SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Act of 1934 (Amendment No. )
Filed by the registrant x
---
Filed by a party other than the registrant___
Check the apprpriate box:
x Preliminary proxy statement
- --
__ Definitive proxy statement
__ Definitive additional materials
__ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RESPONSE USA, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
RESPONSE USA, INC.
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
x No fee required
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__ Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and O-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 O-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):______________________________________________________
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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 O-11(a) (2) and identify the filing for which the
offseting 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:
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RESPONSE USA, INC.
11-H Princess Road
Lawrenceville, New Jersey 08648
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 17, 1997
To the Stockholders of Response USA, Inc.:
You are hereby notified that the annual meeting of
stockholders of Response USA, Inc., a Delaware corporation (the
"Company") will be held at Schneck Weltman Hashmall, LLP, 1285
Avenue of the Americas, New York, New York 10019, on Wednesday,
September 17, 1997, at 3:00 p.m. local time, for the following
purposes:
1. To elect five members to the Board of Directors of
the Company to serve until their respective successors are
elected and qualified;
2. To authorize the Board of Directors of the Company
to effect a one-for-three reverse split of the outstanding shares
of Common Stock;
3. To authorize an amendment to the Company's
certificate of incorporation to amend the terms of the Company's
1996 Series A Convertible Preferred Stock (the "Preferred
Stock");
4. To authorize an amendment to the Company's
certificate of incorporation to increase the authorized number of
shares of common stock, $.008 par value per share ("Common
Stock") from 12,500,000 to 37,500,000;
5. To ratify the selection by the Company of Deloitte
& Touche LLP, independent public accountants, to audit the
financial statements of the Company for the year ended June
30, 1997; and
6. To transact such other matters as may properly
come before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on
August 4, 1997 (the "Record Date"), are entitled to notice of and
to vote at the meeting.
A proxy statement and proxy are enclosed herewith. If
you are unable to attend the meeting in person you are urged to
sign, date and return the enclosed proxy promptly in the enclosed
addressed envelope which requires no postage if mailed within the
United States. If you attend the meeting in person, you may
withdraw your proxy and vote your shares. Also enclosed herewith
is the Company's Annual Report for 1996.
By Order of the Board
of Directors
Ronald A. Feldman, Secretary
Lawrenceville, New Jersey
August , 1997
PRELIMINARY PROXY STATEMENT
RESPONSE USA, INC.
11-H Princess Road
Lawrenceville, New Jersey 08648
INTRODUCTION
This proxy statement is furnished in connection with
the solicitation of proxies for use at the annual meeting (the
"Annual Meeting") of stockholders of Response USA, Inc. (the
"Company"), to be held on Wednesday, September 17, 1997, and at
any adjournments thereof. The accompanying proxy is solicited by
the Board of Directors of the Company and is revocable by the
stockholder by notifying the Company's secretary at any time
before it is voted, or by voting in person at the Annual Meeting.
This proxy statement and accompanying proxy will be distributed
to stockholders beginning on or about August , 1997. The
principal executive offices of the Company are located at 11-H
Princess Road, Lawrenceville, New Jersey 08648, telephone (609)
896-4500.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record at the close of business on
August 4, 1997, are entitled to receive notice of, and vote at
the Annual Meeting. As of August 4, 1997, the number and class
of stock outstanding and entitled to vote at the meeting was [
] shares of common stock, par value $.008 per share (the "Common
Stock") and 5,890 shares of 1996 Series A Convertible Preferred
Stock (the "Preferred Stock"). Each share of Common Stock is
entitled to one vote on all matters. No other class of
securities will be entitled to vote at the meeting, except that
holders of Preferred Stock are entitled to [ ] votes for each
share of Preferred Stock they hold solely with respect to the
vote on Proposal 3. There are no cumulative voting rights.
The nominees receiving the highest number of votes cast
by the holders of Common Stock will be elected as the Company's
directors and constitute the entire Board of Directors of the
Company. The affirmative vote of at least a majority of the
shares represented and voting at the Annual Meeting at which a
quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) is
necessary for approval of Proposal Nos. 2, 3, 4 and 5. Proposal
No. 3 also requires the affirmative vote of those holding at
least 75% of the shares of Preferred Stock. A quorum is
representation in person or by proxy at the Annual Meeting of at
least one-third of the outstanding shares of the Company.
PROPOSALS TO STOCKHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each nominee to the Board of Directors will serve until
the next Annual Meeting of stockholders, or until his earlier
resignation, removal from office, death or incapacity.
Unless otherwise specified, the enclosed proxy
will be voted in favor of the election of Richard M. Brooks,
Ronald A. Feldman, Robert M. Rubin, Bruce H. Luehrs and Stuart R.
Chalfin. Information is furnished below with respect to all
nominees.
The following information with respect to the principal
occupation or employment of the nominees, the name and principal
business of the corporation or other organization in which such
occupation or employment is carried on and other affiliations and
business experience during the past five years has been furnished
to the Company by the respective nominees:
Richard M. Brooks has been Chief Executive Officer and
Chairman of the Company since July 1994, a director of the
Company since August 1990, and has served as the President and
Chief Financial Officer of the Company since February 1990. Mr.
Brooks was Chief Operating Officer of the Company from February
1990 until July 1994. From August 1986 to February 1990, Mr.
Brooks was general counsel to Response Ability Systems, Inc.
("Systems"), a wholly-owed subsidiary of the Company. Mr. Brooks
served as Regional Counsel Mid-Atlantic Region for the Interstate
Commerce Commission from May 1979 to March 1983 and was a senior
attorney for the United States Treasury Department from March
1974 to April 1979. Mr. Brooks received his Bachelor of Science
Degree in Business Administration in June 1970 from Temple
University, and graduated from Temple University School of Law in
1973.
Ronald A. Feldman has been a director and
Secretary-Treasurer of the Company since August 1990 and Chief
Operating Officer since July 1994. He has also served as the
Secretary and Treasurer of Systems from June 1990 and Vice
President of the Company since April 1992. From August 1986
through September 1989, he was the supervisor of Systems'
manufacturing operations and supervised the Company's monitoring
activities since March 1987. Mr. Feldman attended Temple
University from 1980 to 1982.
