<PAGE> 1
CYTOCARE, INC.
100 COLUMBIA
SUITE 100
ALISO VIEJO, CALIFORNIA 92656
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 21, 1995
To the Stockholders of
CYTOCARE, INC.
The Annual Meeting of Stockholders of Cytocare, Inc., a Delaware
corporation (the "Company"), will be held at the Company's headquarters, 100
Columbia, Suite 100, Aliso Viejo, California on September 21, 1995, at 2:00
p.m., local time, for the following purposes:
1. To elect a board of 3 directors of the Company to serve for
the ensuing year and until their successors are duly elected and qualified;
2. To approve amendment of the Company's Certificate of
Incorporation to effect the Company's name change from Cytocare, Inc. to
Medstone International, Inc.;
3. To ratify the appointment of Ernst & Young, LLP as independent
accountants of the Company for the year ending December 31, 1995; and
4. To transact such other business as may properly come before
the meeting and any adjournment or postponement thereof.
Errol Payne and Paul Quadros, directors of the Company, have advised
the Board that they will not stand for re-election at the Annual Meeting. In
addition, Mr. Payne will be stepping down as the Company's Chief Executive
Officer. We thank Mr. Payne and Mr. Quadros for their service to the Board.
The Board of Directors has nominated David Radlinski, the Company's new Chief
Executive Officer, and Donald John Regan, Vice President and General Counsel of
Kinsell, O'Neill, Newcomb & De Dios, Inc. to replace Messrs. Payne and Quadros
on the Board.
THE FOREGOING ITEMS OF BUSINESS ARE MORE FULLY DESCRIBED IN THE PROXY
STATEMENT ACCOMPANYING THIS NOTICE.
The Board of Directors has fixed the close of business on August 18,
1995 as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. YOU ARE URGED TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN
PERSON IF YOU WISH TO DO SO, EVEN IF YOU HAVE SIGNED AND RETURNED YOUR PROXY
CARD.
FOR THE BOARD OF DIRECTORS,
David V. Radlinski, Secretary
Aliso Viejo, California
_____________, 1995
<PAGE> 2
CYTOCARE, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Cytocare, Inc., a Delaware corporation
(the "Company"), for use at the Company's 1995 Annual Meeting of Stockholders
to be held on September 21, 1995, at 2:00 p.m., local time (the "Meeting") and
at any and all adjournments and postponements of the Meeting. This Proxy
Statement and the accompanying form of proxy are expected to be first mailed to
stockholders on or about August 29, 1995.
PURPOSES OF THE ANNUAL MEETING
The purposes of the Annual Meeting are (1) to elect a Board of
Directors of the Company, (2) to approve the amendment of the Company's
Certificate of Incorporation to effect the Company's name change to Medstone
International, Inc., (3) to ratify the appointment of Ernst & Young, LLP as
independent accountants of the Company for the fiscal year 1995, and (4) to
transact such other business as may properly come before the Meeting or any and
all postponements or requirements thereof.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company
(Attention: David V. Radlinski, Secretary) a written notice of revocation or a
fully executed proxy bearing a late date or by attending the Meeting and voting
in person.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on August 18, 1995
(the "Record Date") are entitled to notice of and to vote at the Meeting. At
the Record Date, __________________ shares of the Company's Common Stock were
issued and outstanding.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common
Stock on any matter that may be presented for consideration and action by the
stockholders at the Meeting.
The costs of soliciting proxies will be paid by the Company. Proxies
may be solicited in person or by telephone, telegraph or cable by personnel of
the Company who will not receive any additional compensation for such
solicitation. The Company may reimburse brokers or other persons representing
beneficial owners of stock for their expenses in forwarding solicitation
materials to such beneficial owners.
QUORUM AND REQUIRED VOTE
The holders of a majority of the shares of Common Stock outstanding on
the record date and entitled to be voted at the Annual Meeting, present in
person or by proxy, will constitute a quorum for the transaction of business at
the Meeting and any adjournment thereof.
While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or
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absence of a quorum for the transaction of business, and (ii) the total number
of votes cast with respect to a proposal (other than the election of
directors). In the absence of a controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes should be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, broker non-votes should be counted for purposes of determining the
number of votes cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat
broker non-votes in this manner. Thus, a broker non-vote will not have any
effect on the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1996 Annual Meeting of
Stockholders must be received by the Company no later than April 1, 1996 in
order that they may be included in the Proxy Statement and form of proxy
relating to that meeting.
