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:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
QUANTECH LTD.
(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)(1)
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.:
3) Filing Party:
4) Date Filed:
<PAGE>
QUANTECH LTD.
1419 ENERGY PARK DRIVE
ST. PAUL, MINNESOTA 55108
TELEPHONE (612) 647-6370
FAX (612) 647-6369
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 2, 1997
--------------------
TO THE SHAREHOLDERS OF QUANTECH LTD.
Please take notice that the Annual Meeting of Shareholders of Quantech Ltd.
(the "Meeting") will be held, pursuant to due call by the Board of Directors of
the Company, at the Minneapolis Hilton and Towers, 1001 Marquette Avenue,
Minneapolis, Minnesota on December 2, 1997, at 3:30 p.m., or at any adjournment
or adjournments thereof, for the purpose of considering and taking appropriate
action with respect to the following:
1. To elect two (2) directors for a term of three years;
2. To adopt an amendment to the Articles of Incorporation to increase the
number of authorized shares; and
3. To transact any other business as may properly come before the
Meeting or any adjournments thereof.
Pursuant to due action of the Board of Directors, shareholders of record on
October 17, 1997, will be entitled to vote at the Meeting or any adjournments
thereof.
A Proxy for the Meeting is enclosed herewith. You are requested to fill in
and sign the Proxy, which is solicited by the Board of Directors, and mail it
promptly in the enclosed envelope.
Saint Paul, Minnesota Robert Case
October 30, 1997 Chief Executive Officer
<PAGE>
QUANTECH LTD.
1419 ENERGY PARK DRIVE
ST. PAUL, MINNESOTA 55108
TELEPHONE (612) 647-6370
FAX (612) 647-6369
--------------------
PROXY STATEMENT
--------------------
Annual Meeting of Shareholders - December 2, 1997
INFORMATION CONCERNING SOLICITATION OF VOTING
This Proxy Statement is furnished by the Board of Directors of Quantech
Ltd. (the "Company") in connection with the solicitation of proxies to be used
at the Annual Meeting of Shareholders (the "Meeting") of the Company to be held
on Tuesday, December 2, 1997, at 3:30 p.m. Central Time, at the Minneapolis
Hilton and Towers, 1001 Marquette Avenue, Minneapolis, Minnesota 55403, and at
all adjournments thereof for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. ANY PROXY IN WHICH NO
DIRECTION IS SPECIFIED WILL BE VOTED IN FAVOR OF EACH OF THE MATTERS TO BE
CONSIDERED AND IN FAVOR OF THE DIRECTOR NOMINEES LISTED HEREIN. This Proxy
Statement and the accompanying Annual Report, Notice and Proxy are being mailed
to shareholders on or about October 30, 1997.
The close of business on October 17, 1997 has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Meeting. At that date, the Company's outstanding voting securities
consisted of 51,040,759 shares of common stock, $.01 par value per share (the
"Common Stock"). On all matters which will come before the Meeting, each
shareholder or his proxy will be entitled to one vote for each share of Common
Stock of which such shareholder was the holder of record on the record date.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time prior to its use by: (I) delivering to the principal
office of the Company a written notice of revocation; or (II) filing with the
Company a duly executed Proxy bearing a later date. Proxies not revoked will be
voted in accordance with the choice specified by shareholders by means of the
ballot provided on the Proxy for that purpose. Proxies which are signed but
which lack any such specification will, subject to the following, be voted in
favor of the proposals set forth in the Notice of Meeting and in favor of the
number and slate of directors proposed by the Board of Directors and listed
herein. If a shareholder abstains from voting as to any matter, then the shares
held by such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such matter, but shall not be deemed to have been voted in favor of such matter.
Abstentions, therefore, as to any proposal will have the same effect as votes
against such proposal. If a broker returns a "non-vote" proxy, indicating a lack
of voting instructions by the beneficial holder of the shares and a lack of
discretionary authority on the part of the broker to vote on a particular
matter, then the shares covered by such non-vote proxy shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote required for
approval of such matter.