Robert M. Rubin has been a Director of the Company
since October 1991. Between October 1990 and January 1, 1994,
Mr. Rubin served as the Chairman of the Board and Chief Executive
Officer of American United Global, Inc., a publicly-traded
company ("AUGI"); from January 1, 1994 through January 19, 1996
he was Chairman of the Board of AUGI. Since January 19, 1996,
Mr. Rubin has served as Chairman of the Board, President and
Chief Executive Officer of AUGI. AUGI, through its subsidiary
National Stillman Corporation, is engaged in the manufacture of O-
rings for industrial application and through its subsidiary
Western Power & Equipment Corp. ("Western"), is a dealer of Case
brand construction equipment. Mr. Rubin has been Chairman of the
Board of Directors of Western since November 1992. Western
became a publicly-traded company in June 1995. Mr. Rubin is a
former director, Vice Chairman and is currently a minority
stockholder of American Complex Care, Inc. ("ACC"), a public
company currently engaged in providing on-site health care
services, including intra-dermal infusion therapies. ACC's two
major operating units filed an assignment of assets for the
benefit of its creditors without resort to bankruptcy
proceedings. Mr. Rubin is also a director, Chairman and minority
stockholder of Universal Self Care, Inc., a public company
engaged in the distribution of products to diabetics and Diplomat
Corporation, a publicly-traded corporation engaged in the
distribution of diapers and other products for juveniles. Mr.
Rubin is also Chairman, Chief Executive Officer and a Director
and a principal stockholder of ERD Waste Corp., a public company
specializing in the management and disposal of municipal solid
waste, industrial and commercial nonhazardous solid waste and
hazardous waste. Mr. Rubin is also a director of Help at Home,
Inc., a public company which provides housekeeping services to
elderly and disabled persons within their homes; Arzan
International (1991) Ltd. and Kay Kotts Associates, Inc., a
public company engaged in providing tax preparation and
assistance services.
Bruce H. Luehrs has an extensive background in venture
capital, mergers and acquisitions and commercial and investment
banking. In 1996, Mr. Luehrs formed Penn Valley Capital ("PVC")
which provides advisory services to companies in transition due
to periods of rapid growth or financial difficulty. Since
September 1996, Mr. Luehrs has served as Principal and
controlling shareholder of PVC, a private investment banking
company located in Wynewood, Pennsylvania. PVC provides advisory
services to companies in the telecommunications and medical
industries. Prior to forming PVC, Mr. Luehrs was a Vice President
with Columbia Capital Corporation, a merchant bank located in
Alexandria, Virginia, focused exclusively on the
telecommunications industry. Previously, Mr. Luehrs was a
principal at PNC Equity Management, an equity fund affiliated
with PNC Corporation and was a Senior Vice President at First
Fidelity Bank, (subsequently acquired by First Union Bank). While
at Fidelity, Mr. Luehrs founded and was president of Fidelcor
Capital, a licensed Small Business Investment Corporation (SBIC).
Mr. Luehrs experience includes service as a member of the Board
of Directors of a private nursing home company with revenues in
excess of $50 million. Mr. Luehrs received his undergraduate
degree in economics from Duke University and his Masters in
Management from Northwestern University in 1977.
Stuart R. Chalfin has been, since 1975, a principal of
Fishbein & Company, P.C., independent public accountants, where
he specializes in advising closely held businesses and
professionals. Mr. Chalfin served as Managing Partner of the firm
from 1979-1986, and President from 1990-1996. The firm employs
approximately 75 accountants. Mr. Chalfin is affiliated with the
Committee on Relations with Colleges and Universities and the
Linda Creed Foundation and is a member of the American Institute
of Certified Public Accountants.
INFORMATION CONCERNING BOARD MEETINGS
The Company's Board of Directors met twice during the
fiscal year ended June 30, 1996. All of the incumbent Directors
attended at least 75% of such meetings.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The Company maintains an Audit Committee consisting of
Messrs. Brooks and Rubin and will include Mr. Chalfin upon his
election; an Incentive Stock Option Plan Committee consisting of
Messrs. Brooks and Rubin, and will include Mr. Luehrs upon his
election; and a Compensation Committee consisting of Messrs.
Brooks and Rubin, and will include Mr. Chalfin upon his election.
MANAGEMENT
The current executive officers and directors of the
Company are set forth below:
Name Age Position
---- --- --------
Richard M. Brooks 48 Chief Executive Officer,
President, Chief Financial
Officer and Chairman
Ronald A. Feldman 34 Vice President, Chief
Operating Officer,
Secretary-Treasurer and
Director
Robert M. Rubin 56 Director
Stuart Levin 36 Director
Todd E. Herman 43 Director
Directors are elected to serve until the next annual
meeting of stockholders and until their successors have been
elected and have qualified. Directors do not receive
remuneration for their services as such, but may be reimbursed
for expenses incurred in connection therewith, such as the cost
of travel to Board meetings. Officers serve at the pleasure of
the Board of Directors until their successors have been elected
and have qualified.
Executive Compensation
- ----------------------
Securities
Underlying
Name and Principal Options All Other
Principal Position Year Salary SARS Compensation
- ------------------ ---- -------- ----------- ------------
Richard M. Brooks 1996 $217,980 - -
President and 1995 175,003 - -
Chief Executive and 1994 140,010 - -
Financial Officer
Ronald A. Feldman 1996 $135,654 - -
Chief Operating Officer, 1995 106,495 - -
Vice President, 1994 100,022 - -
Secretary and Treasurer
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
Shares at FY-End at FY-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized($) Unexercisable Unexercisable
- ---- ------------ ----------- ------------- -------------
Richard Brooks 25,000 $65,625 708,333/0 $4,205,727/0
President, Chief
Executive and
Financial Officer
Ronald A. Feldman 25,000 $65,625 260,067/0 $1,544,148/0
Chief Operating Officer,
Vice President, Secretary
and Treasurer
Employment and Consulting Agreements
Mr. Brooks and Mr. Feldman each entered into five-year
employment agreements with the Company, effective as of October
23, 1992, as amended to expire on June 30, 2000 to act as
President, Chief Financial and Chief Operating Officer, as
amended to include Chief Executive Officer; and Vice President,
Secretary-Treasurer, as amended to include Chief Operating
Officer, respectively which provide for initial annual base
salaries of $225,000 and $140,000, respectively. Messrs. Brooks
and Feldman also receive life insurance, disability,
hospitalization, major medical, vacation and other employee
benefits, reimbursement of reasonable business expenses incurred
on behalf of the Company, and use of Company-owned vehicles. The
Company maintains and is the beneficiary of a key person life
insurance policy in the amount of $3,000,000 and $1,000,000 on
the life of Mr. Brooks and Mr. Feldman, respectively.
