SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
CNS, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Items 22(a)(2) of Schedule A.
[ ] $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:
(2) Aggregate number of securities to which transactions 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
CNS, INC
4400 WEST 78TH ST.
BLOOMINGTON, MINNESOTA 55435
(612) 820-6696
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1996
To the Stockholders of CNS, Inc:
Notice is hereby given that the Annual Meeting of Stockholders of CNS, Inc.
(the "Company") will be held April 24, 1996 at 3:30 p.m., local time, in the
auditorium of the Lutheran Brotherhood Building, 625 Fourth Avenue South,
Minneapolis, Minnesota for the following purposes:
1. To elect six (6) directors to serve until the next annual meeting of
Stockholders;
2. To approve the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending December 31, 1996; and
3. To act upon any other matters that may properly be presented at the
meeting.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form of
Proxy and the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1995.
The Board of Directors has fixed the close of business on March 8, 1996 as
the record date for the determination of Stockholders entitled to notice of,
and to vote at, the meeting.
By Order of the Board of Directors
/s/ Daniel E. Cohen
Daniel E. Cohen, M.D.
Chairman of the Board
Dated: March 25, 1996.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE SIGN, DATE, AND RETURN YOUR PROXY IN THE REPLY
ENVELOPE PROVIDED SO THAT YOUR SHARES MAY BE VOTED AT THE MEETING. THE PROXY IS
SOLICITED BY MANAGEMENT AND MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
CNS, INC.
4400 WEST 78TH ST.
BLOOMINGTON, MINNESOTA 55435
(612) 820-6696
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 24, 1996
GENERAL MATTERS
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of CNS, Inc. (the "Company") from holders of Common Stock
of proxies in the accompanying form to be voted at the Annual Meeting of
Stockholders on April 24, 1996 at 3:30 p.m., local time, and at all
adjournments thereof. This Proxy Statement is first being sent to
Stockholders on or about March 25, 1996.
Any shareholder giving a proxy will have the right to revoke it by written
notice to the Secretary of the Company or by filing with the Secretary
another proxy bearing a later date at any time before it is voted at the
meeting. A shareholder wishing to vote in person after giving his or her
proxy must first give written notice of revocation to the Secretary. All
shares represented by valid, unrevoked proxies will be voted at the meeting
and any adjournment thereof.
OUTSTANDING VOTING SECURITIES
Stockholders of record as of the close of business on March 8, 1996, will be
entitled to vote at the meeting. On that date, the Company had outstanding
17,436,052 shares of common stock, $.01 par value ("Common Stock"), each of
which is entitled to one vote per share on each matter to be voted upon at
the meeting. As provided in the Certificate of Incorporation of the Company,
there is no cumulative voting. The Company has no class of voting securities
outstanding other than the Common Stock.
SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of March 8, 1996 the number and percentage
of outstanding shares of Common Stock of the Company beneficially owned by
each person who is known to the Company to beneficially own more than five
percent (5%) of the Common Stock of the Company, by each director of the
Company, by each executive officer named in the Summary Compensation Table
below, and by all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) OF CLASS
- ------------------------------------ ------------------------ --------
<S> <C> <C>
Richard W. Perkins(3)(4) 1,291,908 7.4%
Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391
Daniel E. Cohen, M.D.(3)(5)(6) 800,664 4.6%
Richard E. Jahnke(3)(5) 151,500 *
Patrick Delaney(3) 60,066 *
R. Hunt Greene(3) 40,000 *
Andrew J. Greenshields(3)(7) 34,000 *
Kirk P. Hodgdon(5) 43,000 *
Rihab FitzGerald(5)(8) 145,484 *
Ronald D. Cox(5) 147,922 *
All directors and officers 2,844,996 15.7%
as a group (12 persons)(9)
</TABLE>
* Indicates ownership of less than one percent.
(1) Except as noted, all shares beneficially owned by each owner were owned of
record, and each owner held sole voting power and sole investment power for
all shares held.
(2) Includes the following number of shares which could be purchased under
stock options exercisable within sixty (60) days of the date hereof: Mr.
Perkins, 40,000 shares; Dr. Cohen, 100,000 shares; Mr. Jahnke, 151,500
shares; Mr. Delaney, 40,000 shares; Mr. Greene, 40,000 shares; Mr.