The costs of this solicitation will be borne by the Company. The Company
will request brokerage houses and other nominees, custodians and fiduciaries to
<PAGE>
forward soliciting material to beneficial owners of the Company's Common Stock.
The Company will reimburse brokerage firms and other persons representing
beneficial owners for their expenses in forwarding solicitation materials to
beneficial owners. Proxies are being solicited primarily by mail, but, in
addition, officers and regular employees of the Company may solicit proxies
personally, by telephone, by telegram or by special letter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND EXECUTIVE MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of October 17, 1997: (I) by each of
the executive officers of the Company named in the Summary Compensation Table;
(II) by each director and director nominee; (III) by all current directors and
executive officers of the Company as a group; and (IV) by each person known to
the Company to be the beneficial owner of more than 5% of the outstanding shares
of the Company's Common Stock. Except as otherwise indicated, each shareholder
has sole voting and investment power with respect to the shares beneficially
owned.
<TABLE>
<CAPTION>
Number of Shares Percent of Shares
Officers and Directors(1) Beneficially Owned Beneficially Owned
- --------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Robert Case 991,667 (2)(3) 1.9%
Gregory G. Freitag 1,135,500 (3)(4) 2.2%
James G. Lyons 1,000,000 (3)(5) 1.9%
Robert R. McKiel 883,030 (6) 1.7%
Richard W. Perkins 850,000 (7) 1.6%
Edward E. Strickland 1,000,000 (3)(8) 1.9%
R.H. Joseph Shaw 1,335,000 (9) 2.6%
All directors and executive officers as a
group (6 persons) 5,865,297 (10) 10.5%
5% Shareholder
- ---------------------------------------------
David S. Goldsteen, M.D. 4,605,031 (11) 8.9%
</TABLE>
<PAGE>
(1) The address of such persons except Mr. Shaw is 1419 Energy Park Drive,
St. Paul, Minnesota 55108.
(2) Includes 991,667 shares that may be purchased upon exercise of options
and warrants that are currently exercisable or exercisable within 60
days of the record date.
(3) Does not include convertible notes in the principal amounts of $25,000,
$10,000, $50,000, $25,000 and $25,000 held by Messrs. Case, Freitag,
Lyons and Strickland and the Strickland Family Limited partnership,
respectively. The conversion price for such notes is based upon a
formula that could not be calculated as of the date of this Proxy
Statement.
(4) Includes 1,130,000 shares that may be purchased upon exercise of
options and warrants that are currently exercisable.
(5) Includes 700,000 shares that may be purchased upon exercise of options
and warrants that are currently exercisable.
(6) Includes 830,841 shares that may be purchased upon exercise of options
and warrants that are currently exercisable.
(7) Includes 550,000 shares that may be purchased upon exercise of options
and warrants that are currently exercisable.
(8) Inludes 625,000 shares that may be purchased upon exercise of options
and warrants that are currently exercisable. Also includes 100,000
shares and 75,000 shares that may be purchased upon exercise of options
and warrants that are currently exercisable held by the Strickland
Family Limited Partnership of which entity Mr. Strickland is a general
partner.
(9) Includes 1,246,262 shares of Common Stock issuable upon exercise of
warrants and 37,925 shares held by Mr. Shaw's wife. Also includes
11,168 shares held by Spectrum Diagnostics, Inc., of which company
Mr. Shaw is an officer and director, but not a shareholder, and by
such position has voting and dispositive power over such shares. Mr.
Shaw's address is 280 Summit Avenue, St. Paul, Minnesota 55102.
(10) Includes 4,827,508 shares that may be purchased upon exercise of
options that are currently exercisable or exercisable within 60 days
of the record date. Also includes 100,000 shares and 75,000 shares
that may be purchased upon exercise of warrants that are currently
exercisable held by the Strickland Family Limited Partnership of which
entity Mr. Strickland is a general partner.
