<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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:
|X| Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Electropharmacology, Inc.
-------------------------
(Name of Registrant as Specified in Its Charter)
Board of Directors of Electropharmacology, Inc.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
PRELIMINARY COPY
ELECTROPHARMACOLOGY, INC.
2301 N.W. 33rd Court, Suite 102
Pompano Beach, Florida 33069
October __, 1996
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of
Stockholders which will be held on Friday, November 1, 1996 at 10:00 A.M. at
DoubleTree Suites, 555 Cypress Creek, Ft. Lauderdale, Florida 33309.
The Notice of Annual Meeting and Proxy Statement which follow
describe the business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
Notice of Annual Meeting and Proxy Statement, may I urge you to complete, sign,
date and return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent, North
American Transfer Co., in writing, at 147 W. Merrick Road, Freeport, New York
11520.
Your vote is very important, and we will appreciate a prompt
return of your signed proxy card. We hope to see you at the meeting.
Cordially,
Joseph Mooibroek
Chairman
<PAGE>
PRELIMINARY COPY
ELECTROPHARMACOLOGY, INC.
2301 N.W. 33rd Court, Suite 102
Pompano Beach, Florida 33069
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 1, 1996
--------------------
To the Stockholders of ELECTROPHARMACOLOGY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Electropharmacology, Inc. (the "Company") will be held on Friday, November 1,
1996, at 10:00 A.M. at DoubleTree Suites, 555 Cypress Creek, Ft. Lauderdale,
Florida 33309, for the following purposes:
1. To elect six (6) directors to hold office until the Annual
Meeting of Stockholders to be held in 1997 and until their respective successors
have been duly elected and qualified;
2. To consider and vote on a proposal to approve an amendment
to the Company's Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 322,840 to 1,500,000;
3. To consider and vote on a proposal to approve an amendment
to the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 10,000,000 to 30,000,000 and the number
of authorized shares of Preferred Stock from 1,000,000 to 10,000,000; and
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on
October 1, 1996 are entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
By Order of the Board of Directors,
Joseph Mooibroek
Chairman
October __, 1996
- - - ---------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE>
PRELIMINARY COPY
PROXY STATEMENT
ELECTROPHARMACOLOGY, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 1, 1996
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Electropharmacology, Inc.
(the "Company") for use at the Annual Meeting of Stockholders to be held on
November 1, 1996 at 10 a.m. at DoubleTree Suites, 555 Cypress Creek,
Ft. Lauderdale, FL 33309, including any adjournment or adjournments thereof,
for the purposes set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the
accompanying form of proxy to stockholders on or about October 10, 1996.
The costs of soliciting proxies will be borne by the Company.
It is estimated that these costs will be nominal.
Proxies in the accompanying form, duly executed and returned
to the management of the Company and not revoked, will be voted at the Annual
Meeting. Any proxy given pursuant to such solicitation may be revoked by the
stockholder at any time prior to the voting of the proxy by a subsequently dated
proxy, by written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
The address and telephone number of the principal executive
offices of the Company are:
2301 N.W. 33rd Court, Suite 102
Pompano Beach, Florida 33069
Telephone No.: (954) 975-9818
Fax No.: (954) 975-4021
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on
October 1, 1996 (the "Record Date") are entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, there were issued and outstanding
3,485,931 shares of Common Stock, $.01 par value (the "Common Stock"), and
421,950 shares of Series A Convertible Preferred Stock, $.01 par value (the
"Series A Preferred Stock"). Each share of Common Stock and Series A Preferred
Stock entitles the holder to one vote on each matter submitted to a vote at the
Annual Meeting. Subject to certain exceptions and except as may be required by
law, the holder of the Series A Preferred Stock votes together with the holders
of Common Stock as a single class. See "Voting Procedures."
<PAGE>
VOTING PROCEDURES
The directors will be elected by the affirmative vote of a
plurality of the shares of Common Stock and Series A Preferred Stock voting as a
single class present in person or represented by proxy at the Annual Meeting,
provided a quorum exists. A quorum is established if, as of the Record Date, at
least a majority of the outstanding shares of Common Stock and Series A
Preferred Stock are present in person or represented by proxy at the Annual
Meeting. Adoption of the amendment to the Company's Stock Option Plan requires
an affirmative vote of a majority of the shares of Common Stock and Preferred
Stock present in person or represented by proxy voting as a single class.
Adoption of the amendment to the Company's Certificate of Incorporation requires
the affirmative vote of a majority of the outstanding shares of Common Stock and
Series A Preferred Stock voting as separate classes. All other matters, if any,
at the meeting will be decided by the affirmative vote of a majority of the
shares of Common Stock and Series A Preferred Stock present in person or
represented by proxy voting as a single class, provided a quorum exists. Votes
will be counted and certified by one or more Inspectors of Election who are
expected to be employees of the Company, its counsel or North American Transfer
Co., the Company's transfer agent. In accordance with Delaware law, abstentions
and "broker non-votes" (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares as to a matter with respect to which the brokers
or nominees do not have discretionary power to vote) will be treated as present
for purposes of determining the presence of a quorum. For purposes of
determining approval of a matter presented at the meeting, abstentions will be
deemed present and entitled to vote and will, therefore, have the same legal
effect as a vote "against" a matter presented at the meeting. Broker non-votes
will be deemed not entitled to vote on the subject matter as to which the
non-vote is indicated and will, therefore, have no legal effect on the vote on
that particular matter.
The enclosed proxies will be voted in accordance with the
instructions thereon. Unless otherwise stated, all shares represented by such
proxy will be voted as instructed.
Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
At each Annual Meeting of Stockholders directors are elected
for a one-year term. At this year's Annual Meeting of Stockholders, six
directors will be elected to hold office for a term expiring at the Annual
Meeting of Stockholders to be held in 1997. The Board of Directors has nominated
Messrs. Joseph Mooibroek, David Saloff, Bruce Benner, Larry Haimovitch, Murray
Feldman and Steven Mayer to serve as directors. Each director will be elected to
serve until a successor is elected and qualified or until the director's earlier
resignation or removal.
At this year's Annual Meeting of Stockholders, the proxies
granted by stockholders will be voted individually for the election, as
directors of the Company, of the
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persons named above, unless a proxy specifies that it is not to be voted in
favor of a nominee for director. In the event any of the nominees listed above
shall be unable to serve, it is intended that the proxy will be voted for such
other nominees as are designated by the Board of Directors. Each of the persons
named above has indicated to the Board of Directors of the Company that he will
be available to serve.
Following is information with respect to the Company's
directors, director nominees and executive officers:
Joseph Mooibroek, age 54, has been Chairman of the Board of
Directors, President and Chief Executive Officer of the Company since August
1996. From April 1994 to July 1996, Mr. Mooibroek served as founder, Chairman
and Chief Executive Officer of Shiloah Medical Corporation, a company engaged in
acquisition, advisory and consulting services in the medical industry. From
February 1983 to April 1994, Mr. Mooibroek served as founder, Chairman and Chief
Executive Officer of American Medical Electronics, Inc., an orthopaedic device
company specializing in bone growth stimulation devices and implantable fixation
products.
