SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X ] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by rule 14A-6(e)(2))
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Creative Medical Development, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
975 SE Sandy Boulevard
Portland, Oregon 97214
PROXY STATEMENT AND
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 1999
To the shareholders of Creative Medical Development, Inc.:
The Annual Meeting of the shareholders of Creative Medical Development,
Inc. (the "Company") will be held at the Company offices at 975 SE Sandy
Boulevard, Portland, Oregon 97214 at 10:00 A.M. on February 23, 1999, or at any
adjournment or postponement thereof, for the following purposes:
1. To elect three directors of the Company.
2. To approve an Amendment to the Company's Certificate of Incorporation
which changes the Company's name to OMNI Rail Products, Inc.
3. To approve a proposal that each outstanding three shares of Common
Stock be converted into one share of Common Stock.
4. To transact such other business as may properly come before the
meeting.
Details relating to the above matters are set forth in the attached Proxy
Statement. All shareholders of record of the Company as of the close of business
on January 25, 1999 will be entitled to notice of and to vote at such meeting or
at any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY. A REPLY CARD IS ENCLOSED FOR YOUR CONVENIENCE. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
January 30, 1999 William E. Cook
Chairman of the Board of Directors
<PAGE>
PROXY STATEMENT
CREATIVE MEDICAL DEVELOPMENT, INC.
975 SE Sandy Boulevard
Portland, Oregon 97214
Telephone (503) 230-8034
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Creative Medical Development, Inc. (the
"Company"), a Delaware corporation, of $.01 par value Common Stock ("Common
Stock") and $.01 par value Series B Preferred Stock ("Preferred Stock") to be
voted at the Annual Meeting of Shareholders of the Company ("Annual Meeting") to
be held at 10:00 A.M. on February 23, 1999 or at any adjournment or postponement
thereof. The Company anticipates that this Proxy Statement and the accompanying
form of proxy will be first mailed or given to all shareholders of the Company
on or about January 31, 1999. The shares represented by all proxies that are
properly executed and submitted will be voted at the meeting in accordance with
the instructions indicated thereon. Unless otherwise directed, votes will be
cast for the election of the nominees for directors hereinafter named, for
combination of the Company's Common Stock, and for approval of the Amendment to
the Certificate of Incorporation. The holders of a majority of the shares
represented at the Annual Meeting in person or by proxy will be required to
approve all proposed matters.
Any shareholders giving a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company, by
substituting a new proxy executed at a later date, or by requesting, in person,
at the Annual Meeting, that the proxy be returned.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the materials enclosed herewith and all costs of soliciting
proxies will be paid by the Company. In addition to the solicitation by mail,
proxies may be solicited by officers and regular employees of the Company by
telephone, telegraph or personal interview. Such persons will receive no
compensation for their services other than their regular salaries. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of the
shares held of record by such persons, and the Company may reimburse such
persons for reasonable out of pocket expenses incurred by them in so doing.
VOTING SHARES AND PRINCIPAL SHAREHOLDERS
The close of business on January 25, 1999 has been fixed by the Board of
Directors of the Company as the record date (the "Record Date") for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. On the record date, there were outstanding 5,109,152 shares of Common
Stock, and 583,858 shares of Series B Preferred Stock, each share of which
entitles the holder thereof to one vote on each matter which may come before the
Annual Meeting. Cumulative voting for directors is not permitted.
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A majority of the issued and outstanding shares entitled to vote,
represented at the meeting in person or by proxy, constitutes a quorum at any
shareholders' meeting.
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock and Series B Preferred Stock
as of January 15, 1999, by (i) each person who is known by the Company to own of
record or beneficially more than 5% of the Company's Common Stock, (ii) each of
the Company's directors and (iii) all directors and officers of the Company as a
group. Except as noted, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated.