Greenshields, 30,000 shares; Mr. Hodgdon, 43,000 shares; Ms. FitzGerald,
67,900 shares; Mr. Cox, 70,000 shares; and all directors and officers as a
group, 714,900 shares. Does not include stock options to purchase 20,000
shares of Common Stock held by each of Messrs. Perkins, Delaney, Greene and
Greenshields which will vest if such individuals are re-elected to the
Company's Board of Directors at the Annual Meeting of Stockholders.
(3) Serves as a director of the Company and has been nominated for re-election.
(4) Includes 1,126,560 shares of Common Stock held for the accounts of clients
of Perkins Capital Management, Inc., a registered investment advisor of
which Mr. Perkins is the controlling shareholder, a director and President.
Perkins Capital Management has the right to sell the shares but does not
have power to vote the shares. Mr. Perkins and Perkins Capital Management
disclaim beneficial ownership of such shares. This total also includes
37,500 shares held in a trust created by Mr. Perkins for his benefit,
10,000 shares held by a profit sharing plan of which Mr. Perkins is a
trustee, 4,000 shares held by a corporation of which Mr. Perkins is sole
shareholder, and 73,848 shares held by a partnership of which Mr. Perkins
is a general partner.
(5) Served as an executive officer of the Company during 1995 and appears on
the table on page hereof.
(6) Includes 327,332 shares of Common Stock owned of record by Dr. Cohen's
spouse, for which he has no voting or investment power.
(7) Includes 4,000 shares held by Mr. Greenshields jointly with his spouse for
which he has shared voting and dispositive power.
(8) Includes 1,442 shares of Common Stock held by Ms. FitzGerald jointly with
her spouse for which she has shared voting and dispositive power.
(9) Includes 339,012 shares of Common Stock owned by spouses and 5,442 shares
owned jointly with spouses.
ELECTION OF DIRECTORS
(PROPOSAL #1)
Although the Company's Bylaws currently provide for a Board of Directors
consisting of seven members, only six directors will be elected at the Annual
Meeting. The Board will fill the remaining vacancy when a qualified candidate
is identified. It is intended that proxies solicited by the Board of
Directors will be voted FOR (unless otherwise directed) the election of the
nominees for director named below. Each of the nominees named below is a
present director of the Company and upon election will serve until the next
annual meeting or until his successor has been elected and qualified. Dr.
Cohen has been a director of the Company since its formation in 1982; Mr.
Delaney has been a director since 1983; Mr. Greene has been a director since
1985; Mr. Greenshields has been a director since 1986; and Messrs. Jahnke and
Perkins have been directors since 1993. If for any reason any of the nominees
becomes unavailable for election, the proxies solicited by the Board of
Directors will be voted for such nominee as is selected by the Board of
Directors. The Board of Directors has no reason to believe that any of the
nominees is not available or will not serve if elected.
The nominees named below have been nominated by the Board of Directors of the
Company. They are all the Directors who served during 1995. The nominees are
listed below with their ages, their present positions with the Company, their
present principal occupations or employment and their principal occupations
or employment for at least the past five years. Dr. Cohen and Mr. Jahnke
devote their full working time to the business of the Company. Messrs.
Delaney, Greene, Perkins and Greenshields devote such time as is necessary to
fulfill their duties as directors.
Daniel E. Cohen, M.D., 43, has served as the Company's Chairman of the Board
since 1993, its Chief Executive Officer since 1989 and the Treasurer since
1982. Dr. Cohen was a founder of the Company and is a board-certified
neurologist.
Richard E. Jahnke, 47, has served as the Company's President and Chief
Operating Officer since 1993. From 1991 to 1993, he was Executive Vice
President and Chief Operating Officer of Lemna Corporation, which
manufactures and sells waste water treatment systems. From 1986 to 1991, Mr.
Jahnke was general manager of the government operations division of ADC
Telecommunications, an electronic communications systems manufacturer. From
1982 to 1986, he was Director of Marketing and Business and Technical
Development at BMC Industries, Inc. From 1972 to 1982, he held various
positions of increasing responsibility in engineering, sales and marketing
management at 3M Company.
Patrick Delaney, 53, has served as the Company's Secretary since October
1995. Mr. Delaney is a partner in the Minneapolis law firm of Lindquist &
Vennum P.L.L.P., counsel to the Company. He has been in the private practice
of law since 1967. He is also a director of Community First Bankshares, Inc.,
a multi-bank holding company, the secretary of MTS Systems Corporation, a
manufacturer of systems for materials testing, simulation, measurement
devices and controls, and a director and the secretary of Applied Biometrics,
Inc, a manufacturer of medical devices.
