SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[Amendment No. _____]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Derma Sciences, Inc.
------------------------------------------------------------------------
(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)(4) 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>
DERMA SCIENCES, INC.
NOTICE OF ANNUAL MEETING
and
PROXY STATEMENT
Annual Meeting of Shareholders
Hyatt Regency
U.S. 1 and Alexander Road
Princeton, New Jersey
May 12, 1999
<PAGE>
DERMA SCIENCES, INC.
214 CARNEGIE CENTER, SUITE 100
PRINCETON, NJ 08540
(800) 825-4325
------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1999
------------------------------------------------------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Derma Sciences, Inc., a Pennsylvania corporation (the "Company"), will be held
on May 12, 1999, at 10:00 a.m., at the Hyatt Regency, U.S. 1 and Alexander Road,
Princeton, New Jersey, for the following purposes:
1. To elect five directors for the year following the annual
meeting or until their successors are elected;
2. To consider and vote upon an amendment to the Company's
Articles of Incorporation to increase the number of authorized
shares of Common Stock from 15,000,000 to 30,000,000;
3. To consider and vote upon ratification of the appointment of
Ernst & Young LLP as the Company's independent certified public
accountants for the year ended December 31, 1999; and
4. To transact such other business as may properly come before the
meeting and all adjournments thereof.
Only shareholders of record at the close of business on March 24,
1999, the record date and time fixed by the Board of Directors, are entitled to
notice of, and to vote at, the meeting.
The Board of Directors unanimously recommends that shareholders vote
"FOR" (i) the election as directors of the nominees named in the accompanying
Proxy Statement, (ii) the approval of an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock from
15,000,000 to 30,000,000, and (iii) the ratification of the selection of Ernst &
Young LLP as the Company's independent certified public accountants for the year
ended December 31, 1999.
You are cordially invited to attend the meeting. Whether or not you
plan to attend personally, and regardless of the number of shares you own, it is
important that your shares be represented. Accordingly, WE URGE YOU TO COMPLETE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. If you
attend the Annual Meeting and wish to vote in person, you may withdraw your
proxy at that time.
By Order of the Board of Directors,
EDWARD J. QUILTY
Chairman of the Board
<PAGE>
DERMA SCIENCES, INC.
214 CARNEGIE CENTER, SUITE 100
PRINCETON, NEW JERSEY 08540
(800) 825-4325
----------------------------------------
PROXY STATEMENT
----------------------------------------
This statement is furnished by the Board of Directors of Derma
Sciences, Inc. (the "Company") in connection with the Board's solicitation of
proxies for use at its Annual Meeting of Shareholders (the "Meeting") to be held
at 10:00 a.m. on Wednesday, May 12, 1999, at the Hyatt Regency, U.S. 1 and
Alexander Road, Princeton, New Jersey, 08540, and at any adjournments thereof.
The purpose of the Meeting and the matters to be acted upon are set forth in the
accompanying Notice of Annual Meeting of Shareholders.
If the accompanying form of Proxy is executed properly and returned,
shares represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted for the election as directors of those nominees named in the
Proxy, for an amendment to the Company's Articles of Incorporation to increase
the number of authorized shares of Common Stock and for ratification of the
selection of Ernst & Young LLP as independent certified public accountants for
the year ended December 31, 1999. The Board knows of no matters which are to be
presented for consideration at the Meeting other than those specifically
described in the Notice of Annual Meeting of Shareholders, but if other matters
are properly presented, it is the intention of the persons designated as proxies
to vote on them in accordance with their judgment.
A Proxy may be revoked at any time prior to the time it is voted by
written notice to the Secretary of the Company at the above address or by
delivery of a proxy bearing a later date. Any shareholder may attend the Meeting
and vote in person whether or not a Proxy was previously submitted.
The close of business on March 24, 1999, has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of, and to vote at, the Meeting. On the Record Date, the Company had
6,235,789 shares of Common Stock, par value $.01 per share, 1,750,000 shares of
Series A Convertible Preferred Stock and 3,333,340 shares of Series B
Convertible Preferred Stock outstanding and entitled to vote. The foregoing
shares of Common and Preferred Stock are the only voting securities of the
Company. Each share held of record will be entitled to one vote at the Meeting.
It is expected that the Notice of Annual Meeting, Proxy Statement and form of
Proxy will first be mailed to shareholders on or about April 7, 1999.
The expense of solicitation will be borne by the Company. The
solicitation of Proxies will be largely by mail, but may include telephonic,
telegraphic or oral communications by officers or other representatives of the
Company. The Company will also reimburse brokers or other persons holding shares
in their names or in the names of their nominees for reasonable out-of-pocket
expenses in connection with forwarding Proxies and proxy materials to the
beneficial owners of such shares.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date certain
information regarding the current beneficial ownership of shares of the
Company's Common Stock by: (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director and director-nominee of the Company, (iii) each officer of the Company,
and (iv) all directors and officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED(13) BENEFICIALLY OWNED(13)
---------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Srini Conjeevaram (2).............................................. 5,166,668 45.31%
Hambrecht & Quist California (3)................................... 2,241,668 26.44%
Redwood Asset Management (4)....................................... 1,198,334 16.37%
Edward J. Quilty (5)............................................... 1,144,107 15.96%
Mary G. Clark, RN ................................................. 775,474 12.44%
Aries Funds (6).................................................... 750,000 10.70%
John T. Borthwick (7).............................................. 369,414 5.82%
Charles F. Caudell, III (8) ....................................... 312,668 4.82%
Richard S. Mink (9) ............................................... 284,168 4.38%
Stephen T. Wills, CPA (10)......................................... 279,168 4.31%
Laurence F. Lane (11).............................................. 26,000 (*)
Timothy J. Patrick ................................................ 0 (*)
All directors and officers as a group (8 persons) (12) ............ 7,582,193 72.92%
</TABLE>
(1) Except as otherwise noted, the address of each of the persons listed is:
