to be outstanding
after the Reverse Stock Split is effected.
Shareholders have no right under Colorado law to dissent from the Reverse
Stock Split of the Common Stock.
Consummation of the Reverse Stock Split will not alter the number of
authorized shares of Common Stock, which will remain two hundred million
(200,000,000) shares (or one hundred ninety-nine million five hundred thousand
(199,500,000) shares, assuming approval by the Company's shareholders of
Proposal No. 4), or the number of authorized shares of Preferred Stock, which
will remain five hundred thousand (500,000) shares (assuming approval by the
Company's shareholders of Proposal No. 4). As discussed above, proportionate
voting rights and other rights of the holders of Common Stock will not be
altered by the Reverse Stock Split (other than as a result of either the
issuance of one additional share for fractional shares or the payment of cash in
lieu of fractional shares, as described above).
Shareholders should note that certain disadvantages may result from the
adoption of this Proposal No. 5. In the event this Proposal No. 5 is approved by
the shareholders and the Reverse Stock Split is effected by the Board, the
number of outstanding shares of Common Stock would be decreased as a result of
the Reverse Stock Split, but the number of authorized shares of Common Stock and
Preferred Stock would not be so decreased. The Company would therefore have the
authority to issue a greater number of shares of Common Stock and Preferred
Stock following the Reverse Stock Split without the need to obtain shareholder
approval to authorize additional shares. Any such additional issuance may have
the effect of significantly reducing the interest of the existing shareholders
of the Company with respect to earnings per share, voting, liquidation value and
book and market value per share. See "Proposal No. 4 -- Approval of Amendment to
Articles of Incorporation to Authorize up to 500,000 Shares of Preferred Stock."
As of August 23, 1996, the number of issued and outstanding shares of Old
Common Stock was 66,580,900, and the number of authorized and unissued shares of
Common Stock was one hundred thirty-three million four hundred nineteen thousand
one hundred (133,419,100). In the event that Proposal No. 4 is approved by the
Company's shareholders, then the number of authorized and unissued shares will
be 132,919,100. The following table illustrates the effects of the 1-for-100
Reverse Stock Split upon the number of shares of Old Common Stock issued and
outstanding, and the number of authorized and unissued shares of Common Stock
(assuming that no additional shares of Old Common Stock are issued by the
Company after the Record Date).
Common Stock Authorized and
Reverse Stock Split Ratio Outstanding(1) Unissued Common Stock(2)
- ------------------------- -------------- ------------------------
1-for-100 665,809 198,834,191
- -----------------------
(1) Does not take into account any reduction in the number of outstanding
shares resulting from the procedures for cashing out fractional shares,
or any increase in the number of outstanding shares resulting from the
issuance of additional shares for fractional shares. In addition, the
number of Common Stock shares outstanding does not include shares of
Common Stock issuable upon exercise or conversion of outstanding options
or warrants.
(2) Assuming the Company's shareholders approve Proposal No. 4.
18
<PAGE>
The Common Stock is currently registered under Section 12(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and, as a result, the Company is
subject to the periodic reporting and other requirements of the Exchange Act.
The Reverse Stock Split will not effect the registration of the Common Stock
under the Exchange Act. After the Effective Date, trades of the New Common Stock
will continue to be reported on the Nasdaq electronic "Bulletin Board" under the
Company's symbol "MMDS."
The proposed Reverse Stock Split would not change the shareholders' equity or
interest in the Company, except as a result of cashing out of fractional shares
or the issuance of additional shares for fractional shares, and the book value
of the number of shares outstanding immediately after the Reverse Stock Split
would be equal to the book value of the number of shares outstanding immediately
prior to the Reverse Stock Split, subject to the treatment of fractional shares.
Since the $.0005 par value of the Common Stock would not be changed following
the Reverse Stock Split, an adjustment would be made in the shareholders' equity
accounts of the Company to decrease the Company's Common Stock account by an
amount equal to the par value of shares disappearing in the Reverse Stock Split
and to make a corresponding increase in the capital in excess of par value of
Common Stock account on the Company's balance sheet. Total shareholders' equity
would thus remain unchanged, subject to the treatment of fractional shares.