R. Hunt Greene, 45, has been an investment banker for over fifteen years. He
is presently Managing Director of Hunt Greene & Co., LLC, a Minneapolis
investment bank. Mr. Greene was a Managing Director of Piper Jaffray Inc., a
Minneapolis based investment bank and general broker-dealer in investment
securities, from 1979 to 1995.
Andrew J. Greenshields, 58, has been President of Pathfinder Ventures, Inc.,
Minneapolis, Minnesota, since 1980. He is also a general partner of
Pathfinder Venture Capital Funds I, II and III, Minneapolis based venture
capital limited partnerships. Mr. Greenshields is also a director of Digital
Systems International, Inc., a manufacturer of telecommunications equipment
and software, and Aetrium, Inc., a manufacturer of semiconductor handling
equipment.
Richard W. Perkins, 65, has been President, Chief Executive Officer and a
director of Perkins Capital Management, Inc. since 1985. He is also a
director of the following public companies: Bio-Vascular, Inc., a medical
products manufacturer; Children's Broadcasting Corporation, an operator of
radio stations with a children's format; Discus Acquisition Corporation, a
holding company for Peerless Chain Corp.; Garment Graphics, Inc., a
manufacturer of imprinted sportswear; Lifecore Biomedical, Inc., a medical
devices company; Nortech Systems, Inc., a contract manufacturer for the
electronics industry; Eagle Pacific Industries, Inc., a manufacturer of
plastic pipe; and Quantech, Ltd.; a development stage medical products
company.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES LISTED.
OTHER INFORMATION REGARDING THE BOARD
BOARD MEETINGS
The Board of Directors met eight times during the fiscal year 1995, which
ended December 31, 1995. Each director attended at least 75% of the aggregate
of the total number of Board meetings and Committee meetings on which he
served during the fiscal year ended December 31, 1995.
COMMITTEES
The Compensation Committee of the Board of Directors, which was comprised of
Mr. Greenshields, Chairman, and Dr. Cohen during 1995, met once during 1995.
Among other duties, the Compensation Committee makes recommendations to the
Board of Directors regarding the employment practices and the policies of the
Company and the compensation paid to Company officers. The Compensation
Committee is currently comprised of Messrs. Greenshields and Perkins.
The Audit Committee of the Board of Directors, which was comprised of Messrs.
Greene, Chairman, and Delaney during 1995, met three times during 1995. The
Audit Committee reviews and evaluates significant matters relating to the
audit and internal controls of the Company, reviews the scope and results of
audits by and the recommendations of the Company's independent auditors, and
approves services provided by the auditors. The Audit Committee is currently
comprised of Messrs. Greene and Greenshields.
The Plan Committee of the Board of Directors, which was comprised of Messrs.
Greenshields, Greene and Delaney during 1995, did not meet, but took action
in writing in lieu of a meeting four times, during 1995. The Plan Committee
has the authority to make awards under and adopt and alter administrative
rules and practices governing the Company's Stock Option Plans and Employee
Stock Purchase Plan (the "Plans"). The Plan Committee also interprets the
terms and provisions of the Plans and any award issued under those Plans.
The Nominating Committee was established on December 14, 1995 and is
comprised of Dr. Cohen and Messrs. Greenshields and Delaney. The Nominating
Committee, which did not meet during 1995, will seek qualified candidates for
the Company's Board of Directors.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31, 1995,
1994 and 1993, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for those years, to Daniel E. Cohen, M.D.,
the Company's Chief Executive Officer, and each of the other four most highly
compensated executive officers of the Company as of December 31, 1995
(together with Dr. Cohen, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION(1)
- ----------------- ---- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Daniel E. Cohen, M.D. 1995 $141,400 $141,400 200,000 $300
Chief Executive Officer, 1994 115,600 -0- -0- 300
Treasurer and Chairman 1993 102,423 -0- -0- 300
of the Board
Richard E. Jahnke 1995 140,500 140,500 75,000 300
President and 1994 112,000 -0- -0- 300
Chief Operating Officer 1993 81,410(2) -0- 200,000 250
Kirk P. Hodgdon 1995 125,250 75,150 50,000 300
Vice President of 1994 102,769(3) -0- 60,000 250
Consumer Marketing 1993 -0- -0- -0- -0-
Rihab FitzGerald 1995 96,250 57,750 50,000 300
Vice President of 1994 90,419 -0- -0- 264
Consumer Sales 1993 70,628 -0- 10,000 233
Ronald D. Cox 1995 93,750 56,250 40,000 300
Vice President of 1994 75,000 -0- -0- 240
Finance and Chief 1993 68,068 -0- 10,000 226
Financial Officer(4)
</TABLE>
(1) Represents the payment of life insurance premiums.
