<PAGE> 1
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 [ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
LIFEQUEST MEDICAL, INC.
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(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LIFEQUEST MEDICAL, INC.
12961 Park Central, Suite 1300
San Antonio, Texas 78216
Telephone: (210) 495-8787
April 13, 1998
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
the 1998 Annual Meeting of the Stockholders of LifeQuest Medical, Inc. The
Annual Meeting will be held Tuesday, May 19, 1998, at 1:00 p.m. E.D.T. at the
Company's Atlanta offices, located at Fulton 400 Corporate Center, Suite 700,
Roswell, Georgia. The formal Notice of Annual Meeting is set forth in the
enclosed material.
The matters expected to be acted upon at the meeting are described in
the attached Proxy Statement. Following the meeting, stockholders will have the
opportunity to ask questions and comment on LifeQuest Medical, Inc.'s
operations.
It is important that your views be represented whether or not you are
able to be present at the Annual Meeting. Please sign and return the enclosed
proxy card promptly.
We appreciate your investment in LifeQuest Medical, Inc. and urge you
to return your proxy card as soon as possible.
Sincerely,
Randall K. Boatright
Interim President and Chief Executive Officer
<PAGE> 3
LIFEQUEST MEDICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
LifeQuest Medical, Inc. (the "Company") will be held on Tuesday, May 19, 1998,
at 1:00 p.m., E.D.T., at the Company's Atlanta offices, located at Fulton 400
Corporate Center, Suite 700, Roswell, Georgia, for the following purposes:
(1) a proposal to elect seven (7) directors to serve until
the next annual meeting of stockholders or until their successors are elected
and qualified;
(2) a proposal to amend the Certificate of Incorporation of
the Company to increase the number of authorized shares of the Company's Common
Stock to 50,000,000;
(3) a proposal to ratify the appointment of Arthur Andersen
LLP as independent public accountants of the Company for the fiscal year ending
December 31, 1998; and
(4) to consider and act upon any other matter which may
properly come before the meeting or any adjournment thereof. The Board of
Directors is presently unaware of any other business to be presented to a vote
of the stockholders at the Annual Meeting.
Information with respect to the above matters is set forth in the
Proxy Statement that accompanies this Notice.
The Board of Directors of the Company has fixed the close of business
on March 25, 1998, as the record date for determining stockholders entitled to
notice of and to vote at the meeting. A complete list of the stockholders
entitled to vote at the meeting will be maintained at the Company's principal
executive offices during ordinary business hours for a period of ten (10) days
prior to the meeting. The list will be open to the examination of any
stockholder for any purpose germane to the meeting during this time. The list
will also be produced at the time and place of the meeting and will be open
during the whole time thereof.
By Order of the Board of Directors,
RANDALL K. BOATRIGHT
Interim President and Chief Executive Officer
San Antonio, Texas
April 13, 1998
------------------------------
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. EVEN
IF YOU PLAN TO BE PRESENT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 4
LIFEQUEST MEDICAL, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy are furnished to the
stockholders of LifeQuest Medical, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation by the Board of Directors of
proxies for use at the Annual Meeting of Stockholders (the "Annual Meeting" or
"Meeting") to be held on Tuesday, May 19, 1998, at 1:00 p.m., E.D.T., at the
Company's Atlanta offices, located at Fulton 400 Corporate Center, Suite 700,
Roswell, Georgia, and at any adjournment or postponement thereof, for the
purposes set forth in the foregoing Notice of Annual Meeting of Stockholders.
Properly executed proxies received in time for the Meeting will be voted.
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of common stock, $.001 par value (the "Common Stock"). At the
close of business on March 25, 1998 (the "Record Date"), there were outstanding
and entitled to vote 6,899,742 shares of Common Stock. The holders of record of
Common Stock on the Record Date will be entitled to one vote per share. The
Company's Certificate of Incorporation does not permit cumulative voting in the
election of directors.
The Annual Report to Stockholders for the year ended December 31, 1997
has been or is being furnished with this Proxy Statement, which is being mailed
on or about April 13, 1998, to the holders of record of Common Stock on the
Record Date. The Annual Report to Stockholders does not constitute a part of
the proxy materials.
VOTING AND PROXY PROCEDURES
Properly executed proxies received in time for the Meeting will be
voted. Stockholders are urged to specify their choices on the proxy, but if no
choice is specified, eligible shares will be voted for the election of the
seven nominees for director named herein, for the proposal to amend the
Certificate of Incorporation of the Company to increase the number of shares of
the Company's Common Stock to 50,000,000; and for ratification of the
appointment of Arthur Anderson LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1998. At the date of this
Proxy Statement, management of the Company knows of no other matters which are
likely to be brought before the Annual Meeting. However, if any other matters
should properly come before the Annual Meeting, the persons named in the
enclosed proxy will have discretionary authority to vote such proxy in
accordance with their best judgment on such matters.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked by a later-dated proxy or by written notice filed with
the Secretary at the Company's executive offices at any time before the
enclosed proxy is exercised. Stockholders attending the Annual Meeting may
revoke their proxies and vote in person. The Company's executive offices are
located at 12961 Park Central, Suite 1300, San Antonio, Texas 78216.
