SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
LIFERATE SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1 Title of each class of securities to which transaction applies: ___
___________________________________________________________________
2 Aggregate number of securities to which transaction applies: ______
___________________________________________________________________
3 Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): ____
___________________________________________________________________
4 Proposed maximum aggregate value of transaction: __________________
5 Total fee paid: ___________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1 Amount Previously Paid: ___________________________________________
2 Form, Schedule or Registration Statement No.: _____________________
3 Filing Party: _____________________________________________________
4 Date Filed: _______________________________________________________
PRELIMINARY PROXY STATEMENT
1997 ANNUAL MEETING
LIFERATE SYSTEMS, INC.
7210 METRO BOULEVARD
EDINA, MINNESOTA 55439
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders of
LifeRate Systems, Inc. The meeting will be held on Thursday, May 22, 1997, at
10:00 a.m., local time, at The Decathlon Club, 1700 East 79th Street,
Bloomington, Minnesota.
We suggest that you carefully read the enclosed Notice of Annual Meeting and
Proxy Statement.
We hope you will be able to attend the Annual Meeting. Whether or not you plan
to attend, we urge you to complete, sign, date and return the enclosed proxy
card in the enclosed envelope in order to make certain that your shares will be
represented at the Annual Meeting.
Very truly yours,
David D. Koentopf
CHAIRMAN OF THE BOARD OF DIRECTORS
April 24, 1997
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
TO SAVE THE COMPANY THE EXPENSE
OF ADDITIONAL SOLICITATION
PRELIMINARY COPY
LIFERATE SYSTEMS, INC.
7210 METRO BOULEVARD
EDINA, MINNESOTA 55439
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 1997
---------------------
TO THE SHAREHOLDERS OF LIFERATE SYSTEMS, INC.:
The Annual Meeting of Shareholders of LifeRate Systems, Inc. (the
"Company") will be held on Thursday, May 22, 1997, at 10:00 a.m., local time, at
The Decathlon Club, 1700 East 79th Street, Bloomington, Minnesota, for the
following purposes:
1. To elect eight directors to serve for the ensuing year or
until their successors are elected and qualified.
2. To consider and act upon a proposal to amend the Company's
Amended and Restated Articles of Incorporation to increase the
number of the Company's authorized shares of common stock from
10,000,000 shares to 20,000,000 shares.
3. To consider and act upon a proposal to ratify the selection of
Ernst & Young LLP as independent auditors of the Company for
the fiscal year ending December 31, 1997.
4. To transact such other business as may be properly brought
before the Annual Meeting or any adjournment thereof.
Only shareholders of record as shown on the books of the Company at the
close of business on April 17, 1997 will be entitled to vote at the Annual
Meeting or any adjournment thereof.
By Order of the Board of Directors
Michel A. LaFond
SECRETARY
April 24, 1997
PRELIMINARY COPY
LIFERATE SYSTEMS, INC.
7210 METRO BOULEVARD
EDINA, MINNESOTA 55439
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1997
-------------------------
INTRODUCTION
The Annual Meeting of Shareholders of LifeRate Systems, Inc. (the
"Company") will be held on Thursday, May 22, 1997, at 10:00 a.m., local time, at
The Decathlon Club, 1700 East 79th Street, Bloomington, Minnesota, or at any
adjournment thereof, for the purposes set forth in the Notice of Meeting.
A proxy card is enclosed for your use. You are solicited on behalf of
the Board of Directors to SIGN, DATE AND RETURN THE PROXY CARD IN THE
ACCOMPANYING ENVELOPE. No postage is required if mailed within the United
States. The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of the Company's common stock,
no par value (the "Common Stock"), will be borne by the Company. Directors,
officers and regular employees of the Company may, without compensation other
than their regular compensation, solicit proxies by telephone, telegraph or
personal conversation. The Company may reimburse brokerage firms and others for
expenses in forwarding proxy material to the beneficial owners of Common Stock.
Any proxy given pursuant to this solicitation and received in time for
the Annual Meeting will be voted in accordance with the instructions given in
such proxy. Any shareholder giving a proxy may revoke it any time prior to its
use at the Annual Meeting by giving written notice of such revocation to the
Secretary of the Company. Written notice of revocation may be given prior to the
Annual Meeting, or a shareholder may appear at the Annual Meeting and give
written notice of revocation prior to use of the proxy.