Name and Address of Number of
Beneficial Owner(1)(2) Shares Owned Percent of Class (1)(2)
- ---------------------- ------------ -----------------------
William E. Cook (3) 2,201,561 24,8%
1413 Loniker Drive
Raleigh, NC 27615
John E. Hart (4) 183,039 2.1%
Box 2495
Grass Valley, CA 95945
Edward S. Smith (5) 641,061 7.2%
921 SW Washington St., Ste. 762
Portland, OR 97205
Robert Tuzik (6) 180,659 2.0%
1732 Aspen Ct.
Lake Oswego, OR 97034
M. Charles Van Rossen (7) 150,000 1.7%
2747 SW English Ct.
Portland, OR 97201
Michael L. DeBonny (8) 999,366 11.2%
16101 Parelius Circle
Lake Oswego, OR 97034
Richard A. Kreitzberg (9) 797,921 9.0%
3332 El Dorado Loop South
Salem, OR 97032
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Ronald J. Gangemi (10) 697,788 7.8%
11950 Willow Valley Road
Nevada City, CA 95959
All officers and directors 3,356,320 37.7%
as a group (5 persons)
- ----------
(1) Assumes no exercise or conversion of common stock purchase warrants and
underwriter's warrants issued in conjunction with the Company's 1994 public
offering, but Common Stock and Series B Preferred Stock obtainable by
persons named in the above table upon exercise of outstanding warrants,
options or other commitments of the Company that are convertible into or
exercisable for shares of Common Stock or Series B Preferred Stock is
deemed outstanding and beneficially owned by such persons in calculating
their percentage ownership.
(2) Includes shares of Series B Preferred Stock held by the person listed.
(3) Includes options to purchase 100,000 shares of Common Stock under the
Company's Incentive Stock Option Plan and 1,903,416 shares of Common Stock
and 198,145 shares of Series B Preferred Stock issuable on conversion of a
Convertible Note held by Mr. Cook.
(4) Includes options held by Mr. Hart to purchase 110,000 shares of Common
Stock under the Company's Incentive Stock Option Plan.
(5) Includes options held by Mr. Smith to purchase 133,450 shares of Common
Stock and 8,526 shares of Series B Preferred Stock under the Company's
Incentive Stock Option Plan.
(6) Includes options held by Mr. Tuzik to purchase 177,817 shares of Common
Stock and 2,842 shares of Series B Preferred Stock under the Company's
Incentive Stock Option Plan.
(7) Includes options held by Mr. Van Rossen to purchase 150,000 shares of
Common Stock under the Company's Incentive Stock Option Plan.
(8) Includes options held by Mr. DeBonny to purchase 292,073 shares of Common
Stock and 29,838 shares of Series B Preferred Stock under the Company's
Incentive Stock Option Plan. As described below in the Certain Transactions
section, Mr. DeBonny's voting rights are subject to an irrevocable proxy.
(9) Includes shares owned by Mr. Kreitzberg's spouse. Also includes options
held by Mr. Kreitzberg to purchase 27,817 shares of Common Stock and 2,842
shares of Series B Preferred Stock under the Company's Incentive Stock
Option Plan.
(10) Includes shares owned by Mr. Gangemi's spouse and children.
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect three directors of the
Company. Cumulative voting is not permitted for the election of directors. In
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the absence of instructions to the contrary, the person named in the
accompanying proxy will vote in favor of the election of each of the persons
named below as the Company's nominees for directors of the Company. All of the
nominees are presently members of the Board of Directors. Each of the nominees
has consented to be named herein and to serve if elected. It is not anticipated
that any nominee will become unable or unwilling to accept nomination or
election, but if such should occur, the person named in the proxy intends to
vote for the election in his stead of such person as the Board of Directors of
the Company may recommend.
The following table sets forth certain information regarding each nominee
and each executive officer of the Company
Officer or
Name Age Office Director Since
---- --- ------ --------------
William E. Cook 50 Chairman of the Board of November, 1998
Directors and Director
Edward S. Smith 80 Director May, 1997
John E. Hart 59 Director and Secretary May, 1997
Robert E. Tuzik 48 President and Chief May, 1997
Operating Officer
M. Charles Van Rossen 42 Chief Financial Officer August, 1998
On April 30, 1998, Jeffrey A. Edwards resigned from his positions as Chief
Financial Officer and Secretary. On July 1, 1998, Michael L. DeBonny resigned as
a director effective April 30, 1998. Mr. Cook served as interim Chief Executive
Officer from March 31, 1998 through November 10, 1998, when he accepted a
directorship and the position of Chairman of the Board of Directors. Mr. Van
Rossen served as contract Chief Financial Officer from May 1, 1998 until his
full time employment in that position on August 11, 1998.
