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 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 (651) 647-6370
Fax (651) 647-6369
Web Page: www.biosensor.com
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 15, 1998
--------------------
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 Tuesday, December 15, 1998, 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 one (1) Class 3 director for a term of three years;
2. To adopt the 1998 Stock Option Plan;
3. To adopt an amendment to the Articles of Incorporation to increase the
number of authorized shares; and
4. 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
November 6, 1998, 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.
St. Paul, Minnesota Robert Case
November 12, 1998 Chief Executive Officer
<PAGE>
QUANTECH LTD.
1419 Energy Park Drive
St. Paul, Minnesota 55108
Telephone (651) 647-6370
Fax (651) 647-6369
Web Page: www.biosensor.com
--------------------
PROXY STATEMENT
--------------------
Annual Meeting of Shareholders - December 15, 1998
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 15, 1998, 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 November 12, 1998.
The close of business on November 6, 1998 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 2,624,952 shares of common stock, no par value (the "Common
Stock"), and 1,624,715 shares of Series A preferred stock (the "Preferred
Stock") convertible into Common Stock at the rate of four shares of Common Stock
for each share of Preferred 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 or had
rights to acquire pursuant to Series A Preferred Stock 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.
<PAGE>
The costs of this solicitation will be borne by the Company. The Company
will request brokerage houses and other nominees, custodians and fiduciaries to
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 November 6, 1998: (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.
Number of Shares Percent of Shares
Officers and Directors(1) Beneficially Owned Beneficially owned(10)
- ------------------------------- --------------------- ------------------------
Robert Case 369,433 (2) 3.9%
Gregory G. Freitag 333,488 (3) 3.5%
James F. Lyons 747,908 (4) 8.0%
Richard W. Perkins 52,500 (5) 0.6%
Edward E. Strickland 583,443 (6) 6.3%
All directors and executive
officers as a group (5 persons) 2,086,772 (7) 20.7%
5% Shareholders
- -------------------------------
The Perkin-Elmer Corporation 1,400,000 (8) 13.3%
David S. Goldsteen, M.D. 602,631 (9) 6.6%
(1) The address of such persons is 1419 Energy Park Drive, St. Paul,
Minnesota 55108.
(2) Includes 48,952 shares that may be obtained upon conversion of
Preferred Stock, and 320,481 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) Includes 15,952 shares that may be obtained upon conversion of
Preferred Stock, and 317,261 shares that may be purchased
upon exercise of options and warrants that are currently exercisable.
(4) Includes 562,720 shares that may be obtained upon conversion of
Preferred Stock, and 170,188 shares that may be purchased
upon exercise of options and warrants that are currently exercisable.
(5) Includes 37,500 shares that may be purchased upon exercise of options
and warrants that are currently exercisable. (6) Includes 406,912
shares that may be obtained upon conversion of Preferred Stock, and
108,435 shares that may be purchased upon exercise of options and
warrants that are currently exercisable. Also includes 5,000 shares,
46,716 shares that may be obtained upon conversion of Preferred Stock,
and 6,380 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.
(footnotes continue on next page)
<PAGE>
(7)Includes 1,034,536 shares that may be obtained upon conversion of
Preferred Stock, and 953,865 shares that may be purchased upon exercise
of options and warrants that are currently exercisable or exercisable
within 60 days of the record date. Also includes 5,000 shares, 46,716
shares that may be obtained upon conversion of Preferred Stock, and
6,380 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.
(8) Includes a warrant to purchase 1.4 million shares of Quantech Common
Stock at a price equal to 95% of the average of the last sale price of
Quantech Common Stock for each of the 25 consecutive trading days
immediately preceding the date of the first notice of exercise of the
warrant provided to Quantech by Perkin-Elmer. This warrant may be
exercised at any time before December 17, 2002. Perkin-Elmer's address
is 761 Main Avenue, Norwalk, CT 06589.
(9) Includes 359,088 shares that may be obtained upon conversion of
Preferred Stock and 51,038 shares that may be purchased upon exercise
of warrants. Dr. Goldsteen's address is IDS Center, Suite 2332, 80
South 8th Street, Minneapolis, MN 55402.
(10) Common Shares that may be obtained upon conversion of Preferred Stock
are included in the outstanding Common Stock for the purposes of this
table.