The Company expects that this Proxy Statement, the Proxy and Notice of
Meeting will first be mailed to shareholders on or about April 24, 1997.
VOTING OF SHARES
Only holders of Common Stock of record at the close of business on
April 17, 1997 will be entitled to vote at the Annual Meeting. On April 17,
1997, the Company had 3,819,708 shares of Common Stock outstanding, each such
share entitling the holder thereof to one vote on each matter to be voted on at
the Annual Meeting. Holders of shares of Common Stock are not entitled to
cumulative voting rights.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting (1,909,855 shares) is required for a quorum for the
transaction of business. In general, shares of Common Stock represented by a
properly signed and returned proxy card will be counted as shares present at the
Annual Meeting for purposes of determining a quorum, without regard to whether
the card reflects votes withheld from director nominees or abstentions (or is
left blank) or reflects a "broker non-vote" on a matter (i.e., a card returned
by a broker on behalf of its beneficial owner customer that is not voted on a
particular matter because voting instructions have not been received and the
broker has no discretionary authority to vote).
The election of a nominee for director and each of the other proposals
described in this Proxy Statement require the approval of a majority of the
shares present and entitled to vote in person or by proxy on that matter (and at
least a majority of the minimum number of votes necessary for a quorum to
transact business at the meeting). Shares represented by a proxy card in which
authority is withheld from the election of a director nominee or voted as
abstaining on any of the other proposals will be treated as shares present and
entitled to vote that were not cast in favor of a particular matter, and thus
will be counted as votes against that matter. Shares represented by a proxy card
including any broker non-votes on a matter will be treated as shares not
entitled to vote on that matter, and thus will not be counted in determining
whether that matter has been approved.
Shares of Common Stock represented by properly executed proxy cards
will be voted in accordance with the choices specified therein. Proxies that are
signed by shareholders but that lack any voting instructions will be voted in
favor of the election as directors of the nominees for director listed in this
Proxy Statement, in favor of the other proposals described in this Proxy
Statement and, with respect to any other business that may properly come before
the Annual Meeting, according to the judgment of the proxies named on the proxy
card.
ELECTION OF DIRECTORS
PROPOSAL 1
NOMINATION
The Bylaws of the Company provide that the Board shall consist of the
number of directors as established by the Shareholders (subject to the authority
of the Board of Directors to increase or decrease the number of directors as
permitted by law). The Shareholders will be asked to elect eight directors of
the Company at the Annual Meeting.
The Board of Directors has nominated eight persons, each of whom are
named below, to be elected at the Annual Meeting. If elected, such individuals
will serve until the next Annual Meeting of Shareholders or until their
successors are duly elected and qualified. All of the nominees are members of
the present Board of Directors and were elected at the 1996 Annual Meeting of
Shareholders.
The Board recommends a vote FOR the election of each of the nominees
listed below. The election of a nominee requires the affirmative vote of a
majority of the shares of Common Stock voting in person or by proxy for
directors at the Annual Meeting. If, prior to the Annual Meeting, the Board
should learn that any nominee will be unable to serve by reason of death,
incapacity or other unexpected occurrence, the proxies that would have otherwise
been voted for such nominee will be voted for a substitute nominee as selected
by the Board. Alternatively, the proxies may, at the Board's discretion, be
voted for such fewer number of nominees as results from such death, incapacity
or other unexpected occurrence. The Board has no reason to believe that any of
the nominees will be unable to serve at the time of the Annual Meeting. Except
as described below, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected.
Daniel A. Pelak was elected by the Board in connection with the
purchase by Medtronic, Inc. of 600,000 shares of the Company's Common Stock in
December 1995. Pursuant to the Investment Agreement, under which Medtronic
purchased such shares, Medtronic has the right to designate one person for
election to the Board, and Mr. Pelak is Medtronic's designee. Pursuant to a
Shareholder Voting Agreement, dated December 26, 1995, Paul Benson, an officer
of the Company, has agreed to vote his shares of Common Stock of the Company for
a person designated by Medtronic to be a director of the Company. See "Certain
Transactions." Mr. Chorske was elected a director in connection with the
Employment Agreement between the Company and Mr. Chorske. See "Compensation and
Other Benefits - Employment Agreements."