David Saloff, age 43, has been Vice Chairman and Executive
Vice President of the Company since August 1996. Mr. Saloff served as Chairman
of the Board, President and Chief Executive Officer since founding the Company
in August 1990 until August 1996. From May 1991 to May 1992, Mr. Saloff served
as Vice President of Marketing for Advanced Photonix Inc. ("Photonix"), a
subsidiary of Xsirius Inc. engaged in the manufacture of fiber optics
components. Mr. Saloff also served as a director of Photonix from May 1990 to
February 1992.
Bruce Benner, age 36, has been a director of the Company since
March 1994. Mr. Benner has been President of Benner & Associates, Inc., a
company engaged in medical equipment sales, since 1983. Mr. Benner has also been
President of the Electronic University, a non-profit organization, since 1991.
Mr. Benner received a B.S. from Rollins College in 1982.
Larry Haimovitch, age 48, has been a director of the Company
since September 1993. Since June 1991, Mr. Haimovitch has been President of
Haimovitch Medical Technology Consultants. From July 1989 to December 1990, Mr.
Haimovitch was a medical device analyst at Furman Selz, an investment banking
firm. Mr. Haimovitch is a frequent moderator of Biomedical Business
International Medical Device Conferences and a regular contributor to its
newsletter. Mr. Haimovitch received a B.S. in 1967 from McGill
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<PAGE>
University in accounting and economics and an M.B.A. in finance and investments
from New York University in 1969.
Murray Feldman, age 61, is a director nominee. Since June
1982, Mr. Feldman has been President of Murray Financial Associates, Inc., a
company primarily engaged in originating, selling and servicing residential
mortgages. Mr. Feldman is the uncle of David Saloff.
Steven Mayer, age 37, is a director nominee. Since June 1994,
Mr. Mayer has been President and Managing Director of Aries Capital Group, a
private investment firm. From April 1992 until June 1994, Mr. Mayer was an
investment banker with Apollo Advisors, L.P. ("Apollo") and Lion Advisors, L.P.
("Lion"), affiliated private investment firms. While at Apollo and Lion, Mr.
Mayer was responsible for equity and debt investments in a wide range of
industries. Prior to that time, Mr. Mayer was a lawyer with Sullivan & Cromwell
specializing in mergers, acquisitions, divestitures, leveraged buyouts and
corporate finance.
Donald F. Soldatis, age 28, has been Chief Financial Officer
of the Company since September 1995. Prior to joining the Company, from July
1993 to October 1994, Mr. Soldatis was an analyst with Realty Consultants USA,
Inc. From May 1991 to June 1993, Mr. Soldatis served as an analyst and
controller for Broad Street Financial Company, specializing in venture capital
investment banking services.
On September 20, 1996, Messrs. Thomas T. Lewis, Stanley Beck
and Arthur Pilla resigned as directors of the Company. The Board has nominated
Messrs. Mayer and Feldman to stand for election as directors at this year's
Annual Meeting to replace two of the three directors who have resigned. Mr.
Mayer is a nominee of Mr. Herrick, the holder of outstanding shares of Series A
Preferred Stock. Mr. Herrick has the right to nominate an additional member to
the Company's Board of Directors. Mr. Saloff has agreed to vote all of his
shares of Common Stock for the persons nominated by Mr. Herrick. See "Voting
Security Ownership of Certain Beneficial Owners and Management" and "Certain
Transactions."
During the fiscal year ended December 31, 1995, the Board of
Directors held three meetings. All of the meetings were attended by incumbent
directors of the Company, either in person or by telephone. In addition, the
Board took other action by unanimous written consent in lieu of a meeting. The
Company has no standing nominating, audit or compensation committees of the
Board of Directors or committees performing similar functions.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company during each of three fiscal years ended December 31, 1995, to its then
President and Chief Executive Officer, and the Chief Operating Officer (the
"Named Executives"). No other
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officers received compensation in excess of $100,000 during the year ended
December 31, 1995.
Summary Compensation Table
Annual Compensation
-------------------
Other
Annual
Compen/
Year Salary($) Bonus($) sation($)
---- --------- -------- ---------
David Saloff, 1995 126,000 -0- -0-
President and Chief 1994 120,000 -0- -0-
Executive Officer(1) 1993 196,000 (3) -0- -0-
Walter Wasserman, 1995 117,000 -0- -0-
Chief Operating Officer(2) 1994 98,438 -0- -0-
1993 25,312 -0- -0-
(1) Effective August 5, 1996, Mr. Saloff resigned as Chairman, Chief Executive
Officer and President of the Company. Mr. Saloff currently serves as Vice
Chairman and Executive Vice President of the Company.
(2) Effective December 31, 1995, Mr. Wasserman resigned as Chief Operating
Officer and director of the Company.
(3) Includes deferred compensation paid in 1993 for services provided by Mr.
Saloff from May 1992 through December 31, 1992.
During the fiscal year ended December 31, 1995, the Company
granted five year options to purchase 23,500 shares of Common Stock at exercise
prices ranging from $5.25 to $8.25 to Mr. Soldatis. As of December 31, 1995, no
Named Executive held any options and no stock options were exercised by the
Named Executives during the fiscal year ended December 31, 1995.
Compensation of Directors
Two former non-employee directors each received options to
purchase 5,000 shares of Common Stock at a price of $5.25 per share for
attending Board meetings during the fiscal year ended December 31, 1995. For the
fiscal year ending December 31, 1996, the Company anticipates that it will issue
to each non-employee director shares of Common Stock with a market value of
$1,500 on a quarterly basis as compensation for attending Board meetings.
Employment Agreements
The Company has entered into a five-year employment agreement
with Joseph Mooibroek, which expires in August 2001 and provides for an annual
base compensation of $275,000 (subject to a minimum 3% annual increase based on
the Consumer Price Index) and such bonuses as the Board of Directors may from
time to time determine (subject to an annual limit of up to 200% of Mr.
Mooibroek's then current base compensation). Payment of up to 25% of such base
compensation (plus interest at the prime rate) may be deferred until the first
business day of the next fiscal year in the event that the Company's net income
for its preceding fiscal year is less than 5% of its gross revenues or the
Company's gross
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revenues in its preceding fiscal year were less than $5,000,000. The employment
agreement also provides for benefits of the type provided to other executive
officers of the Company, life insurance in an amount not less than $500,000,
naming Mr. Mooibroek's wife as beneficiary, and an automobile allowance of
$1,000 per month. Under certain circumstances, the base compensation and bonus
may be paid in the form of shares of Common Stock of the Company.