PROPOSAL ONE
ELECTION OF DIRECTOR
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 one director be elected at
the Meeting to serve as a Class 3 director with a term of three years expiring
in 2001, or until his successor is elected and qualified. The Board of Directors
has nominated for election Mr. James F. Lyons. Mr. Lyons is currently a Class 3
director of the Company.
Board Recommendation
The Board of Directors recommends that the nominee, Mr. Lyons, be elected
as a Class 3 director to hold office for a term of three years and until his
successor is duly elected and qualified.
Proxies and Voting
Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect the nominee. 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 nominee for election to the Board of Directors or may withhold his or her
vote. The nominee, Mr. Lyons, has consented to being named as nominee. Should
Mr. Lyons 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.
<PAGE>
Nominee, Directors and Executive Officers
Class 1 Director (Term Expiring 1999).
Robert Case, age 54, has been 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 as 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.
Class 2 Directors (Term Expiring 2000)
Richard W. Perkins, age 67, has been a director of the Company since
September 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., CNS, Inc, and Vital Images, Inc.
Edward E. Strickland, age 71, has been a director of the Company since
September 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., and Communication Systems, Inc.
Class 3 Nominee (Term Expiring 2001)
James F. Lyons, age 68, has been Chairman of the Board of the Company since
June 1997, and a director of the Company since September 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
1978 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 was a director of ATS Medical, Inc., Bio-Vascular, Inc.
and Spine-Tech, Inc.
Executive Officers
Gregory G. Freitag, age 36, has been Chief Operating Officer of the
Company since June 1997, and Chief Financial Officer and Secretary of the
Company since December 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.
<PAGE>
Director Compensation
The Company does not currently compensate its directors. The Company has,
however, granted options to its directors from time to time. In April 1998
options to purchase 10,000 shares of Common Stock were granted to Messrs. Lyons,
Perkins and Strickland, directors of the Company. All of the options have an
exercise price of $3.00 per share, are immediately exercisable, and expire five
years from the date granted. If the 1998 Stock Option Plan is approved by the
shareholders, non-employee directors will be granted an option to purchase
10,000 shares upon election to the Board and an option to purchase 2,500 shares
after each shareholders meeting if the director is re-elected or his term of
office continues after such shareholders meeting. See Proposal Two - Adoption of
the 1998 Stock Options Plan.
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
$100,000 for fiscal 1998.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------- ------------
All Other
Other Annual Securities Compen-
Name and Fiscal Salary Bonus Compensation Underlying sation
Principal Position Year ($) ($) ($) Options (#) ($)
- -------------------- ------- --------- ------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Robert Case, 1998 $0 0 0 102,500 0
CEO 1997 $0 0 0 12,500 0
Gregory G. Freitag, 1998 $125,000 0 0 115,000
COO, CFO 1997 $125,000 0 0 0 0
1996 $ 72,917 0 0 25,000 0
Robert R. McKiel, 1998 $119,792 0 $5,200(1) 0 0
former Executive 1997 $125,000 0 0 0 0
VP of R & D 1996 $117,500 0 0 0 0
- ------------------------
(1) Other Annual Compensation for Mr. McKiel consisted of amounts paid for
consulting services pursuant to an arrangement in connection with his
resignation from the Company.
</TABLE>
<PAGE>
Option/SAR Grants During 1998 Fiscal Year
The following table provides information related to options granted to the
named executive officers during fiscal 1998. The Company has not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
Individual Grants
- ----------------------- --------------------- - ------------------ -- ------------- -- ----------------
Number of Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Share) Date
- ----------------------- --------------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Robert Case 2,500 (1) 0.6% $3.00 April 3, 2003
Robert Case 100,000 (2) 25.3% $3.00 July 14, 2002
Gregory G. Freitag 90,000 (2) 22.7% $3.00 July 14, 2002
Gregory G. Freitag 25,000 (2) 6.3% $3.00 December 1, 2000
Robert R. McKiel 0 N/A N/A N/A
- ------------------------
</TABLE>
(1) Such option is a nonqualified stock option with 1,667 shares immediately
exercisable and 833 shares exercisable on April 3, 1999.
(2) Such option is an incentive stock option and is immediately exercisable.
<PAGE>
Option Exercises and Value of Options at End of Fiscal 1998
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
Shares Securities Underlying Value of Unexercised
Acquired Options at End In-the-Money Options
on Value of Fiscal 1998 (1) at End of Fiscal 1998 (1)(2)
----------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------- --------- --------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert Case 0 N/A 114,167 883 $25,417 $208
Gregory G.