While Mr. Chorske currently intends to resign his position as the
Company's President and Chief Executive Officer in May 1997, he intends to
continue serving as a director if he is elected at the Annual Meeting. The
Company is currently engaged in an executive search for a new Chief Executive
Officer.
INFORMATION ABOUT NOMINEES
The following information has been furnished to the Company by the
respective nominees for director.
<TABLE>
<CAPTION>
NAMES OF NOMINEES AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------- --- -------------------- --------------
<S> <C> <C> <C>
David D. Koentopf 54 Private Investor and Business Consultant 1993
William W. Chorske 60 President and Chief Executive Officer of 1996
the Company
Stanley R. Cowle 73 Consultant to Piper Jaffray, Inc. 1993
William D. Knopf, M.D. 42 Practicing Cardiologist with the Atlanta 1994
Cardiology Group, P.C.
Daniel A. Pelak 45 Vice President, Cardiovascular Marketing of 1996
Medtronic, Inc.
Kevin L. Roberg 45 Chief Executive Officer of ValueRx, Inc. 1995
Carl J. Schramm, Ph.D. 50 President of Greenspring Advisors, Inc. 1995
Donald C. Wegmiller 58 President of Management Compensation 1993
Group/HealthCare
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
DAVID D. KOENTOPF. Mr. Koentopf has been Chairman of the Board since
April 24, 1996 and has been a director of the Company since December 1993. From
April 24, 1996 until April 29, 1996, Mr. Koentopf also served as interim Chief
Executive Officer of the Company. Mr. Koentopf is a member of the board of
directors for HealthSystem Minnesota, the parent company of Methodist Hospital
and Park Nicollet Clinic. He is also chairman of the board of Everest Medical
Corporation and serves as a director of Arden Industrial Products, Inc. and
Intranet Solutions, Inc. Mr. Koentopf's career includes serving in several
executive capacities for Lifetouch Inc., most recently as President from 1986 to
1992. From 1979 to 1985, he served as president and chief executive officer of
Steiger Tractor Inc.
WILLIAM W. CHORSKE. Mr. Chorske has been the President and Chief
Executive Officer and a director of the Company since May 1, 1996. From 1987
until joining the Company, Mr. Chorske was employed by Medtronic, Inc., since
1995 as Senior Vice President with responsibility for special projects. He
served as Medtronic's Chief Financial Officer from 1987 to 1991 and was
President of Medtronic Europe from 1991 to 1995.
WILLIAM D. KNOPF, M.D. Dr. Knopf has been a director of the Company
since November 1994. Dr. Knopf was the Executive Vice President of Clinical
Affairs of the Company from December 1995 until August 1996 and currently acts
as a consultant and advisor to the Company primarily with respect to clinical
matters. He is a practicing cardiologist with The Atlanta Cardiology Group, P.C.
and has been director of the cardiac catheterization laboratory at Dunwoody
Medical Center, Atlanta, since 1993. From 1987 to 1993, he was medical director
of the cardiac transplant program at St. Joseph's Hospital in Atlanta where he
also served as director of the cardiac catheterization lab from 1990 to 1993. In
1993, Dr. Knopf was one of the founders of the National Cardiovascular Network.
Dr. Knopf received his undergraduate and medical degrees from Emory University,
and he completed his internship and residency at the University of Texas
Southwestern Medical School Affiliated Hospitals. He also completed a fellowship
in cardiology at Emory University School of Medicine Affiliated Hospitals and
the Stanford University Heart Transplant Program.
STANLEY R. COWLE. Mr. Cowle has been a director since December 1993.
Mr. Cowle is currently a consultant to Piper Jaffray, Inc. where he worked for
11 years, most recently as executive vice president-chief administrative
officer. Prior to joining Piper Jaffray, Mr. Cowle held the position of Hennepin
County (Minnesota) administrator for 27 years. He is currently the vice chairman
of Allina Health Systems and serves on the board of directors of Fidelity Bank
and Exchange Resources, Inc. He has served as chairman of the board of directors
for HealthSpan Health Systems Corporation, a health care provider organization,
and he also has served as chairman of Metropolitan Medical Center,
Metropolitan-Mount Sinai Medical Center, HealthOne Corporation and The
Minneapolis Foundation. He has been appointed to two presidential commissions.
During the Nixon administration, he studied comprehensive health care and under
President Ford he participated in defining the role of the National Science
Foundation.