(11) Dr. Goldsteen's address is IDS Center, Suite 2332, 80 South 8th Street,
Minneapolis, MN 55402.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
General
The Company's Bylaws provide that the Board of Directors consist of three
or more persons and be divided into three classes of directors of as nearly
equal size as possible. Directors are elected for a term of three years and the
terms are staggered so that the class of directors whose term expires is elected
each year by the shareholders of the Company. There are currently five persons
serving as directors. The Company is proposing that two directors be elected at
the Meeting to serve as Class 2 directors with a term of three years expiring in
2000, or until their successors are elected and qualified. The Board of
Directors has nominated for election Mr. Richard W. Perkins and Mr. Edward E.
Strickland. Messrs. Perkins and Strickland are currently Class 2 directors of
the Company and do not have any family relationship with any of the Company's
directors.
Board Recommendation
The Board of Directors recommends that the nominees, Messrs. Perkins and
Strickland, be elected as Class 2 directors to hold office for a term of three
years and until their successors are duly elected and qualified.
Proxies and Voting
Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect the nominees. The affirmative vote of the greater of
(I) a majority of shares of Common Stock present and entitled to vote at the
Meeting or (II) a majority of the voting power of the minimum number of shares
that would constitute a quorum for the transaction of business at the Meeting is
necessary to elect the nominee. A shareholder submitting a Proxy may vote for
the nominees for election to the Board of Directors or may withhold his or her
vote. The nominees, Messrs. Perkins and Strickland, have consented to being
named as nominees. Should either Mr. Perkins or Mr. Strickland become unable to
serve if elected, the Proxy Agents named in the Proxy will exercise their voting
power in favor of such other person as the Board of Directors of the Company may
recommend. The Company's Articles of Incorporation prohibit cumulative voting.
Nominees, Directors and Executive Officers
Class 1 Director (Term Expiring 1999).
Robert Case, age 53, has been interim Chief Executive Officer since June
1997 and a director of the Company since October 1996. He founded Case +
Associates, Inc. in 1978 and has been its President since such time. Case +
Associates is a leading consultant in the research, design, development and
engineering of medical products. Its consulting activities include work for
major multinational, as well development stage, medical companies in the design
of products from diagnostic instrumentation and implantable devices to surgical
instruments. He has served as a Chairman of the Industrial Designers Society of
America, and was a member of its national Board of Directors. Mr. Case has also
been a long-time member of the Biomedical Marketing Association. In addition,
Mr. Case conducts both U.S. and European seminars in product definition and
development for Frost & Sullivan, the Society of Plastics Engineers, the Society
for the Advancement of Medical Packaging Institute and Northwestern University.
His educational background includes product design, engineering and marketing at
Syracuse University, the Illinois Institute of Technology and DePaul University.
<PAGE>
Class 2 Nominees (Term Expiring 2000)
Richard W. Perkins, age 66, has been a director of the Company since
September 7, 1995. Since 1985, Mr. Perkins has been President, Chief Executive
Officer and a director of Perkins Capital Management, Inc., Wayzata, Minnesota.
Prior thereto he was a Senior Vice President of Piper Jaffray Inc., Minneapolis,
Minnesota. He is also a director of Bio-Vascular, Inc., Eagle Pacific
Industries, Inc., Children's Broadcasting Corporation, Lifecore Biomedical,
Inc., Nortech Systems, Inc., and CNS, Inc.
Edward E. Strickland, age 68, has been a director of the Company since
September 7, 1995. Mr. Strickland has been an independent financial consultant
for more than seven years. From October 1990 to January 1991, he performed the
duties of Chief Executive Officer while serving on the Executive Committee of
the Board of Directors of Reuter, Inc. where he currently serves as their
Chairman of the Board. Mr. Strickland also serves as a director of Bio-Vascular,
Inc., Hector Communications Corp., Communication Systems, Inc., and AVECOR
Cardiovascular Inc.