The holders of a majority of the total shares of Common Stock issued
and outstanding at the close of business on the Record Date, whether present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The affirmative vote of a plurality of the
total shares outstanding and entitled to vote at the Meeting is required for
the election of directors, the affirmative vote of a majority of the total
shares of Common Stock outstanding and entitled to vote at the Annual Meeting
is required for the approval of the proposal to amend the Certificate of
Incorporation of the Company to increase the number of shares of the Company's
Common Stock to 50,000,000, and the affirmative vote of a majority of the total
shares of Common Stock present in person or represented by proxy and entitled
to vote at the Annual Meeting is required for the ratification of the
appointment of Arthur Andersen LLP and any other matters as may properly come
before the Annual Meeting or any adjournment thereof.
<PAGE> 5
Abstentions are counted toward the calculation of a quorum, but are
not treated as either a vote for or against a proposal. An abstention has the
same effect as a vote against the proposal. Any unvoted position in a brokerage
account will be considered as not voted and will not be counted toward
fulfillment of quorum requirements.
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation (other
than reimbursement of out-of-pocket expenses), by personal interview,
telephone, telegram or otherwise. Arrangements will also be made with brokerage
firms and other custodians, nominees and fiduciaries who hold the voting
securities of record for the forwarding of solicitation materials to the
beneficial owners thereof. The Company will reimburse such brokers, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith.
OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth as of March 25, 1998, certain
information with respect to the Company's Common Stock beneficially owned by
each stockholder known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock, each of its directors and nominees for
director, each executive officer named in the Summary Compensation Table (the
"named executive officers") and by all its directors and executive officers as
a group. Such persons have sole voting power and sole dispositive power with
respect to all shares set forth in the table unless otherwise specified in the
footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP PERCENT(2)
- --------------------------------------- -------------------- ----------
<S> <C> <C>
Renaissance Capital Group, Inc.(3)
8080 N. Central Expressway, Suite 210
Dallas, Texas 75206................................. 1,000,000 13.0%
Richard H. Klein..................................... 592,750(4) 8.6%
William H. Bookwalter................................ 306,780(5) 4.4%
Herbert H. Spoon(6).................................. 201,904 2.9%
Randall K. Boatright, C.P.A.......................... 34,200(7) *
Kalford C. Fadem..................................... 200,000(8) 2.9%
Robert L. Evans...................................... 131,950(9) 1.9%
Jeffrey H. Berg, Ph.D................................ 29,500(10) *
Robert B. Johnson.................................... 39,095(11) *
David J. Collette, M.D.(12).......................... 0 0
Robert S. Fadem(13).................................. 200,000(13) 2.9%
All executive officers and directors as a group
(8 persons, including the executive officers and
directors listed above).............................. 1,534,275(5)(6) 21.7%
(9)(14)
</TABLE>
-2-
<PAGE> 6
- -----------------------
* Represents less than 1% of the issued and outstanding shares of Common
Stock.
(1) Except as otherwise noted, the street address of the named beneficial
owner is 12961 Park Central, Suite 1300, San Antonio, Texas 78216.
(2) Percentage is based on a total of 6,899,742 shares of Common Stock
issued and outstanding on March 25, 1998.
(3) Represents 125,000 shares of Common Stock held by Renaissance Capital
Growth & Income Fund III, Inc. ("Renaissance Fund"), 375,000 shares of
Common Stock issuable upon conversion of convertible debentures held
by Renaissance Fund, 125,000 shares of Common Stock held by
Renaissance U.S. Growth & Income Trust, PLC ("Renaissance Trust") and
375,000 shares of Common Stock issuable upon conversion of convertible
debentures held by Renaissance Trust. Renaissance Capital Group, Inc.
is the investment advisor to Renaissance Fund and Renaissance Trust
and has voting and dispositive power of the shares of Common Stock
beneficially owned by each of Renaissance Fund and Renaissance Trust.
(4) Includes 20,000 shares which Mr. Klein has the right to acquire upon
exercise of stock options.
(5) Does not include 8,405 shares of Common Stock held by The 1997
Bookwalter Family Trust, of which Mr. Bookwalter serves as trustee.
Mr. Bookwalter disclaims beneficial ownership of such shares.
(6) Mr. Spoon resigned from his positions with the Company effective
March 9, 1998.
(7) Represents shares which Mr. Boatright has the right to acquire upon the
exercise of stock options.
(8) Includes 20,000 shares which Mr. Fadem has the right to acquire upon
the exercise of stock options.
(9) Includes shares which Mr. Evans shares voting and dispositive power.
Includes 700 shares Mr. Evans has the right to acquire upon the
exercise of stock options.
(10) Represents shares which Dr. Berg has the right to acquire upon the
exercise of stock options.