DANIEL A. PELAK. Mr. Pelak has been a director of the Company since
January 1996. Mr. Pelak is currently a Vice President of Medtronic Inc., a
multi-national medical device manufacturer. He has been with Medtronic Inc.
since 1976 and has held several key managerial positions. Mr. Pelak served as
the Vice President and General Manager of the Nortech Division of Medtronic from
1988 to 1992, and he is currently Vice President of Cardiovascular Marketing at
Medtronic. Mr. Pelak was elected to the Board as the designee of Medtronic. See
"Certain Transactions."
KEVIN L. ROBERG. Mr. Roberg has been a director of the Company since
October 1995. He is currently the Chief Executive Officer of ValueRx, Inc.,
which markets a patient-focused medication management system developed by the
Mayo Clinic. He was previously president of EBP Western HealthPlans, a
subsidiary of Employee Benefit Plans, Inc. He also was president of PIMRExtra,
EBP's managed pharmacy division. Prior to joining EBP, Mr. Roberg was president
and earlier vice president and chief operating officer of the Self-Funded and
Private Label division of Diversified Pharmaceutical Services. Mr. Roberg has
more than 20 years experience in the health care and insurance industries.
CARL J. SCHRAMM, PH.D. Mr. Schramm has been a director of the Company
since January 1995. He is currently President of Greenspring Advisors, Inc. a
strategic consulting firm. From 1993 to 1995, he was Executive Vice President of
Fortis, Inc., a diversified insurance services company and was President of
Fortis Integrated Health Partnerships. From 1987 to 1992, he served as President
of the Health Insurance Association of America. Previously, he was a Professor
of Health Finance at Johns Hopkins University and founded its Center for
Hospital Finance and Management. In 1985, he organized Health Care Investment
Analysts, Inc., a health care data services firm. He currently serves on the
board of directors and the Compensation Committee of HCIA, Inc. and he has also
served as Chairman of the Maryland Health Services Cost Review Commission. He is
a fellow of the New York Academy of Medicine and serves on the Board of Trustees
of the Milbank Memorial Fund.
DONALD C. WEGMILLER. Mr. Wegmiller has been a director of the Company
since December 1993. Mr. Wegmiller has been a health care executive for 30
years, currently as President of Management Compensation Group/HealthCare, an
executive and physician compensation authority for health care organizations.
From 1978 to 1993, he was employed by HealthSpan Health Systems (formerly Health
One Corporation), serving as President and Chief Executive Officer. Mr.
Wegmiller has held numerous offices in state and national health care
associations, serves on the boards of Medical Graphics, Possis Medical, Inc.,
G.D. Searle & Co., Minnesota Power and Light Company, InPhyNet Medical
Management and HBO & Co. and is currently a director of the National Committee
for Quality Healthcare. Mr. Wegmiller has been a White House staff assistant for
three presidents. He was appointed in 1989 by Health and Human Services
Secretary Louis Sullivan, M.D., to a 12-member advisory council on Social
Security, a quadrennial commission organized to examine issues affecting Social
Security, including the Medicare and Medicaid programs.
ADDITIONAL INFORMATION ABOUT THE BOARD OF DIRECTORS
During 1996, the Board of Directors met six times and took action by
written consent seven times. All of the nominees attended more than 75% of the
meetings of the Board that occurred while they were members of the Board, except
Kevin Roberg, who attended 67% of the meetings that occurred while he was a
member of the Board. During 1996, the committees of the Board consisted of the
Finance/Audit Committee and the Stock Option Committee. In April 1996, the Audit
and Finance Committees were combined into the Finance/Audit Committee.
As of December 31, 1996, the Finance/Audit Committee consisted of David
Koentopf, Stanley Cowle, Daniel Pelak, Kevin Roberg and Donald Wegmiller. The
Finance/Audit Committee has responsibility for the Company's accounting,
auditing, operating and reporting practices, reviewing the Company's annual
financial statements and the selection and work of the Company's independent
auditors and the adequacy of the Company's internal controls and has
responsibility for reviewing, and making recommendations to the Board relating
to the capital structure and financing of the Company. During 1996, the
Finance/Audit Committee met formally two times.
As of December 31, 1996, the Stock Option Committee consisted of
Stanley Cowle, Daniel Pelak and Donald Wegmiller. The Compensation Committee has
responsibility for administering the Company's 1993 Stock Option Plan and
Employee Stock Purchase Plan. Although this committee did not formally meet
during 1996, it took action by written consent seven times.