Class 3 Director (Term Expiring 1998)
James F. Lyons, age 65, has been Chairman of the Board of the Company since
June 1997, and a director of the Company since September 7, 1995. From September
1993 through October 1994, when he retired, Mr. Lyons was Chief Executive
Officer of Bio-Vascular, Inc., a cardiovascular medical products company. From
1977 through 1990, Mr. Lyons was President and Chief Executive Officer of
Bio-Medicus, Inc., a cardiovascular medical products company. Mr. Lyons was also
a director and Chairman of the Board from 1991 through 1996 of AVECOR
Cardiovascular Inc. and is currently a director of ATS Medical, Inc.,
Bio-Vascular, Inc. and Spine-Tech, Inc.
Executive Officers
Gregory G. Freitag, age 35, has been Chief Operating Officer of the
Company since June 1997, and Chief Financial Officer and Secretary of the
Company since December 1, 1995. From 1987 until joining the Company Mr. Freitag
was a lawyer with the Minneapolis, Minnesota law firm of Fredrikson & Byron,
P.A. As a shareholder with Fredrikson & Byron he practiced in the corporate,
securities and merger and acquisition areas of law. Mr. Freitag has his J.D. and
CPA, has served on securities advisory committees to the Minnesota Commissioner
of Commerce, is included in the Minnesota Business Guide to Law & Leading
Attorneys, and received from City Business its "40 Under 40" award recognizing
Mr. Freitag as one of the Twin Cities' next generation of business and community
leaders.
Robert R. McKiel, Ph.D., age 54, has been Executive Vice President-Research
and Development since 1992. From 1984 to 1987, Dr. McKiel served as Vice
President of Amersham International, a large medical company based in the United
Kingdom. From 1987 until joining the Company he served as a consultant to
various companies in the medical diagnostics industry, including Ares-Serono and
Boehringer Mannheim Corporation. In that capacity, he has been involved in a
variety of projects including the design of a clinical immunochemistry analyzer,
implementation of a GMP (Good Manufacturing Practices) program for a clinical
device manufacturer and a redesign of a pharmaceutical quality control program.
He earned his baccalaureate degree in organic chemistry at the University of
Notre Dame and a doctorate in biological chemistry at the University of
Illinois. After completion of his post-doctoral residency in clinical chemistry
at the University of Illinois Medical Center, he joined the Illinois Medical
Center staff. From 1973 to 1979, he served as an Assistant Director of the
University of Illinois Hospital Laboratories and as head of the Radioimmunoassay
Laboratory, held various faculty appointments, and taught in the departments of
Biological Chemistry and Pathology. In 1979, Dr. McKiel joined Amersham
Corporation to establish a U.S. based technical support system for the company's
products, and to enhance Amersham's effectiveness in the design and marketing of
new products in the U.S. In 1984, he took on the additional responsibility of
managing the marketing of clinical products.
<PAGE>
Director Compensation
The Company does not currently compensate its directors. The Company has,
however, granted options to its directors from time to time. Additional
directors' options may be granted in the future to attract and retain qualified
personnel to its Board of Directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to, or earned by, the Chief Executive
Officer of the Company and to all executive officers whose compensation exceeded
$100,000 for fiscal 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------- ------------
Other Annual Securities All Other
Name and Fiscal Salary Bonus Compensation Underlying Compensation
Principal Position Year ($) ($) ($) Options (#) ($)
- -------------------- ------- --------- ------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Robert Case, 1997 $0 0 0 250,000 0
interim CEO
R.H. Joseph Shaw, 1997 $143,750 0 $106,370 (1) 0 0
former Chief 1996 $150,000 0 $7,800 0 0
Executive Officer 1995 $150,000 0 $7,800 1,246,262 0
Gregory G. Freitag, 1997 $125,000 0 0 0 0
COO, CFO 1996 $ 72,917 0 0 500,000 0
Robert R. McKiel, 1997 $125,000 0 0 0 0
Executive Vice 1996 $117,500 0 0 0 0
President of R & D 1995 $110,000 0 0 830,841 0
- ------------------------
</TABLE>
(1) Other Annual Compensation for Mr. Shaw in 1997 consisted primarily of
amounts paid or payable to Mr. Shaw pursuant to an arrangement in connection
with his resignation from the Company.