214 Carnegie Center, Suite 100, Princeton, New Jersey 08540.
(2) Srini Conjeevaram is a general partner of the Galen III Partnerships. The
Galen III Partnerships can be reached at: 610 Fifth Avenue, Fifth Floor,
New York, New York 10020. Includes shares owned by Galen Partners III,
L.P., Galen Partners International III, L.P. and Galen Employee Fund III,
L.P. Ownership consists of: 625,000 shares of Class A Convertible
Preferred Stock ("Class A Preferred"); 375,000 warrants to purchase
Common Stock exercisable at $0.90 per share ("Class A Warrants");
2,083,334 shares of Class B Convertible Preferred Stock ("Class B
Preferred"); and 2,083,334 warrants to purchase Common Stock exercisable
at $1.35 per share ("Class B Warrants").
(3) Hambrecht & Quist California can be reached at: One Bush Street, San
Francisco, California 94104. Ownership consists of: 612,500 shares of
Class A Preferred; 612,500 Class A Warrants; 508,334 shares of Class B
Preferred; and 508,334 Class B Warrants.
(4) Redwood Asset Management can be reached at: Ovre Ullorn Terrasse 32, 0358
Oslo, Norway. Ownership consists of: 115,000 shares of Common Stock;
250,000 Class A Warrants; 416,667 Class B Preferred; and 416,667 Class B
Warrants.
(5) Ownership consists of: 210,500 shares of Common Stock; 190,000 Class A
Warrants; 41,667 shares of Class B Preferred; 41,667 Class B Warrants;
exercisable options to purchase 650,273 shares of Common Stock; and
options to purchase 10,000 shares of Common Stock which will become
exercisable within 60 days of the Record Date.
(6) The Aries Funds can be reached at: Paramount Capital, Inc., The Aries
Fund, 787 Seventh Avenue, 48th Floor, New York, New York 10019. Includes
shares owned by The Aries Fund, A Cayman Islands Trust and Aries Domestic
Fund, L.P. Ownership consists of: 375,000 shares of Class A Preferred;
and 375,000 Class A Warrants.
(7) Ownership consists of: 259,414 shares of Common Stock; exercisable
options to purchase 100,000 shares of Common Stock; and options to
purchase 10,000 shares of Common Stock will become exercisable within 60
days of the Record Date.
(8) Ownership consists of: 59,750 shares of Common Stock; 31,250 Class A
Warrants; 20,834 shares of Class B Preferred; 20,834 Class B Warrants;
exercisable options to purchase 132,500 shares of Common Stock; and
2
<PAGE>
options to purchase 47,500 shares of Common Stock will become exercisable
within 60 days of the Record Date.
(9) Ownership consists of: 31,250 shares of Common Stock; 31,250 Class A
Warrants; 20,834 shares of Class B Preferred; 20,834 Class B Warrants;
exercisable options to purchase 132,500 shares of Common Stock; and
options to purchase 47,500 shares of Common Stock will become exercisable
within 60 days of the Record Date.
(10) Ownership consists of 38,750 shares of Common Stock; 38,750 Class A
Warrants; 20,834 shares of Class B Preferred; 20,834 Class B Warrants;
and exercisable options to purchase 160,000 shares of Common Stock. No
additional options to purchase Common Stock will become exercisable
within 60 days of the Record Date.
(11) Ownership consists of: 8,000 shares of Common Stock; and exercisable
options to purchase 18,000 shares of Common Stock. No additional shares
subject to options will become exercisable within 60 days of the Record
Date.
(12) Ownership consists of: an aggregate of 3,420,167 shares of Common Stock,
Class A Preferred and Class B Preferred; and options currently
exercisable and exercisable within 60 days of the Record Date to purchase
4,162,026 shares of Common Stock.
(13) The number of shares beneficially owned and the percent beneficially
owned by each entity or individual assume the exercise of all exercisable
options (including those that would be exercisable within 60 days of the
Record Date) and the exercise of all warrants owned by such entity or
individual.
(*) Less than one percent
PROPOSAL 1 - ELECTION OF DIRECTORS
A board of five directors will be elected at the Meeting by the
shareholders of the Company to hold office until their successors have been
elected and qualify. It is intended that, unless authorization to do so is
withheld, the proxies will be voted "FOR" the election of the director nominees
named below. Each nominee has consented to be named in this Proxy Statement and
to serve as a director if elected. However, if any nominee becomes unable to
stand for election as a director at the Meeting, an event not now anticipated by
the Board, the Proxy will be voted for a substitute designated by the Board.
The nominees are listed below with brief statements of their
principal occupation and other information:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE DIRECTOR SINCE PRINCIPAL OCCUPATION
<CAPTION>
<S> <C> <C> <C>
Edward J. Quilty 48 March, 1996 Chairman of the Board of the Company and Chairman of the Board
of Palatin Technologies, Inc.
Mary G. Clark 66 Nominee Founder of, and Special Consultant to, the Company
Srini Conjeevaram 40 May, 1998 General Partner and Chief Financial Officer of Galen Associates
Laurence F. Lane 53 June, 1995 Vice President of Regulatory Affairs of NovaCare, Inc.
Timothy J. Patrick 40 February, 1998 President and Chief Executive Officer of Proxima Therapeutics,
Inc.
</TABLE>
The term of office of each person elected as director will continue
until the Company's next Annual Meeting of Shareholders or until his or her
successor has been elected and qualifies.