In addition to cash compensation and other benefits,
under amendments to their employment agreements executed in
August 1992, Messrs. Brooks and Feldman received options to
purchase 133,333 and 85,067 shares of Common Stock, respectively,
at a price equal to $.375. These options are exercisable until
November 14, 2004. Messrs. Brooks and Feldman also received
options to purchase 600,000 and 200,000 shares of Common Stock,
respectively, awarded under the Company's Non-Qualified Stock
Option plan. In November 1995 the exercise price on Messrs.
Brooks's and Feldman's options were reduced to the prevailing
market price of $2.50. During February 1996, Messrs. Brooks and
Feldman both exercised 25,000 options to purchase common stock.
Robert M. Rubin, a director of the Company, has
performed consulting services for the Company in the past. In
connection therewith, in January 1992, the Company granted
options to purchase 58,929 shares of the Company's Common Stock
to Mr. Rubin exercisable at a price of $3.50 until January 1997.
Mr. Rubin subsequently transferred these options and disclaims
beneficial ownership thereof. Of such options, options to
purchase 6,250 shares of Common Stock were canceled in August
1992. In February 1993, Mr. Rubin was issued a warrant to
purchase 50,000 shares of Common Stock at $5.00 per share, in
consideration of services to the Company. The exercise price of
such warrant was subsequently reduced to $.008 per share and the
warrant was exercised. In September 1994, Mr. Rubin was granted
150,000 options to purchase Common Stock at the prevailing market
price of $.8125, which are exercisable for a period of ten years.
In February 1995, the exercise price of the 150,000 options to
purchase Common Stock were reduced to the prevailing market price
of $.375. Additionally, in February 1995, Mr. Rubin was granted
150,000 options to purchase common stock at a price of $3.75 per
share, which are exercisable for a period of ten years. In
November 1995 the exercise price on Mr. Rubin's options were
reduced to the prevailing market price of $2.50.
Incentive Stock Option Plan
In March 1992, the Company's Board of Directors and
stockholders adopted and approved an Incentive Stock Option Plan
("ISO Plan"). The ISO Plan provides for the grant to key
employees of the Company of stock options intended to qualify as
"incentive stock options" under the provisions of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). A
total of 400,000 shares of Common Stock have been reserved for
issuance under the ISO Plan of which 30,500 shares were granted
in October 1992, 37,000 were granted in February 1994, 35,000
were granted in April 1994, 13,000 were granted in December 1994,
and 62,750 were granted in December 1995. The ISO Plan is
administered by a committee of the Board of Directors which,
among other things, has the sole discretion to select optionees
and determine the number of shares covered by each option, its
exercise price and certain of its other terms. The exercise
price of options granted under the ISO Plan may not be less than
the fair market value of the Company's Common Stock on the date
of grant, and not less than 110% of such fair market value in the
case of participants owning more than 10% of the Company's Common
Stock. Options expire no later than ten years after they are
granted (5 years after grant in the case of participants owning
more than 10% of the Company's Common Stock). The number of
shares for which the optionee may exercise an option in any
calendar year is limited to option shares with an aggregate fair
market value, determined at the time the option is granted, which
does not exceed $100,000. The $100,000 limit for any calendar
year is subject to further reduction by the fair market value of
any stock (determined at the time of option grant) for which the
employee was granted an option under any Company plan during such
calendar year. Options terminate three months after the optionee
ceases to be employed by the Company unless the optionee's
employment is terminated by reason of disability, in which case,
the options shall expire following one year after such employment
termination. The committee has the right to accelerate the
expiration date in certain events. Options granted under the ISO
Plan are not transferable, except by will or the law of descent
and distribution.
Non-Qualified Stock Options
In August 1990, the Company's Board of Directors
approved a Nonqualified Stock Option Plan (the "NQO Plan")
pursuant to which the Company may grant stock options to
directors, officers, key employees and consultants. A total of
372,733 shares of Common Stock are presently outstanding and
exercisable from $2.50 to $35.00, expiring in November 2004
through July 2005. Options shall terminate six months after the
optionee ceases to be employed by the Company or any subsidiary,
regardless of the cause for termination.
In connection with the acquisition of USS, the Company
also issued an aggregate of 600,000 options to two former
stockholders of USS who became employees of the Company. Such
options were exercisable at $3.75 per share until March 2000. In
November 1995 the exercise price was reduced to $2.50, the
prevailing market price and expire on November 14, 2004.
The compensation of the Company's executive officers
during the fiscal year ended June 30, 1996 was determined by the
Board of Directors at the time of the Company's public offering
in October 1992, as amended. Such determination was based upon
the Board's assessment of each executive's performance to date.
Security Ownership of Certain Beneficial
Owners and Management
-----------------------------------------
The following table sets forth, as of May 1, 1997, the
record and beneficial ownership of Common Stock of the Company by
each officer and director, all officers and directors as a group,
and each person known to the Company to own beneficially or of
record five percent or more of the outstanding shares of the
Company:
Number of Percentage
Shares Owned of Shares
Name and Address* Beneficially (1) Outstanding
- ----------------- ----------------- -----------
Richard M. Brooks (2) 710,315 13.1%
Ronald A. Feldman (3) 262,067 4.8%
Robert M. Rubin (4) 533,082 9.8%
9450 Aegean Drive
Boca Raton, Fl 33496
Stuart Levin -0- -
Todd E. Herman (5) 328,161 6.1%
BKR, Inc. 1,094,164 20.4%
Officers and directors
as a group (five persons)
(2)(3)(4)(5) 1,833,625 33.8%
* Unless otherwise specified, the address of each named person
is c/o Response USA, Inc., 11-H Princess Road, Lawrenceville, New
Jersey.
(1) Shares of Common Stock which are not outstanding but which a
person has the right to acquire within sixty days pursuant
to outstanding options are deemed outstanding for the
purpose of computing such person's ownership of Common Stock
and percentage of outstanding Common Stock owned by such
person, but are not deemed to be outstanding for the purpose
of computing number of shares or the percentage of Common
Stock owned by any other person.
(2) Includes 708,333 shares issuable upon exercise of currently
exercisable options. See "Management -- Employment and
Consulting Agreements."
(3) Includes 260,067 shares issuable upon exercise of currently
exercisable options. See "Management -- Employment and
Consulting Agreements."
(4) Mr. Rubin's wife and children own 5,893 shares of Common
Stock, as to which Mr. Rubin disclaims beneficial ownership.
Includes 300,000 shares issuable upon exercise of currently
exercisable options.