Directors hold office for a period of one year from their election at the
annual meeting of stockholders and until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. None of the above individuals has any family
relationship with any other. Directors not employed by the Company receive a
$2,500 quarterly retainer, $500 each for attending Board of Directors' meetings
and are reimbursed for out-of-pocket expenses.
Background
The following is a summary of the business experience of each executive
officer and director of the Company for at least the last five years:
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William E. Cook served as restructuring consultant and interim Chief Executive
Officer of the Company from March 31, 1998 through November 10, 1998, when he
accepted a seat on the board of directors and the chairmanship of the board. Mr.
Cook, through his company RiptideHoldings, Inc., was hired by the Company to
assist with the restructuring and turnaround of the Company. Mr. Cook has been
President of Riptide for three years. For the four years prior to that Mr. Cook
was President, CEO, a director and board chairman of DDL Electronics, Inc., a
New York Stock Exchange company with printed circuit board and electronic
contract assembly manufacturer operations in the United States and Europe. Prior
to that, Mr. Cook was a partner with TBM Associates, a venture capital firm
based in Boston, Massachusetts. Prior to that, Mr. Cook was President and CEO of
Signal Technology, Inc., a company he co-founded in 1981. Mr. Cook acts as a
consultant and/or serves on the boards of several private companies. Mr. Cook
has both undergraduate and graduate degrees in Engineering from North Carolina
State University and a Masters degree in Business Administration from MIT.
Edward S. Smith was Chairman of the Board of Directors from March 31, 1998 until
Mr. Cook's acceptance of the position. He has been a director of the Company
since closing of the Company's merger with OMNI on April 30, 1997 and had been a
director of OMNI from 1994 to the closing of the merger. Mr. Smith is
President/Owner of Ted Smith & Company. He is the former chairman and Chief
Executive Officer of Omark Industries, Inc., an international manufacturer of
cutting chain for chain saws, hydraulic log loaders and sporting ammunition. His
business activity during the last five years has been concentrated on private
investing and board memberships. Currently he serves on the Board of Directors
of Georgia Gulf Corporation and Expert Systems Publishing Company.
John E. Hart has been a director of the Company since closing of the merger with
OMNI on April 30, 1997. Prior to the Company's merger with OMNI, he had been
general counsel to the Company since October 1993 and its Secretary and
Treasurer since June, 1994. From 1985 to 1994 he was engaged in the private
practice of law. He resumed his law practice in May, 1997. Mr. Hart holds a JD
degree from the University of Southern California and a BA degree from the
University of Redlands.
Robert E. Tuzik became President and Chief Operating Officer of the Company
October 15, 1998. He was Vice President - Sales and Marketing of the Company
from closing of the Company's merger with OMNI on April 30, 1997 until his
appointment to the position of President and Chief Operating Officer on October
15, 1998. He had been Vice President - Sales and Marketing from 1996 to the
closing of the merger. From 1995 to 1996 he owned and operated Talus Associates,
specializing in railway marketing and media relations. Prior to that he spent
six years as engineering editor of Railway Track and Structures, a railroad
engineering journal. Mr. Tuzik holds a BA in English and MS in Journalism from
the University of Illinois at Chicago and Northwestern University.
M. Charles Van Rossen began serving as contract Chief Financial Officer of the
Company May 1, 1998 and became a full time employee as of August 11, 1998. From
1995 to 1998 Mr. Van Rossen was a private financial and management consultant.
Prior to that he spent four years as Chief Financial Officer and Controller of
DDL Electronics, Inc., a New York Stock Exchange company with printed circuit
board and electronic contract assembly manufacturer operations in the United
States and Europe. Prior to that he spent seven years with the Pacificorp group
of companies working in various management positions for that company's many
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subsidiaries. Prior to that Mr. Van Rossen was an audit manager with KPMG Peat
Marwick. He is a Certified Public Accountant and holds a BS degree in Accounting
and Quantitative Methods from the University of Oregon.
Executive Compensation
The following table sets forth certain information concerning compensation
paid to the Company's executive officers for the years ended April 30, 1996,
1997 and 1998, respectively.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
--------------------------------------------- -------------------
Other
Year Annual
Ended Compen- Options LTIP All other
Name and Principal Position April 30 Salary Bonus sation SARs Payments Comp.