INFORMATION RELATIVE TO DIRECTORS
EDWARD J. QUILTY has served as Chairman of the Board since May, 1996
and as a director of the Company since March, 1996. Mr. Quilty has been the
Chairman of the Board of Palatin Technologies, Inc., a biopharmaceutical company
specializing in peptide drug design for diagnostic and therapeutic agents, since
November, 1995. From July, 1994 through November, 1995, he was President and
Chief Executive Officer of
3
<PAGE>
MedChem Products, Inc., a publicly traded developer
and manufacturer of specialty medical products which was acquired by C. R. Bard
in November, 1995. From March, 1992 through July, 1994 Mr. Quilty served as
President and Chief Executive Officer of Life Medical Sciences, Inc., a
developer and manufacturer of specialty medical products including wound healing
agents. The assets of Life Medical Sciences were purchased by MedChem Products,
Inc. Mr. Quilty has over 25 years of experience in the healthcare industry
primarily in strategic planning, management and sales and marketing. Mr. Quilty
is a member of the Healthcare Manufacturing Marketing Council. He earned a
Bachelor of Science degree from Southwest Missouri State University,
Springfield, Missouri in 1972 and a Master of Business Administration degree
from Ohio University, Athens, Ohio in 1987.
MARY G. CLARK, RN is a nominee for director of the Company. She
founded the Company and has served as a Special Consultant for Scientific
Affairs to the Company since March, 1994. She served as Chairman of the Board of
the Company from February, 1991 through March, 1994 and Vice Chairman from
April, 1994 to May, 1998. Mrs. Clark served as the Company's President from 1984
to 1990 and as director of the Company from November, 1984 to March, 1994. She
is the inventor and original patent holder of the Company's flagship products,
Dermagran Spray and Dermagran Ointment. She is also the founder, owner and
operator of the Primary Medical and Nutritional Clinic, Old Forge, Pennsylvania,
a clinic specializing in medical and nutritional preventative therapies. She has
extensive clinical medical experience with emphasis in the nutritional
biochemistry and ortho-molecular medicine fields. Mrs. Clark earned a Registered
Nurse degree from Scranton State General Hospital in 1954 and a Clinical Nurse
Therapist degree in Intensive Cardiovascular Care from Mechanicsburg
Rehabilitation Center in 1972. She was appointed by former Pennsylvania Governor
Robert P. Casey to membership on the Entrepreneurial Advisory Board for the
Commonwealth of Pennsylvania.
SRINI CONJEEVARAM has served as director of the Company since May,
1998. Mr. Conjeevaram has been the General Partner and Chief Financial Officer
of Galen Associates, an investment banking firm, since January, 1991. Prior to
his affiliation with Galen Associates, he was an Associate in Corporate Finance
at Smith Barney from July, 1989 to December, 1990 and a Senior Project Engineer
for General Motors Corporation from April, 1982 to July, 1987. Mr. Conjeevaram
serves as a director of Halsey Drug Company, Inc., a publicly traded company. He
earned a Bachelor of Science degree in Mechanical Engineering from Madras
University, Madras, India, a Master of Science degree in Mechanical Engineering
from Stanford University, Stanford, California and a Master of Business
Administration in Finance from Indiana University, Bloomington, Indiana.
LAURENCE F. LANE has served as a director of the Company since June,
1995. Mr. Lane has been the Senior Vice President of Regulatory Affairs of
NovaCare, Inc., a publicly traded medical rehabilitation corporation, since
November, 1986. He has over twenty years of government relations and policy
experience. Mr. Lane has served as the Director for Special Programs of the
American Health Care Association, Director for Policy Development of the
American Association of Homes for the Aging and legislative representative of
the American Association of Retired Persons. He managed the 1980 White House
Mini-Conference on Long Term Care and served as a credentialed resource person
for the 1981 White House Conference on Aging. Mr. Lane is a member of the
following organizations: National Association for the Support of Long Term Care,
International Subacute Healthcare Association, National Association for
Rehabilitation Agencies, National Health Lawyers Association, and Healthcare
Financial Management Association. He earned Bachelor of Arts and Master of Arts
degrees from the School of Public and International Affairs of George Washington
University, Washington, D.C. Mr. Lane has pursued doctoral studies at the
Washington Public Affairs Center, University of Southern California and received
a Gerontology certificate from Andrus Gerontology Center, University of Southern
California in 1974.
TIMOTHY J. PATRICK has served as director of the Company since
February, 1998. Mr. Patrick has been the President and Chief Executive Officer
of Proxima Therapeutics, Inc., a medical device company developing proprietary
site-specific delivery systems for the treatment of solid tumors, since April,
1996. He previously served as President of Gesco International, a subsidiary of
MedChem Products that manufactured and marketed PICC vascular access catheters,
from July, 1994 to January, 1996. Mr. Patrick served McGaw, Inc. for 13 years in
various sales executive positions the last of which was President of Central
Admixture Pharmacy Services, a business unit of McGaw, Inc. that provided
patient-specific intravenous solution products to hospitals and home care
companies. Mr. Patrick earned a Bachelor of Arts degree in Biology from Miami
University, Oxford, Ohio in 1981.
4
<PAGE>
COMPENSATION OF DIRECTORS
Outside directors are entitled to an annual retainer of $12,000. Each
outside director may elect, with respect to any calendar year, to receive his or
her retainer in options to purchase Common Stock of the Company. Upon such
election, each electing director will receive options to purchase that number of
shares of Common Stock of the Company determined by dividing $24,000 by the
Common Stock's fair market value. For a given calendar year, the Common Stock's
fair market value is the lowest average between the Common Stock's bid and asked
prices quoted on the Nasdaq SmallCap Market during the period from December 1
through December 15 of the immediately preceding calendar year.
All directors are reimbursed for expenses incurred in connection with
each board and committee meeting attended. Inside directors receive no
compensation for their services as directors.