(5) Of which 300,000 shares are issuable upon exercise of
currently exercisable options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
USS
On March 4, 1994, the Company through its wholly-owned
subsidiary, USS, completed the acquisition of substantially all
of the assets of United Video Associates Inc., a Pennsylvania
corporation ("UVA"), and National Security Finance Limited
Partnership II, a limited partnership organized under the laws of
New Jersey ("NSF")(the "Acquisition"). UVA and NSF were engaged
in the installation, servicing and monitoring of commercial and
residential electronic security systems. In consideration of the
Acquisition, the Company paid UVA and NSF an aggregate of
$1,747,576. In addition, the Company issued an aggregate of
43,569 shares of its common stock to the shareholders and
partners of USS and NSF, respectively. Under the terms of this
Agreement, in March, 1995 and June, 1995 the Company issued an
additional 120,000 shares of its common stock to the stockholders
and partners of USS and NSF valued at $477,137. The Company also
entered into five-year employment agreements with two principals
of USS to provide management services to USS.
On November 1, 1994, the Company completed the
acquisition of all of the outstanding capital stock of Universal
Security Systems, Inc., a New Jersey Corporation ("USS"), owned
by two officers of USS who are principals of UVA and NSF, and one
other stockholder, in exchange for 75,770 shares of the Company's
Common Stock to the former stockholders of USS. USS is engaged
in the installation, servicing and monitoring of electronic
security systems. The Company also entered into an employment
agreement with one of the former stockholders.
Other Transactions
On October 1, 1994, Mr. Rubin entered into a consulting
agreement with the Company pursuant to which he is paid an annual
consulting fee of $60,000, for a period of two years. The
agreement was terminated on April 30, 1996.
The Company believes that each of the foregoing
transactions were on terms at least as favorable to the Company
as those which would have been available from an unrelated third
party in an arm's length transaction.
PROPOSAL NO. 2
AUTHORIZATION OF REVERSE STOCK SPLIT
Background
- ----------
In connection with contemplated financing transactions,
the Board of Directors has determined that it may be necessary to
effect a reverse split of the Company's outstanding shares of
Common Stock (the "Reverse Stock Split"). The Company's Board of
Directors has unanimously authorized the Reverse Stock Split
pursuant to which no more than each three of the ( )
currently outstanding shares of Common Stock (the "Old Shares")
would be automatically converted into one share of Common Stock
(the "New Shares"). The Reverse Stock Split, if authorized, will
become effective only in a ratio not to exceed one-for-three and
only upon the further authorization of the Board of Directors
that such reverse split is required. The reverse stock split
will be effected, if at all, within six months of its
authorization by the stockholders.
Reasons for the Reverse Stock Split
- -----------------------------------
The primary reason for the Reverse Stock Split is to
increase the per share stock price. The Company believes that it
will be necessary to maintain the stock price of the Common Stock
above its current levels in order to attract additional public
financing for the Company (including the proposed financing as
described in Proposal No. 3. In addition, the Company believes
that higher stock prices will generate greater interest among
professional investors and institutions. If the Company is
successful in generating interest among such entities, it is
anticipated that the shares of Common Stock would have greater
liquidity and a stronger investor base.
The Reverse Stock Split will be effectuated, if at all,
by reducing the number of issued and outstanding shares at a
ratio of no greater than one-for-three; however, the number of
authorized shares of Common Stock (12,500,000 shares) will remain
the same (subject to the authorization of additional shares of
Common Stock). Accordingly, as a result of the Reverse Stock
Split, if effectuated, the Company will have a greater number of
authorized but unissued shares (the exact number of which shall
be determined based upon the actual ratio of the reverse split,
if any). The Reverse Stock Split has potentially dilutive
effects on each of the stockholders. Each of the stockholders
may be diluted to the extent that any of the authorized but
unissued shares are subsequently issued.
The Reverse Stock Split will not alter the percentage
interests in the Company of any stockholder, except to the extent
that the Reverse Stock Split results in a stockholder of the
Company owning a fractional share. In lieu of issuing fractional
shares, the Company will issue to any stockholder who otherwise
would have been entitled to receive a fractional share as a
result of the Reverse Stock Split an additional full share of
Common Stock.
Effect of the Reverse Split
- ---------------------------
The principal effects of the Reverse Stock Split will
be that the number of shares of Common Stock issued and
outstanding will be reduced from [ ] to approximately [
], assuming the full one-for-three reverse split is effectuated.
The Company's stated capital will not be affected.
No Right of Appraisal
- ---------------------
Under the Delaware Corporation Law, the state in which
the Company is incorporated, the Reverse Stock Split does not
require the Company to provide dissenting stockholders with a
right of appraisal and the Company will not provide stockholders
with such right.
Outstanding Warrants and Options
- --------------------------------
Commencing with the effective date of the Reverse Stock
Split, if effectuated, all outstanding warrants and options
entitling the holders thereof to purchase shares of Common Stock
will entitle such holders to receive, upon exercise of their
options, one-third of the number of shares of Common Stock which
such holders may purchase upon exercise of their warrants or
options and the exercise price will increase threefold.
Federal Income Tax Consequences
- -------------------------------
The Company believes that the Federal income tax
consequences of the Reverse Stock Split to holders of Old Shares
and holders of New Shares will be as follows:
(i) Except as explained in (v)below, no income
gain or loss will be recognized by a stockholder
on the surrender of the Old Shares or receipt
of the certificate representing New Shares.
(ii) Except as explained in (v) below, the tax basis
of the New Shares will equal the tax basis of
the Old Shares exchanged therefor.
(iii) Except as explained in (v) below, the holding
period of the New Shares will include the
holding period of the Old Shares if such Old
Shares were held as capital assets.
(iv) The conversion of the Old Shares into the New
Shares will produce no taxable income or gain
or loss to the Company.
(v) The Federal income tax treatment of the receipt
of the additional fractional interest by a
stockholder is not clear and may result in tax
liability not material in amount in view of the
low value of such fractional interest.
The Company's opinion is not binding upon the Internal
Revenue Service or the courts, and there can be no assurance that
the Internal Revenue Service or the courts will accept the
positions expressed above.
The state and local tax consequences of the Reverse
Stock split may vary significantly as to each stockholder,
depending upon the state in which he/she resides. Stockholders
are urged to consult their own tax advisors with respect to the
Federal, State and local tax consequences of the reverse stock
split.