(11) Includes 39,000 shares which Mr. Johnson has the right to acquire upon
the exercise of stock options.
(12) Dr. Collette resigned from his positions with the Company December 31,
1997.
(13) Includes 20,000 shares which Mr. Fadem has the right to acquire upon
exercise of stock options. Represents shares which Mr. Fadem shares
voting and dispositive power.
(14) Includes 158,900 shares which executive officers and directors have
the right to acquire upon the exercise of options. Does not include
201,904 shares held by Mr. Spoon.
-3-
<PAGE> 7
MATTERS TO COME BEFORE THE ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
Seven directors (constituting the entire Board) are to be elected at
the Annual Meeting. All of the nominees named below are now directors of the
Company. All nominees have consented to be named and have indicated their
intent to serve if elected.
<TABLE>
<CAPTION>
Served as a
Name Age Positions and Offices with the Company Director Since
- ---- --- -------------------------------------- --------------
<S> <C> <C> <C>
Randall K. Boatright, 49 Interim President and Chief Executive Officer, 1997
C.P.A. Chief Financial Officer, Secretary and Director
William H. Bookwalter 32 Vice President and Director 1997
Kalford C. Fadem 39 Vice President and Director 1997
Richard H. Klein 45 Vice President and Director 1997
Robert B. Johnson 67 Director 1990
Jeffrey H. Berg, Ph.D. 54 Director 1995
Robert L. Evans 58 Director 1997
</TABLE>
- ------------------
Biographical information on these directors is set forth below under
"Further Information -- Board of Directors and Executive Officers."
It is the intention of the persons named in the enclosed proxy to vote
such proxy for the election of such nominees. Management of the Company does
not contemplate that any of such nominees will become unavailable for any
reason, but if that should occur before the meeting, proxies that do not
withhold authority to vote for directors will be voted for another nominee, or
other nominees, in accordance with the best judgment of the person or persons
appointed to vote the proxy.
The enclosed form of proxy provides a means for the holders of Common
Stock to vote for each of the nominees listed therein, to withhold authority to
vote for one or more of such nominees or to withhold authority to vote for all
nominees. Each properly executed proxy received in time for the Meeting will be
voted as specified therein, or if a stockholder does not specify in his or her
executed proxy how the shares represented by his or her proxy are to be voted,
such shares shall be voted for the nominees listed therein or for other
nominees as provided above. The director nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected as directors. Abstentions and
broker non-votes will not be treated as a vote for or against any particular
director nominee and will not affect the outcome of the election.
COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of its Board
of Directors. The Company's Board of Directors has established two standing
committees: Audit and Compensation.
The Audit Committee recommends the selection of and confers with the
Company's independent accountants regarding the scope and adequacy of annual
audits, reviews reports from the independent accountants
-4-
<PAGE> 8
and meets with the independent accountants and with the Company's financial
personnel to review the adequacy of the Company's accounting principles,
financial controls and policies. The Audit Committee consists of two non-
employee directors: Jeffrey H. Berg, Ph.D. and Robert B. Johnson.
The Compensation Committee reviews the Company's compensation
philosophy and programs, exercises authority with respect to the payment of
direct salaries and incentive compensation to directors and officers of the
Company and administers the Option Plan. The Compensation Committee consists of
two non-employee directors: Jeffrey H. Berg, Ph.D. and Robert B. Johnson.
MEETINGS OF THE BOARD OF DIRECTORS
During 1997, the Board of Directors met four times and took action on
fourteen occasions by unanimous written consent. The Compensation Committee and
the Audit Committee each met one time during 1997 and the Compensation
Committee took action on two occasions by unanimous written consent. Each of
the directors of the Company attended at least 75% of the aggregate of the
meetings of the Board of Directors and Committees of which he was a member.
COMPENSATION OF DIRECTORS
During 1997, each non-employee member of the Board of Directors
received an annual stipend of $9,000 as well as $1,000 for attendance at each
meeting of the Board of Directors or Committee of the Board of Directors. The
members of the Board of Directors are also reimbursed for their travel expenses
to and from the meetings. The Board of Directors adopted a Non-Employee
Director Stock Option Plan (the "NEDSOP") in 1997, pursuant to which
non-employee directors may be granted stock options to purchase Common Stock.
The amount and exercise price of options granted under the NEDSOP are
determined by a committee appointed by the Board of Directors to administer the
NEDSOP. During 1997, options to purchase 19,200 shares of common stock were
granted under the NEDSOP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE INDIVIDUALS NOMINATED FOR ELECTION AS DIRECTORS
PROPOSAL 2: PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK
FROM 10,000,000 SHARES TO 50,000,000 SHARES.