The following table sets forth information with respect to the
non-qualified stock options owned by directors of the Company in 1998:
<TABLE>
<CAPTION>
OPTIONS GRANTED EXERCISABLE OPTIONS AT EXERCISE PRICE
NAME (#) DECEMBER 31, 1998 (#) ($/SHARE) EXPIRATION DATE
---- --- --------------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Laurence F. Lane 10,000(1) 8,000 $1.125 November 21, 2006
10,000(2) 10,000 $1.125 April 7, 2007
<FN>
(1) These options began vesting at a rate of 20% per year on November 21, 1995 and were repriced on April 8, 1997.
(2) These options were granted on April 8, 1997.
</FN>
</TABLE>
BOARD COMMITTEES
The Company maintains an Audit Committee that is composed of Laurence F.
Lane and Srini Conjeevaram. The Audit Committee reviews the results and scope of
the audit and the financial recommendations provided by the Company's
independent auditors. The Audit Committee held one meeting in 1998.
The Company maintains a Compensation Committee that is composed of
Edward J. Quilty, Timothy S. Patrick and Srini Conjeevaram. The Compensation
Committee reviews the compensation of management and recommends to the Board of
Directors the amounts and types of cash and equity incentives to be offered to
management. The Compensation Committee held five meetings in 1998.
The Company maintains a Nominating Committee that is composed of Edward
J. Quilty, Laurence F. Lane and Timothy S. Patrick. The Nominating Committee
reviews the qualifications of prospective directors for consideration by the
Board of Directors as management's nominees for directors. The Nominating
Committee held one meeting in 1998.
The Company will consider nominations for directors submitted by
shareholders. Shareholder nominations for election to the Board of Directors
must be made by written notification received by the Company not later than
sixty days prior to the next annual meeting of shareholders. Such notification
shall contain, at a minimum, the following information:
1. The name and residential address of the proposed nominee and of
each notifying shareholder;
2. The principal occupation of the proposed nominee;
3. A representation that the notifying shareholder intends to
appear in person or by proxy at the meeting to nominate the
person specified in the notice;
4. The total number of shares of the Company owned by the notifying
shareholder;
5
<PAGE>
5. A description of all arrangements or understandings between the
notifying shareholder and the proposed nominee and any other
person or persons pursuant to which the nomination is to be made
by the notifying shareholder;
6. Any other information regarding the nominee that would be
required to be included in a proxy statement filed with the SEC;
and
7. The consent of the nominee to serve as director of the Company,
if elected.
The Committee will return, without consideration, any notice of
proposed nomination which does not contain the foregoing information.
During 1998, there were eight meetings of the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED ABOVE.
EXECUTIVE OFFICERS
The executive officers of the Company are:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AGE POSITIONS WITH THE COMPANY OF THE COMPANY SINCE
<S> <C> <C> <C> <C>
Edward J. Quilty 48 Chairman of the Board of Directors May, 1996
Richard S. Mink 46 Chief Operating Officer and Executive Vice April, 1997
President - Marketing
Charles F. Caudell, III 46 Vice President - Sales April, 1997
Stephen T. Wills 42 Vice President and Chief Financial Officer July, 1997
</TABLE>
Additional information relative to Edward J. Quilty is included in the
preceding pages under "Election of Directors."
RICHARD S. MINK has served as Chief Operating Officer of the Company
since November, 1997 and as its Executive Vice President - Marketing since
March, 1999, having previously served the Company as Vice President for
Marketing since April, 1997. Prior to joining the Company, Mr. Mink was Senior
Vice President/General Manager, Marketing Information Services Division of Bio
Imaging Technologies, Inc., a medical image data and information management
company, from November, 1996 to April, 1997. He was a self-employed marketing
consultant from May, 1995 to October, 1996, Executive Vice President for Sales
and Marketing for MedChem, Inc. from August, 1994 to May, 1995, Vice President
for Sales and Marketing for Life Medical Sciences from July, 1993 to August,
1994, and had risen to the position of Director of Marketing for Becton
Dickinson Company during his tenure there from August, 1977 to July, 1993.
During May, 1996 through April, 1997, Mr. Mink was a member of the New Jersey
Technology Council Healthcare Advisory Board. He earned a Bachelor of Science
degree in Biology/Chemistry and a Master of Business Administration degree from
Rutgers University, Newark, New Jersey in 1975 and 1977, respectively.
CHARLES F. CAUDELL, III has served as Vice President - Sales since
March, 1999, having previously served the Company as Executive Vice President
for Field Operations and Vice President for Sales since November, 1997 and
April, 1997, respectively. Prior to joining the Company, Mr. Caudell was
Division Director of CalgonVestal, a former Merck & Co. wound care subsidiary,
and later Division Director of ConvaTec upon the purchase of this company by
Bristol Myers-Squibb, from January, 1984 to April, 1997. Mr. Caudell earned a
Bachelor of Arts degree in Communications from Wake Forest University,
Winston-Salem, North Carolina in 1974 and a Master of Business Administration
from Ohio University, Athens, Ohio in 1993.
<PAGE>
6
STEPHEN T. WILLS, CPA, MST has served as Chief Financial Officer of
the Company since July, 1997 and Vice President since November, 1997. Mr. Wills
also serves as President and Chief Operating Officer of Golomb, Wills & Company,
PC, a public accounting firm, and as Vice President and Chief Financial Officer
of Palatin Technologies, Inc., a publicly traded biopharmaceutical company. Mr.
Wills is a member of the American Institute of Certified Public Accountants, New
Jersey Society of Certified Public Accountants and Pennsylvania Institute of
Certified Public Accountants. He earned a Bachelor of Science degree in
Accounting from West Chester University, West Chester, Pennsylvania in 1979 and
a Master of Science in Taxation from Temple University, Philadelphia,
Pennsylvania in 1994.