The employment agreement provides for employment on a
full-time basis and contains a provision that Mr. Mooibroek will not compete or
engage in a business competitive with the current or anticipated business of the
Company during the term of the employment agreement and for a period of one year
after termination. Pursuant to the employment agreement, Mr. Mooibroek may be
terminated for cause in the event (i) of a final conviction by a court of
competent jurisdiction for any felony or crime involving fraud, dishonesty or
misappropriation or (ii) the Company fails to achieve certain annual performance
levels based on gross revenues and earnings. In the event Mr. Mooibroek's
employment is terminated without cause (including as a result of a change of
control), he will be entitled to receive a lump sum cash severance payment equal
to 200% of the sum of (i) his highest annual base compensation during the
three-year period prior to termination (or such shorter period during which the
agreement is in effect) and (ii) the average annual bonus during the three-year
period prior to termination. In the event there is more than a two-year term
remaining under the employment agreement, and Mr. Mooibroek remains unemployed
for two years after termination, he is entitled to receive his annual base
compensation from such two-year anniversary of the termination date until the
earlier of (i) the end of the term of the agreement or (ii) the date on which he
becomes employed. In the event there is less than a one-year term remaining
under the employment agreement, he is entitled to receive 50% of the severance
amount otherwise provided in the agreement.
In connection with such employment agreement, the Company
granted, subject to stockholder approval of Proposal I, options to Mr. Mooibroek
to purchase an aggregate of 592,086 shares of the Company's Common Stock (10% of
the Company's outstanding Common Stock on a fully diluted basis less the number
of shares underlying warrants held by Mr. Herrick) at an exercise price of $5.50
per share (the average sales price of the Common Stock for the 20 days prior to
the date of grant). Such options are immediately exercisable as to 20% of the
shares covered thereby and an additional 20% of the shares covered thereby on
each of the first, second, third and fourth anniversaries of the option
agreement; provided that all of the shares vest immediately under certain
circumstances including in the event the Company terminates Mr. Mooibroek's
employment without cause. In addition, the Company has agreed to grant to Mr.
Mooibroek additional options equal to 10% of the number of warrants which may be
exercised by Mr. Herrick . The exercise price of such options will be the
average sales price of the Common Stock for the 20 days prior to the date of any
such grant. As part of Mr. Mooibroek's compensation, the Company will pay Mr.
Mooibroek an aggregate of $200,000 as a reimbursement for relocation and related
expenses.
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<PAGE>
The Company has entered into a five-year employment agreement
with David Saloff, which expires in December 2001 and provides for an annual
base salary of $120,000 and such bonuses as the Board of Directors may from time
to time determine. The employment agreement provides for benefits of the type
provided to other executive officers of the Company, life insurance and an
automobile allowance of $500 per month. The employment agreement provides for
employment on a full-time basis and contains a provision that the employee will
not compete or engage in a business competitive with the current or anticipated
business of the Company during the term of the employment agreement and for a
period of one year after termination. In the event that the executive's
employment is terminated without cause, the executive will be entitled to
receive severance pay equal to the sum of (i) the executive's annual base
compensation and (ii) any accrued annual bonus. In the event there is more than
a one-year term remaining under the employment agreement, and the executive
remains unemployed for one year after termination, the executive is entitled to
receive his annual base compensation from such one-year anniversary of the
termination date until the earlier of (i) the end of the term of the agreement
or (ii) the date on which the executive becomes employed.
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VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of October 1, 1996, based on
information obtained from the persons named below with respect to the beneficial
ownership of shares of Common Stock by (i) each person who is known by the
Company to own more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company and (iii) all of the Company's current officers and
directors as a group. The address for each person is c/o the Company, 2301 NW
33rd Court, Suite 102, Pompano Beach, Florida 33069.
<TABLE>
<CAPTION>
Amount and Nature Percentage of
of Outstanding
Name of Beneficial Owner Beneficial Ownership(1) Shares Owned
- - - ------------------------ ----------------------- ------------
<S> <C> <C>
Joseph Mooibroek............................... -- (2) *
David Saloff................................... 839,712(3) 24.1%
Larry Haimovitch............................... 9,847(4) *
Bruce Benner................................... 28,018(5) *
Steven Mayer................................... -- *
Murray Feldman................................. 1,099,170(6) 28.2
Norton Herrick................................. 2,143,900(7) 41.2
All officers and directors as a group (seven persons) 1,520,726(8) 37.7%
</TABLE>
* Less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from October 1, 1996 statement upon
the exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from October 1, 1996 have been exercised. Unless
otherwise noted, the Company believes that all persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(2) Does not include options to purchase 592,086 shares, the grant of which is
subject to approval of Proposal I.
(3) Includes 580,513 shares of Common Stock over which Mr. Saloff has sole
voting power pursuant to a proxy granted to Mr. Saloff by Mr. Feldman. Does
not include options to purchase 100,000 shares, the grant of which is
subject to approval of Proposal I. See "Certain Transactions."
(4) Represents shares issuable upon exercise of options. Does not include 8,878
shares issuable upon the exercise of options.
(5) Includes 3,228 shares issuable upon exercise of options.
(6) Includes (i) 415,607 shares issuable upon the exercise of warrants and (ii)
580,513 shares subject to a proxy granted to Mr. Saloff. See "Certain
Transactions."
(7) Consists of (i) 421,950 shares of Common Stock, (ii) 421,950 shares of
Common Stock issuable upon conversion of Series A Preferred Stock and (iii)
1,300,000 shares of Common Stock issuable upon the exercise of warrants.
See "Certain Transactions."
(8) Includes an aggregate of 137,367 shares issuable upon the exercise of
options.
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<PAGE>
CERTAIN TRANSACTIONS
In March and May 1995, the Company borrowed an aggregate of $400,000
from David Saloff, Vice Chairman and Executive Vice President of the Company.
Such indebtedness was repaid in May 1995. At December 31, 1995, $75,000 and
$45,000, respectively, of indebtedness was outstanding to Phyllis Saloff, David
Saloff's mother, and Lawrence Schlesinger, a former director of the Company.
This indebtedness was repaid in January 1996.
In November 1995, the Company issued to Mr. Norton Herrick (i) 421,950
shares of Series A Convertible Preferred Stock (the "Series A Preferred Stock")
and (ii) warrants to purchase an aggregate of 1,721,950 shares of Common Stock
in consideration of $2,000,000. Each share of Series A Preferred Stock is
convertible, at the option of the holder, into one share of Common Stock
(subject to adjustment in certain circumstances) at any time until November 13,
2000, at which time outstanding shares of Series A Preferred Stock automatically
convert into Common Stock. The Series A Preferred Stock is entitled to receive
non-cumulative cash dividends, when, as and if declared by the Board of
Directors of the Company and has a liquidation preference of $4.74 per share.
The warrants consisted of warrants to purchase: (i) 421,950 shares of Common
Stock at an exercise price of $.01 per share; (ii) 800,000 shares of Common
Stock at an exercise price of $6.00 per share; (iii) 250,000 shares of Common
Stock at an exercise price of $7.50 per share; and (iv) 250,000 shares of Common
Stock at an exercise price of $9.00 per share. The Warrants are exercisable at
any time until November 13, 2005. In May 1996, Mr. Herrick exercised warrants to
purchase 421,950 shares of Common Stock for an aggregate consideration of
$4,219.50.