On March 17, 1998, the Board unanimously adopted a resolution
declaring it advisable to amend the Company's Certificate of Incorporation to
increase the number of shares of Common Stock that the Company has the
authority to issue to 50,000,000 shares (the "Amendment"). The Board of
Directors further directed that the Amendment be submitted for consideration by
stockholders at the Company's Annual Meeting. In the event the Amendment is
approved by stockholders, the Company will thereafter amend the Certificate of
Incorporation (sometimes referred to hereinafter as the "Certificate") with the
Delaware State Secretary of State with a filing reflecting such Common Stock
Amendment, which will become effective at the close of business on the date the
Certificate is accepted for filing by the Secretary of State. The text of
Article Four of the Certificate, as proposed to be amended, is set forth below:
The total number of shares of all classes of stock which the Company
shall be authorized to issue is 52,000,000 shares, divided into the
following: (i) 2,000,000 shares of preferred stock, of the par value
of $.001 (one tenth of one cent) per share (hereafter called
"Preferred Stock"); and (ii) 50,000,000 shares of common stock, of the
par value of $.001 (one tenth of one cent) per share (hereafter called
"Common Stock").
In the event stockholders approve the Amendment, the Company will be
authorized to amend Article Four of the Company's Certificate to increase the
number of shares of Common Stock which the Company is authorized to issue from
10,000,000 to 50,000,000.
-5-
<PAGE> 9
As of March 25, 1998, there were 6,899,742 shares of Common Stock
issued and outstanding. Of the remaining authorized but unissued shares of
Common Stock, 2,735,119 shares have been reserved for issuance under Company
option and other benefit plans for employees and directors or pursuant to
convertible debentures issued by the Company. The remaining 365,139 shares of
Common Stock were unreserved. Holders of Common Stock do not have preemptive
rights to subscribe to additional securities that may be issued by the Company,
which means that current stockholders do not have a prior right to purchase any
new issue of Common Stock of the Company in order to maintain their
proportionate ownership interest.
The Board believes that it is in the Company's best interests to
increase the number of authorized but unissued shares of Common Stock in order
to have additional shares available for issuance to meet the Company's future
business needs as they arise. The Company's management has no present
arrangements, agreements, understandings or plans for the issuance or use of
the additional shares proposed to be authorized by the Amendment. The Board
believes the availability of such additional shares will provide the Company
with the flexibility to issue Common Stock for a variety of other proper
corporate purposes as the Board may deem advisable without further action by
the Company's stockholders, except as may be required by law, regulation or the
rules of any national securities exchange or quotation system on which the
shares of the Company's Common Stock are then listed. These purposes could
include, among other things, the sale of stock to obtain additional capital
funds, the purchase of property, the acquisition or merger into the Company of
other companies, the use of additional shares for various equity compensation
and other employee benefit plans, the declaration of stock dividends or
distributions, and other bona fide corporate purposes. Were these situations to
arise, the issuance of additional shares of Common Stock could have a dilutive
effect on earnings per share, and, for a person who does not purchase
additional shares to maintain his or her pro rata interest, on a stockholder's
percentage voting power in the Company.
Although an increase in the authorized shares of Common Stock could,
under certain circumstances, also be construed as having an anti-takeover
effect (for example, by diluting the stock ownership of a person seeking to
effect a change in the composition of the Board of Directors or contemplating a
tender offer or other transaction for the combination of the Company with
another company), the current proposal to amend the Certificate to increase the
number of authorized shares of Common Stock is not in response to any effort to
accumulate the Company's stock or to obtain control of the Company by means of
a merger, tender offer, solicitation in opposition to management or otherwise.
In addition, the proposal is not part of any plan by management to recommend a
series of similar amendments to the Board of Directors and the stockholders.
Under the Delaware General Corporation Law, the affirmative vote of
the holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting is required to adopt this Proposal No.
2. With respect to the proposal to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock from 10,000,000 to 50,000,000 shares, all such shares will be
voted FOR or AGAINST, or not voted, as specified on each proxy. If no choice is
indicated, a proxy will be voted FOR the proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of the
Company's Common Stock from 10,000,000 to 50,000,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON
STOCK FROM 10,000,000 TO 50,000,000
PROPOSAL 3: PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1998
The Board of Directors, upon recommendation of its Audit Committee,
has appointed the firm of Arthur Andersen LLP to serve as independent public
accountants of the Company for the fiscal year ending December 31, 1998.
Although stockholder ratification is not required, the Board of Directors has
directed that such appointment be submitted to the stockholders of the Company
for ratification at the Annual Meeting. Arthur Andersen LLP has served as
independent public accountants of the Company with respect to the Company's
consolidated financial
-6-
<PAGE> 10
statements for the past seven years and is considered by management of the
Company to be well qualified. If the stockholders do not ratify the appointment
of Arthur Andersen LLP, the Board of Directors may reconsider the appointment.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from stockholders.