Officers are elected by and serve at the discretion of the Board of
Directors.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table shows all compensation paid by the Company to its
Chairman, Chief Financial Officer and each of the Company's executive officers
whose compensation exceeded $100,000 for their services in all capacities during
the years 1996, 1997 and 1998:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
<S> <C> <C> <C> <C> <C>
Edward J. Quilty 1998 $150,000 $25,000 380,273(1) --
Chairman 1997 $149,986 -- 300,000(2) --
1996 $ 59,615 -- 150,000 --
Richard S. Mink 1998 $157,875 $ 6,000 -- --
Chief Operating Officer and Executive Vice 1997 $100,961 $ 25,000(3) 200,000 --
President - Marketing
Charles F. Caudell, III 1998 $157,875 $ 6,000 -- --
Executive Vice President - Sales 1997 $100,961 -- 200,000 --
Stephen T. Wills, CPA, MST 1998 $100,000 (4) -- -- --
Vice President and 1997 $ 85,000 (5) -- 75,000 --
Chief Financial Officer
John T. Borthwick (6) 1998 $180,000 -- -- $ 9,962 (7)
Manager - Manufacturing Representatives 1997 $180,000 -- 50,000 $ 9,962 (7)
1996 $180,000 -- -- $10,861 (7)(8)
</TABLE>
(1) Options issued pursuant to the anti-dilution provisions of Mr. Quilty's
employment agreement, See Option Grants Table below. (2) Includes
150,000 options originally granted in 1996 and repriced by the Executive
Committee of the Board of Directors on April 8, 1997.
(3) Sign-on bonus.
(4) Does not include payments made to an affiliate of Mr. Wills, Golomb,
Wills & Company, PC. See Certain Transactions below.
(5) Represents compensation earned during the period July through December,
1997.
(6) John T. Borthwick resigned as Chief Executive Officer and President in
May, 1997 and November, 1997, respectively. Mr. Borthwick is no longer
an executive officer.
(7) The Company enrolled John T. Borthwick in a split-dollar life insurance
program on July 1, 1993. The monthly premiums are $830.18 for $500,000
coverage.
7
<PAGE>
(8) Matching contributions made pursuant to the Company's 401(k) plan.
Option Grants Table
The following table sets forth information regarding grants of stock
options to the following named executive officer made for the year ended
December 31, 1998:
<TABLE>
<CAPTION>
PERCENT OF TOTAL EXERCISE
OPTIONS
NAME GRANTED (#) OPTIONS GRANTED TO PRICE ($/SHARE)
EMPLOYEES IN 1998 EXPIRATION DATE
------------ ------------------------ ---------------- --------------------------
<S> <C> <C> <C> <C> <C>
Edward J. Quilty 380,273 (1) 60.8% $1.185 May 22, 2007
- -------------------
<FN>
(1) Options issued pursuant to the anti-dilution provisions of Mr. Quilty's employment agreement. See Employment Arrangements
below.
</FN>
</TABLE>
Aggregate Year End Option Value Table
The following table sets forth information regarding the aggregate
number and value of options to purchase Common Stock held by the named executive
officers as of December 31, 1998. No options have been exercised:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1998 (#) AT DECEMBER 31, 1998 ($)(1)
-------------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward J. Quilty ......................... 380,273 0 0 0
150,000 0 0 0
20,000 30,000 0 0
100,000 0 0 0
Richard S. Mink .......................... 20,000 30,000 0 0
88,500 29,500 0 0
24,000 8,000 0 0
Charles F. Caudell, III .................. 20,000 30,000 0 0
88,500 29,500 0 0
24,000 8,000 0 0
Stephen T. Wills, CPA..................... 36,665 8,335 0 0
30,000 0 0 0
John T. Borthwick ........................ 80,000 20,000 0 0
20,000 30,000 0 0
- -------------------
<FN>
(1) Determined based on a fair market value for the Company's Common Stock at December 31, 1998 of $0.75 per share.
</FN>
</TABLE>
EMPLOYMENT ARRANGEMENTS
Edward J. Quilty
The Company entered into an employment agreement on August 1, 1996,
and amended on May 2, 1997, (the "Agreement") with Edward J. Quilty, its
Chairman of the Board. The term of the Agreement begins on May 21, 1996 and
expires on May 21, 1999. The Agreement provides that Mr. Quilty will receive
base salary of $150,000
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per year, together with such additional incentive
compensation as may be awarded upon the recommendation of the Compensation
Committee of the Board of Directors; provided, however, additional incentive
compensation, if any, shall be predicated upon the extent to which the Company
attains its earnings goals and the extent of Mr. Quilty's contributions thereto.
As additional compensation, the Agreement grants Mr. Quilty 150,000
non-qualified stock options, exercisable at a price of $1.125 per share, all of
which are currently exercisable. If the Company sells additional Common Stock
during the term of the Agreement in a transaction, or related series of
transactions, the result of which is to increase the number of shares of Common
Stock outstanding by 40%, then Mr. Quilty will be granted such additional stock
options, exercisable at $1.125 per share, as may be necessary to enable him to
purchase the same percentage of outstanding Common Stock as he maintained prior
to such sale or issuance.
In addition, in the event of the sale of substantially all of the
stock or assets of the Company, or upon the merger or consolidation of the
Company in which the Company is not the surviving entity, the Company shall pay
Mr. Quilty a severance payment equal to the greater of his salary for the
remaining term of the Agreement or $125,000. Mr. Quilty may not disclose any
confidential information of the Company during or after the term of the
Agreement, and may not compete with the Company during the term of the Agreement
and for a period of one year thereafter.