Federal Income Tax Consequences of the Reverse Stock Split
The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. The Company, however, believes that
because the Reverse Stock Split is not part of a plan to increase any
shareholder's proportionate interest in the assets or earnings and profits of
the Company, the following federal income tax results (or lack thereof) will be
applicable to the Reverse Stock Split:
1. A shareholder will not recognize gain or loss on the exchange of Old
Common Stock for New Common Stock. In the aggregate, the shareholder's
basis in shares of New Common Stock will equal his basis in shares of Old
Common Stock.
2. A shareholder's holding period for tax purposes for shares of New Common
Stock will be the same as the holding period for tax purposes of the
shares of Old Common Stock exchanged therefor.
3. The Reverse Stock Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as
amended, or will otherwise qualify for general nonrecognition treatment,
and the Company will not recognize any gain or loss as a result of the
Reverse Stock Split.
4. To the extent a shareholder receives cash from the Company in lieu of a
fractional share of New Common Stock, the shareholder will be treated for
tax purposes as though he sold the fractional share to the Company. Such
a shareholder will recognize a gain equal to the excess of (i) his cash
distribution over (ii) his tax basis in the fractional share deemed sold.
The gain will be long-term capital gain if the shareholder's shares are
capital assets in his hands and if he had held his shares for more than
one year before the Reverse Stock Split. If the shareholder's tax basis
in the fractional share deemed sold exceeds his cash distribution, the
shareholder will recognize a loss.
Vote Required
Approval of this proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company entitled to vote at the Annual
Meeting. If approved by the shareholders, the
19
<PAGE>
amendment to the Articles will become effective upon filing with the Colorado
Secretary of State of the Certificate of Amendment to the Company's Articles of
Incorporation. However, the Board of Directors will be authorized, without a
further vote of the shareholders, to abandon the Reverse Stock Split and
determine not to file the Certificate of Amendment if the Board concludes that
such action would be in the best interest of the Company and its shareholders.
If this proposal is not approved by the shareholders, then the Certificate of
Amendment will not be filed.
A copy of the proposed Amendment to the Articles of Incorporation
incorporating this Proposal No. 5 is set forth in Exhibit C, attached to this
Proxy Statement, and is incorporated herein by this reference; provided,
however, that the text of this amendment to the Articles is subject to change as
may be required by the Colorado Secretary of State, and the Board may make any
and all changes to the Certificate of Amendment to the Articles that it deems
necessary to file the document with the Colorado Secretary of State, and give
effect to the amendment described in this Proposal No. 5, assuming approval of
such proposal by the shareholders. In the event this Proposal No. 5 is approved
by the shareholders and the amendments to the Articles of Incorporation
described in Proposals No. 3 and No. 4 (above) are also approved, the Company's
Articles of Incorporation will be restated to include each of the amendments if
so determined by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION TO
EFFECT A 1-FOR-100 REVERSE STOCK SPLIT PURSUANT TO THE RESOLUTIONS WITH RESPECT
THERETO SET FORTH IN EXHIBIT C TO THIS PROXY STATEMENT.
AN ABSTENTION WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
20
<PAGE>
<TABLE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth all compensation for the years ended December
31, 1995, 1994 and 1993, earned by the Company's current Chief Executive
Officer, and former Chief Executive Officer (collectively, the "Named Executive
Officers"). No other Executive Officer received any compensation during 1995,
1994 or 1993.
Summary Compensation Table
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------- ---------------------------------------------
Awards Payouts
---------------------- ---------------------
Other Restricted Options/
Annual Stock SARS LTIP All Other
Name & Principal Position Year Salary Bonus Compensation Award(s) (Number) Payout Compensation
- ------------------------- ---- ------ ----- ------------ -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerry Kilgore 1995 $48,000 -0- -0- -- -0- -- --
Former President 1994 $36,000 -0- -0- -- -0- -- $5,400(2)
1993 $36,000 -0- $47,400(1) -- 3,000,000 -- $5,400(2)
Kenneth Cahill(3) 1995 -- -- -- -- -- -- --
Chairman & CEO 1994 -- -- -- -- -- -- --
1993 -- -- -- -- -- -- --
<FN>
- ---------------
(1) Represents the difference between the market price and exercise price of
stock options granted to Mr. Kilgore in December, 1992 and October, 1993.