(2) Mr. Jahnke became President and Chief Operating Officer effective March 8,
1993 and received a salary for only ten months in 1993.
(3) Mr. Hodgdon became Vice President of Consumer Marketing effective February
21, 1994 and received a salary for the remainder of 1994.
(4) Mr. Cox retired in February 1996.
STOCK OPTIONS
The following table contains information concerning grants of stock options
to the Named Executives during 1995:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATE
NUMBER % OF TOTAL OF STOCK PRICE
OF SECURITIES OPTIONS EXERCISE OF APPRECIATION
UNDERLYING GRANTED TO BASE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED (#) IN 1995 ($/SH) DATE 5% 10%
- ---- ----------- ------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Cohen 200,000(1) 28.7% $5.50 02/09/05 $691,784 $1,753,117
Richard E. Jahnke 75,000(1) 10.7 5.50 02/09/05 259,419 657,419
Kirk P. Hodgdon 50,000(1) 7.2 5.50 02/09/05 172,946 438,279
Rihab FitzGerald 50,000(1) 7.2 5.50 02/09/05 172,946 438,279
Ronald D. Cox 40,000(2) 5.7 5.50 02/09/05 138,357 350,623
</TABLE>
(1) The options vest as follows: 25% on each of February 9, 1995 1996, 1997 and
1998.
(2) The option vested 50% on each of February 9, 1995 and 1996.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during 1995 and unexercised
options held as of December 31, 1995:
AGGREGATED OPTION EXERCISES IN 1995 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY
ACQUIRED AT FY-END (#) OPTIONS AT FY-END(1)
ON ------------- --------------------
NAME EXERCISE(#) VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Cohen -0- N/A 50,000 150,000 $ 481,250 $1,443,750
Richard E. Jahnke 6,000 $ 88,500 92,750 176,250 1,202,594 2,198,906
Kirk P. Hodgdon 6,000 75,375 18,500 85,500 190,063 918,937
Rihab FitzGerald 1,100 13,681 55,400 43,500 695,394 437,812
Ronald D. Cox 10,000 162,500 44,000 26,000 512,500 269,375
</TABLE>
(1) Based on the closing sale price of $15.125 per share for the Common Stock
on December 31, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Daniel E. Cohen, M.D., the Company's Chief Executive Officer, served on the
Board of Directors' Compensation Committee during 1995. All recommendations
of the Compensation Committee have been and are subject to Board of Director
review and approval.
REPORT ON EXECUTIVE COMPENSATION
This is a joint report of the Compensation Committee and Plan Committee of
the Board of Directors of the Company, which are composed of the undersigned
Board members. This report shall not be deemed incorporated by reference into
any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934 and shall not otherwise be deemed to be filed under either such Act.
Compensation Philosophy. The compensation philosophy of the Company is to
provide competitive levels of compensation that are consistent with the
Company's annual and long-term performance goals, recognize individual
initiative and achievements and assist the Company in attracting and
retaining qualified executives. It is intended that, in judging appropriate
levels of compensation for 1995-1996, the Committee would take into account
internally set performance goals and comparisons with the performance of
other publicly held companies which have rapidly growing revenues under $100
million. The Board was advised about executive compensation in 1995 by Andcor
Human Resources, a consulting firm in Minneapolis, Minnesota.
Base Salary. Executive base salary is reviewed annually and adjustments, if
any, are based on levels of responsibility, experience, internal equity,
external pay practices and the rate of inflation. In 1995, the Compensation
Committee recommended to the Board of Directors and the Board adopted a plan
under which the base salaries of the executive officers were set effective
April 1, 1995.