Assuming the presence of a quorum, ratification of the appointment of
Arthur Andersen LLP requires the affirmative vote of a majority of the votes
cast by the holders of shares of Common Stock entitled to vote in person or by
proxy at the Annual Meeting. Abstentions and broker non-votes will not be
considered as a vote for or against the proposal and therefore will have no
effect on the outcome of the proposal. Proxies will be voted for or against
such approval in accordance with specifications marked thereon, and if no
specification is made, the proxies will be voted for such approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998
-7-
<PAGE> 11
FURTHER INFORMATION
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information with respect to each director and
executive officer of the Company as of March 25, 1998. The executive officers
are elected by the Board of Directors and serve at the discretion of the Board.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- -----------------------------------------------
<S> <C> <C>
Randall K. Boatright, C.P.A.............................. 49 Interim President and Chief Executive Officer,
Chief Financial Officer, Secretary and Director
William H. Bookwalter.................................... 32 Vice President and Director
Richard H. Klein......................................... 45 Vice President and Director
Kalford C. Fadem......................................... 39 Vice President and Director
Robert S. Fadem.......................................... 36 Vice President
Robert L. Evans.......................................... 58 Director
Jeffrey H. Berg, Ph.D(1)(2).............................. 54 Director
Robert B. Johnson(1)(2).................................. 67 Director
</TABLE>
- ----------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
JEFFREY H. BERG, PH.D. has served as a director of the Company since
March 1995, and has served as the President of Health Care Insights, a
consulting firm specializing in health care companies, since January 1993.
During 1992, Mr. Berg was a financial analyst covering the health care industry
for The Chicago Corp, an investment bank. During 1990 and 1991, Mr. Berg was a
financial analyst covering the health care industry for William K. Woodruff
&Co., a Dallas-based investment bank. From 1987 to January 1990, he was the
Vice President of Research specializing in the health care industry for J. C.
Bradford & Co. Mr. Berg is currently a director of Bio-Imaging Technologies,
Biologix International, IMX Corporation and Allou Health and Beauty Care, Inc.,
each of which is a publicly-held company.
ROBERT B. JOHNSON has served as a director of the Company since 1990.
He has been retired since 1988. From 1973 to 1988, he was employed by Lederle
Laboratories, the pharmaceutical division of American Cyanamid Company, in
various capacities, including President from 1984 to 1988, Vice President from
1978 to 1984 and Director of Manufacturing from 1976 to 1978.
RANDALL K. BOATRIGHT, C.P.A. has served as Interim President and Chief
Executive Officer of the Company since March 1998, and as director of the
Company since February 1997. Mr. Boatright has also served as Vice President,
Chief Financial Officer and Secretary of the Company since 1992. From 1985 to
1992, Mr. Boatright served as Executive Vice President, Chief Financial Officer
and Director of Abraxas Petroleum Corporation. Prior to that, Mr. Boatright
practiced accounting with the firm of Coopers and Lybrand LLP. Mr. Boatright is
a certified public accountant in Texas and Virginia.
WILLIAM H. BOOKWALTER has been a Vice President and Director of the
Company since September 1997. From 1991 until its acquisition by the Company in
September 1997, Mr. Bookwalter served as President and Chief Executive Officer
of William H. Bookwalter and Associates, Inc.
ROBERT L. EVANS is Manager-Western Operations for GE Fanuc Automation
North America, Inc. GE Fanuc specializes in automation technology and is a
global joint venture between GE Company and Fanuc Ltd. of
-8-
<PAGE> 12
Japan. Mr. Evans has been employed by GE Company in various marketing, sales,
and management assignments since 1962.
KALFORD C. FADEM has served as a director of the Company since
February 1997. Mr. Fadem has also served as a Vice President of the Company
since 1996. From 1993 to 1996, Mr. Fadem served as President of Val-U-Med, Inc.
prior to its acquisition by the Company. Previous to that, Mr. Fadem was
employed as an application developer, support engineer, and sales manager for
several computer aided design and computer aided engineering (CAD/CAE) software
developers.
ROBERT S. FADEM has served as a Vice President of the Company since
1996. From 1993 to 1996, Mr. Fadem served as Vice President of Sales for
Val-U-Med, Inc. prior to its acquisition by the Company. Previous to that Mr.
Fadem was employed in medical sales.
RICHARD H. KLEIN has served as a director for the Company since
February 1997. Mr. Klein has also served as a Vice President of the Company
since 1996. From 1992 to 1996, Mr. Klein served as President of Klein Medical,
Inc. prior to its acquisition by the Company. Previous to that, Mr. Klein was
employed as a sales representative for Weck Surgical, Inc.
Robert S. Fadem and Kalford C. Fadem are brothers. Robert L. Evans is
the father-in-law of Robert S. Fadem. There are no other family relationships
among the Board of Directors and executive officers. In connection with the
acquisition by the Company of Klein Medical, Inc., Mr. Klein was elected to the
Company's Board of Directors. In connection with the acquisition by the Company
of Val-U-Med, Inc., Robert L. Evans and Kalford C. Fadem were each elected to
the Company's Board of Directors. In connection with the acquisition by the
Company of W.H. Bookwalter and Associates, Inc., Mr. Bookwalter was elected to
the Company's Board of Directors.
All directors of the Company hold office until the next annual meeting
of stockholders and the election and qualification of their successors. Each
officer of the Company was chosen by the Board of Directors and serves at the
pleasure of the Board of Directors until his or her successor is appointed or
until his or her earlier resignation or removal in accordance with applicable
law.