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Cook 1998 30,000 0 0 0 0 0
Interim CEO
Michael L. DeBonny 1998 150,000 0 0 0 0 0
CEO, President 1997 151,814 0 0 618,144 0 0
and Treasurer 1996 120,918 8,026 0 0 0 0
Ronald G. Nutting 1998 66,702 0 0 0 0 0
Executive Vice President 1997 106,544 0 0 0 0 0
and Secretary 1996 88,179 5,538 0 0 0 0
</TABLE>
Proposal to Amend Company's Certificate of Incorporation to change the Company's
name
The Company's Board of Directors recommends that the shareholders approve
the proposed Amendment to Article FIRST of its Certificate of Incorporation,
which changes the name of the corporation to OMNI Rail Products, Inc. The
proposed amendment provides:
Article FIRST of the Certificate of Incorporation is amended to read in its
entirety as follows:
"FIRST: The name of the corporation is OMNI Rail Products, Inc."
Proposal to combine outstanding shares
The Company's Board of Directors recommends that the shareholders approve
the proposed resolution to combine each three outstanding shares of capital
stock into one share of capital stock. The proposed resolution provides:
RESOLVED that, on adoption of this resolution by the shareholders,
each outstanding three shares of common stock are converted into one share
of common stock and each outstanding three shares of Series B preferred
stock are converted into one share of Series B preferred stock.
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CERTAIN TRANSACTIONS
On July 6, 1998, Michael L. DeBonny who had served as an officer and
director of the Company entered into a Separation and Mutual Release Agreement
which resolved certain disputes and controversies between him and the Company.
Mr. DeBonny's employment was terminated and he resigned as a director both
effective April 30, 1998. In addition, Mr. DeBonny relinquished options to
purchase 618,144 shares of common stock and 63,150 shares of Series B preferred
stock and granted the directors of the Company an irrevocable proxy to vote all
shares he is entitled to vote through April 30, 2000. Mr. DeBonny will receive,
subject to possible adjustments, his salary and certain fringe benefits through
February 28, 1999.
On October 15, 1998, the directors authorized the issuance of up to
$250,000 worth of convertible subordinated notes to comply with the FINOVA debt
restructuring requirements. To date, William E. Cook, who was restructuring
consultant to the Company and interim CEO, until joining the board of directors
and becoming Chairman of the Board on November 10, 1998, has invested a total of
$122,580 in those notes. It is anticipated that Edward S. Smith, director and
Richard Kreitzberg, former director will purchase the balance of the notes to be
issued. The notes are five year notes, bearing interest at 8% per annum, payable
interest only, subject to certain acceleration and prepayment provisions, and
are convertible to common stock at a conversion price of $0.0644 per share.
In February, 1997, three OMNI directors (Messrs. DeBonny, Kreitzberg and
Smith) purchased shares in OMNI for a total of $99,617 at $3.50 per share.
Simultaneously, put agreements were executed requiring the Company to purchase
those shares at a price equivalent to $4.00 per share 120 days following the
investment. Mr. Kreitzberg exercised his put and his shares were repurchased in
June, 1997. The put agreements with Messrs. DeBonny and Smith were extended and
the put price adjusted. In March, 1998, they agreed to defer exercise of the
puts until April 2, 1999 and to adjust the price of the put to reflect an 11%
per annum return on the investment. Effective as of June 30, 1998, in
conjunction with the FINOVA debt restructuring, Mr. Smith's put was deemed
exercised and a note was issued to him for the amount due. The note is
subordinated to the FINOVA obligations and has deferred payments on the same
terms as other unsecured creditors who were required by FINOVA to subordinate
and defer payment. Mr. DeBonny's put was cancelled as of June 30, 1998, in
conjunction with the FINOVA debt restructuring and his separation agreement. The
subordinated promissory note from the Company to Mr. DeBonny which had been used
to pay for the stock issued in the put transaction in February 1997 was
reinstated and payment was deferred on the same terms as other unsecured
creditors who were required by FINOVA to subordinate and defer payment.