Cash Bonus. Bonuses are awarded to executive officers in consideration of
contributions to the Company and the Company's overall performance. In 1995,
the Compensation Committee proposed and the Board of Directors adopted a plan
under which Dr. Cohen, the Chairman and Chief Executive Officer of the
Company, and Mr. Jahnke, the President and Chief Operating Officer of the
Company, were eligible for cash bonuses equal to amounts of between 25% and
100% of their base salaries depending on the Company's levels of revenues and
net income for 1995, with minimum revenues and income required before any
bonus amounts were earned. The levels of revenues and net income required for
various bonus levels were set by the Board of Directors. Under the same plan,
Vice Presidents of the Company were eligible for cash bonuses of between 15%
and 60% of their base salaries if the same level of revenues and net income
were achieved. The financial performance of the Company resulted in the
eligible officers of the Company receiving their maximum bonuses allowable
under the plan.
Stock Options. The Company's Stock Option Plans include executive officers.
Stock options are generally granted to executive officers at the time they
are elected. The Compensation and Plan Committees have adopted the position
that stock ownership by management and stock-based performance compensation
arrangements are beneficial in aligning management's and shareholder's
interests in enhancing shareholder value. During 1995, the Company granted
options to the executive officers of the Company to purchase an aggregate of
560,000 shares of common stock of the Company at a price equal to the market
price on the date of grant (February 9, 1995) and exercisable for ten years.
The right to exercise the options vests as to 25% of the shares on February 9
of each of the years 1995, 1996, 1997 and 1998, except options to purchase
40,000 shares granted to Ronald Cox, who retired as Chief Financial Officer
of the Company in February 1996.
Chief Executive Officer Compensation. Dr. Cohen's compensation for 1993-1995
is shown in the Summary Compensation Table above. The Compensation Committee
believes that Dr. Cohen managed the Company well in a difficult economic
climate for its sleep disorders diagnostic devices, which business was sold
in 1995, has successfully guided the development and marketing of its Breathe
Right(R) external nasal dilator, and has made arrangements for the Company to
test and possibly enter into production and sale of new product lines.
Board Action. All recommendations of the Compensation Committee have been and
are subject to Board of Director review and approval. Stock option grants by
the Plan Committee are not subject to Board of Director review and approval
in order to satisfy Rule 16b-3 under the Securities Exchange Act of 1934.
SUBMITTED BY THE COMPENSATION COMMITTEE AND PLAN COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
1996 Compensation Committee: 1996 Plan Committee:
Andrew J. Greenshields, Chairman Andrew J. Greenshields, Chairman
Richard W. Perkins R. Hunt Greene
Patrick Delaney
STOCK PERFORMANCE
The graph below sets forth a comparison of the cumulative shareholder return
of the Company's Common Stock over the last five fiscal years with the
cumulative total return over the same periods for the Nasdaq Market Index and
the Surgical, Medical and Dental Instruments and Supplies Index (the "Medical
Instruments Index") (SIC Code 384, which includes 214 companies). The graph
below compares with the two indicated indexes the cumulative total return of
the Company's Common Stock over the last five fiscal years assuming a $100
investment on December 31, 1990 and assuming reinvestment of all dividends
paid. The Company did not pay any dividends during this period. This graph
shall not be deemed incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
CNS, Inc. $100.00 $171.43 $ 95.24 $314.29 $338.10 $1,152.38
Medical Instruments Index 100.00 179.16 153.78 121.02 134.08 223.96
Nasdaq Market Index 100.00 128.38 129.64 155.50 163.26 211.77
</TABLE>
EMPLOYMENT AGREEMENTS
Dr. Cohen, and Messrs. Jahnke, Hodgdon and David Byrd, who became the Chief
Financial Officer of the Company in February, 1996, have employment
agreements with the Company which provide that they are entitled to base
salaries, respectively, of $150,000, $150,000, $127,000 and $130,000 annually
plus cash bonus amounts of up to 100% of base salary for Dr. Cohen and Mr.
Jahnke and up to 60% of base salary for Messrs. Hodgdon and Byrd. Either Dr.
Cohen or the Company may terminate the agreement on 90 days' notice. Dr.
Cohen's agreement contains a noncompete obligation which remains in effect
for a period of two years after termination of employment. Each of the
employment agreements with Messrs. Jahnke, Hodgdon and Byrd contains a
noncompete obligation which remains in effect for a period of one year after
termination of employment.
DIRECTOR COMPENSATION
Non-employee directors were not paid any fees or remuneration for services as
members of the Board of Directors during fiscal year 1995. Fees were paid to
Mr. Delaney's law firm, Lindquist & Vennum P.L.L.P., for services rendered to
the Company.