-9-
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for making all compensation
decisions for the named executives including determining base salary, annual
incentive compensation amounts and granting stock options under the Company's
1989 Stock Option Plan, as amended (the "Option Plan").
Overall Objectives of the Executive Compensation Program
The purpose of the Company's compensation plan is to attract, retain
and motivate key management employees. It is the philosophy of the Company to
pay its executives at levels commensurate with both Company and individual
performance. A primary consideration in developing the Company's executive
compensation programs is to link the long-term financial interests of
executives with those of the Company and its stockholders. The Compensation
Committee reviews compensation for comparable organizations in order to
establish the Company's total compensation program and determine awards under
the Option Plan.
In 1997, the total compensation program for the Company's top
executives, approved by the Company's Board of Directors, consisted of a base
salary, bonus and stock option grants.
Base Salary Program
It is the Company's policy to establish salaries at a level
approximating the average of the competitive levels in comparable organizations
and to provide annual salary increases reflective of the executive's
performance, level of responsibility and position with the Company.
Annual Incentive
Each year, the Compensation Committee evaluates the performance of the
Company as a whole, as well as the performance of each individual executive.
Factors considered include revenue growth, net profitability and cost control.
The Compensation Committee does not utilize formalized mathematical formulae,
nor does it assign weightings to these factors. The Compensation Committee, in
its sole discretion, determines the amount, if any, of incentive payments to
each executive. The Compensation Committee believes that the Company's growth
in revenue and profitability requires subjectivity on the part of the Committee
when determining incentive payments. The Compensation Committee believes that
specific formulae restrict flexibility.
1989 Stock Option Plan
The Option Plan permits the Company to make grants of stock options to
employees as part of the Company's overall incentive compensation program. The
Option Plan is intended to attract, retain and motivate key management
personnel and to align the interest of the executives with those of
stockholders. The overall long-term incentive grant levels are established by
reviewing the number of shares reserved for such plans by comparable
organizations. Individual long-term incentive grants are based on the
employee's position in the Company and responsibility level.
Compensation of Chief Executive Officer
In 1997, the Compensation Committee structured the compensation
package of Mr. Herbert H. Spoon, the former Chief Executive Officer of the
Company in the same manner and based upon the same criteria as the Company's
other executive officers. It is the belief of the Compensation Committee that
Mr. Spoon's total compensation package for 1997 properly reflected his
importance and contributions to the Company.
-10-
<PAGE> 14
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), currently imposes a $1 million limitation on the deductibility of
certain compensation paid to each of the Company's five highest paid
executives. Excluded from this limitation is compensation that is "performance
based." For compensation to be performance based it must meet certain criteria,
including being based on predetermined objective standards approved by
stockholders. In general, the Company believes that compensation relating to
options granted under the Option Plan will not be excluded from the $1 million
limitation calculation. Compensation relating to the Company's incentive
compensation awards do not currently qualify for exclusion from the limitation,
given the discretion that is provided to the Committee in establishing the
performance goals for such awards. The Committee believes that maintaining the
discretion to evaluate the performance of the Company's management is an
important part of its responsibilities and inures to the benefit of the
Company's stockholders. The Committee, however, intends to take into account
the potential application of Section 162(m) with respect to incentive
compensation awards and other compensation decisions made by it in the future.
Conclusion
The Compensation Committee believes these executive compensation
policies serve the interests of the stockholders and the Company effectively.
The Committee believes that the various pay vehicles offered are appropriately
balanced to provide increased motivation for executives to contribute to the
Company's overall future successes, thereby enhancing the value of the Company
for the stockholders' benefit.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Jeffrey H. Berg, Ph.D.
Robert B. Johnson
-11-
<PAGE> 15
EXECUTIVE COMPENSATION
The following table summarizes all compensation awarded to, earned by
or paid for services rendered to the Company in all capacities during the years
ended December 31, 1995, 1996 and 1997 by the Company's Chief Executive Officer
and the Company's other executive officers who received in excess of $100,000
in salary and bonus from the Company during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- --------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION(1)
- ----------------------------- --------- --------- ------------ ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Herbert H. Spoon(2) 1997 $163,958 $10,000 $0 13,800 $1,817
President and Chief 1996 $141,600 $6,000 $0 31,580 $721
Executive Officer 1995 $153,500 0 $0 18,840 $702
Randall K. Boatright, C.P.A. 1997 $102,158 $7,000 $0 10,400 $1,149
Vice President, Chief 1996 $99,909 $4,000 $0 8,600 $484
Financial Officer and 1995 $95,400 0 $0 8,200 $458
Secretary
David J. Collette, M.D.(3) 1997 $147,099 $0 $0 11,200 $505
Vice-President of Research 1996 $138,625 $5,000 $0 9,360 $140
& Development 1995 $132,500 $0 $0 9,300 $288
Richard H. Klein(4) 1997 $188,711 $0 $0 0 $0
Vice President 1996 0
1995 --
Kalford C. Fadem(5) 1997 $166,250 $0 $0 0 $0
Vice President 1996 0
1995 --
Robert S. Fadem(5) 1997 $166,250 $0 $0 0 $0
Vice President 1996 0
1995 --
</TABLE>
- ----------------
(1) Represents life insurance premiums paid by the Company.