<PAGE>
Option/SAR Grants During 1997 Fiscal Year
The following table provides information relating to options granted to the
named executive officers during fiscal 1997. The Company has not granted any
stock appreciation rights.
Individual Grants
Number of Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees Base Price Expiration
Name # in Fiscal Year ($/Sh) Date
- ---- ------------------- -------------- ----------- ----------
Robert Case 250,000(1) 32.3% $0.25 10/31/01
R.H. Joseph Shaw 0 N/A N/A N/A
Gregory G. Freitag 0 N/A N/A N/A
Robert R. McKeil 0 N/A N/A N/A
- ---------------
(1) Such option is a nonqualified stock option and becomes exercisable in
three equal annual installments commencing October 23, 1996.
Option Exercises and Value of Options at End of Fiscal 1997
The following table sets forth, for each of the executive officers named in
the Summary Compensation Table above, the year-end value of unexercised options.
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Shares Options at End In-the-Money Options
Acquired of Fiscal 1997 (1) at End of Fiscal 1997 (1)(2)
on Value ----------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------- --------- --------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert Case 0 N/A 83,333 166,667 $3,333 $6,667
R.H. Joseph
Shaw 0 N/A 1,246,262 0 $49,850 $0
Gregory G.
Freitag 0 N/A 500,000 0 $20,000 $0
Robert R.
McKiel 0 N/A 830,841 0 $33,234 $0
- ------------------------
</TABLE>
(1) The shares represented for Messrs. Shaw and McKiel were granted as warrants
to purchase Common Stock and not options. As such, these shares are not
included in the Company's Nonqualified Stock Option Plan described below.
(2) Value based on market value of the Company's Common Stock on June 30, 1997
($.29 per share closing price) less the exercise price.
<PAGE>
Compensation Arrangements
In May 1995, the Company entered into a three-year employment agreement
with Mr. McKiel and in December of 1995 entered into a two year employment
agreement with Mr. Freitag (the "Employment Agreements"), which provide for
annual base salaries of $110,000 (subsequently raised to $125,000) and $125,000,
respectively, and further provide that Messrs. McKiel and Freitag are entitled
to certain severance benefits in the event that their employment is terminated
by the Company "without cause" or by such executive following a "change of
control" (both as defined in the Employment Agreements). In the event the
employment agreements are terminated for any reason by the Company, other than
for cause as defined in the agreements, Mr. McKiel would receive the salary due
under the remaining term of the agreement plus one year's salary, and Mr.
Freitag would receive two years' salary and bonus. Mr. McKiel also has the
right, upon termination without cause, to "put" any shares he owns or has the
right to receive pursuant to options back to the Company at fair market value.
Each of the Employment Agreements contains a covenant not to compete with the
Company: (1) for Mr. McKiel for twelve months following termination, except in
the event of his termination by the Company "without cause" or at his election
upon a "change of control"; and (2) for such period as Mr. Freitag is paid
termination benefits.