(2) Represents, in each reported year, the amount paid to a Simplified
Employee Pension Plan for Mr. Kilgore.
(3) Mr. Cahill joined the Company in June, 1996.
</FN>
</TABLE>
The Company did not grant any options or SARs in 1995.
The following table sets forth information with respect to the Named Executive
Officers, concerning the exercise of options during the fiscal year ended
December 31, 1995 and unexercised options held as of the end of that fiscal
year.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of Share Value of
Shares Underlying Unexercised
Acquired Unexercised In-the-Money
on Value Options at Options at
Name Exercise(#) Realized($) FY-End(#)(1) FY-End($)(1)(2)(3)
- ---- ----------- ----------- --------------- ------------------
Jerry Kilgore -- -- 3,000,000 $0
Kenneth Cahill -- -- -- --
- --------------
(1) All options are presently exercisable.
(2) Market value of underlying securities minus the exercise price. Based on
closing sale price of $0.03 per share on December 29, 1995.
(3) Exercise price equal to $0.10 per share.
Employment Agreements with Named Executive Officers
None.
21
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Change in Independent Public Accountants
The principal independent public accounting firm utilized by the Company
during the fiscal years ended December 31, 1994 and 1995, was Hein + Associates
LLP, independent certified public accountants (the "Former Auditors"). The
Former Auditors resigned effective August 19, 1996, as the certifying accountant
for the Company. See Form 8-K filed with the Securities Exchange Commission on
August 27, 1996, and the Form 8-K/A filed with the Securities Exchange
Commission on September 11, 1996 (SEC file No. 002-94117-D).
The certifying accountant's reports of the Former Auditors for the fiscal
years ending December 31, 1994 and 1995, contain no adverse opinion, disclaimer
of opinion, or qualifications as to uncertainty, audit scope or accounting
principles. The current management of the Company has no knowledge of any matter
of accounting principle or practice, of financial statement disclosure or of
auditing scope or procedure brought to the attention of the current management
by the Former Auditors which gave rise to an actual disagreement or difference
of opinion with the Former Auditors with respect to such a matter for the fiscal
years ended December 31, 1994 and 1995 and for any subsequent interim periods
until the date of the resignation of the Former Auditors. The current management
of the Company has not yet had a full opportunity, however, to determine whether
the accounting principles or practices, financial statement disclosure, or
auditing scope or procedures for the fiscal years ending December 13, 1994 and
1995 were, in the view of the current management of the Company, appropriate.
The Company does not anticipate that the Former Auditors will be available
for, or will attend, the Annual Meeting.
Selection of New Independent Public Accountants
Because the Former Auditors resigned on August 19, 1996, as of September 27,
1996, the Company has not yet selected a new independent public accounting firm
to audit the financial statements of the Company for its fiscal year ending
December 31, 1996.
23
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Settlement Agreement with Jerry Kilgore and Related Matters
Beginning on or about October 1, 1992 and continuing through approximately
April 21, 1994, Mr. Jerry Kilgore, who during such period was the President and
Treasurer and a Director of the Company, made several unauthorized investments
of Company funds, which investments were not made on behalf, or recorded in the
name, of the Company. Also, during fiscal years 1991, 1992 and 1993 and until
approximately the end of the first quarter of 1994, Mr. Kilgore made several
payments of Company funds ostensibly as compensation for services to the
Company, which payments were made to relatives and/or associates of Mr. Kilgore
and were unsupported by any contracts or appropriate invoices. Mr. Kilgore also
took bonus payments during such period which were not duly authorized. As a
result of these unauthorized investments and payments, and after giving effect
to partial reimbursements made by Mr. Kilgore to the Company, Mr. Kilgore's
liability to the Company as of March 1, 1995, was determined by the Board of
Directors to be $422,774.24, which included interest retroactive to the date of
the first misappropriation of Company funds.