The Company and Mr. Quilty are currently engaged in negotiations with
a view to executing a new employment agreement providing for Mr. Quilty's
continued service as Chairman and his assumption of the roles of President and
Chief Executive Officer.
Richard S. Mink
The Company entered into a two-year employment agreement on April 14,
1997, (the "Agreement") with Richard S. Mink, its Chief Operating Officer and
former Vice President for Marketing. The Agreement provides that Mr. Mink
receive the following: (1) base salary of $150,000 per year, together with a
$25,000 sign-on bonus; (2) incentive compensation as may be awarded upon the
recommendation of the Office of the Chief Executive and approved by the Board of
Directors; provided, however, incentive compensation, if any, shall be
predicated upon the extent to which the Company attains its earnings goals and
the extent of Mr. Mink's contributions thereto; and (3) 118,000 incentive and
32,000 non-qualified stock options, exercisable at $1.125, which options become
exercisable to the extent of 50%, 75% and 100% upon completion of six, eighteen
and twenty-four months of employment, respectively. These options become 100%
exercisable if Mr. Mink becomes disabled, the Agreement is terminated by the
Company other than "for cause," the Agreement is terminated by Mr. Mink for the
Company's breach, upon the sale of substantially all of the stock or assets of
the Company, or upon the merger or consolidation of the Company in which the
Company is not the surviving entity.
Upon the sale of substantially all of the stock or assets of the
Company, or upon the merger or consolidation of the Company in which the Company
is not the surviving entity, the Company shall pay Mr. Mink a severance payment
equal to the greater of his salary for the remaining term of the Agreement or
$150,000. Mr. Mink may not disclose any confidential information of the Company
during or after the term of the agreement, and may not compete with the Company
during the term of the Agreement and for a period of one year thereafter.
The Company and Mr. Mink are currently engaged in negotiations with a
view to executing a new employment agreement providing for Mr. Mink's continued
service.
Charles F. Caudell, III
The Company entered into a two-year employment agreement on April 21,
1997, (the "Agreement") with Charles F. Caudell, III, its Executive Vice
President for Sales. The Agreement provides that Mr. Caudell receive the
following: (1) base salary of $150,000 per year; (2) incentive compensation as
may be awarded upon the recommendation of the Office of the Chief Executive and
approved by the Board of Directors; provided, however, incentive compensation,
if any, shall be predicated upon the extent to which the Company attains its
earnings goals and the extent of Mr. Caudell's contributions thereto; and (3)
118,000 incentive and 32,000 non-qualified stock options, exercisable at $1.125,
which options become exercisable to the extent of 50%, 75% and 100% upon
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<PAGE>
completion of six, eighteen and twenty-four months of employment, respectively.
These options become 100% exercisable if Mr. Caudell becomes disabled, the
Agreement is terminated by the Company other than "for cause," the Agreement is
terminated by Mr. Caudell for the Company's breach, upon the sale of
substantially all of the stock or assets of the Company, or upon the merger or
consolidation of the Company in which the Company is not the surviving entity.
Upon the sale of substantially all of the stock or assets of the
Company, or upon the merger or consolidation of the Company in which the Company
is not the surviving entity, the Company shall pay Mr. Caudell a severance
payment equal to the greater of his salary for the remaining term of the
Agreement or $150,000. Mr. Caudell may not disclose any confidential information
of the Company during or after the term of the agreement, and may not compete
with the Company during the term of the Agreement and for a period of one year
thereafter.
The Company and Mr. Caudell are currently engaged in negotiations with a
view to executing a new employment agreement providing for Mr. Mink's continued
service.
Stephen T. Wills, CPA, MST
The Company entered into an employment agreement on February 1, 1999
(the "Agreement") with Stephen T. Wills, CPA, MST, its Vice President and Chief
Financial Officer. The Agreement carries an indefinite term which can be
canceled by either party upon thirty days notice. The Agreement provides that
Mr. Wills receive the following: (1) base salary of $102,000 per year, together
with incentive compensation as may be awarded upon the recommendation of the
Chairman and approved by the Board of Directors; and (2) 100,000 non-qualified
stock options, exercisable at $1.20, which options became exercisable in 25,000
increments commencing on February 1, 1999 and on each anniversary thereof
through February 1, 2002. These options become 100% exercisable upon a change in
ownership of in excess of 75% of the Company or the sale by the Company of
substantially all of its assets. Upon termination of the Agreement by the
Company without cause, the Company will pay Mr. Wills a severance payment equal
to his salary for one year and will extend the period to exercise the options
granted under the Agreement to the earlier of five years or December 14, 1008.
John T. Borthwick
The Company entered into a five-year employment agreement on December
29, 1995, as amended on March 5, 1997, (the "Agreement") with John T. Borthwick,
its Director of Business Development and former President and Chief Executive
Officer. The Agreement provides that Mr. Borthwick will receive base
compensation of $180,000 during the calendar years 1996, 1997 and 1998 and base
compensation for the calendar years 1999 and 2000 to be determined by the Board
of Directors upon the recommendation of the Compensation Committee, together
with such incentive and/or bonus compensation as may be awarded upon the
recommendation of the Compensation Committee; provided, however, incentive
and/or bonus compensation, if any, will be predicated upon the extent to which
the Company attains its earnings goals and the extent of Mr. Borthwick's
contributions thereto. As additional compensation, the Agreement grants Mr.
Borthwick 100,000 non-qualified stock options, exercisable at a price of $2.31
per share, of which 80,000 were vested as of January 1, 1999 and the remaining
20,000 vest on January 1, 2000.