DIRECTOR COMPENSATION
The Company does not pay fees to non-employee directors of the Company,
other than the Chairman of the Board. The Company generally reimburses directors
who are not full-time employees of the Company for out-of-pocket expenses
incurred while attending Board or committee meetings. In 1996, no director other
than the Chairman of the Board received any cash compensation for services as a
director in 1996.
David Koentopf received $51,500 in compensation in 1996 for acting as
Chairman of the Board. Mr. Koentopf served as interim Chief Executive Officer
from April 24, 1996 to April 29, 1996 but received no additional compensation
for such services.
The Board of Directors has granted certain directors who are not
full-time employees of the Company options to purchase 13,333 shares of Common
Stock upon such directors' initial election to the Board. The directors who have
each been granted such an option are Stanley R. Cowle, William Knopf, M.D.,
David D. Koentopf, Carl J. Schramm and Donald Wegmiller. These options generally
vest at the rate of one-third of the number of shares covered by such option on
December 31 of each of the first three years following such director's election
to the Board, provided that such director has continuously served on the Board.
The options have an exercise price equal to the fair market value of one share
of Common Stock on the date of grant with respect to shares for which such
options vest in the first year and equal to the fair market value on January 1
of the year in which subsequent installments of the options vest. In April 1996,
William W. Chorske and Kevin Roberg were each granted an option to purchase
13,333 shares of Common Stock at an exercise price equal to the fair market
value of one share of Common Stock on the date of grant. These options were
exercisable with respect to one-third of such shares on the date of grant and
become exercisable with respect to one-third of such shares on each of the first
two anniversaries of the date of grant. All of the foregoing options are
exercisable for a period of five years from their date of grant.
In July 1996, the Company entered into a settlement agreement and a
consulting agreement with William Knopf, M.D., in connection with which he was
granted an option to purchase 50,000 shares of Common Stock at an exercise price
equal to the fair market value of one share of Common Stock on the date of
grant. See "Certain Transactions."
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 5, 1997, unless
otherwise indicated, by (a) each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) each director,
(c) each executive officer named in the Summary Compensation Table below under
the heading "Compensation and Other Benefits -- Summary of Cash and Certain
Other Compensation" and (c) all directors and executive officers of the Company
as a group.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT PERCENT OF CLASS
- ------------------------------------ ------ ----------------
Medtronic Inc. 600,000 15.7%
7000 Central Avenue N.E.
Minneapolis, MN 55432
David D. Koentopf 13,333 (2) *
William W. Chorske 70,555 (3)(4) 1.8%
Stanley R. Cowle 15,332 (2) *
William D. Knopf, M.D. 52,732 (3)(5) 1.3%
Daniel A. Pelak 0 (6) 0
Kevin L. Roberg 8,888 (3) *
Carl J. Schramm 13,333 (2)(7) *
Donald C. Wegmiller 13,999 (2) *
Thomas Niccum 17,332 (8) *
Paul D. Benson 97,667 2.6%
David W. Haskin 180,000 4.4%
All Directors and Executive
Officers as a Group (9 persons) 305,504 (6)(7)(9) 8.0%
- ------------------------
* Less than 1% of the outstanding shares
(1) Unless otherwise noted, all of the shares are held by individuals
possessing sole voting and dispositive power with respect to the shares
shown. Shares not outstanding, but deemed beneficially owned by virtue
of the right of a person or member of a group to acquire them within 60
days, are treated as outstanding only when determining the amount and
percent owned by such person or group.
(2) Includes 13,333 shares that such director has the right to acquire
within 60 days pursuant to the exercise of stock options.
(3) Includes 8,888 shares that such director has the right to acquire
within 60 days pursuant to the exercise of stock options.
(4) Includes 61,667 shares that Mr. Chorske has the right to acquire within
60 days pursuant to the exercise of stock options.
(5) Includes 7,334 shares that Dr. Knopf has the right to acquire within 60
days pursuant to the exercise of stock options. Includes 26,666 shares
owned by Atlanta Cardiology Group P.C. deemed beneficially owned by Dr.
Knopf. See "Certain Transactions."
(6) Does not include any shares beneficially owned by Medtronic, Inc. Mr.