In connection with Mr. Herrick's investment, the Company filed a
registration statement registering the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock or upon exercise of the warrants
under the Securities Act of 1933, as amended. Mr. Herrick is entitled to sell
(i) up to one-third of his securities beginning on May 13, 1996, (ii) up to
two-thirds of his securities beginning on November 13, 1996 and (iii) the
balance commencing February 13, 1997. The Company also granted Mr. Herrick the
right to require the Company to increase the number of directors to nine persons
and to nominate two individuals for election as directors. Mr. Herrick has
nominated Mr. Mayer for election as a director at this year's Annual Meeting.
Mr. David Saloff, Vice Chairman and Executive Vice President of the Company, has
agreed to vote all of his shares of Common Stock for the persons nominated by
Mr. Herrick and to take all other actions necessary in his capacity as a
stockholder to cause the election to the Board of Directors of the persons
nominated by Mr. Herrick. In addition, the Company granted Mr. Herrick a right
of first refusal with respect to any sale by the Company of Common Stock,
options, warrants or other securities convertible into Common Stock.
In November 1995, Murray Feldman, the uncle of Mr. Saloff, converted an
aggregate of $1,000,000 principal amount of promissory notes into 195,945 shares
of Common Stock. In consideration of such conversion, the Company granted to Mr.
Feldman five-year
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warrants to purchase 300,000 shares of Common Stock at a price of $6.25 per
share, subject to adjustment in certain circumstances. Subject to certain
limitations and exclusions, the Company agreed to include the shares underlying
the warrants in appropriate registration statements filed by the Company.
In December 1995, the Company repurchased 10,493 shares of Common Stock
for $60,000 in connection with the resignation of Mr. Wasserman as the Company's
Chief Operating Officer.
The Company believes that the foregoing transactions were on terms no
less favorable to the Company than could have been obtained from unaffiliated
third-parties.
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<PAGE>
PROPOSAL I
AMENDMENT OF STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER
FROM 322,840 TO 1,500,000
At the Annual Meeting, the Company's stockholders will be
asked to approve an amendment to the Company's Stock Option Plan (the "Plan") to
increase the number of shares of Common Stock reserved for issuance under the
Plan from 322,840 to 1,500,000. The Board of Directors has also authorized
certain amendments to the Plan to provide for its administration as discussed
below. A copy of the Plan, as amended, is attached hereto as Exhibit A.
The Board believes that in order to enable the Company to
continue to attract and retain personnel of the highest caliber, provide
incentive for officers, directors, key employees and other key persons and
continue to promote the well-being of the Company, it is in the best interest of
the Company and its stockholders to provide to officers, directors, key
employees, consultants and other independent contractors who perform services
for the Company, through the granting of stock options, the opportunity to
participate in the value and/or appreciation in value of the Company's Common
Stock. The Board has found that the grant of options under the Plan has proven
to be a valuable tool in attracting and retaining key employees. It believes
that such authority should be expanded to increase the number of options which
may be granted under the Plan. The Board believes that such authority will
provide the Company with significant means to attract and retain talented
personnel and maintain current key employees.
Summary of the Plan
The Company has adopted the Plan pursuant to which 322,840
shares of Common Stock are currently reserved for issuance upon the exercise of
options designated as either (i) options intended to constitute incentive stock
options ("ISOs") under the Internal Revenue Code of 1986, as amended (the
"Code") or (ii) nonqualified options. ISOs may be granted under the Plan to
employees and officers of the Company. Non-qualified options may be granted to
consultants, directors (whether or not they are employees), employees or
officers of the Company.
The Plan is intended to qualify under Rule 16b-3 under the
Securities Exchange Act of 1934, and is currently administered by the Board of
Directors. The Board, within the limitations of the Plan, determines the persons
to whom options will be granted, the number of shares to be covered by each
option, whether the options granted are intended to be ISOs, the duration and
rate of exercise of each option, the option purchase price per share and the
manner of exercise, and the time, manner and form of payment upon exercise of an
option. Unless sooner terminated, the Plan will expire at the close of business
on April 30, 2003.
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<PAGE>
ISOs granted under the Plan may not be granted at a price less
than the fair market value of the Common Stock on the date of grant (or 110% of
fair market value in the case of persons holding 10% or more of the voting stock
of the Company). Non-qualified options granted under the Plan may not be granted
at a price less than the fair market value of the Common Stock on the date of
grant. Options granted under the Plan will expire not more than ten years from
the date of grant (five years in the case of persons holding 10% or more of the
voting stock of the Company). Unless otherwise provided by the Board in
connection with individual option grants, all options granted under the Plan are
not transferable during an optionee's lifetime but are transferable at death by
will or by the laws of descent and distribution. In the event of death or
disability, options may be exercised during a twelve month period following such
event or such shorter period as the Board may provide. In the event of
retirement of an optionholder who is an officer, director or employee of the
Company or the cessation of services provided by an optionholder who is a
non-employee, an option may be exercised within three months of the date of
termination. In the event that an optionholder is terminated other than pursuant
to death, disability or retirement, all options must be exercised by the date of
termination, unless otherwise provided by the Board.
The Plan contains anti-dilution provisions authorizing
appropriate adjustments in certain circumstances. Shares of Common Stock subject
to options which expire without being exercised or which are cancelled as a
result of the cessation of employment are available for further grant.
Within authority granted to it under the Plan, the Board has
authorized certain amendments to the Plan. Among other things, such amendments
provide that the maximum number of options that may be granted to any optionee
under the Plan shall not exceed one million over a period of three consecutive
calendar years. Such requirement is intended to meet the exception from Section
162(m) of the Code for performance-based compensation. The amendments also
provide for the payment for stock issuable upon the exercise of option in cash,
securities or other legal consideration as the Board may deem appropriate, the
immediate vesting of options in the event of a change of control of the Company
(including through a merger or sale of assets) and for certain tax withholding
obligations of optionees.
To date, an aggregate of 174,774 options (net of forfeitures)
have been granted under the Plan. During the fiscal year ended December 31,
1995, the Company granted five-year options to purchase an aggregate of 55,000
shares under the Plan. Of such options, options to purchase 23,500 shares were
granted to Mr. Donald F. Soldatis, Chief Financial Officer of the Company, at
exercise prices ranging from $5.25 to $8.25. In August 1996, the Company
granted, subject to stockholder approval of Proposal I, options to purchase
592,086 and 100,000 shares of Common Stock, respectively, to Messrs. Mooibroek
and Saloff at exercise prices of $5.50 per share.
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<PAGE>
Certain Federal Income Tax Consequences of the Plan
The following is a brief summary of the Federal income tax
aspects of grants made under the Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The participant will recognize no
taxable income upon the grant or exercise of an Incentive Stock Option. Upon a
disposition of the shares after the later of two years from the date of grant
and one year after the transfer of the shares to the participant, (i) the
participant will recognize the difference, if any, between the amount realized
and the exercise price as long-term capital gain or long-term capital loss (as
the case may be) if the shares are capital assets in his or her hands; and (ii)
the Company will not qualify for any deduction in connection with the grant or
exercise of the options. The excess, if any, of the fair market value of the
shares on the date of exercise of an Incentive Stock Option over the exercise
price will be treated as an item of adjustment for his or her taxable year in
which the exercise occurs and may result in an alternative minimum tax liability
for the participant. In the case of a disposition of shares in the same taxable
year as the exercise where the amount realized on the disposition is less than
the fair market value of the shares on the date of exercise, there will be no
adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price which is the same amount included in regular
taxable income.