On August 28, 1995, the Company entered into a Settlement Agreement (the
"Settlement Agreement") with Mr. Kilgore, the purpose of which was to facilitate
Mr. Kilgore's satisfaction of his debt to the Company over a period of time, in
recognition of fact that he lacked the financial capacity to repay immediately
the misappropriated funds. While Mr. Kilgore no longer serves as President and
Treasurer or as a Director of the Company, the Settlement Agreement acknowledged
that his continued employment is necessary for the continued operation of the
business of the Company, and he has agreed to be employed by the Company and to
serve in an advisory capacity to the Company's Board of Directors for certain
limited purposes.
Concurrently with the execution of the Settlement Agreement, Mr. Kilgore made
and issued to the Company an interest-bearing Promissory Note (the "Note")
payable to the Company in the amount of $422,774.24. The Note was collateralized
by (1) Mr. Kilgore's approximately 19 million shares of the Common Stock of the
Company and his outstanding options to acquire 10,500,00 shares of such Common
Stock (as well as the shares of Common Stock issuable upon exercise of such
options), (2) his approximately 16,600 shares of stock in Valley of the Sun
Wireless TV, Inc., an Arizona corporation ("Valley"), (3) a promissory note in
the principal amount of $235,000.00 issued to Mr. Kilgore on August 10, 1994 by
Carolina Multi-Communications Corp., a Nevada corporation ("CM-CC") and (4) Mr.
Kilgore's residential real property located in Denver, Colorado. The Settlement
Agreement also granted the Company full authority to receive payment of any
principal, interest, dividends, or any other distribution from CM-CC and/or the
shares of stock in Valley and to liquidate or otherwise dispose of the same at
any time.
Lastly, the Settlement Agreement provides that within sixty days after the
Note was is paid in full, Mr. Kilgore must remit to the Company a sum equal to
the reasonable attorneys' fees, accounting fees, Directors' fees, and any other
costs and expenses incurred by the Company relating to and arising from Mr.
Kilgore's misappropriation of funds, the investigation thereof, the preparation,
execution and performance of the Settlement Agreement and any other effort to
recover the Company's funds.
On June 27, 1996, Mr. Kilgore sold all of the 26,835,000 shares of common
stock of the Company owned by him (the "Shares") to Kenneth M. Cahill
("Cahill"), the Tiegs Family Trust (an affiliate of Darel A. Tiegs) ("Tiegs"),
the R. Lazy J Trust (an affiliate of J. Royce Renfrow) ("Renfrow"), and James
Humpal ("Humpal"), each of whom are currently Directors of the Company, for an
aggregate purchase price of $561,946 in cash, pursuant to an Agreement dated May
16, 1996 (the "Sale Agreement"), between Mr. Kilgore, Cahill, Tiegs and Renfrow.
Cahill, Tiegs, Renfrow and Humpal shall be collectively referred to herein as
the "Purchasers."
Pursuant to the Sale Agreement, of the total purchase price amount of
$561,946, (i) $63,600 was paid by the Purchasers to Mr. Kilgore, and (ii)
$498,346 was paid by the Purchasers directly to the Company on behalf of Mr.
Kilgore, as payment in full of all amounts due by Mr. Kilgore to the Company
pursuant to the Settlement Agreement and the Note.
24
<PAGE>
In connection with the Sale Agreement, on June 27, 1996, the members of the
Company's Board of Directors, Charles L. Diehl and J. Kenneth McClatchy,
resigned from the Board of Directors and as the Company's officers, and Kenneth
M. Cahill, J. Royce Renfrow, James A. Humpal, and Darel A. Tiegs were appointed
as Board members to fill the four vacancies on the Board. In addition, Kenneth
Cahill was appointed as Chief Executive Officer and President of the Company,
Darel Tiegs was appointed as Vice President, and J. Royce Renfrow was appointed
as Corporate Secretary and General Counsel.
As additional consideration for the sale of the Shares, the Purchasers agreed
to submit to the Company's new Board of Directors a proposal to sell the
Company's medical testing products manufacturing operations to Mr. Kilgore. The
Purchasers, as new directors of the Company, also agreed to vote in favor of
this asset sale transaction and to recommend to the shareholders of the Company
the approval of such sale.