Pelak is an employee of Medtronic and its designee for election to the
Board of Directors.
(7) Does not include 16,666 shares beneficially owned by Mr. Schramm's
spouse as to which shares Mr. Schramm disclaims beneficial ownership.
(8) Includes 6,666 shares that Mr. Niccum has the right to acquire within
60 days pursuant to the exercise of stock options. Does not include
100 shares owned by Mr. Niccum's spouse as to which shares Mr. Niccum
disclaims beneficial ownership.
(9) Includes 167,887 shares that all directors and executive officers as a
group have the right to acquire within 60 days pursuant to the exercise
of stock options.
COMPENSATION AND OTHER BENEFITS
The following table sets forth the total compensation for each of the
last three fiscal years awarded to or earned by the Chief Executive Officer of
the Company and each of the Company's four most highly compensated executive
officers whose total compensation exceeded $100,000 in 1996 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
William W. Chorske(1) 1996 $166,667 -- $20,000 75,000 --
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
David D. Koentopf(2) 1996 -- -- $51,500 -- --
CHAIRMAN AND FORMER INTERIM
CHIEF EXECUTIVE OFFICER
David W. Haskin(3) 1996 $63,636 -- -- -- --
FORMER CHIEF EXECUTIVE OFFICER 1995 $125,000 -- -- -- --
1994 $90,000 -- -- -- --
Bruce Klein(4) 1996 $95,833 $40,000 -- 40,000 --
FORMER CHIEF FINANCIAL OFFICER
Paul D. Benson 1996 $95,000 $20,000 -- -- --
SENIOR VICE PRESIDENT, 1995 $75,000 $20,000 -- -- --
STRATEGIC BUSINESS DEVELOPMENT 1994 $75,000 -- -- -- --
Thomas Niccum(5) 1996 $91,688 $25,000 -- -- --
VICE PRESIDENT, PRODUCT 1995 $47,187 $100,000 -- 10,000 $9,450(6)
DEVELOPMENT
</TABLE>
- ------------------------
(1) William W. Chorske became Chief Executive Officer on May 1, 1996.
(2) David D. Koentopf served as interim Chief Executive Officer of the
Company from April 24, 1996 until April 29, 1996, but received no
additional compensation for such service. The amounts shown in the
table reflect Mr. Koentopf's compensation for serving as Chairman of
the Board, a position he assumed on April 24, 1996.
(3) David W. Haskin resigned as Chief Executive Officer on April 24, 1996.
(4) Bruce Klein became Chief Financial Officer in March 1996 and resigned
such position effective January 1997.
(5) Thomas Niccum became an employee of the Company in June 1995. Prior to
such time he provided services to the Company as an independent
contractor.
(6) Represents consulting fees paid to Mr. Niccum for services rendered
prior to his becoming an employee of the Company in June 1995.
OPTION GRANTS AND EXERCISES IN 1996
The following tables provide information for the year ended December
31, 1996 as to individual grants and exercises of options to purchase shares of
the Company's Common Stock by each of the Named Executive Officers of the
Company.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED (#)(1) YEAR ($/Sh) DATE
- ---- -------------------- ------------------- ----------- ----------
<S> <C> <C> <C> <C>
William W. Chorske 75,000 21.2% $9.375 4/29/06
David D. Koentopf -- -- -- --
David W. Haskin -- -- -- --
Bruce Klein 40,000 11.3% $9.375 1/97(2)
Paul D. Benson -- -- -- --
Thomas Niccum -- -- -- --
</TABLE>
- ------------------------
(1) All options were granted under the Company's 1993 Stock Option Plan and
are subject to the terms of such plan. Such options vest at the rate of
one-third of the shares covered by such options on the date of grant
and each of the first two anniversaries of the date of grant, provided
that such individuals continue to provide services to the Company. Upon
a defined "Change in Control" of the Company, all outstanding Options
become immediately exercisable in full and will remain exercisable for
the remainder of their terms regardless of whether the holder remains
in the employ or service of the Company or any subsidiary. A "Change in
Control" of the Company for purposes of the 1993 Stock Option Plan
includes (i) the sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company to a corporation that is
not controlled by the Company, (ii) the approval by the Company's
shareholders of any plan or proposal for the liquidation or dissolution
of the Company, (iii) the acquisition by any person, directly or
indirectly, of 50% of more of the Company's Common Stock, or (iv) any
change in control of the Company of a nature that would be required to
be reported pursuant to Section 13 or 15(d) of the Exchange Act,
whether or not the Company is then subject to such reporting
requirements.