If Common Stock acquired upon the exercise of an Incentive
Stock Option is disposed of prior to the expiration of the holding periods
described above, (i) the participant will recognize ordinary compensation income
in the taxable year of disposition in an amount equal to the excess, if any, of
the lesser of the fair market value of the shares on the date of exercise or the
amount realized on the disposition of the shares, over the exercise price paid
for such shares; and (ii) the Company will qualify for a deduction equal to any
such amount recognized, subject to the limitation that the compensation be
reasonable. The participant will recognize the excess, if any, of the amount
realized over the fair market value of the shares on the date of exercise, if
the shares are capital assets in his or her hands, as short-term or long-term
capital gain, depending on the length of time that the participant held the
shares, and the Company will not qualify for a deduction with respect to such
excess.
Subject to certain exceptions for disability or death, if an
Incentive Stock Option is exercised more than three months following the
termination of the participant's employment, the option will generally be taxed
as a Non-Qualified Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to Non-Qualified
Stock Options (i) upon grant of the option, the participant will recognize no
income; (ii) upon exercise of the option (if the shares are not subject to a
substantial risk of forfeiture), the participant will recognize ordinary
compensation income in an amount equal to the excess, if any, of the fair
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<PAGE>
market value of the shares on the date of exercise over the exercise price, and
the Company will qualify for a deduction in the same amount, subject to the
requirement that the compensation be reasonable; (iii) the Company will be
required to comply with applicable Federal income tax withholding requirements
with respect to the amount of ordinary compensation income recognized by the
participant; and (iv) on a sale of the shares, the participant will recognize
gain or loss equal to the difference, if any, between the amount realized and
the sum of the exercise price and the ordinary compensation income recognized.
Such gain or loss will be treated as short-term or long-term capital gain or
loss if the shares are capital assets in the participant's hands depending upon
the length of time that the participant held the shares.
The approval of Proposal I to amend the Plan requires the
approval of a majority of the votes cast by all of the holders of the Common
Stock and Preferred Stock voting as a single class.
The Board believes that the proposed amendment to the Plan
will help the Company attract and retain qualified officers, directors and key
employees. Accordingly, the Board believes that the amendment to the Plan is in
the best interest of the Company and unanimously recommends a vote "FOR" its
approval.
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<PAGE>
PROPOSAL II
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK FROM 10,000,000 TO 30,000,000
AND THE NUMBER OF SHARES OF PREFERRED STOCK
FROM 1,000,000 TO 10,000,000
The Board has adopted a resolution unanimously approving and
recommending to the Company's stockholders for their approval an amendment (the
"Proposed Amendment") to the Certificate of Incorporation to provide for an
increase in the authorized number of shares of Common Stock from 10,000,000 to
30,000,000 and the number of shares of Preferred Stock from 1,000,000 to
10,000,000. The text of the Proposed Amendment is attached hereto as Exhibit B.
Common Stock
The Company currently has authorized 10,000,000 shares of Common Stock,
of which 3,485,931 shares are issued and outstanding. In addition, 3,335,547
shares of Common Stock are reserved for issuance upon exercise of currently
outstanding warrants, options granted under the Plan and options currently
available for future grant under the Plan, leaving the Company 3,178,522 shares
of Common Stock available for future issuance. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. There is no cumulative voting with respect to the election
of directors, with the result that the holders of a majority of the shares of
Common Stock and Series A Preferred Stock voting as a single class may elect all
of the directors. Subject to the prior rights of holders of Preferred Stock, if
any, the holders of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefor.
In the event of liquidation, dissolution or winding up of the Company's affairs,
the holders of Common Stock are entitled to share ratably in the assets of the
Company, if any, legally available for distribution to them after payment of
debts and liabilities and after provision has been made for each class of stock
having preference over the Common Stock. Holders of shares of Common Stock have
no preemptive, subscription or redemption rights.
Preferred Stock
The Company currently has authorized 1,000,000 shares of Preferred
Stock, of which 421,950 shares have been designated Series A Preferred Stock and
are issued and outstanding and held of record by Mr. Herrick. Each share of
Series A Preferred Stock is convertible, at the option of the holder, into one
share of Common Stock (subject to adjustment in certain circumstances) at any
time until November 13, 2000, at which time outstanding shares of Series A
Preferred Stock automatically convert into Common Stock. Shares of Series A
Preferred Stock have votes equal to those of the Common Stock into which they
are
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<PAGE>
convertible and, subject to certain exceptions and except as required by law,
vote together with the Common Stock as a single class. The holder of the Series
A Preferred Stock is entitled to vote on certain matters, including the
incurrence of secured indebtedness by the Company, changes in the number and
terms of the directors of the Company and the issuance of cash dividends and
redemptions or repurchases of securities by the Company. The Series A Preferred
Stock is entitled to receive non-cumulative cash dividends when, as and if
declared by the Board of Directors of the Company and has a liquidation
preference of $4.74 per share. The balance of the currently authorized and
unissued shares of Preferred Stock may be issued by the Company with such
designations, rights and preferences as may be determined by the Board of
Directors from time to time without stockholder approval.
The Board believes the increase in the authorized number of shares of
Common Stock and Preferred Stock is in the best interests of the Company and
believes it advisable to authorize such shares to have them available for, among
other things, possible issuance in connection with public or private offerings
of shares for cash, dividends payable in stock of the Company, acquisitions of
other companies or properties and implementation of employee benefit plans. In
particular, the Board of Directors considers this the Proposed Amendment
advisable in order to provide greater flexibility for future capital
requirements. The development of the Company to date has been financed to a
considerable extent through the issuance of its Common Stock, Preferred Stock or
other securities convertible into Common Stock. The Board believes that it would
be beneficial to the Company to be in a position to make additional issuances of
such Common Stock, Preferred Stock or convertible securities if circumstances
warrant such issuances. Approval by the stockholders of the Proposed Amendment
will avoid the expensive procedure of calling and holding a special meeting for
that purpose at a later date.
The Company is actively seeking sources of additional financing and
from time to time evaluates potential acquisition opportunities and, while the
Company currently has no agreements that will or could result in the issuance of
any shares of Common Stock or Preferred Stock for such or any other purposes,
the Company anticipates that it will issue Common Stock, Preferred Stock or
other convertible securities in connection with future financing and/or
acquisition transactions. Such additional shares could be used to dilute the
stock ownership of or otherwise create voting impediments to persons seeking to
obtain control of the Company.
The additional shares of Common Stock and Preferred Stock that would be
available for issuance if the Proposed Amendment is approved, could be issued
for any corporate purpose by the Board at any time without further stockholder
approval. Further authorization from the Company's stockholders will not be
solicited prior to the issuance of Common Stock or Preferred Stock. Any
newly authorized shares of Preferred Stock may be issued by the Company with
such designation rights and preferences as may be determined by the Board of
Directors. The voting and equity ownership rights of the Company's stockholders
may be diluted by any such issuances. Stockholders will not have preemptive
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<PAGE>
rights to subscribe for shares of Common Stock or Preferred Stock, unless the
Company grants such rights at the time of issue.