In March, 1997, OMNI entered into a short term equipment rental agreement
with Mr. Smith in which, as an accommodation, he purchased three sets of forms
for production of certain concrete crossings at a cost of $94,820. The forms are
currently rented to OMNI month to month at a monthly rental of $1,580.33.
In June, 1997, the Company entered into an agreement with John E. Hart to
provide certain consulting, investor relations and legal services. The agreement
provides for a retainer of $2,500 per month which covers up to twenty-five hours
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of services. In addition, in connection with a proposed transaction with a
German company, Mr. Hart provided services in connection with negotiations and
documentation of the transaction, on a flat fee basis which included an option
to purchase 10,000 shares of the Company's Common Stock at $1.00 per share.
As a condition of the merger transaction with OMNI, the Company entered
into agreements with Messrs. Hart and Gangemi to exchange all of their Series A
preferred stock (60,000 and 750,000 shares respectively) for 20,000 and 250,000
shares, respectively, of Series B preferred stock.
Management is of the opinion that all transactions described above between
the Company and its officers, directors or stockholders were on terms at least
as fair to the Company as had the transactions been concluded with an
unaffiliated party. All material transactions effected in the future between the
Company and its officers, directors and principal stockholders will be subject
to approval by a majority of the Company's outside directors not having an
interest in the transaction.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTS
KPMG Peat Marwick LLP conducted the audit of the Company's financial
statements for the year ended April 30, 1998. It is the Company's understanding
that this firm is obligated to maintain audit independence as prescribed by the
accounting profession and certain requirements of the Securities and Exchange
Commission. As a result, the directors of the Company do not specifically
approve, in advance, non-audit services provided by the firm, nor do they
consider the effect, if any, of such services on audit independence.
OTHER BUSINESS
Management of the Company is not aware of any other matters which are to be
presented to the Annual Meeting, nor has it been advised that other persons will
present any such matters. However, if other matters properly come before the
meeting, the individual named in the accompanying proxy shall vote on such
matters in accordance with his best judgment.
The above notice and Proxy Statement are sent by order of the Board of
Directors.
William E. Cook
Chairman of the Board of Directors
January 30, 1999
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
CREATIVE MEDICAL DEVELOPMENT, INC.
TO BE HELD FEBRUARY 23, 1999
The undersigned hereby appoints William E. Cook, Edward S. Smith or John E.
Hart as the lawful agent and Proxy of the undersigned (with all the powers the
undersigned would possess if personally present, including full power of
substitution), and hereby authorizes him to represent and to vote, as designated
below, all the shares of Common Stock and Series B Preferred Stock of Creative
Medical Development, Inc. held of record by the undersigned on January 25, 1999,
at the Annual Meeting of Shareholders to be held February 23, 1999, or any
adjournment or postponement thereof.
1. ELECTION OF DIRECTORS
____ FOR the election as a director of all nominees listed below
(except as marked to the contrary below).
____ WITHHOLD AUTHORITY to vote for all nominees listed below:
NOMINEES: William E. Cook, John E. Hart, Edward S. Smith
INSTRUCTION: To withhold authority to vote for individual nominees, write their
names in the space provided below.
- --------------------------------------------------------------------------------
2. To approve the amendment to the Company's Certificate of Incorporation
to change the corporate name to OMNI Rail Products, Inc.
FOR _____ AGAINST ____ WITHHOLD VOTE _____
2. To approve the resolution to combine each three outstanding shares of
capital stock into one share of capital stock. .
FOR _____ AGAINST ____ WITHHOLD VOTE _____
4. In his discretion, the Proxy is authorized to vote upon any matters
which may properly come before the Annual Meeting, or any adjournment or
postponement thereof.
It is understood that when properly executed, this proxy will be voted in
the manner directed herein by the undersigned shareholder. WHERE NO CHOICE IS
SPECIFIED BY THE SHAREHOLDER THE PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS NAMED IN ITEM 1 ABOVE AND FOR THE PROPOSALS SET FORTH IN ITEMS 2 AND
3, ABOVE.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and confirms all that said Proxy may do by virtue hereof.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: ----------------------------------
Signature
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE. ----------------------------------
Signature, if held jointly
PLEASE CHECK THIS BOX IF YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OF
SHAREHOLDERS. _____