(2) Expired upon Mr. Klein's departure from the Company in January 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END (#)(1) OPTIONS AT FY-END ($)(2)
---------------------------- ---------------------------------
NAME (EXERCISABLE/ UNEXERCISABLE) (EXERCISABLE/ UNEXERCISABLE)
- ---- ---------------------------- ---------------------------------
<S> <C> <C>
William W. Chorske 4,444/70,556 0/0
David D. Koentopf 13,333/0 $1,111/0
David W. Haskin 0/0 --
Bruce Klein 13,333/26,667 0/0
Paul D. Benson 0/0 --
Thomas Niccum 6,666/3,334 0/0
</TABLE>
- ------------------------
(1) The exercise price may be paid in cash or, in the Stock Option
Committee's discretion, in shares of the Company's Common Stock valued
at fair market value on the date of exercise.
(2) Based on the closing bid price on December 31, 1996 of $3.25, as
reported by the Nasdaq SmallCap Market System.
EMPLOYMENT AGREEMENTS
Effective May 1, 1996, the Company and William W. Chorske entered into
a one-year employment agreement, which provides for the employment of Mr.
Chorske as the Company's President and Chief Executive Officer. The agreement
provides for an annual base salary of $250,000. In addition, the Company granted
Mr. Chorske an option (not under any formal plan of the Company) to purchase
61,667 shares of Common Stock at a price of $9.375 per share, which will become
exercisable in full upon completion of one year of employment. Mr. Chorske will
also be paid a bonus upon termination of the agreement equal to the amount, if
any, by which the "value" of the foregoing option is less than $150,000. For
purposes of the agreement, the "value" of the foregoing option is equal to
50,000 (which represents a portion of the shares subject to the foregoing
option) multiplied by the difference between the average of the closing bid
prices of the Company's Common Stock in the twenty-business day period preceding
termination of the agreement and the exercise price of the option. In the event
that Mr. Chorske terminates the agreement for "good reason" following a change
in control of the Company, Mr. Chorske is entitled to receive his base salary
for the remaining term of the agreement and the bonus that would otherwise be
payable. In consideration for his service as a director, the Company also
granted Mr. Chorske an option under the Company's 1993 Stock Option Plan to
purchase 13,333 shares of Common Stock at price of $9.375, which is currently
exercisable with respect to one-third of such shares and will become exercisable
with respect to one-third of such shares on each of the first two anniversaries
of his election as a director, provided that Mr. Chorske remains a director of
the Company. The agreement also requires Mr. Chorske to assign to the Company
any inventions related to the Company's business and to keep the Company's
proprietary information confidential. Mr. Chorske is also prohibited from
competing with the Company for a period of two years following termination of
his employment with the Company.
All employees of the Company, including executive officers, have signed
agreements that prohibit disclosure of confidential information to anyone
outside of the Company both during and after employment and provide that any
inventions or other works of authorship relating to or resulting from the
employee's work for the Company will be the exclusive property of the Company.
CERTAIN TRANSACTIONS
From May 1994 through December 1995, Clinical Sales and Services, Inc.
("CSSI") provided sales and marketing services to the Company. Donna Edmonds, a
former officer and director of the Company, Jeffrey Comer, a former officer of
the Company, and William Knopf, M.D., a director of the Company, were principals
of CSSI at the time CSSI was performing services for the Company. Under the 1994
agreement, the Company issued 10,666 shares of Common Stock (which had a fair
market value of $3.00 per share based on the price at which the Company had sold
shares in a private offering) to CSSI for services rendered from May through
December 1994. The Company also sold CSSI 33,332 shares pursuant to the exercise
of an option at a price of $3.00 per share for a total purchase price of
$100,000 in December 1994. Beginning November 1, 1994, the Company agreed to pay
CSSI commissions for certain sales by CSSI. In September 1995, the Company
entered into a Sales and Marketing Services Agreement with CSSI, which replaced
the 1994 agreement, under which the Company agreed to pay CSSI a business
development fee of $30,000 per month, subject to adjustment upon agreement of
the parties, until certain sales levels were met, a 20% commission on system
sales to medical practice groups, a 15% commission on system sales to other
customers, and a 15% commission on recurring revenues after the first year of
the sale, payable for longer of (a) 5 years or (b) the term of the CSSI
agreement. In addition, the Company agreed to make a $100,000 equity investment
in CSSI, granted certain individuals affiliated with CSSI options to purchase an
aggregate of 100,000 shares of Common Stock at a price of $5.875 per share
(including options for 30,000 shares to Donna Edmonds, 29,000 shares to Jeffrey
Comer and 11,000 shares to William Knopf) and paid $86,000 to CSSI shareholders
for their income tax liability related to the distribution of Common Stock of
the Company to such individuals. In 1994, the Company did not pay CSSI any cash
compensation, although it did reimburse CSSI approximately $108,000 for
expenses. In 1995, the Company paid or accrued a total of approximately
$1,650,000 for services provided by CSSI (approximately $1,311,000 in fees and
approximately $339,000 for expenses reimbursed or paid on behalf of CSSI).