(2) Mr. Spoon resigned from his positions with the Company effective March 9,
1998.
(3) Dr. Collette resigned from his positions in the Company effective
December 31, 1997.
(4) Mr. Klein became an employee of the Company in November 1996, but did not
receive compensation from the Company in 1996.
(5) Messrs. Fadem and Fadem became employees of the Company in December 1996,
and as such did not receive compensation from the Company in 1996.
-12-
<PAGE> 16
STOCK OPTION GRANTS IN FISCAL 1997
The following table provides certain information related to options
granted by the Company to the named executive officers during fiscal 1997
pursuant to the Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL 1997 ($/SHARE) DATE
- ---- --------------------- ------------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
Herbert H. Spoon(1) 13,800 7.20% $3.125 1/28/07
Randall K. Boatright, 10,400 5.43% $3.125 1/28/07
C.P.A.
David J. Collette, M.D.(2) 11,200 5.84% $3.125 1/28/07
Richard H. Klein 0 -- -- --
Kalford C. Fadem 0 -- -- --
Robert S. Fadem 0 -- -- --
</TABLE>
- ---------------------------------
There were no other grants to executive officers during fiscal 1997.
(1) Mr. Spoon resigned from his positions with the Company effective
March 9, 1998.
(2) Dr. Collette resigned from his positions with the Company effective
December 31, 1997.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to options exercised
by the named executive officers of the Company during fiscal 1997 and the
number and value of options held at fiscal year end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END($)(1)
----------------------- ------------------------
SHARES
ACQUIRED UPON
OPTION VALUE
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert H. Spoon(2) 0 0 150,434 33,740 $458,906 $36,981
Randall K. Boatright, 0 0 27,400 28,000 $8,985 $23,616
C.P.A.
David J. Collette,(3) 0 0 27,855 29,825 $10,048 $25,875
M.D.
Richard H. Klein 0 0 20,000 40,000 $18,750 $37,500
Kalford C. Fadem 0 0 20,000 40,000 $18,750 $37,500
Robert S. Fadem 0 0 20,000 40,000 $18,750 $37,500
</TABLE>
- --------------------
(1) Represents the product of (a) the number of shares underlying options
granted multiplied by (b) the difference between (i) the fair market value
of Common Stock on December 31, 1997 ($3.9375) and (ii) the exercise price
of the options.
(2) Mr. Spoon resigned from his positions with the Company effective March 9,
1998.
(3) Dr. Collette resigned from his positions with the Company effective
December 31, 1997.
-13-
<PAGE> 17
Performance Graph
The following Performance Graph compares the Company's cumulative
total stockholder return on its Common Stock from January 1, 1993 through
December 31, 1997, to the NASDAQ Index and to a Peer Group of other public
companies over the same period. The Peer Group is comprised of the following
companies: AMBI, Inc., Aronex Pharmaceuticals, Collagen Loop, CYTRX
Corporation, Immunogen, Inc., IVAX Corporation, Lifecell Corporation, Luther
Medical Products, and VasoMedical, Inc. The graph assumes that the value of the
investment in the Company's Common Stock and each Index was $100 at January 1,
1993, and that all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
FISCAL YEAR ENDING
COMPANY 1992 1993 1994 1995 1996 1997
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Lifequest Medical, 100 76.42 17.92 20.75 25.47 29.72
Inc.
Peer Group 100 100.81 62.30 87.42 40.25 30.58
NASDAQ Market 100 119.95 125.94 163.35 202.99 248.30
Index
- --------------------------------------------------------------------------------------------
</TABLE>
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the Commission or subject to
Regulations 14A and 14C under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), or to the liabilities of Section 18 under the
Exchange Act.
-14-
<PAGE> 18
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL ARRANGEMENTS
The Company and Richard H. Klein are parties to an employment
agreement whereby Mr. Klein receives $125,000 per annum as well as a cash bonus
in the event the Company's Surgical Supplies Division achieves certain sales
performance criteria. The agreement with Mr. Klein expires December 31, 1999.
As an inducement to enter into such agreement, the Company granted Mr. Klein
non-qualified stock options for up to 60,000 shares of Common Stock, which vest
over time.
The Company and Kalford C. Fadem are parties to an employment
agreement whereby Kalford C. Fadem receives $100,000 per annum as well as bonus
based upon the gross profits of the Company's Endosurgery Division. The
agreement with Kalford C. Fadem expires December 31, 1999. As an inducement to
enter into such agreement, the Company granted Kalford C. Fadem non-qualified
stock options for up to 60,000 shares of Common Stock, which vest over time.