Following the consummation of the transactions contemplated in the Sale
Agreement, Mr. Kilgore continues to hold options to purchase up to 3,000,000
shares of the Company's common stock. Pursuant to the Sale Agreement, Mr.
Kilgore has agreed that, upon exercise of any of such options, he will appoint
one or more of the Purchasers as proxy to vote the shares acquired upon such
exercise at any shareholder meeting. In addition, Mr. Kilgore has agreed that he
will use his best efforts in obtaining proxies for approximately 5,000,000
additional shares of the Company's outstanding common stock in order to obtain
shareholder approval of any transaction requiring shareholder approval,
including the sale of the Company's medical laboratory testing products
manufacturing operations to Mr. Kilgore.
The Sale Agreement also contemplates that Mr. Kilgore will remain as an
employee of the Company until the sale of the medical testing products
manufacturing operations has been consummated. Mr. Kilgore will continue to be
paid a salary of $9,250 per month until his employment terminates upon such
sale.
In connection with the transactions contemplated by the Settlement Agreement
and the resignation of its former directors, Messrs. Diehl and McClatchy, the
Company has entered into an Indemnification Agreement with Messrs. Diehl and
McClatchy, dated June 27, 1996, pursuant to which the Company has acknowledged
its continuing obligation to indemnify Messrs. Kilgore, Diel and McClatchy for
claims that may be asserted against such persons in connection with the
Settlement Agreement transactions. The Indemnification Agreement provides that
the Company will indemnify the former directors against such claims to the
fullest extent permitted by the Company's Articles of Incorporation and Colorado
Corporation Law.
Agreement for Sale of Medical Testing Products Manufacturing Operations to
Mr. Kilgore
The Company has entered into an Asset Purchase Agreement, dated June 27, 1996
(the "Asset Purchase Agreement"), between the Company and Mr. Kilgore, pursuant
to which the Company has agreed to sell its medical testing products
manufacturing operations, including all licenses, contracts, inventories,
operating assets, personal and real property, and any other assets related to
such operations to Mr. Kilgore for $251,000. See "Proposal No. 2, Approval and
Ratification of Sale of Medical Testing Products Manufacturing Business."
InnerCircle Group Management Agreement
In June 1996, the Company entered into an agreement with InnerCircle Group
Incorporated ("InnerCircle") with respect to the management of the Company.
InnerCircle is a company that provides general managerial services to various
businesses. Kenneth M. Cahill, Darel A. Tiegs, James A. Humpal and J. Royce
Renfrow each own a 25% equity interest in InnerCircle and are employees of
InnerCircle. As employees of InnerCircle, they will be obligated to assume the
following roles in the Company: (i) Kenneth M. Cahill: President/CEO and
Director; (ii) Darel A. Tiegs: Vice President and Director; (iii) James A.
Humpal: Treasurer and Director; and (iv) J. Royce Renfrow: Corporate
Secretary/General Counsel and Director.
Under the agreement, InnerCircle is to provide the following services: (i)
general and administrative business office services, including the use of Class
A office space, as necessary, furniture, equipment, fixtures and
25
<PAGE>
secretarial services; (ii) general legal and accounting services necessary for
the day-to-day operation of the Company's offices and activities, not including
outside legal and accounting services; (iii) planning, structuring, development
and financing, if applicable, of projects to be considered on behalf of the
Company, including the completion of project approved; and (iv) the compliance
with appropriate corporate and securities laws of the state of incorporation of
the Company and the United States, including filing of appropriate reports,
forms and documents with the various regulatory authorities. For such services,
the Company will pay InnerCircle a minimum of sixty-five Thousand Dollars
($65,000) per month. Such compensation is to be adjusted quarterly based on the
performance of InnerCircle and the additional duties assumed by InnerCircle. The
agreement may be terminated by the Company with ninety (90) days notice, or by
InnerCircle with thirty (30) days notice.
The Board of Directors has determined that the agreement with InnerCircle is
fair and reasonable to the Company.