Freitag 0 N/A 115,000 0 $28,750 $0
Robert R.
McKiel 0 N/A 41,542 0 $0 $0
- ------------------------
</TABLE>
(1) The shares represented for Mr. 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,
1998 ($3.25 per share closing price) less the exercise
price.
Compensation Arrangements
In December 1997, the Company entered into "at will" employment agreements
with Mr. Case and Mr. Freitag (the "Employment Agreements"). Mr. Case's
employment agreement provides that if his employment is terminated by the
Company due to a sale of substantially all of the assets of the Company or a
change in the control of more than 50% of the Company's Capital Stock by an
acquiring party, he would receive a lump-sum payment of $150,000. Mr. Freitag's
employment agreement provides for a base salary of $125,000 per year and further
provides that if his employment is terminated by the Company "without cause" he
would receive six months' salary, except in the event his employment is
terminated as a result of a sale of substantially all of the assets of the
Company or a change in the control of more than 50% of the Company's Common
Stock by an acquiring party he would receive a lump-sum payment of one year's
salary and bonus.
<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 465,750 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 465,750 shares of Company Common Stock have been
granted under the Plan of which 427,418 have vested. 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. No additional options will be granted under this plan if
the 1998 Stock Option Plan is adopted at the Company's 1998 Annual Meeting.
Certain Transactions
In March 1998, the Company issued warrants to purchase 60,000 and 15,000
shares of its Common Stock to James F. Lyons and Edward E. Strickland,
respectively, directors of the Company, as compensation for the guarantee of a
$500,000 bank loan to the Company. The warrants have an exercise price of $0.75.
The amount under such loan was increased by $250,000 in August and such
directors received additional options in September to purchase an aggregate of
75,000 shares of Common Stock at $1.13 per share for their extension of the
guarantee to this amount. In April 1998, the Company issued a warrant to
purchase 2,500 shares of its Common Stock to Gregory G. Freitag, the Company's
COO and CFO, as compensation for providing short term loans to the Company on
several occasions during 1997 and 1998. The warrant has an exercise price of
$1.49.
<PAGE>
PROPOSAL TWO
ADOPTION OF THE 1998 STOCK OPTION PLAN
In April 1998, the Company's Board of Directors adopted the 1998 Stock
Option Plan (the "Plan") and reserved 2,000,000 shares for issuance thereunder
subject to approval of the Company's shareholders at the 1998 annual meeting. If
any options granted under the 1998 plan expire or are terminated prior to being
exercised in full, then the unexercised portion of such options will once again
be available for additional option grants. Options to purchase 965,250 shares of
Common Stock have been issued pursuant to the Plan subject to its approval.
The purpose of the Plan is to promote the success of the Company and its
subsidiaries by facilitating the retention of competent personnel and by
furnishing incentive to officers, directors, employees, consultants, and
advisors upon whose efforts the success of the Company will depend to a large
degree.
Under the 1998 Stock Plan, all employees, officers and directors
(including Non-Employee Directors) of the Company or a subsidiary, and
consultants and advisors who perform bona fide services for the Company or a
subsidiary, provided such services are not in connection with the offer or sale
of securities in a capital raising transaction, are eligible to receive stock
options. It is the intention of the Company to grant options which qualify as
incentive stock options ("ISOs") under section 422 of the Internal Revenue Code,
as well as nonqualified stock options ("NSOs"). The 1998 Plan is administered by
the Board of Directors or by a Committee appointed by the Board (referred to as
the "Administrator") which selects the individuals to whom options will be
granted, the number of shares subject to each option and the exercise price and
terms and conditions of each option.
The exercise price for ISOs cannot be less than 100% of the fair market
value of the Common Stock per share on the date the option is granted, and, in
the case of ISOs granted to holders of more than 10% of the voting power of the
Company, not less than 110% of such fair market value. The term of an option
cannot exceed 10 years, and the term of an ISO granted to a holder of more than
10% of the voting power of the Company cannot exceed five years. The exercise
price for NSOs is generally 100% of the fair market value of the Common Stock
per share on the date the option is granted unless otherwise determined by the
Administrator, provided that the exercise price is not less than 85% of the fair
market value of the Common Stock per share on the date granted.