The Board is required to make any determination to issue shares of
Common Stock or Preferred Stock based on its judgment as to the best interests
of the Company and its stockholders. Although the Board has no present intention
of doing so, it could issue shares of Common Stock or Preferred Stock that
could, depending on the circumstances, make more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or otherwise. When in the judgment of the Board such use would be
in the best interest of the Company and its stockholders, such shares could be
used to create voting or other impediments or to discourage persons seeking to
gain control of the Company. Such shares could be privately placed with
purchasers favorable to the Board in opposing such action. The issuance of new
shares of Common Stock or Preferred Stock also could be used to dilute the stock
ownership of a person or entity seeking to obtain control of the Company should
the Board consider the action of such entity or person not to be in the best
interest of the Company and its stockholders. Any such issuance could also have
the effect of diluting the earnings per share, book value per share and/or
voting power of the Common Stock or Preferred Stock.
The approval of Proposal II to amend the Certificate of Incorporation
to increase the authorized number of shares of Common Stock and Preferred Stock
requires the approval of a majority of the votes entitled to be cast by all of
the holders of the Common Stock and Preferred Stock voting as separate classes.
The Board believes that the amendment to the Certificate of
Incorporation is in the best interest of the Company and unanimously recommends
a vote "FOR" its approval.
INDEPENDENT AUDITORS
BDO Seidman, LLP has audited and reported upon the financial
statements of the Company for the fiscal year ended December 31, 1995. It is
currently anticipated that BDO Seidman, LLP will be selected by the Board of
Directors to examine and report on the financial statements of the Company for
the year ending December 31, 1996. Representatives of BDO Seidman, LLP are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
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<PAGE>
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Stockholders who wish to present proposals appropriate for
consideration at the Company's 1996 Annual Meeting of Stockholders which is
expected to be held in May 1997 must submit the proposal in proper form to the
Company at its address set forth on the first page of this Proxy Statement not
later than January 30, 1997 in order for the proposition to be considered for
inclusion in the Company's proxy statement and form of proxy relating to such
annual meeting. Any such proposals, as well as any questions related thereto,
should be directed to the Secretary of the Company.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and
through brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED
DECEMBER 31, 1995 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON OCTOBER 1, 1996. COPIES OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST
TO :
ELECTROPHARMACOLOGY, INC.
2301 N.W. 33rd Court, Suite 102
Pompano Beach, Florida 33069
ATTENTION: Joseph Mooibroek
The Board of Directors is aware of no other matters, except
for those incident to the conduct of the Annual Meeting, that are to be
presented to stockholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournments
thereof, it is the intention of the persons named in the proxy to vote the proxy
in accordance with their judgment.
By order of the Board
of Directors,
Joseph Mooibroek
Chairman
October __, 1996
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<PAGE>
EXHIBIT A
ELECTROPHARMACOLOGY, INC.
1993 STOCK OPTION PLAN
(AS AMENDED)
1. Purpose. The purpose of the Electropharmacology, Inc. 1993
Stock Option Plan (the "Plan"), is to provide an incentive to officers,
directors, employees and consultants of Electropharmacology, Inc. (the
"Company") and to other persons providing significant services to the Company to
remain in the employ of the Company or provide services to the Company and
contribute to its success.
As used in the Plan, the term "Code" shall mean the Internal
Revenue Code of 1986, as amended, and any successor statute, and the term
"Subsidiary" shall have the meaning set forth in Section 424(f) of the Code.
Although the Company has no Subsidiaries as of the date of Board approval of
this Plan, references to Subsidiaries herein shall apply to any Subsidiaries
which the Company may acquire in the future.
2. Administration. (a) The Plan shall be administered by the
Board of Directors of the Company (the "Board"), which may from time to time
delegate all or any part of its authority under the Plan to a committee (the
"Plan Committee") of two or more non-employee Directors (as defined in Rule
16b-3 as promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 ) who also qualify as "outside directors" for
purposes of Section 162(m) of the Code. A majority of the Board or Plan
Committee shall constitute a quorum, and the action of the members of the Board
or Plan Committee present at any meeting at which the quorum is present, or acts
unanimously approved in writing, shall be the acts of the Board or Plan
Committee.
(b) The interpretation and construction by the Board
of any provisions of the Plan or of any agreement, notification or document
evidencing the grant of Options and any determination by the Board pursuant to
any provision of the Plan or of any such agreement, notification or document
shall be final and conclusive. No member of the Board shall be liable for any
such action or determination made in good faith.
(c) Subject to the provision of the Plan, the Board
shall have the sole authority to determine:
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<PAGE>
(1) The persons to whom options to purchase
Stock (as defined herein) shall be granted;
(2) The number of options to be granted to
each person and the number of shares of Stock to which each option
pertains,subject to the limitations set forth in section 4 of the Plan;
(3) The price to be paid for the Stock upon
the exercise of each option, which shall be equal to or grater than the
market value per share of Stock on the date the option is granted;
(4) The period within which each option
shall be exercised and, with the consent of the optionee, any
extensions of such period (provided, however, that the original period
and all extensions shall not exceed the maximum period permissible
under the Plan); and
(5) The terms and conditions of each stock
option agreement entered into between the Company and persons to whom
the Company has granted an option and of any amendments thereto
(provided that the optionee consents to each such amendment).
3. Eligibility. Officers, directors, employees and consultants
of the Company and persons providing significant services to the Company shall
be eligible to receive grants of options under the Plan.
4. Stock Subject to Plan. (a) There shall be reserved for
issue upon the exercise of options granted under the Plan 1,500,000 shares of
Common Stock of the company ("Stock") or the number of shares of Stock, which,
in accordance with the provisions of Section 10 hereof, shall be substituted
therefor. Such shares may be shares of original issuance or treasury shares or a
combination thereof.
(b) Upon the full or partial payment of any option
price by the transfer to the Company of shares of Stock or upon satisfaction of
tax withholding provisions in connection with any such exercise or any other
payment made or benefit realized under the Plan by the transfer or
relinquishment of shares of Stock, there shall be deemed to have been issued or
transferred under the Plan only the net number of shares of Stock actually
issued or transferred by the Company.
(c) Upon payment in cash of the benefit provided by
any award granted under the Plan, any shares of Stock that were covered by that
option shall again be available for issuance or transfer hereunder.
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<PAGE>
(d) Notwithstanding any other provision of the Plan
to the contrary, no optionee shall be granted options for more than 1,000,000
shares of Stock during any period of three consecutive calendar years, subject
to adjustment as provided in Section 10 of the Plan.
5. Terms of Options.
(a) Incentive Stock Options. It is intended that
options granted pursuant to this Section 5(a) qualify as incentive stock options
as defined in Section 422 of the Code. Incentive stock options shall be granted
only to employees of the Company. Each stock option agreement evidencing an
incentive stock option shall provide that the option is subject to the following
terms and conditions and to such other terms and conditions not inconsistent
therewith as the Board may deem appropriate in each case.