PROPOSAL ONE -
ELECTION OF DIRECTORS
VOTING PROCEDURE
The authorized number of the Company's directors is currently fixed at
three. All three directors will be elected at the Meeting to serve until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. Provided a quorum is present at the Meeting, the three nominees
receiving the greatest numbers of votes will be elected. Each share entitles
its holder to vote for three nominees and to cast one vote for any nominee.
NOMINEES FOR ELECTION
Management's nominees for election as directors at the Meeting are
set forth in the table below. Unless authority to vote for any directors is
withheld in a proxy, it is intended that each proxy will be voted for such
nominees. In the event that any of the nominees for directors before the
Meeting become unavailable to serve, it is intended that shares represented by
proxies which are executed and returned will be voted for such substitute
nominees as may be recommended by the Company's existing Board of Directors,
unless other directions are given in the proxies. To the best of the Company's
knowledge, all the nominees will be available to serve.
<TABLE>
<CAPTION>
NOMINEE AGE PRINCIPAL OCCUPATION
------- --- --------------------
<S> <C> <C>
David V. Radlinski 50 Chairman of the Board and
Chief Executive Officer of the Company
Frank R. Pope 45 General Partner
Technology Funding
Donald John Regan 61 Vice President and General Counsel
Kinsell, O'Neil, Newcomb & De Dios, Inc.
</TABLE>
Mr. Radlinski is currently the President of Medstone International,
Inc. and Chief Financial Officer and Secretary of the Company. He had been the
Company's Executive Vice President of Finance, Chief Financial Officer and
Secretary from July 1987 until January 1991. From 1984 to 1987, he was Vice
President of Finance and Chief Financial Officer of Printronix, Inc., a
publicly-owned company which manufactures computer printers.
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<PAGE> 4
Mr. Pope is a general partner and officer of the Technology Funding
venture capital management firms. Before joining Technology Funding in March
1981, he was a Tax Manager with the accounting firm of Coopers and Lybrand,
L.L.P. Mr. Pope is a C.P.A. and a member of the California Bar.
Mr. Regan is currently the Vice President and General Counsel of
Kinsell, O'Neal, Newcomb & De Dios, Inc., a municipal investment banking firm.
Mr. Regan has practiced securities, municipal finance, nonprofit corporation,
real estate, and business transactions law for over thirty years, commencing
with his association, on graduation from law school, with Rutan & Tucker, Costa
Mesa, California. He is a member of the National Association of Bond Lawyers,
has published several articles on securities law and served as a lecturer for
the Practicing Law Institute. He specializes in revenue and project finance
bonds. He is also a founding owner of and remains as special counsel to ARV
Assisted Living, Inc., a developer of residential retirement facilities and the
largest provider of assisted living services in the United States.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
The nominees receiving the highest number of affirmative votes of the
shares entitled to be voted, up to the number of directors to be elected, shall
be elected as directors. Votes withheld will be counted for purposes of
determining the presence of a quorum for the transaction of business at the
meeting but have no other legal effect upon election of directors under
Delaware law.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE NOMINEES SET FORTH HEREIN.
PROPOSAL TWO -
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT THE COMPANY'S NAME CHANGE
In connection with the Company's previously announced plans to spin
out its business units into independent companies, the Board of Directors has
decided to amend the Company's Certificate of Incorporation to effect a name
change from Cytocare, Inc. to Medstone International, Inc. The Board of
Directors believes that this name change will more accurately identify the
Company's principal business as it currently exists and the ongoing business
once the spin outs have been accomplished.
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock is required to approve the amendment to
the Company's Certificate of Incorporation.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION DESCRIBED HEREIN.
PROPOSAL THREE -
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young, LLP, independent
auditors, to audit the financial statements of the Company for the year ending
December 31, 1995, and recommends that the stockholders vote for the
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection. Ernst &
Young, LLP has audited the Company's financial statements since 1987.
Representatives of Ernst & Young, LLP are expected to be present at the Annual
Meeting of Stockholders and will have the opportunity to make statements if
they so desire. The representatives also are expected to respond to
appropriate questions from stockholders.
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THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1995.