The Board of Directors will offer the following
resolution at the Annual Meeting:
RESOLVED, that the Board of Directors is empowered
in their discretion without further action of the
stockholders of the Company, to file an amendment to
the Certificate of Incorporation of the Company to
effect a reverse split of the Company's outstanding
shares of common stock, $.008 par value, on a ratio of
no more than one-for-three, and that the President,
Secretary and Chief Executive Officer of the Company,
or other officer designated by the President, and each
of them be, and hereby are empowered to take any and
all action necessary to effectuate the foregoing.
The affirmative vote of at least a majority of the
shares of Common Stock represented and voting at the Annual
Meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required
quorum) is necessary for approval of Proposal No. 2. Under
Delaware law, there are no rights of appraisal or dissenter's
rights which arise as a result of a vote to increase the number
of authorized shares of the Company's Common Stock.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 3
AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
TO AMEND THE TERMS OF THE PREFERRED STOCK
On July 1, 1996, the Company completed the private
placement of 7,500 shares of Preferred Stock for an aggregate of
$7,500,000.
In September 1996, as a result of then current market
conditions for the Common Stock, the Company suspended conversion
of the Preferred Stock. In particular, there was a dramatic
increase in the "short" position for the Common Stock from July
through August, 1996. During this same period, the price of the
Common Stock declined from $7.375 to $4.656. The Company
commenced an investigation into the trading activity, including
discussions with some of the Company's market-makers and a review
of trading activity; the Company could find no basis for the
increase in the short position or the decline in the price.
Lacking any other explanation, and based upon a practice
sometimes used by investors after the purchase of convertible
securities, the Company believed that certain investors may have
been selling the Common Stock short in anticipation of the
effectiveness of the registration statement which registered the
sale of the Common Stock issuable upon conversion of the
Preferred Stock. In the weeks that followed the effectiveness of
the registration statement, the Company received requests for
significant conversions into shares of Common Stock.
The Company believed that it was not in the best interests
of the Company to allow conversions which could result in a
further precipitous drop in the market value of the Common Stock.
Although the Company was concerned about this trading activity,
and in fact retained the services of an expert to review the
trading activity to determine if there were any improprieties,
the Company did not believe that it had a sufficient basis to
advise the Securities and Exchange Commission ("SEC") or The
Nasdaq Stock Market of the source of the trading activity.
Furthermore, the Company was concerned about the impact on the
overall market for its securities. The Company sold the
Preferred Stock with the belief that the investors in the
offering would hold their preferred stock as an investment rather
than selling at the first opportunity. The unusual trading
activity was not necessarily illegal or improper under the rules
and regulation of either the SEC or Nasdaq.
On January 2, 1997, Lake Management LDC ("Lake") and KA
Investments LDC, each Holders of the Preferred Stock, together
filed a Complaint in the Court of Chancery of the State of
Delaware against the Company challenging, among other things, the
Company's decision to suspend conversion rights and seeking,
among other things, specific performance under the Certificate of
Designations to convert their Preferred Stock to Common Stock of
the Company. The case is captioned Lake Management LDC and KA
Investments LDC v. Response USA, Inc., Civil Action No. 15449.
On February 10, 1997, the Company responded to the Complaint by
filing an Answer, Defenses and Counterclaim. A Reply to the
Counterclaim was filed on March 3, 1997. Lake participated in a
group settlement with the other Preferred Holders, and dismissed
the foregoing action. The Company also agreed to the payment to
Lake of attorneys' fees.
On February 18, 1997, Halifax Fund L.P., a holder of the
Preferred Stock ("Halifax"), filed a Complaint in the Court of
Chancery of the State of Delaware against the Company
challenging, among other things, the Company's decision to
suspend conversion and seeking, among other things, specific
performance under the Certificate of Designations to convert its
Preferred Stock to Common Stock of the Company. The case is
captioned Halifax Fund, L.P. v. Response USA, Inc., Civil Action
No. 15553. Halifax also filed a Motion for a Preliminary
Injunction and a Motion for Expedited Proceedings. On March 5,
1997, the Court held a conference and denied Halifax's request
for a hearing on its motion for a preliminary injunction. On
March 11, 1997, Halifax filed a second Motion for a Preliminary
Injunction. The Court held a telephonic conference on March 12,
1997 and denied Halifax's request for a hearing on its second
preliminary injunction motion. Halifax filed a motion for
partial summary judgment. On May 13, 1997, the Court orally
granted partial summary judgment to Halifax solely with respect
to its right to convert Preferred Stock into Common Stock. On
May 28, 1997, the Court entered its Order granting partial
summary judgment to Halifax, including among other things,
specific performance of Halifax's right to convert and
permanently enjoining the Company from denying the right to
convert the Preferred Stock.
Prior to June 30, 1997, the Company reached an
agreement with the holders of the Preferred Stock (other than
Halifax)(the "Holders"), pursuant to which the Holders agreed to
refrain from all conversions of the Preferred Stock for the
periods set forth below, and the Company agreed to issue to the
Holders certain warrants as described below and to amend (subject
to stockholder approval), the terms of the Preferred Stock by the
filing of an Amended and Restated Certificate of Designation (the
"Agreement").
Pursuant to the terms of the Agreement, on June 26,
1997, each Holder received five thousand warrants (the
"Warrants") for each 100 shares of Preferred Stock held as of
June 26, 1997. The Warrants, which will not be redeemable by the
Company, will be exercisable at a price per share of $2.00 to
purchase one share of Common Stock. Fifty percent (50%) of the
Warrants are exercisable after one (1) year from issuance; the
remaining fifty percent (50%) shall be exercisable two (2) years
from issuance. The term of the Warrants shall be ten years. The
Common Stock issuable upon exercise of the Warrants shall be
registered with the Securities Exchange Commission ("SEC")
pursuant to a Registration Statement on Form S-3 which shall be
filed by the Company with the SEC no later than August 21, 1997.
In consideration of the issuance of the Warrants, and
subject to the terms and conditions set forth in the Agreement,
each Holder agreed (a) to give its proxy and its consent in favor
of the Amended and Restated Certificate of Designation (the
"Amendment") in the form of Exhibit [ ] attached hereto, and
(b) to refrain from any and all conversions of such Holder's
Preferred Stock, pursuant to the terms of the original
Certificate of Designations, until the earlier of November 30,
1997 or upon the occurrence of default dates ("Trigger Dates").