(1) Option Price. The price to be paid for
each share of Stock upon the exercise of each incentive stock option
shall be determined by the Board at the time the option is granted, but
shall in no event be less than 100% of the fair market value of the
shares on the date the option is granted, or not less than 110% of the
fair market value of such shares on the date such option is granted in
the case of an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or Subsidiaries. As used in this
Plan the term "date the option is granted" means the date on which the
Board authorizes the grant of an option hereunder or any later date
specified by the Board. Fair market value of the shares shall be (i)
the mean of the high and low prices of shares of Stock sold on the New
York or American Stock Exchange on the date the option is granted (or
if there was no sale on such date, the highest asked price for the
Stock on such date), or (ii) date the option is granted, the mean
between the "bid" and "asked" prices of the Stock in the National
Over-The-Counter Market on the date the option is granted, or (iii) if
the Stock is not traded in any market, the price determined by the
Board to be fair market value, based upon such evidence as it may deem
necessary or desirable.
(2) Period of Option and Exercise. The
period or periods within which an option may be exercised shall be
determined by the Board at the time the option is granted, but in no
event shall any option granted hereunder be exercised more than ten
years from the date the option was granted nor more than five years
from the date the option was granted in the case of an individual then
owning (within the meaning of Section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the
Company or Subsidiaries.
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<PAGE>
(3) Payment for Stock. (A) Each grant of an
incentive stock option shall specify the form of consideration to be
paid in satisfaction of the option price and the manner of payment of
such consideration, which may include (i) cash in the form of currency
or check or other cash equivalent acceptable to the Company, (ii)
nonforfeitable, unrestricted shares of Stock, which are already owned
by the optionee and have a value at the time of exercise that is equal
to the option price, (iii) any other legal consideration that the Board
may deem appropriate, including without limitation any form of
consideration authorized under Section 5(a)(3)(B) below, on such basis
as the Board may determine in accordance with the Plan and (iv) any
combination of the foregoing.
(B) Any grant may provide that payment of
the option price may also be made in whole or in part in the form of
other shares of stock that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Board
whenever any option price is paid in whole or in part by means of any
of the forms of consideration specified in this Section 5(a)(3)(B), the
shares received by the optionee upon the exercise of the option shall
be subject to the same risks of forfeiture or restrictions on transfer
as those that applied to the consideration surrendered by the optionee;
provided, however, that such risks of forfeiture and restrictions on
transfer shall apply only to the same number of shares received by the
optionee as applied to the forfeitable or restricted shares surrendered
by the optionee.
(C) Any grant may provide for deferred
payment of the option price from the proceeds of sale through a bank or
broker on the date of exercise of some or all of the shares to which
the exercise relates.
(b) Nonqualified Stock Options. Nonqualified stock
options may be granted not only to employees but also to directors or
consultants who are not employees of the Company and to persons who provide
substantial services to the Company.
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<PAGE>
Each nonqualified stock option granted under the Plan shall be evidenced by a
stock option agreement between the person to whom such option is granted and the
Company. Such stock option agreement shall provide that the option is subject to
the following terms and conditions and to such other terms and conditions not
inconsistent therewith as the Board may deem appropriate in each case.
(1) Option Price. The price to be paid for
each share of Stock upon the exercise of an option shall be determined
by the Board at the time the option is granted. As used in this Plan,
the term "date the option is granted" means the date on which the Board
authorizes the grant of an option hereunder or any later date specified
by the Board. To the extent that the fair market value of Stock is
relevant to the pricing of the option by the Board, fair market value
of the Stock shall be determined as set forth in Section 5(a)(1)
hereof.
(2) Period of Option and Exercise. The
period or periods within which an option may be exercised shall be
determined by the Board at the time the option is granted, but in no
event shall such period exceed 10 years from the date the option is
granted.
(3) Payment for Stock. (A) Each grant of a
Nonqualified Stock Option shall specify the form of consideration to be
paid in satisfaction of the option price and the manner of payment of
such consideration, which may include (i) cash in the form of currency
or check or other cash equivalent acceptable to the Company, (ii)
nonforfeitable, unrestricted shares of Stock, which are already owned
by the optionee and have a value at the time of exercise that is equal
to the option price, (iii) any other legal consideration that the Board
may deem appropriate, including without limitation any form of
consideration authorized under Section 5(b)(3)(B) below, on such basis
as the Board may determine in accordance with the Plan and (iv) any
combination of the foregoing.
(B) Any grant may provide that payment of
the option price may also be made in whole or in part in the form of
other shares of stock that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Board
whenever any option price is paid in whole or in part by means of any
of the forms of consideration specified in this Section 5(b)(3)(B), the
shares received
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<PAGE>
by the optionee upon the exercise of the option shall be subject to the
same risks of forfeiture or restrictions on transfer as those that
applied to the consideration surrendered by the optionee; provided,
however, that such risks of forfeiture and restrictions on transfer
shall apply only to the same number of shares received by the optionee
as applied to the forfeitable or restricted shares surrendered by the
optionee.
(C) Any grant may provide for deferred
payment of the option price from the proceeds of sale through a bank or
broker on the date of exercise of some or all of the shares to which
the exercise relates.
6. Nontransferability. The options granted pursuant to the
Plan shall be nontransferable except by will or the laws of descent and
distribution, and shall be exercisable during the optionee's lifetime only by
him and after his death, by this personal representative or by the person
entitled thereto under his will or the laws of intestate succession.
Notwithstanding the foregoing, the Board, in its sole discretion, may provide
for transferability of particular option under the Plan.
7. Termination of Employment or Other Relationship. Upon
termination of the optionee's employment or other relationship with the Company,
his rights to exercise options then held by him shall be only as follows (in no
case do the time periods referred to below extend the term specified in any
option):
(a) Death or Disability. Upon the death of an
optionee, any option which he holds may be exercised (to the extent exercisable
at his death), unless it otherwise expires, within such period after the date of
his death (not to exceed twelve (12) months) as the Board shall prescribe in his
option agreement, by the employee's representative or by the person entitled
thereto under his will or the laws of intestate succession. Upon the disability
(within the meaning of Section 22(e)(3) of the Code) of an employee, any option
which he holds may be exercised (to the extent exercisable as of the date of
disability), unless it otherwise expires, within such period after the date of
his disability (not to exceed twelve (12) months) as the Board shall prescribe
in his option agreement.
(b) Retirement. Upon the retirement of an officer,
director or employee or the cessation of services provided by a nonemployee
(either pursuant to a Company retirement plan, if any, or pursuant to the
approval of the Board), an option may be exercised (to the extent exercisable at
the date of such termination or cessation) by him within such period after the
date of his retirement or cessation of services (not to exceed three (3) months)
as the Board shall prescribe in his option agreement.
(c) Other Termination. In the event an officer,
director or employee ceases to serve as an officer or director or leaves the
employ of the Company or a nonemployee ceases to provide services to the Company
for any reason other than as set
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<PAGE>
forth in (a) and (b), above, any option which he holds shall terminate at the
date his employment terminates or he ceases providing services to the Company
unless otherwise specified by the Board in the option agreement.