SECURITY OWNERSHIP
The following table sets forth the number of shares of the Company's
Common Stock known to the Company to be beneficially owned as of March 9, 1995
(i) by each person who owns beneficially more than 5 percent of the outstanding
shares of Common Stock, (ii) by each of the present directors and nominees for
director, (iii) by each of the executive officers named in the Executive
Compensation table below (the "Named Officers") and (iv) by all executive
officers and directors of the Company as a group, and the percentage of the
total outstanding shares of Common Stock such shares represented as of March 9,
1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNERSHIP
------------------------------------ ----------------- -----------------
<S> <C> <C>
Errol G. Payne(2)(5) 457,667(6) 8.5%
100 Columbia, Suite 100
Aliso Viejo, CA 92656
Frank R. Pope 428,619(3)(4) 8.3%
2000 Alameda de las Pulgas
San Mateo, CA 94402
Technology Funding 422,702(3) 8.2%
2000 Alameda de las Pulgas
San Mateo, CA 94402
Hathaway & Associates, Ltd. 375,000 7.2%
119 Rowayton Avenue
Rowayton, CT 06853
David V. Radlinski(5) 142,124(7) 2.7%
100 Columbia, Suite 100
Aliso Viejo, CA 92656
Thomas W. Gardner(5) 108,656(8) 2.1%
100 Columbia, Suite 100
Aliso Viejo, CA 92656
Paul D. Quadros(2) 20,000 (9)
716 Columbia Drive
San Mateo, CA 94402
All executive officers and directors
as a group (5 persons) 1,050,256(10) 19.12%
---------------
</TABLE>
(1) All such shares were held of record with sole voting and investment
power, subject to applicable community property laws, by the named
individual and/or by his wife, except as indicated in the following
footnotes.
(2) Mr. Payne and Mr. Quadros are directors of the Company who are not
standing for reelection.
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(3) Includes 211,351 shares held by Technology Funding Partners I and
211,351 shares held by Technology Funding Partners II. Technology
Funding, Inc. and Technology Funding Ltd. (together, "Technology
Funding"), of which Frank R. Pope is an officer or general partner,
are the managing general partners of Technology Funding Partners I and
Technology Funding Partners II. Technology Funding and Mr. Pope are
entitled to exercise voting and investment power with respect to all
shares owned by Technology Funding Partners I and Technology Funding
Partners II and therefore are deemed to be beneficial owner of such
shares.
(4) Includes 3,917 shares issuable upon exercise of presently outstanding
stock options under the Company's Non-employee Director Stock Option
Plan.
(5) Executive officer of the Company.
(6) Includes 216,667 shares issuable upon exercise of presently
outstanding stock options.
(7) Includes 61,000 shares issuable upon exercise of presently outstanding
stock options.
(8) Includes 35,000 shares issuable upon exercise of presently outstanding
stock options.
(9) Percentage information is omitted because the beneficially owned
shares represent less than 1% of the outstanding shares of the
Company's Common Stock.
(10) Includes 316,584 shares issuable upon exercise of presently
outstanding stock options.
COMMITTEES AND MEETINGS
The Audit Committee of the Board of Directors currently consists of
Messrs. Quadros and Pope. The Audit Committee reviews and reports to the Board
of Directors with respect to various auditing and accounting matters, including
the selection of the Company's independent public accountants and the scope of
the annual audit.
The Compensation Committee currently consists of Messrs. Quadros and Pope.
The Compensation Committee reviews salaries and other compensation of employees
of the Company and furnishes recommendations for compensation adjustments to
the Board of Directors.
The Stock Option Committee currently consists of Messrs. Quadros and Pope.
The Stock Option Committee administers the Company's employee stock option
plans and, to the extent required, the Company's nonemployee director stock
option plan.
The Board of Directors has not established a standing nominating committee
or other committee performing similar functions.
During the Company's fiscal year ended December 31, 1994, the Board of
Directors met once and the Stock Option Committee met twice. Messrs. Payne,
Quadros and Pope attended 100% of these meetings applicable to them.
COMPENSATION OF DIRECTORS
The Company currently does not compensate Messrs. Quadros and Pope for
their services, but they are reimbursed for expenses incurred by them in
connection with the Company's business.