If the Company sells additional Common Stock during the term of the
Agreement in a transaction, or related series of transactions, the result of
which is to increase the number of shares of Common Stock outstanding by 40%,
the Agreement provides that Mr. Borthwick will then be granted such additional
stock options, exercisable at $2.31 per share, as may be necessary to enable him
to purchase the same percentage of outstanding Common Stock as he maintained
prior to such sale or issuance. In addition, in the event of a sale of
substantially all of the stock or assets of the Company, or a merger or
consolidation of the Company in which the Company is not the surviving entity,
or upon the written agreement of the Company to effect such sale, merger or
consolidation, Mr. Borthwick will have the option of completing the remaining
term of his employment under the Agreement or receiving severance compensation
equal to his total compensation accrued during the twelve-month period
immediately preceding such sale, merger or consolidation. Further, in the event
of such sale, merger or consolidation: (1) the stock options granted pursuant to
the Agreement will become exercisable in their entirety and will remain
exercisable for a period of not less than thirty (30) days; and (2) the
promissory note between Mr. Borthwick and the Company dated January
10
<PAGE>
17, 1995 in the original principal amount of $99,530.34 will be forgiven.
The Agreement further provides that Mr. Borthwick will receive a
severance payment of 100% of his total compensation accrued during the
twelve-month period immediately preceding the expiration of the Agreement if the
Company does not renew or extend the term of the Agreement upon expiration
thereof. The Agreement also provides that Mr. Borthwick will receive: (i) a
vehicle for use primarily (but not exclusively) in the conduct of Company
business, (ii) split-dollar life insurance in the face amount of $500,000, and
(iii) disability income insurance providing for payments of 50% of compensation.
Mr. Borthwick may not disclose any confidential information of the Company
during or after the term of the Agreement, and may not compete with the Company
during the term of the Agreement and for a period of one year thereafter.
STOCK OPTION PLAN
The Company adopted the Stock Option Plan, (the "Plan") in July 1991,
and amended the Plan in January, 1994, November 21, 1995 and September 25, 1998.
The number of shares of common stock reserved for issuance pursuant to the Plan
is 1,500,000 shares. The Plan authorizes the Company to grant two types of
equity incentives: (i) options intended to qualify as "incentive stock options"
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended, and (ii) non-qualified stock options ("NQSOs"). The Plan authorizes
options to be granted to directors, officers, key employees and consultants of
the Company, except that ISOs may be granted only to employees. The Plan is
administered by a committee of disinterested directors designated by the Board
of Directors (the "Compensation Committee"). Subject to the provisions of the
Plan, the Compensation Committee determines who is eligible to receive stock
options, together with the nature, amount, timing, exercise price, vesting
schedule and all other terms and conditions of the options to be granted.
Under the Plan, ISOs and NQSOs may have a term of up to ten years.
Stock options are not assignable or transferable except by will or the laws of
descent and distribution. Stock options granted under the Plan which have lapsed
or terminated revert to the status of "unissued" and become available for
reissuance.
At December 31, 1998, options to purchase 381,000 shares of the
Company's common stock at prices ranging from $0.80 to $1.125 per share had been
granted under the Plan.
CERTAIN TRANSACTIONS
The Company employs the accounting firm of Golomb, Wills & Company,
PC for various tax and financial planning services. Stephen T. Wills, CPA, MST,
Vice President and Chief Financial Officer of the Company, is a principal of
Golomb, Wills & Company, PC. Payments to Golomb, Wills & Company, PC during 1998
totaled $110,501.
The Company has a five-year consulting agreement with its founder and
former President and director, Mary G. Clark. In 1998 compensation under this
agreement was $99,000. Mrs. Clark is a nominee for director.
PROPOSAL 2 - AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
Under the Company's Amended and Restated Articles of Incorporation,
the Company is authorized to issue up to 15,000,000 shares of the Company's
Common Stock, par value $.01 per share. The Company's board of directors has
approved an amendment to the Articles of Incorporation that increases the
maximum number of authorized shares of the Company's Common Stock by 15,000,000
shares to a total of 30,000,000 shares ("Common Stock Amendment") and has
recommended that the Company's shareholders approve the Common Stock Amendment.
If the Company's shareholders do not approve the Common Stock Amendment, then
the number of authorized shares of the Company's Common Stock will remain at
15,000,000.
The purpose of the proposed Common Stock Amendment is to provide
sufficient shares for corporate purposes including the conversion of Class A and
Class B Preferred Stock and Class A and Class B Warrants into Common Stock, the
exercise of stock options that have been granted to certain officers, directors
and former
11
<PAGE>
directors of the Company, possible future acquisitions, stock splits
or other corporate purposes. Once authorized, the additional shares of the
Company's Common Stock may be issued by the Company's board of directors without
further action by the Company's shareholders, unless such action is required by
law or applicable stock exchange requirements. As of the Record Date, 6,235,789
shares of the Company's Common Stock were issued and outstanding, 1,750,000
shares of Class A Preferred Stock can be converted to Common Stock, 2,250,000
shares of Class A Warrants can be converted to Common Stock, 3,333,340 shares of
Class B Preferred Stock can be converted to Common Stock, 3,333,340 shares of
Class B Warrants can be converted to Common Stock, and options to purchase
2,044,162 shares of Common Stock are outstanding. If the Common Stock Amendment
is not approved by the Company's shareholders, the Company will examine other
means to fulfill its obligations to preferred shareholders, warrant holders and
option holders. These means could include the reverse split of the Company's
Common Stock or the redesignation of previously authorized preferred stock as
common stock.
The Board of Directors unanimously recommends that shareholders vote
"FOR" approval of the Common Stock Amendment.
PROPOSAL 3 - RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP as independent
certified public accountants for the Company for the year ended December 31,
1999. Ernst & Young LLP has served as the Company's auditors since 1990. The
ratification of the selection of independent certified public accountants is to
be voted upon at the Meeting.