If the Company fails to comply with the Trigger Dates, the
Holders' right to convert its Preferred Stock shall be activated
if and only if a majority of the Holders as of such Trigger Date
have collectively provided appropriate written notice exercising
such right. The Trigger Dates are comprised of the following:
(1) the filing with the Securities and Exchange Commission
("SEC") of this Proxy Statement on or before July 10, 1997;
(2) the mailing of a definitive proxy statement to the Company's
stockholders for the Stockholders' Meeting on or before August 4,
1997 (subject to extension in the event the SEC conducts a review
of this Proxy Statement); (3) the filing by the Company of a
registration statement on Form S-3 or other appropriate form,
with respect to the registration for resale of the shares
issuable upon exercise of the Warrants and other shares of Common
Stock issuable to the Holders, on or before August 21, 1997;
(4) the filing by the Company of the Amendment and an amendment
to the Company's Certificate of Incorporation to increase the
Company's authorized Common Stock to at least 37,500,000 shares,
on or before September 18, 1997 (subject to extension in the
event the SEC conducts a review of this Proxy Statement); (5) the
filing by the Company of a registration statement with the SEC
for the primary issuance by the Company of securities to generate
approximately $8,750,000 of net proceeds for use by the Company
to redeem all of the Preferred Stock (the "Registration
Statement"), on or before October 1, 1997; and (6) upon such
applicable date as the Company abandons or withdraws the
Registration Statement prior to the Registration Statement being
declared effective for use by the Company on or before
November 30, 1997.
The Agreement contains various covenants providing for
the Company's compliance with the Trigger Dates and related
matters. In addition, the Agreement also provides that upon
closing of the transactions contemplated by the Agreement, each
Holder shall release the Company from any and all claims,
actions, and other liabilities, including but not limited to,
liability arising out of the Company's failure to honor the
conversions of Preferred Stock prior to the date of the Agreement
and certain other matters. This release becomes null and void in
the event that the Company fails to redeem all of the Preferred
Stock on or before November 30, 1997, and is inapplicable to any
claims which a Holder may have under the Agreement and certain
ancillary documents executed in connection therewith.
The Certificate of Designations, as amended and restated in its
entirety to reflect the changes made by the Amendment, is
attached as Exhibit [ ]. The following description is qualified
in its entirety by reference to Exhibit [ ].
The Amendment gives the Company the right to redeem the
Preferred Stock ("Redemption") for payment of the following to
the Holders:
1.Cash in an amount equal to One Thousand Three Hundred
Fifty Dollars ($1,350) per share of Preferred Stock
(the "Redemption Price"); and
2.Interest at a rate of twelve percent (12%) per annum
on the Redemption Price from May 12, 1997 until
consummation of the Redemption.
The Amendment provides that the suspension of conversion rights
would no longer be effective and the right to convert the
Preferred Stock shall be effective commencing on and after
November 30, 1997, in accordance with the terms set forth in the
Amended and Restated Certificate of Designations. In addition,
pursuant to the Agreement, effective as of June 18, 1997, each
Holder agrees to refrain from conversions of the Preferred Stock
until the earlier of November 30, 1997 or certain other specified
dates.
Under the terms of the Certificate of Designations in
effect prior to the Amendment, each share of Preferred Stock is
convertible into shares of Common Stock, at the sole option of
the Holder, based upon the following formula:
The Premium + 1,000
-------------------
Conversion Price
where: (a) the Premium equals (i) 10% multiplied by (ii) the
number of days from the date the purchaser deposited funds for
the purchase of the Preferred Stock through and including the
date of conversion divided by 365 and multiplied by (iii) one
thousand (1,000); (b) 1,000 represents the face value of the
Preferred Stock; and (c) the Conversion Price is equal to the
lesser of (i) 80% of the average closing bid price of the Common
Stock as reported by NASDAQ for the five trading days preceding
the date of conversion or (ii) $5.00 per share. The Company may
redeem all or any portion of the Premium for cash in lieu of
converting such Premium into shares of Common Stock upon the
foregoing conversion terms. A Holder is not entitled, however,
to convert shares of the Preferred Stock which would result in
such Holder and his affiliates beneficially owning more than 4.9%
of the outstanding Common Stock. After a certain period of time
after June 1, 1999, the Company may require conversion of the
Preferred Stock upon the foregoing conversion terms.
The Amendment provides that the 1,000 face value of the
Preferred Stock utilized in the Conversion formula shall be
increased to 1,200. In addition, the fixed price shall initially
mean $5.00 and shall be reset on December 1, 1997 to the closing
price of the Company's Common Stock on November 30, 1997, as
reported by the NASDAQ Small Cap Stock Market ("NASDAQ") (or if
not reported by NASDAQ, as reported by such other exchange or
market where traded) (the "Fixed Price") and shall be reset on
the first day (each a "Reset Date") of each month thereafter,
beginning January 1, 1998, to an amount equal to the lower of (x)
the Fixed Price in effect on the day immediately preceding such
Reset Date and (y) the lowest closing price of the Company's
Common Stock as reported by NASDAQ (or, if not reported by
NASDAQ, as reported by such other exchange or market where
traded) for any day during the calendar month immediately
preceding such Reset Date. The Fixed Price and the amounts set
forth in clauses (x) and (y) of the definition thereof shall be
subject to equitable adjustments from time to time for stock
splits, stock dividends, recapitalizations, reorganizations and
similar transactions.
On or before the opening of the market on Monday,
December 1, 1997, the Company shall deposit into escrow, that
number of shares of Common Stock reserved or required to be
reserved pursuant to Section 5(c) of the Certificate of
Designations and necessary and sufficient for the purpose of
effecting conversion of the Preferred Stock on or after
November 30, 1997, in accordance with the terms of the Amended
and Restated Certificate of Designations. Pursuant to the
Amendment, the Company is required to reserve for issuance a
sufficient number of shares of Common Stock to effect the
conversion of all outstanding Preferred Stock, and shall have
reserved for issuance 200% of shares then issuable upon
conversion of the outstanding Preferred Stock (based upon the
conversion price then in effect and assuming that the Preferred
Stock is fully convertible. The escrow shall be established
pursuant to an Escrow Agreement by and among the Company, the
remaining Holders as of November 30, 1997 and American Registrar
& Transfer Company, independent escrow agent (the
"Agent")("Escrow Agreement"). The Agent shall process any and
all conversion requests made by or on behalf of the Holders on or
after December 1, 1997, and ending upon such date that no
Preferred Stock is outstanding, pursuant to the terms of the
Amended and Restated Certificate of Designations and the Escrow
Agreement.