Under the Nonemployee Director Stock Option Plan, each new nonemployee
director is automatically granted an option to purchase up to 5,000 shares as
of the effective date of his or her first appointment to the Board or first
election to the Board by the stockholders, whichever is earlier. Subject to
acceleration of the option exercises in the event of certain events specified
in the plan, each such option becomes exercisable with respect to 1/60 of the
shares issuable for each elapsed full month during the five-year period after
its grant date, but will not be initially exercisable until six months after
the grant date. The exercise price of each option will equal the fair market
value of the underlying Common Stock on the date the option is granted. Each
option will expire six years after its grant, except that the expiration will
be extended until one year after the optionee's death if it occurs less than
one year before the option's expiration date. An option granted under the plan
is not transferrable during the grantee's lifetime and must be exercised within
one year following his or her death, or within 90 days after the grantee ceases
to be a member of the Board for any other reason, and will only be exercisable
to the extent it is exercisable on the date the grantee leaves the Board.
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EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and to each of the Company's executive
officers who received salary and bonus payments in excess of $100,000 during
fiscal 1994.
SUMMARY - COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ------------------------- -------
NAME OTHER RESTRICTED SECURITIES
AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS(S) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($) $ $ $ (#)(2) ($)
----------------- ------ ------- ------- ----------- ---------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Errol G. Payne 1994 200,000 --- --- --- --- --- ---
Chairman of the Board and 1993 200,000 --- --- --- --- --- ---
Chief Executive Officer 1992 200,000 --- --- --- --- --- ---
David V. Radlinski (4) 1994 175,000 --- --- --- 36,750 (6) --- ---
Chief Financial Officer 1993 162,500 12,500 --- --- --- --- ---
and Secretary and 1992 125,000 50,000 --- --- 14,250 --- ---
President of Medstone
International, Inc.
Mark G. Cherney (3) 1994 140,000 --- --- --- 25,000 (6) --- ---
President 1993 127,500 12,500 --- --- --- --- ---
Endocare, Inc. 1992 90,000 50,000 --- --- 25,000 --- ---
Thomas W. Gardner 1994 95,000 --- --- --- 5,000 (6) --- ---
Vice President 1993 127,500 12,500 1,724 --- --- --- ---
Cytocare, Inc. 1992 90,000 50,000 --- --- 25,000 --- ---
</TABLE>
__________________________________
(1) In addition to the cash compensation shown in the table, executive
officers of the Company may receive indirect compensation in the form of
perquisites and other personal benefits. For each of the named
executive officers, the amount of this indirect compensation in 1994,
1993 and 1992 did not exceed the lesser of $50,000 or 10% of the
executive officer's total salary and bonus for that year.
(2) Options to acquire shares of Common Stock.
(3) As of January 3, 1995, Mr. Cherney resigned as President of Endocare,
Inc. and as Vice President of Cytocare, Inc.
(4) As of July 26, 1995, Mr. Radlinski was granted an option on 50,000
shares.
(5) As of July 26, 1995, Mr. Gardner was granted an option on 40,000 shares.
(6) Fully vested options which would have expired on April 2, 1994 were
extended for a period of one year, until April 2, 1995.
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STOCK OPTION EXTENSIONS DURING 1994
No new stock options were granted to the Named Officers during the year
ended December 31, 1994. The following table provides information related to
the stock options in March 1994 that had their expiration date extended one
year until April 2, 1995 at the original exercise price.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL EXTENSIONS VALUE AT
----------------------------------------------------------------------- ASSUMED
% OF TOTAL ANNUAL RATES OF
EMPLOYEE STOCK PRICE
SHARES OPTIONS APPRECIATION
UNDERLYING GRANTED OR FOR
OPTIONS EXTENDED EXERCISE OPTION TERM
EXTENDED IN FISCAL PRICE EXPIRATION --------------------
NAME (#) YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- --------- ----------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Errol G. Payne --- --- ---- --- --- ---
David V. Radlinski 11,750(1) 11% 4.43 4/2/95 5,287 10,928
25,000(1) 23% 5.00 4/2/95 12,750 26,250
Thomas W. Gardner 5,000(2) 5% 5.00 4/2/95 2,550 5,250
Mark G. Cherney(3) 15,000 14% 4.43 4/2/95 6,750 13,950
10,000 9% 5.00 4/2/95 5,100 10,500
</TABLE>
(1) In February 1995, the expiration of these options plus an additional
10,000 options which were expiring in 1995, were extended until April 2,
1996.
(2) In February 1995, the expiration of these options plus an additional 5,000
options which were expiring in 1995, were extended until April 2, 1996.