Transactions with Gallery Rodeo International
In August 1996, the Company purchased from Gallery Rodeo International
("Gallery"), a corporation controlled by the Company's Board of Directors, a
promissory note dated July 14, 1995, issued by Elk Creek Partners Limited
Partnership, in the principal amount of $500,000. The Company paid Gallery
$450,000 in cash for this note. The note bears interest at a rate of ten percent
(10%) per annum, payable in equal monthly installments of $4,166.67. Principle
and accrued but unpaid interest under the note is due and payable in full on
July 13, 2000. The note is secured by certain real property (including a casino
building and lot) located in Cripple Creek, Colorado.
In August 1996, the Company purchased from Gallery a promissory note dated
June 30, 1995, issued by Colorado Escrow Inc., in the principal amount of
$208,133.34. The Company paid Gallery $200,000 in cash for this note. The note
bears interest at a rate of seven and one-half percent (7.5%) per annum, payable
in equal monthly installments of $1,300.87. Principle and accrued but unpaid
interest under the note is due and payable in full on November 27, 1997. Kenneth
Cahill, the President and CEO and a Director of the Company, owns, directly or
indirectly, approximately 70% of Colorado Escrow, Inc.
Kenneth Cahill is the Chairman of the Board, Chief Executive Officer, and
President of Gallery. Darel Tiegs and J. Royce Renfrow collectively own 890,975
shares of Gallery's Common Stock (approximately 5.6% of the outstanding shares)
and are each officers of Gallery. James Humpal is also an officer of Gallery.
The Board of Directors has determined that the purchase of the promissory
notes is fair and reasonable to the Company.
26
<PAGE>
SHAREHOLDER PROPOSALS
To be considered for presentation to the annual meeting of the Company's
shareholders to be held in 1997, a shareholder proposal must be received by
Kenneth Cahill, President and Chief Executive Officer, MICROTECH MEDICAL
SYSTEMS, INC., 2 North Cascade, Suite 330, Colorado Springs, CO 80903, no later
than March 31, 1997.
OTHER MATTERS
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own more
than 10% of the Company's Common Stock (collectively "Covered Persons") to file
initial reports of ownership (Form 3) and reports of changes in ownership of
Common Stock (Forms 4 and Forms 5) with the Securities and Exchange Commission
(the "Commission") as well as the Company and any exchange upon which the
Company's Common Stock is listed.
The Company is required to identify Covered Persons that the Company knows
have failed to file or filed late Section 16(a) reports during the previous
fiscal year. To the Company's knowledge, no Covered Persons during the fiscal
year ended December 31, 1995 failed to file on a timely basis reports required
by Section 16(a) of the Exchange Act.
Other Matters. The Board of Directors knows of no other business which will be
presented at the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in respect thereof in accordance with the judgments of the persons
voting the proxies.
It is important that the proxies be returned promptly and that your shares be
represented. Shareholders are urged to mark, date, execute and promptly return
the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
------------------------------
Kenneth M. Cahill,
Chairman of the Board, President and
Chief Executive Officer
September 27, 1996
Colorado Springs, Colorado
<PAGE>
Exhibit A
PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION
Article FIRST of the Articles of Incorporation of the Company shall be amended
to read in its entirety as follows:
"FIRST: The name of the corporation is ECLIPSE CORPORATION."
28
<PAGE>
Exhibit B
PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION
Article FOURTH of the Articles of Incorporation of the Company shall be
amended to read in its entirety as follows:
"The aggregate number of shares that the Corporation shall have authority
to issue is two hundred million (200,000,000), which are to be divided into
one hundred ninety-nine million five hundred thousand (199,500,000) shares of
common stock of $.0005 par value, and five hundred thousand (500,000) shares
of preferred stock of $.0005 par value.