In July of 1996, the Compensation Committee of the Board of Directors
approved a bonus for Mr. Robert Case, interim CEO, and Mr. Greg Freitag, COO and
CFO, to provide an incentive compensation arrangement for the roles they assumed
as CEO and COO, respectively. The bonus is tied to market performance of the
Company and may be paid either in cash or stock, at the then current market
value, at the discretion of the Company, provided, however, that Mr. Case can
receive up to $250,000 in cash at his discretion if the Company has raised funds
sufficient to pay all Company obligations secured by Company assets. The amount
of such bonuses are equal to 1% and .75% for Messrs. Case and Freitag,
respectively, of an increase in market value over $17,500,000 as determined by
multiplying the Company's fully diluted number of equity securities by a market
value of the Company equal to the average closing price of the Company's Common
Stock for the 30 trading days after the earlier of: (I) the public announcement
of the Company beginning its 510 K work for CK-MB; or (II) March 31, 1998,
provided, however, that in the event of the sale of the Company market price
will be based upon the sale price of the Company.
<PAGE>
Nonqualified Stock Options
On September 3, 1996 the Company's Board of Directors adopted the Quantech
Ltd. Nonqualified Stock Option Plan (the "Plan"). The Plan provides for the
granting of nonqualified options to purchase Common Stock of the Company to
employees, directors and members of the Company's Scientific Advisory Board. A
total of 4,313,500 shares of the Company's Common Stock have been reserved for
issuance upon exercise of options granted under the Plan. Outstanding options
for the purchase of up to 3,148,500 shares of Company Common Stock have been
granted under the Plan. The Company's Compensation Committee has complete
discretion to determine the persons to whom options are granted under the Plan
and to set the terms of such options including, but not limited to, terms
relating to price (which generally will be the fair market value of the
Company's Common Stock on the date of grant), duration, vesting, termination and
the number of shares subject to such option. The Plan will continue for an
indefinite period until terminated by the Board of Directors or Compensation
Committee. In addtion, the Compensation Committee granted to Mr. Robert Case and
Mr. Greg Freitag options outside of the plan to purchase 1,500,000 shares and
1,000,000 shares of Common Stock, respectively, at $.25 per share, which options
vested as to 50% immediately upon their grant in July 1997 and 50% on January
30, 1998.
Certain Transactions
In September 1997 the Company entered into an agreement to cancel certain
sublicense rights that had been granted to Dr. David Goldsteen, a shareholder of
the Company, along with other parties. In return for these sublicense rights,
the Company agreed to issue 3,000,000 shares of the Company's common stock,
convertible secured promissory notes totaling $550,000, and warrants to purchase
1,650,000 shares of common stock to the sublicense owners.
The convertible secured promissory notes carry an interest rate of 13.5%
and are payable June 1, 1998. The notes are also convertible into shares of
common stock at a price the lesser of (I) $0.35 per share or (II) a price equal
to 80 percent of the market price of the common stock for (i) the 20 consecutive
trading days prior to the issuance of the notes or June 1, 1998, if the notes
have not been paid by June 1, 1998 or (ii) the price at which the transaction
which triggers prepayment of the notes is completed. The warrants exercise price
is calculated in the same manner as the notes conversion price, except the
maximum price is limited to $0.25.
PROPOSAL TWO
ADOPTION OF AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES
Article 3.1 of the Company's Articles of Incorporation provides that the
aggregate number of shares of all classes of stock which the Company shall have
the authority to issue is One Hundred and Twenty Million (120,000,000) shares
consisting of 90,000,000 shares of Common Stock and 30,000,000 undesignated
shares. The Board of Directors recommends to the shareholders that Article 3.1
of the Company's Articles of Incorporation be amended to increase the number of
authorized shares of the Common Stock to Two Hundred Fifty Million (250,000,000)
shares. Of the 250 million shares 200 million shares have been deemed Common
Stock and 50 million shares deemed undesignated shares.