(3) As of January 3, 1995, Mr. Cherney resigned from the Company.
STOCK OPTIONS HELD AT END OF FISCAL YEAR
The following table provides information related to options held by the
Named Officers at December 31, 1994. No options were exercised by such
officers during 1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- --------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Errol G. Payne --- --- 195,834 54,166 865,195 239,305
David V. Radlinski (2)(4) --- --- 159,417 1,583 537,518 4,559
Thomas W. Gardner (2)(5) --- --- 82,222 2,778 301,299 8,001
Mark G. Cherney (3) --- --- 97,222 2,778 323,049 8,001
</TABLE>
(1) The closing price for the Company's Common Stock as reported by the
National Association of Securities Dealers (NASD) on December 31, 1994 was
$5.88. Value is calculated on the basis of the difference between the
option exercise price and $5.88, multiplied by the number of shares of
Common Stock underlying the option.
(2) Subsequent to December 31, 1994, Mr. Radlinski and Mr. Gardner exercised
100,000 and 50,000 options, respectively.
(3) As of January 3, 1995, Mr. Cherney resigned from the Company and exercised
all of his exercisable options.
(4) As of July 26, 1995, Mr. Radlinski was granted an option on 50,000 shares.
(5) As of July 26, 1995, Mr. Gardner was granted an option on 40,000 shares.
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CERTAIN TRANSACTIONS
During 1991, the Company was a party to the formation of Cardiac
Science, Inc., for which the Company purchased 5,353,031 shares of common
stock, for a cash payment of $.0016 per share. This purchase represented 77.3%
of the outstanding stock. As of July 8, 1991, the Company distributed a
dividend to its stockholders of record on that date, one share of Cardiac
Science, Inc. stock for each share of Cytocare stock held. The Company
retained 629,768 shares of common stock of Cardiac Science, Inc.
In June 1991, the Company agreed to loan Cardiac Science, Inc. up to
$220,000 to provide working capital pursuant to the terms of a revolving note
agreement. The unpaid principal amount of the loan, together with interest
accrued thereon at the rate of 10% per annum, was due and payable to Cytocare
in December 1991. Cytocare then agreed to extend this note and to loan
additional amounts to Cardiac Science, Inc. As of April 30, 1992, the Company
had loaned Cardiac Science, Inc. approximately $310,000. In April 1992, the
Company agreed to extend its initial loan to Cardiac Science, Inc. and to loan
Cardiac Science, Inc. an additional $200,000. These loans bore interest at a
rate of 8% per annum, payable quarterly, are secured by Cardiac Science's
assets and were to mature on the earlier of April 1, 1995 or the closing of the
initial public offering of Cardiac Science's common stock. Cardiac Science,
Inc. has the option to pay the interest on the notes in either cash or shares
of its common stock valued at $.15 per share. To pay such interest, Cardiac
Science, Inc. had issued 419,054 shares of its common stock to the Company as
of December 31, 1994. In connection with such loan extension and the agreement
to make additional loans, Cardiac Science issued to Cytocare 3,400,000 warrants
to purchase shares of its common stock at $.15 per share for an aggregate
exercise price of up to $510,000.
In September 1994, Cardiac Science reached an agreement with Cytocare
pursuant to which, and concurrently with the closing of a Private Placement of
Cardiac Science's Common Stock (i) Cytocare exercised the warrants to the
extent of 2,720,000 shares, (ii) Cardiac Science utilized the proceeds
therefrom ($408,000) to pay an equivalent portion of the note, (iii) the due
date for the remaining principal balance on the note ($102,000) was extended to
April 1, 1996, (iv) Cytocare maintains its current lien on the assets of the
Company until the balance of the note is paid, (v) the expiration date for the
remaining warrants to purchase 680,000 shares of Cardiac Science common stock
was changed to March 31, 1996, (vi) all outstanding unsecured obligations owing
by Cardiac Science to Cytocare (approximately $270,000) were satisfied by the
issuance to Cytocare of 1,800,000 shares of common stock and a ten year warrant
to purchase 1,000,000 shares of common stock at $.001 per share, and (v)
Cardiac Science established a location of operations completely independent of
Cytocare.