(d) Board Discretion. The Board may in its sole
discretion accelerate the exercisability of any or all options upon termination
of employment or cessation of services.
8. Change of Control of the Company. If there is a change in
control of the Company, an option granted under the Plan will, in the sole
discretion of the Board, become immediately exercisable in full. For purposes
of the Plan, "Change of Control" shall mean the occurrence of any of the
following events:
(a) The Company shall merge into itself, or be merged
or consolidated with, another corporation and as a result of such
merger or consolidation less than 50% of the outstanding voting
securities of the surviving or resulting corporation shall be owned in
the aggregate by the former shareholders of the Company as the same
shall have existed immediately prior to such merger or consolidation;
(b) The Company shall sell or otherwise transfer all
or substantially all of its assets to any other corporation or other
legal person, and immediately after such sale or transfer less than 50%
of the combined voting power of the outstanding voting securities of
such corporation or person is held in the aggregate by the former
shareholders of the Company as the same shall have existed immediately
prior to such sale or transfer;
(c) A person, within the meaning of Sections 3(a)(9),
Section 13(d)(3) or 14(d)(2) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, shall become the beneficial owner (as
defined in Rule 13d-3 of the Securities and Exchange Commission
pursuant to the Securities and Exchange Act of 1934) (other than Joseph
Mooibroek, Norton Herrick and David Saloff and their respective
affiliates) of 35% or more of the outstanding voting securities of the
Company (whether directly or indirectly); or
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<PAGE>
(d) During any period of three consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease, for any reason, to constitute at least
a majority thereof, unless the election, or the nomination for election
by the shareholders of the Company, of each Director first elected
during any such period was approved by a vote of at least one-third of
the Directors of the Company who are Directors of the Company on the
date of the beginning of any such period.
9. Transfer to Related Corporation. In the event an employee
leaves the employ of the Company to become an employee of a Subsidiary or any
employee leaves the employ of a Subsidiary to become an employee of the Company
or another Subsidiary, such employee shall be deemed to continue as an employee
for purposes of this Plan.
10. Adjustment of Shares. In the event of changes in the
outstanding Stock by reason of stock dividends, split-ups, consolidations,
recapitalization, reorganizations or like events (as determined by the Board),
an appropriate adjustment shall be made by the Board in the number and kind of
shares reserved under the Plan, in the number and kind of shares set forth in
Section 4 hereof, and in the number and kind of shares and the option price per
share specified in any stock option agreement with respect to any unpurchased
shares. The determination of the Board as to what adjustments shall be made
shall be conclusive. Adjustments for any options to purchase fractional shares
shall also be determined by the Board. The Board shall give prompt notice to all
optionees of any adjustment pursuant to this Section.
11. Securities Law Requirements. The Board may require
prospective optionees, as a condition of either the grant or the exercise of an
option, to represent and establish to the satisfaction of the Board that all
shares of Stock acquired upon the exercise of such option will be acquired for
investment and not for resale. The Company may refuse to permit the sale or
other disposition of any shares acquired pursuant to any such representation to
permit the sale or other disposition of any shares acquired pursuant to any such
representation until it is satisfied that such sale or other disposition would
not be in contravention of applicable state or federal securities law.
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<PAGE>
12. Tax Withholding. To the extent that the Company is
required to withhold federal, state, local or foreign taxes in connection with
any payment made or benefit realized by an optionee or other person under the
Plan, and the amounts available to the Company for such withholding are
insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that an optionee or such other person make
arrangements satisfactory to the Company for payment of the balance of such
taxes required to be withheld. At the discretion of the Board, such arrangements
may include relinquishment of a portion of such benefit. The Company and any
optionee or such other person may also make similar arrangements with respect to
the payment of any taxes with respect to which withholder is not required.
13. Amendment. The Board may amend the Plan at any time,
except that without shareholder approval:
(a) The number of shares of Stock which may be
reserved for issuance under the Plan shall not be increased except as provided
in Section 10 hereof;
(b) The option price per share of Stock subject to
incentive options may not be fixed at less than 100% of the fair market value of
a share of Stock on the date the option is granted;
(c) The maximum period of ten (10) years during which
the options may be exercised may not be extended:
(d) The class of persons eligible to receive options
under the Plan as set forth in Section 3 shall not be changed; and
(e) This Section 13 may not be amended in a manner
that limits or reduces the amendments which require shareholder approval.
14. Effective Date. The Plan shall be effective upon its
adoption by the Board of Directors of the Company. Options may be granted but
not exercised prior to shareholder approval of the Plan. If any options are so
granted and shareholder approval shall not have been obtained within 12 months
of the date of adoption of the Plan by the Board of Directors,such options shall
terminate retroactively as of the date they were granted.
15. Termination. The Plan shall terminate automatically as of
the close of business on the date preceding the 10th anniversary date of its
initial adoption by the Board of Directors or earlier by resolution of the Board
of Directors or upon consummation of the disposition of capital stock or assets
of the Company, as described in Sections 8
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<PAGE>
hereof. Unless otherwise provided herein, the termination of the Plan shall not
affect the validity of any option agreement outstanding at the date of such
termination.
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<PAGE>
EXHIBIT B
FORM OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES
OF COMMON STOCK FROM
10,000,000 TO 30,000,000 SHARES AND
PREFERRED STOCK FROM 1,000,000 TO 10,000,000 SHARES
The first paragraph of Section 4 of the Certificate of
Incorporation, which refers to the authorized shares of the corporation, is
hereby amended to read as follows:
"FOURTH. The total number of shares of capital stock which the
Corporation shall have authority to issue is Forty Million (40,000,000)
shares, of which Thirty Million (30,000,000) shares shall be Common
Stock, par value $.01 per share, and Ten Million (10,000,000) shares of
Preferred Stock, par value $.01 per share."
1
<PAGE>
APPENDIX 1 -- PROXY CARD
ELECTROPHARMACOLOGY, INC.
2301 N.W. 33rd Court, Suite 102
Pompano Beach, Florida 33069
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 1, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph Mooibroek and Donald
Soldatis and each of them, Proxies, with full power of substitution in each of
them, in the name, place and stead of the undersigned, to vote at the Annual
Meeting of Stockholders of Electropharmacology, Inc. on Friday, November 1,
1996, at 10 a.m. at DoubleTree Suites, 555 Cypress Creek, Ft. Lauderdale,
Florida 33309 or at any adjournment or adjournments thereof, according to the
number of votes that the undersigned would be entitled to vote if personally
present, upon the following matters:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees below
Bruce Benner, Murray Feldman, Larry Haimovitch, Steven Mayer, Joseph Mooibroek,
David Saloff
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below).
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(Continued and to be signed on reverse side)
<PAGE>
2. AMENDMENT TO THE STOCK OPTION PLAN OF THE COMPANY TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE FROM 322,840 TO 1,500,000
SHARES.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 10,000,000 TO
30,000,000 AND THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK FROM
1,000,000 TO 10,000,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE.
IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS
LISTED ABOVE.
DATED: _______________________________, 1996
Please sign exactly as name appears hereon. 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.
--------------------------------------------
Signature
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Signature if held jointly
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.