<PAGE>
The undesignated shares allow the Board of Directors of the Company to
designate the shares and issue them upon such terms and at such times as it
considers appropriate without further shareholder approval. This flexibility
allows for a greater ability to structure future financings or transactions, if
required. However, in the event of a proposed merger, tender offer or other
attempt to gain control of the Company of which the Board does not approve, the
unissued Common Stock, through the dilution of percentage ownership, and the
undesignated shares, through the issuance of a series of stock with certain
rights and preferences, could allow the Board to impede the completion of such a
transaction. An effect of the proposed amendment, therefore, may be to deter a
future takeover attempt. The Board does not intend to issue any shares except on
terms which the Board deems to be in the best interests of the Company and its
then existing shareholders. Neither the Board of Directors nor management of the
Company is aware of any specific effort to accumulate the Company's securities
or to obtain control of the Company by means of a merger, tender offer or
solicitation of proxies in opposition to management.
Of the shares now authorized for issuance, as of October 22, 1997,
51,040,759 shares were issued and outstanding as Common Stock and an additional
23,035,403 shares of Common Stock were reserved for issuance pursuant to stock
options and warrants. These figures do not include shares that may be issued
upon the conversion of any notes.
Management and the Board of Directors believe that it is desirable to
increase the number of authorized shares of Common Stock and undesignated shares
available for issuance as recommended to enable the Company to issue Common
Stock or other shares in the future to finance its business, for issuance
pursuant to stock options so as to continue to retain and obtain qualified
employees, directors and scientific advisors, for issuance pursuant to currently
outstanding warrants and warrants that could be issued to strategic partners,
and for possible issuance in connection with acquisitions or other business
combinations. The Company has no present plans, understandings or agreements for
issuance or use of the proposed additional shares in connection with any
acquisitions or business combinations. However, the Board of Directors believes
that the proposed increase is desirable so that, as the need may arise, the
Company will have more financial flexibility and be able to issue shares of
equity securities, without the expense and delay of a special shareholders'
meeting, in connection with possible equity financing, future opportunities for
expanding the business through investments, strategic arrangements or
acquisitions and employee benefit plans or other purposes.
Accordingly, the Board of Directors recommends that Article 3.1 of the
Articles of Incorporation of the Company be amended as follows:
ARTICLE 3.1
CAPITAL STOCK
The aggregate number of shares the corporation has the authority to
issue shall be 250,000,000, which shall have a par value of $.01 per share
solely for the purpose of a statute or regulation imposing a tax or fee
based upon the capitalization of the corporation, and which shall consist
of 200,000,000 common shares and 50,000,000 undesignated shares. The Board
of Directors of the corporation is authorized to establish from the
undesignated shares, by resolution adopted and filed in the manner provided
by law, one or more classes or series of shares, to designate each such
class or series (which may include but is not limited to designation as
additional common shares), and to fix the relative rights and preferences
of each such class or series.
<PAGE>
Board Recommendation and Shareholder Vote Required
The Board of Directors recommends a vote FOR an amendment to Article 3.1 of
the Articles of Incorporation. Approval of the adoption of the amendment to the
Articles of Incorporation requires the affirmative vote of the greater of (I) a
majority of shares of Common Stock present and entitled to vote at the Meeting
or (II) a majority of the voting power of the minimum number of shares that
would constitute a quorum for the transaction of business at the Meeting.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's next
Annual Meeting of Shareholders must be received by the Company at its office
located at 1419 Energy Park Drive, St. Paul, Minnesota 55108 on or before June
26, 1998 to be considered for inclusion in the Company's Proxy Statement and
form of Proxy relating to such meeting.
OTHER MATTERS
Board of Directors and Committees
The Board of Directors held three meetings during the fiscal year ended
June 30, 1997. Each director attended all of these meetings. The directors also
meet informally from time to time to discuss issues concerning the Company and
take action through unanimous written consent. The Company has Audit and
Compensation Committees, but does not have a Nominating Committee of the Board
of Directors.
The Audit Committee is comprised of directors Perkins, Lyons and Strickland
with Mr. Strickland as Chairman. The Audit Committee has the responsibility of
selecting Quantech's independent auditors and communicating with such auditors
on matters of auditing and accounting. The Audit Committee met once during the
fiscal year ended June 30, 1997 and all members were present.