As of December 31, 1994, Cardiac Science's outstanding note balance was
$104,335, including accrued interest. A reserve of $104,335 has been provided
for non-payment of the note. The Company also holds 5,568,822 shares of
Cardiac Science which it carries at a net valuation of 0. The Company also
advanced amounts to Cardiac Science for accounting, operational expenses,
payroll and health insurance of employees working part-time on Cardiac Science
projects. These amounts were to be repaid by Cardiac Science on a
month-to-month basis. As of December 31, 1994, $8,948 had been advanced to
Cardiac Science. A reserve of $4,023 has been provided for non-payment of the
advances.
COMPENSATION COMMITTEE INTERLOCKS INSIDER PARTICIPATION
During 1994, the Compensation Committee consisted of Paul Quadros and
Frank Pope. Neither of these individuals was at any time during 1994 or prior
thereto an officer or employee of the Company, nor did either individual
receive compensation during such period for services rendered to the Company.
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<PAGE> 10
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company is not aware of any director, officer, or 10% shareholder
who during 1994 failed to file on a timely basis any report regarding the
Company's securities required by Section 16(a) of the Securities Exchange Act
of 1934.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has provided the following Board
Compensation Committee Report:
Executive Compensation Policy - Cytocare, Inc.'s overall compensation
philosophy is as follows:
a) Attract and retain quality talent, which is critical to both the
short-term and long-term success of this company;
b) Reinforce strategic performance objectives through the use of
incentive compensation programs; and
c) Create a mutuality of interest between executive officers and
shareholders through compensation structures that share the rewards
and risks of strategic decision making.
Base Compensation - The Committee's approach to base compensation is to
offer competitive salaries in comparison to market practices. The 1994 average
base salaries of the executive officers did not change in 1994.
The Committee annually examines market compensation levels and trends
observed in the labor market. Market information is used as a frame of
reference for annual salary adjustments and starting salary offers. The review
considers the decision-making responsibilities of each position and the
experience, work performance, and team-building skills of position incumbents.
Long-term Incentive Compensation - Cytocare uses incentive stock
options as its long-term incentive compensation. The total of targeted or
projected values of long-term awards at the date of grant is set considering
observed market practices for similar positions in similar industries.
No incentive stock options were granted by the Committee to executives
in the fiscal year ended December 31, 1994.
Frank Pope, Chairman of Compensation Committee
Paul Quadros, Member
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OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Meeting. Should any other
matters properly come before the Meeting or any adjournment or postponement
thereof, it is the intention of the persons named in the enclosed proxy to vote
the shares they represent as the Board of Directors may recommend.
ANNUAL REPORT
The Company's 1994 Annual Report to Stockholders is being mailed to
stockholders concurrently with this Proxy Statement, but such report is not
incorporated herein and is not deemed to be a part of this proxy solicitation
material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS, WILL BE FURNISHED WITHOUT
CHARGE TO ANY PERSON FROM WHOM THE ACCOMPANYING PROXY IS SOLICITED UPON WRITTEN
REQUEST TO THE COMPANY'S SECRETARY, MR. DAVID V. RADLINSKI, AT CYTOCARE, INC.,
100 COLUMBIA, SUITE 100, ALISO VIEJO, CALIFORNIA 92656.
FOR THE BOARD OF DIRECTORS,
David V. Radlinski, Secretary
Aliso Viejo, California
______________, 1995
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES ON, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL
AND YOUR COOPERATION WILL BE APPRECIATED.
10
<PAGE> 12
PROXY CYTOCARE, INC.
100 COLUMBIA
SUITE 100
ALISO VIEJO, CA 92656
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Errol G. Payne and David V. Radlinski, 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 Cytocare, Inc. held of record by the undersigned on
August 18, 1995 at the Annual Meeting of Stockholders to be held on September
21, 1995, and at any adjournments thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
line through or otherwise strike out the nominee's name below)
Frank R. Pope, David V. Radlinski, Donald John Regan
2. APPROVAL OF THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT THE COMPANY'S NAME CHANGE FROM CYTOCARE, INC.
TO MEDSTONE INTERNATIONAL, INC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, LLP AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 1995.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
(IMPORTANT -- PLEASE SIGN ON OTHER SIDE)
<PAGE> 13
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE NOMINEES NAMED IN PROPOSAL 1, PROPOSAL 2 AND 3.
DATED:___________________________, 1995
_________________________________________
Signature
_________________________________________
Signature
Please sign exactly as name appears hereon.
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.
[ ] I PLAN TO ATTEND THE MEETING
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