Representatives of Ernst & Young LLP will attend the Meeting and will
have the opportunity to make a statement if they desire to do so. These
representatives will also be available to respond to appropriate questions.
The Board of Directors unanimously recommends that shareholders vote
"FOR" the ratification of the selection of Ernst & Young LLP as the Company's
independent certified public accountants for the year ended December 31, 1999.
OTHER BUSINESS
Management of the Company knows of no other business which will be
presented for consideration at the Meeting, but should any other matters be
brought before the Meeting it is intended that the persons named in the
accompanying proxy will vote at their discretion.
12
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder desiring to present a proposal to other shareholders
at the next Annual Meeting must transmit such proposal to the Company so that it
is received by the Company on or before January 17, 2000. All such proposals
should be in compliance with applicable regulations of the Securities and
Exchange Commission.
ANNUAL REPORT
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL HOLDER OF
COMMON STOCK ON THE RECORD DATE, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER
31, 1998 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH REQUEST
SHOULD BE MADE IN WRITING TO THE CORPORATE SECRETARY, DERMA SCIENCES, INC., 214
CARNEGIE CENTER, SUITE 100, PRINCETON, NEW JERSEY 08540.
By Order of the Board of Directors,
EDWARD J. QUILTY
Chairman
March 31, 1999
13
<PAGE>
Microfilm Number _______________ EXHIBIT A
Entity Number __________________
----------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT- DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 89)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: Derma Sciences, Inc.
------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) commercial registered office provider and the county
of venue is (the Department is hereby authorized to correct the following
address to conform to the records of the Department):
(a) 1065 Highway 315, Suite 403 Wilkes-Barre PA 18702 Luzerne
------------------------------------------------------------------------
Number and Street City State Zip County
(b) ______________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
15 Pa.C.S. Section 101 et seq.
-----------------------------------------
4. The original date of its incorporation is: March 28, 1996
----------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
___ The amendment shall be effective on: _______________________________
6. (Check one of the following):
X The amendment was adopted by the shareholders pursuant to 15
--- Pa.C.S.ss.1941(a) and (b).
___ The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss. 1914 (c).
7. (Check, and if appropriate complete, one of the following):
___ The amendment adopted by the corporation, set forth in full, is as
follows:
X The amendment adopted by the corporation as set forth in full in
--- Exhibit A, attached hereto and made a part hereof.
A-1
<PAGE>
DSCB:15-1915 (Rev 89)-2
8. (Check if the amendment restates the Articles):
___ The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
____________ day of ____________________, 19________.
Derma Sciences, Inc.
-----------------------
(Name of Corporation)
BY:______________________________________
(Signature)
TITLE: Edward J. Quilty, Chairman
A-2
<PAGE>
ARTICLES OF AMENDMENT
EXHIBIT A
Article 3 of the Articles of Incorporation of the corporation is
amended in its entirety to read as follows:
3. The classes and number of shares which the corporation shall have
the authority to issue are:
(a) Common Stock. 30,000,000 shares of common stock.
(b) Preferred Stock. 11,750,000 shares of preferred stock with
such designations, voting rights, preferences, limitations
and special rights as the board of directors may direct.
A-3
<PAGE>
DERMA SCIENCES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 1999
The undersigned hereby constitutes and appoints Edward J. Quilty as proxy of the
undersigned to vote all of the shares of Derma Sciences, Inc. that the
undersigned may be entitled to vote at the Annual Meeting of Shareholders of
Derma Sciences, Inc. to be held at the Hyatt Regency, U.S. 1 and Alexander Road,
Princeton, New Jersey on May 12, 1999, at 10:00 a.m., and any adjournments
thereof. This proxy shall be voted on the proposals described in the Proxy
Statement as specified below.
The Board of Directors recommends a vote "FOR" each of the following:
1. ELECTION OF DIRECTORS
Election of nominees: Edward J. Quilty, Mary G. Clark, Srini Conjeevaram,
Laurence F. Lane and Timothy J. Patrick. TO WITHHOLD AUTHORITY TO VOTE FOR AN
INDIVIDUAL NOMINEE, PLACE A LINE THROUGH SUCH NOMINEE'S NAME.
/__/ FOR all nominees /__/ WITHHOLD AUTHORITY for all nominees
2. AMENDMENT OF THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 15,000,000 TO 30,000,000
/__/ FOR /__/ AGAINST /__/ ABSTAIN
3. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS CERTIFIED PUBLIC
ACCOUNTANTS FOR THE YEAR ENDED DECEMBER 31, 1999
/__/ FOR /__/ AGAINST /__/ ABSTAIN
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL NOIMINEES AND "FOR" PROPOSALS 2 and 3. THIS PROXY ALSO DELEGATES
DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER BUSINESS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE MEETING AND THE
PROXY STATEMENT. The undersigned also hereby ratifies all that the proxy named
herein may do by virtue hereof and hereby confirms that this proxy shall be
valid and may be voted regardless of whether the undersigned's name is signed as
set forth below or a seal is affixed or the description, authority or capacity
of the person signing is given or other defect of signature exists.
--------------------------------
Signature of Shareholder
--------------------------------
Signature of Co-Owner
Dated: ___________, 1999
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE. Please sign this
proxy exactly as your name appears in the
address at the left. If shares are registered in
more than one name, all owners should sign. If
you are signing in a fiduciary or representative
capacity, such as attorney-in-fact, executor,
administrator, trustee or guardian, please give
full title and attach evidence of authority.
Corporations, please sign with full corporate
name by a duly authorized officer or officers
and affix the corporate seal. If a partnership,
please sign in partnership name by an authorized
person.
I/WE PLAN TO ATTEND THE MEETING /__/