The Compensation Committee is also comprised of directors Perkins, Lyons
and Strickland with Mr. Lyons as Chairman. The Compensation Committee has the
responsibility of reviewing on an annual basis all officer compensation and
administering any employee options and plans related thereto. The Compensation
<PAGE>
Committee met three times during the fiscal year ended June 30, 1997 and all
members were present. The Compensation Committee also meets informally to
discuss compensation issues and take action through unanimous written consent.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Company, or written representations that no Forms 5 were
required, the Company believes that during the fiscal year ended June 30, 1997,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were satisfied.
Independent Auditor's
McGladrey & Pullen, LLP served as independent auditors for the fiscal year
ended June 30, 1997 and has been selected to serve for the current year.
Representatives of McGladrey & Pullen, LLP will be present at the Meeting, will
be given an opportunity to make a statement regarding financial and accounting
matters of the Company if they so desire, and will be available to respond to
appropriate questions from shareholders.
Form 10-KSB
The Company will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997, as filed
with the Securities and Exchange Commission, including the Financial Statements
and the Financial Statement Schedules thereto. The Company will furnish to any
such person any exhibit described in the list accompanying the Form 10-KSB upon
the payment, in advance, of reasonable fees related to the Company's furnishing
such exhibit(s). Requests for copies of such report and/or exhibit(s) should be
directed to Gregory Freitag, Chief Financial Officer, at the Company's principal
address.
Other Business
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Meeting in accordance with the directions
given. In voting by proxy in regards to the matters presented, shareholders may
vote in favor of the item, against the item or abstain from voting. Shareholders
should specify their choices on the enclosed Proxy. Any Proxy on which no
direction is specified will be voted in favor of each of the matters to be
considered.
The Board of Directors does not intend to bring any matters before the
Meeting other than as stated in this Proxy Statement and is not aware that any
other matters will be presented for action at the Meeting. Should any other
matters be properly presented, the persons named in the enclosed form of Proxy
will vote the Proxy with respect thereto in accordance with their best judgment,
pursuant to the discretionary authority granted by the Proxy.
Dated: October 30, 1997 Robert Case
Chief Executive Officer
<PAGE>
Quantech Ltd.
----------------------------------------
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 2, 1997
--------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert Case and Gregory G. Freitag,
officers of the Company, with full power of substitution, his or her Proxy to
represent and vote, as designated below, all shares of Quantech Ltd. registered
in the name of the undersigned, with the powers the undersigned would possess if
personally present at the Company's 1997 Annual Meeting of Shareholders to be
held on Tuesday, December 2, 1997, at 3:30 p.m. Central Time, at the Minneapolis
Hilton and Towers, 1001 Marquette Avenue, Minneapolis, Minnesota 55403, and at
any adjournment thereof, hereby revoking all proxies previously given with
respect to the meeting.
The Board of Directors recommends that you vote "FOR" each proposal
1. ELECT RICHARD W. PERKINS AS A DIRECTOR OF THE COMPANY:
[ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
ELECT EDWARD E. STRICKLAND AS A DIRECTOR OF THE COMPANY:
[ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
2. AMEND ARTICLES OF INCORPORATION to increase the number of authorized
shares to 250,000,000 shares consisting of 200,000,000 Common Shares and
50,000,000 undesignated shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER MATTERS: In their discretion, the appointed Proxies are
[ ] Authorized [ ] Not Authorized
to vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR PROPOSALS #1 AND #2 AND WILL BE
DEEMED TO GRANT AUTHORITY UNDER PROPOSAL #3.
Dated: ______, 1997 ________________________________________________
------------------------------------------------
PLEASE DATE AND SIGN ABOVE exactly as name(s)
appear at the left. Executors, administrators,
trustees, guardians, etc., should indicate
capacity when signing. For stock held in Joint
Tenancy, each joint owner should sign.