The preferred shares may be issued as and when the Board of Directors
shall determine in one or more series. The Board of Directors is vested with
the authority to establish and designate series, to fix the number of shares
therein, and the variations in the relative rights, preferences, and
limitations as between series, including voting powers, number of shares,
dividends, redemption privileges and conversion rights. Upon any liquidation,
dissolution, or winding-up of the Corporation, whether voluntary or
involuntary, and after the holders of the preferred stock of each series shall
have been paid in full the amounts to which they respectively shall be
entitled or a sum sufficient for such payment in full shall have been set
aside, the remaining net assets of the Corporation shall be distributed pro
rata to the holders of the common stock in accordance with their respective
rights and interests, to the exclusion of the holders of the preferred stock."
29
<PAGE>
Exhibit C
PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION
Article FOURTH of the Articles of Incorporation of the Company shall be
amended to add the following paragraph to the end of Article FOURTH as follows:
"FOURTH: On the amendment of this Article FOURTH to read as hereinabove
set forth, each one hundred (100) outstanding shares of this corporation's
stock shall be combined, reconstituted and converted into one (1) share."
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MICROTECH MEDICAL SYSTEMS, INC.
FOR THE 1996 ANNUAL MEETING OF THE SHAREHOLDERS
October 10, 1996
The undersigned shareholder of MICROTECH MEDICAL SYSTEMS, INC., a Colorado
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated September 26 27, 1996, and the 1995
Annual Report to Stockholders and hereby appoints J. Royce Renfrow proxy, with
full power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1996 Annual Meeting of Shareholders of
MICROTECH MEDICAL SYSTEMS, INC., to be held on October 10, 1996 at 10:00 a.m.,
local time, at the Holiday Inn Denver Southeast, 3200 S. Parker Road, Aurora,
Colorado 80814, and at any adjournment or adjournments thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE APPROVAL AND
RATIFICATION OF THE SALE OF THE COMPANY'S MEDICAL TESTING PRODUCTS MANUFACTURING
BUSINESS TO JERRY KILGORE, FOR AMENDING THE ARTICLES OF INCORPORATION TO CHANGE
THE NAME OF THE CORPORATION, FOR AMENDING THE ARTICLES OF INCORPORATION TO
AUTHORIZE THE ISSUANCE OF UP TO 500,000 SHARES OF PREFERRED STOCK, FOR AMENDING
THE ARTICLES OF INCORPORATION TO EFFECT A 1-FOR-100 REVERSE STOCK SPLIT, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
1. ELECTION OF DIRECTORS:
__FOR all nominees listed below __WITHHOLD AUTHORITY to vote for all
(except as indicated.) nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.
Kenneth M. Cahill Darel A. Tiegs J. Royce Renfrow
James A. Humpal Thomas M. Dines
2. PROPOSAL TO APPROVE AND RATIFY THE SALE OF THE COMPANY'S MEDICAL TESTING
PRODUCTS MANUFACTURING BUSINESS TO JERRY KILGORE.
__FOR __AGAINST __ABSTAIN
3. PROPOSAL TO RATIFY AND APPROVE AN AMENDMENT TO THE ARTICLES OF
INCORPORATION OF THE COMPANY TO EFFECT A CHANGE OF THE NAME OF THE COMPANY TO
"ECLIPSE CORPORATION."
__FOR __AGAINST __ABSTAIN
4. PROPOSAL TO RATIFY AND APPROVE AN AMENDMENT TO THE ARTICLES OF
INCORPORATION OF THE COMPANY TO AUTHORIZE THE COMPANY TO ISSUE UP TO FIVE
HUNDRED THOUSAND (500,000) SHARES OF PREFERRED STOCK WITH SUCH DESIGNATIONS,
POWERS, PREFERENCES, PRIVILEGES OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREON AS MAY BE DETERMINED BY THE BOARD OF
DIRECTORS.
__FOR __AGAINST __ABSTAIN
5. PROPOSAL TO RATIFY AND APPROVE AN AMENDMENT TO THE ARTICLES OF
INCORPORATION OF THE COMPANY TO EFFECT A 1-FOR-100 REVERSE SPLIT OF THE SHARES
OF COMMON STOCK OF THE COMPANY.
__FOR __AGAINST __ABSTAIN
Dated: , 1996
-----------------------------------------
-----------------------------------------
Signature
-----------------------------------------
Signature
This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.