On June 17, 1994, each non-employee director of the Company was granted a
ten-year, nonqualified option under the proposed 1994 Stock Plan to purchase
80,000 shares of Common Stock at $3.095 per share, the fair market value of
the Common Stock on the date of grant. The options vest as follows: 20,000
shares on the date of grant and 20,000 shares on the date of each annual
Stockholders' meeting held during the succeeding three years at which the
director is re-elected to the Board of Directors.
APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL #2)
The Board of Directors has selected KPMG Peat Marwick LLP, certified public
accountants, as independent auditors to make an examination of the accounts
of the Company for the fiscal year ending December 31, 1996, and to perform
other appropriate accounting services. Unless otherwise specified, proxies
solicited by the Board of Directors will be voted FOR such appointment of
KPMG Peat Marwick LLP.
The Company has requested representatives of KPMG Peat Marwick LLP to attend
the meeting. They will have an opportunity to make a statement if they desire
to do so, and they will be available to respond to appropriate questions.
ANNUAL REPORT
An Annual Report of the Company describing the Company's key activities and
containing financial statements for the fiscal year ended December 31, 1995
accompanies this Notice of Annual Meeting and proxy solicitation material.
SHAREHOLDER PROPOSALS
If a shareholder desires to present a proposal to be voted upon at the next
meeting of Stockholders of CNS, Inc., such proposal, in order to be included
in the proxy statement, must be received at the Company's office at P.O. Box
39802, Minneapolis, Minnesota, 55439 by November 25, 1996.
SOLICITATION
The cost of soliciting proxies, including the cost of preparing, assembling,
and mailing the proxies and soliciting material, as well as the cost of
forwarding the material to the beneficial owners of stock, will be borne by
the Company. Directors, officers and regular employees of the Company may,
without compensation other than their regular remuneration, solicit proxies
personally or by telephone.
GENERAL
If a shareholder abstains from voting on any matter, the Company intends to
count the person abstaining as present for purposes of determining whether a
quorum is present at the Annual Meeting of Stockholders for the transaction
of business but as not having voted for any proposal, although there is no
definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions. Additionally, the Company intends to count broker
"non-votes" as present for purposes of determining the presence or absence of
a quorum for the transactions of business. A "non-vote" occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not
vote on another proposal because the nominee does not have discretionary
voting power and has not received instructions from the beneficial owner.
Therefore, abstentions and broker "non-votes" have the same effect as votes
against the proposals.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
and the NASD. Executive officers and directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, all insiders of the Company filed in a
timely manner all such reports, except for Patrick Delaney, who reported one
transaction late.
The management of the Company does not know of any other business to be
presented at the Annual Meeting of Stockholders. If any matter properly comes
before the meeting, however, it is intended that the persons named in the
enclosed form of proxy will vote said proxy in accordance with their best
judgment.
ALL PROXIES PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
STOCKHOLDERS. IF NO DIRECTION IS GIVEN, PROXIES WILL BE VOTED FOR THE ELECTION
OF MANAGEMENT'S NOMINEES FOR DIRECTORS, AND FOR THE APPOINTMENT OF KPMG PEAT
MARWICK. AS THE COMPANY'S INDEPENDENT AUDITORS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Daniel E. Cohen
Daniel E. Cohen, M.D.
Chairman of the Board
Minneapolis, Minnesota
March 25, 1996
PLEASE SIGN, DATE AND MAIL YOUR PROXY NOW
CNS, INC.
4400 WEST 78TH STREET
BLOOMINGTON, MINNESOTA 55435
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel E. Cohen, M.D., and Patrick Delaney,
and each of them as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Common Stock of CNS, Inc. held of record by the undersigned on
March 8, 1996, at the annual meeting of shareholders to be held on April 24,
1996, or at any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary)
DANIEL E. COHEN, M.D., RICHARD E. JAHNKE, PATRICK DELANEY,
R. HUNT GREENE, ANDREW J. GREENSHIELDS, RICHARD W. PERKINS
(INSTRUCTION: To withhold authority to vote for any nominee, print that
nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY. [ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be completed and signed on reverse side)
(continued from other side)
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, the Proxy will be
voted for items 1 and 2. Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Dated: __________________________, 1996
_______________________________________
Name of Shareholder(s) (Please print)
_______________________________________
Signature (and Title if applicable)
_______________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