On June 30, 1997, after the Company concluded the
Agreement with the Holders, the Company agreed to convert 1000
shares of Preferred Stock owned by Halifax and issue to Halifax
900,000 shares of the Company's Common Stock. The Company
assisted in locating a purchaser for the Common Stock received by
Halifax upon conversion of its Preferred Stock. Halifax's Common
Stock was purchased for an aggregate price of $1,500,000,
comprised of $1,350 per share for each share of Preferred Stock,
plus $150,000 for reimbursement of attorneys' fees. The Company
issued to Halifax 5,000 Warrants for each 100 shares of Preferred
Stock held. The litigation between Halifax and the Company was
dismissed with prejudice upon receipt by Halifax of the full
purchase price. In the event that the Company settles with any
other Preferred Holder on terms which Halifax in its sole
discretion believes are better than those received by Halifax in
the settlement, Halifax has the right to elect the alternative
settlement.
In the opinion of the Board of Directors, the Amendment
is in the best interests of the Company and all of its
shareholders. In the view of the Board, the redemption price
being paid is fair and reasonable in view of the value of the
Company's business, its historic earnings, its prospects for the
future and the original investments made by the Holders.
There are no tax consequences of the Redemption to the Company.
The Amendment will be effective upon the filing of a
Certificate of Amendment with the Department of State of the
State of Delaware. The Company intends to file the Amended and
Restated Certificate of Designations within five days after
approval by the stockholders
On June 10, 1997, the Board of Directors of the Company
authorized the redemption of the Preferred Stock, subject to
approval of the Amendment by the shareholders entitled to vote
thereon and consummation of the Hampshire Securities Financing
described below or such other alternative financing as the
Company may obtain in lieu thereof. If the requisite number of
shares of Preferred Stock approve the Amendment, the Company
intends to redeem the Preferred Stock pursuant to the terms of
the Amended and Restated Certificate of Designations on or prior
to November 30, 1997, unless one of the other conditions to
approval of the Amendment or the Redemption does not occur. If
the Amendment is not approved by either the Holders or other
stockholders required to approve the Amendment, the Company may
repurchase the Preferred Stock from those individual Holders who
approved the Amendment upon the terms of the Amendment.
On March 26, 1997, the Company and Hampshire executed a
letter of intent (the "Letter of Intent"), whereby the Company
engaged Hampshire as its exclusive financial advisor for a two-
year period for purposes of managing a public offering of the
Company's Common Stock. Pursuant to the Letter of Intent,
Hampshire would act as sole or managing underwriter of a public
offering which is intended to raise $15,000,000 for the Company
(the "Public Offering"). The Letter of Intent provides, among
other things, that the Company will take appropriate action such
that it will be capitalized with approximately 1.9 million shares
of Common Stock and an equivalent number of options following a
one-for-three reverse stock split, and a stock option plan. The
Letter of Intent sets forth certain obligations of the Company in
connection with Hampshire's role as sole or managing underwriter,
including (a) the granting to Hampshire of a customary
overallotment option; (b) electing two independent persons to the
Company's Board of Directors; (c) execution of customary lock-up
agreements; and (d) the payment by the Company of certain
expenses relating to the Registration Statement and other
documents prepared in connection with the Public Offering. The
Public Offering is conditioned upon, among other matters,
Hampshire's completion of its due diligence, the execution of a
definitive underwriting agreement, no material adverse change in
the business or financial condition of the Company. The Letter
of Intent merely sets forth the intentions of the Company and
Hampshire at the time it was executed. There can be no assurance
that the Public Offering will be completed on the foregoing
terms, or at all. The Company reserves the right to substitute
alternative financing for the Hampshire Securities Financing for
the purpose of redeeming the Preferred Stock pursuant to the
amendment on or prior to November 30, 1997.
The Board will offer the following resolution at the Annual
Meeting:
RESOLVED, that an Amended and Restated Certificate
of Designation be filed in order to effectuate the
approved changes to the terms of the 1996 Series A
Preferred Stock and that the President, Secretary and
Chief Executive Officer of the Company, or other
officer designated by the President, and each of them
be, and hereby are empowered to take any and all action
necessary to effectuate the foregoing.
Under Section 242 of the Delaware General Corporate
Law, the approval of the majority of the Common Stock and
Preferred Stock, voting together as a class, entitled to vote
thereon is required to approve the Amendment. Richard M. Brooks,
Ronald A. Feldman, Robert M. Rubin and Todd E. Herman, directors
and officers of the Company holding an aggregate of 265,225
shares of Common Stock have executed an agreement dated as of
June 18, 1997 in connection with the Agreement, wherein they have
agreed to vote their shares in favor of the Amendment, as well as
in favor of an amendment to the Company's Certificate of
Incorporation to increase the Company's authorized Common Stock
to 37,500,000 shares. Pursuant to the terms of the Certificate
of Designations, each Holder is entitled to vote that number of
shares of Common Stock into which that number of shares of
Preferred Stock held by such Holder as of the Record Date are
convertible. As of the Record Date, each shares of Preferred
Stock is convertible into [ ] shares of Common Stock. Under
Delaware law, there are no rights of appraisal or dissenter's
rights which arise as a result of a vote to increase the number
of authorized shares of the Company's Common Stock.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 4
AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK
The reason for the proposed amendment to the Company's
Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock, is that it is a condition
to the Preferred Agreement and necessary in connection with
contemplated financing transactions as described in Proposal No.
3. The Company will also require such additional authorized
shares in connection with its ongoing acquisition efforts which
often entail the issuance of Common Stock as a substitution for
other forms of consideration such as cash or promissory notes, as
well as for future capital raising requirements.
The Company's authorized capital stock consists of
12,500,000 shares of Common Stock, par value $.008 per share, of
which [ ] shares were outstanding as August 4, 1997.
Each stockholder is entitled to one vote for each share of Common
Stock owned of record on all matters to be voted on by
stockholders. The holders of Common Stock are entitled, upon
liquidation or dissolution of the Company, to receive pro rata,
all assets remaining available for distribution to stockholders.
The Common Stock has no preemptive or other subscription rights,
and there are no conversion rights or redemption provisions. All
outstanding shares of Common Stock are validly issued, fully paid
(in cash or services), and nonassessable.
The Board of Directors believes that an increase in
authorized shares of Common Stock from 12,500,000 to 37,500,000
is required for the foregoing purposes, and the Board will offer
the following resolution at the Annual Meeting:
RESOLVED, that Article IV of the Certificate of
Incorporation of the Company be amended to increase the
number of authorized capital stock of the Company to
37,500,000 shares, $.008 par value and that the
President, Secretary and Chief Executive Officer of the
Company, or other officer designated by the President,
and each of them be, and hereby are empowered to take
any and all action necessary to effectuate the
foregoing.