The Company and Robert S. Fadem have entered into an employment
agreement whereby Robert S. Fadem receives $100,000 per annum as well as bonus
based upon the gross profits of the Company's Endosurgery Division. The
agreement with Robert S. Fadem expires December 31, 1999. As an inducement to
enter into such agreement, the Company granted Robert S. Fadem non-qualified
stock options for up to 60,000 shares of Common Stock, which vest over time.
The Company and William H. Bookwalter have entered into an Employment
Agreement whereby Mr. Bookwalter receives a base salary of $100,000 per annum
as well as a bonus based upon the gross profits of the Company's Med-Service
Division. The Agreement with Mr. Bookwalter expires September 30, 2000. As an
inducement to enter into such Agreement, the Company granted Mr. Bookwalter
non-qualified stock options for up to 60,000 shares of Common Stock, which
vests over time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors served on the Board of Directors'
Compensation Committee during 1997: Robert B. Johnson and Jeffrey H. Berg,
Ph.D.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's
directors, executive officers and persons who own more than 10 percent of a
registered class of the Company's equity securities file with the Commission
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Directors, executive officers
and greater than 10 percent stockholders are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
the Section 16(a) reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended December 31,
1997, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10 percent beneficial owners were complied
with.
CERTAIN TRANSACTIONS
In September 1997, the Company acquired W.H. Bookwalter and Associates,
Inc. ("WHB"). Under the terms of the Plan of Merger and Acquisition Agreement
(the "WHB Agreement"), the shareholders of WHB, being William H. Bookwalter,
Dr. John R. Bookwalter, Frederick F. Judd III and William Bookwalter, as
Trustee for the 1997 Bookwalter Family Trust, received an aggregate of 466,473
shares of Common Stock. Of such shares of Common Stock, William H. Bookwalter
received 306,780 shares of Common Stock, the 1997 Bookwalter Family Trust
received 8,405 shares of Common Stock and Dr. John Bookwalter received 84,049
shares of Common Stock. Dr. John Bookwalter is the father of William H.
Bookwalter. In connection with the terms of the WHB Agreement, William H.
Bookwalter was elected to the Company's Board of Directors and the Company
entered into an employment agreement and stock option agreement with William H.
Bookwalter.
In November 1997, Herbert H. Spoon and the Company entered into an
investment agreement pursuant to which Mr. Spoon purchased 50,000 shares of
Common Stock at a purchase price of $4.00 per share. The closing market price
of the Company's Common Stock on the date of Mr. Spoon's purchase was $4.375.
-15-
<PAGE> 19
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at
the Annual Meeting of Stockholders of the Company to be held in 1999 must be
received by the Company, addressed to the Secretary of the Company at 12961
Park Central, Suite 1300, San Antonio, Texas 78216, no later than December 13,
1998, to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management does not intend to
present any other items of business and is not aware of any matters to be
presented for action at the Annual Meeting other than those described above.
However, if any other matters should come before the Annual Meeting, it is the
intention of the persons named as proxies in the accompanying proxy card to
vote in accordance with their best judgment on such matters.
By order of the Board of Directors,
RANDALL K. BOATRIGHT
Interim President and Chief Executive Officer
San Antonio, Texas
April 13, 1998
-16-
<PAGE> 20
LIFEQUEST MEDICAL, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- MAY 19, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark, sign, date and return in the enclosed envelope.
P The undersigned stockholder of LifeQuest Medical, Inc. (the "Company")
R hereby appoints Randall K. Boatright and Robert B. Johnson, or each of
O them, proxies of the undersigned with full power of substitution to vote
X at the Annual Meeting of Stockholders of the Company to be held on
Y Tuesday, May 19, 1998, at 1:00 p.m., Eastern Daylight Time, at the
Company's Atlanta offices, Fulton 400 Corporate Center, Suite 700,
Roswell, Georgia, and at any adjournment thereof, the number of votes
which the undersigned would be entitled to cast if personally present:
(1) ELECTION OF DIRECTORS
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed below to vote for all nominees listed below
(except as marked below)
Randall K. Boatright Richard H. Klein Robert B. Johnson
William H. Bookwalter Robert L. Evans Jeffrey H. Berg, Ph. D.
Kalford C. Fadem
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, DRAW A LINE THROUGH OR STRIKE OUT THAT
NOMINEE'S NAME AS SET FORTH ABOVE.
(2) PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION OF THE
COMPANY TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE
COMPANY'S COMMON STOCK TO 50,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 21
(4) To consider and act upon any other matter which may properly
come before the meeting or any adjournment thereof;
all as more particularly described in the Proxy Statement dated April 13, 1998,
relating to such meeting, receipt of which is hereby acknowledged.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR the nominees listed in Proposal 1, FOR Proposal 2 and
FOR Proposal 3.
--------------------------------------------
--------------------------------------------
Signature of Stockholder(s)
Please sign your name exactly as it appears
hereon. Joint owners must each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give your full title as it appears hereon.
Dated , 1998.
---------------------------