Non-Employee Directors of the Company are granted upon election an option
to purchase 10,000 shares of Common Stock at a price per share equal to 100% of
the fair market value of the Common Stock on such date. One-third of such
options are exercisable immediately, with one-third becoming exercisable on each
of the second and third anniversaries of the date of grant. After each
shareholders meeting, if the director is re-elected or his term of office
continues after such shareholders meeting, each Non-Employee Director is granted
an option to purchase 2,500 shares of the Common Stock at an exercise price per
share equal to 100% of the fair market value of the Common Stock on such date.
These options are immediately exercisable.
Board Recommendation and Shareholder Vote Required
The Board of Directors recommends a vote FOR adoption of the 1998 Stock
Option Plan. Approval of the adoption of the 1998 Stock Option Plan requires the
affirmative vote of the greater of (I) a majority of the number 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.
<PAGE>
PROPOSAL THREE
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 Twelve Million Five Hundred Thousand (12,500,000)
shares consisting of 10,000,000 shares of Common Stock and 2,500,000 shares of
Series A Convertible Preferred Stock. 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
Seventy Five Million (75,000,000) shares. Of the 75 million shares, 50 million
shares have been deemed Common Stock, 2.5 million have been deemed Series A
Convertible Preferred Stock, and 22.5 million shares deemed undesignated shares.
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 November 6, 1998,
1,624,715 shares were issued and outstanding as Series A Preferred Stock,
2,624,952 shares were issued and outstanding as Common Stock, an additional
4,256,287 shares of Common Stock were reserved for issuance pursuant to stock
options and warrants, and 6,498,860 shares of Common Stock were reserved for
conversion of the Preferred Stock. Currently the total number of shares of
Common Stock issued or subject to issuance pursuant to options, warrants and
conversion of Preferred Stock exceeds the number of authorized shares. Messrs.
Case, Lyons, and Freitag have agreed not to exercise warrants or options or
convert Preferred Stock held by them until sufficient shares of Common Stock are
authorized.
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,
for issuance in the event shares of Preferred Stock are converted to Common, 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:
<PAGE>
ARTICLE 3.1
CAPITAL STOCK
The aggregate number of shares the corporation has the authority to
issue shall be 75,000,000, 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 50,000,000 common shares, 2,500,000 Series A preferred shares, and
22,500,000 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.
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 July
15, 1999 to be considered for inclusion in the Company's Proxy Statement and
form of Proxy relating to such meeting. Shareholder proposals intended to be
presented at the next annual meeting but not included in the Company's proxy
statement and proxy will be considered untimely if received by the Company after
September 28, 1999.
OTHER MATTERS
Board of Directors and Committees
The Board of Directors held three meetings during the fiscal year ended
June 30, 1998. 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, 1998 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
Committee met one time during the fiscal year ended June 30, 1998 and all
members were present. The Compensation Committee also meets informally to
discuss compensation issues and takes action through unanimous written consent.
<PAGE>
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 shareholders 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, 1998,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were satisfied except with respect to
Mr. Lyons who filed two Forms 4 late reporting two transactions and Mr.
Freitag who filed one Form 4 late reporting one transaction.
Independent Auditors
McGladrey & Pullen, LLP served as the Company's independent auditors for
the fiscal year ended June 30, 1998 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, 1998,
as filed with the Securities and Exchange Commission, including the Financial
Statements. 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 regard 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: November 12, 1998 Robert Case
Chief Executive Officer
<PAGE>
Quantech Ltd.
----------------------------------------
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 15, 1998
--------------------------------------------------
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 1998 Annual Meeting of Shareholders to be
held on Tuesday, December 15, 1998, 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 JAMES F. LYONS AS A CLASS 3 DIRECTOR OF THE COMPANY:
[ ] FOR nominee [ ] WITHHOLD AUTHORITY to vote for nominee
2. ADOPT THE 1998 STOCK OPTION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AMEND ARTICLES OF INCORPORATION to increase the number of authorized shares
to 75,000,000 shares consisting of 50,000,000 Common Shares, 2,500,000
Series A Preferred Shares and 22,500,000 undesignated shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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, #2 AND #3 AND WILL BE
DEEMED TO GRANT AUTHORITY UNDER PROPOSAL #4.
Dated: November 12, 1998
------------------------------------
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.