The affirmative vote of at least a majority of the
shares of Common Stock represented and voting at the Annual
Meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required
quorum) is necessary for approval of Proposal No. 4. Under
Delaware law, there are no rights of appraisal or dissenter's
rights which arise as a result of a vote to increase the number
of authorized shares of the Company's Common Stock.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 4 TO BE IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF AUDITORS
The firm of Fishbein & Company, P.C. ("Fishbein")
audited the financial statements of the Company for the fiscal
years ended June 30, 1990 through June 30, 1996. On July 2,
1997, the Board of Directors of the Company determined not to
appoint Fishbein to audit the financial statements of the Company
for the fiscal year ended June 30, 1997. On July 3, 1997,
pursuant to a vote of the Board of Directors, the firm of
Deloitte & Touche LLP was selected to audit the financial
statements of the Company for the year ended June 30, 1997.
The report of Fishbein on the Company's financial
statements for the previous years did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope, or accounting
principles. During the entire period of the engagement of
Fishbein, through July 2, 1997, there had been no disagreement on
any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to Fishbein's satisfaction, would
have caused Fishbein to make reference in connection with its
reports to the subject matter of the disagreement.
Accordingly, the Board of Directors will offer the following
resolution at the Annual Meeting:
RESOLVED, that the appointment by the
Board of Directors of Deloitte & Touche LLP,
independent public accountants, to audit the
financial statements of the Company for the
year ended June 30, 1997 be, and hereby is,
ratified and approved.
It is anticipated that a member of Deloitte & Touche
LLP will be present at the Annual Meeting to respond to
appropriate questions and will have the opportunity, if he
desires, to make a statement.
The affirmative vote of at least a majority of the
shares represented and voting at the Annual Meeting at which a
quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) is
necessary for approval of Proposal No. 5. Under Delaware law,
there are no rights of appraisal or dissenter's rights which
arise as a result of a vote to ratify the selection of auditor's.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 5 TO BE IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
STOCKHOLDERS' PROPOSALS
It is anticipated that the Company's 1998 Annual
Meeting of Stockholders will be held in November 1998.
Stockholders who sought to present proposals at the Company's
Annual Meeting of Stockholders must have submitted their
proposals to the Secretary of the Company on or before September
1, 1998.
GENERAL
The Company has hired Shareholder Communications
Corporation to act as a proxy solicitor. Shareholder
Communications Corporation will receive approximately $8,000 in
connection with its services as solicitation agent. The address
of the solicitation agent is:
Shareholder Communications Corporation
40 Exchange Place
New York, New York 10005
In addition to the use of mails, proxies may be
solicited by personal interview, telephone and telegraph, by
directors, officers and regular employees of the Company, without
special compensation therefor. The Company expects to reimburse
banks, brokers and other persons for their reasonable out-of-
pocket expenses in handling proxy materials for beneficial owners
of the Company's Common Stock.
Unless contrary instructions are indicated on the
proxy, all shares of Common Stock represented by valid proxies
received pursuant to this solicitation (and not revoked before
they are voted) will be voted FOR Proposal Nos. 2, 3, 4 and 5 and
for the election of all directors nominated. All shares of
Preferred Stock represented by valid proxies (and not revoked
before they are voted) will be voted FOR Proposal No. 3.
The Board of Directors knows of no business other than
that set forth above to be transacted at the meeting, but if
other matters requiring a vote of the stockholders arise, the
persons designated as proxies will vote the shares of Common
Stock represented by the proxies in accordance with their
judgment on such matters. If a stockholder specifies a different
choice on the proxy, his or her shares of Common Stock will be
voted in accordance with the specification so made.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE
URGE YOU TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF
PROXY IN THE PREPAID ENVELOPE PROVIDED, NO MATTER HOW LARGE OR
SMALL YOUR HOLDINGS MAY BE.
By Order of the Board of Directors,
Ronald A. Feldman, Secretary
Lawrenceville, New Jersey
August , 1997
RESPONSE USA, INC.
Annual Meeting of Stockholders -- Wednesday, September 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RICHARD M. BROOKS and RONALD A.
FELDMAN and each of them, with power of substitution, as proxies to
represent the undersigned at the Annual Meeting of Stockholders to be held
at Schneck Weltman & Hashmall LLP, 1285 Avenue of the Americas, New York,
New York 10019, Wednesday, September 17, 1997 at 3:00 p.m. local time and
at any adjournment thereof, and to vote the shares of stock the undersigned
would be entitled to vote if personally present, as indicted on the reverse
side hereof.
The shares represented by the proxy will be voted as directed.
If no contrary instruction is given, the shares will be voted FOR Proposal
Nos. 2, 3, 4 and 5 and for the election of Richard M. Brooks, Ronald A.
Feldman, Robert M. Rubin, Bruce H. Luehrs and Stuart R. Chalfin as
Directors.
Please mark boxes in blue or black ink.
1. Proposal No. 1 - Election of Directors.
Nominees: Richard M. Brooks, Ronald A. Feldman, Robert M. Rubin,
Bruce H. Luehrs and Stuart R. Chalfin.
AUTHORITY
FOR withheld
all as to all
nominees nominees
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For, except authority withheld as to the following nominee(s):
_______________________________________________________
2. Proposal No. 2 to authorize the Board of Directors of the Company to
effect a one-for-three reverse split of the outstanding shares of the
Company's common stock, $.008 par value per share.
FOR AGAINST ABSTAIN
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3. Proposal No. 3 to authorize an amendment to the Company's certificate
of incorporation to amend the terms of the Company's 1996 Series A
Convertible Preferred Stock.
FOR AGAINST ABSTAIN
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4. Proposal No. 4 to authorize an amendment to the Company's certificate
of incorporation to increase the authorized number of shares of Common
Stock from 12,500,000 to 37,500,000.
FOR AGAINST ABSTAIN
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l l l l l l
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5. Proposal No. 5 for ratification of the selection of Deloitte & Touche
LLP as the independent auditors of the Company.
FOR AGAINST ABSTAIN
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6. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
(Please date, sign as name appears at left, and return promptly. If the
stock is registered in the name of two or more persons, each should sign.
When signing as Corporate Officer, Partner, Executor, Administrator,
Trustee, or Guardian, please give full title. Please note any change in
your address alongside the address as it appears in the Proxy.
Dated:_________
__________________
(Signature)
__________________
(Print Name)
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