In 1996, the Company did not pay or accrue any fees for services by CSSI.
In September 1994, The Atlanta Cardiology Group, P.C. ("ACG") and the
Company entered into an agreement for the joint development of practice
guidelines and clinical outcomes for cardiology, under which ACG agreed to pay
the Company a fee for system design and implementation and ACG was to receive
royalties on sales of the cardiology system over the next ten years. During
1995, the Company paid (or accrued) $150,000 for all services rendered by ACG
and the Company received $50,000 in revenues from the sale of products and
services to ACG. In early 1996, the Company and ACG agreed to restructure their
relationship. Among other things, the Company agreed to pay ACG a royalty equal
to 10% of gross sales of the Company's cardiology system and a 2% royalty on all
database sales. In 1996, the Company received no revenues from ACG and accrued
$60,052 in fees to ACG for all services rendered in 1996, including royalties
under the prior agreement. In March 1997, the Company entered into an agreement
with ACG to replace the prior agreements. Under the revised agreement, the
Company issued a convertible subordinated note to ACG in the principal amount of
$2,250,000, maturing on April 1, 2002. The note accrues interest at a rate of
10% per annum, and interest is payable at the rate of 5% per year, with the
balance of accrued interest payable at the maturity date. Up to $2,000,000 of
the principal amount of the note is convertible by ACG into shares of Common
Stock at the rate of $3.60 per share. As long as the note is outstanding, ACG
has the right to designate an individual to attend all board meetings. William
D. Knopf, M.D., a practicing cardiologist and partner in ACG, is a director of
the Company.
On December 26, 1995, the Company entered into an Investment Agreement
and a License and Development Agreement with Medtronic, Inc. and a Shareholder
Voting Agreement with Medtronic, Inc. and certain shareholders of the Company.
Pursuant to the Investment Agreement, the Company privately sold to Medtronic
600,000 shares of its Common Stock at a price of $8.00 per share for a total
price of $4.8 million. The Company granted to Medtronic certain rights to
receive additional shares if the Company sells shares of Common Stock during the
next 12 months at a price per share less than $8.00, certain rights of first
refusal to purchase capital stock and assets of the Company and to develop or
commercialize the Company's technology in one or more fields other than the
cardiovascular and neurological fields, certain rights to have shares of the
Company held by Medtronic and certain assignees of Medtronic registered for sale
to the public and the right to designate one (1) person to be nominated and
elected to the Board of Directors of the Company. Daniel A. Pelak, a Vice
President of Medtronic, was elected to the Company's Board in January 1996 as
Medtronic's designee under this agreement. Pursuant to the License and
Development Agreement, the Company granted to Medtronic a 30-year world-wide,
fully paid, royalty free license granting Medtronic certain rights relating to
the sale and use of the Company's system in the cardiovascular and neurological
fields. In addition, the Company agreed to install the System at certain
clinical sites specified by Medtronic on a preferred pricing basis, to install
the System at one site specified by Medtronic at no cost to Medtronic and to
engage with Medtronic in certain joint development of products and systems.
Under the Shareholder Voting Agreement, David Haskin, Donna Edmonds, Jeffrey
Comer and Paul Benson agreed to vote their shares of common stock of the Company
for the person designated by Medtronic to be a member of the Board of Directors
of the Company.
In July 1995, the Company entered into an agreement with Anthony P.
Furnary, M.D., an advisor to the Company, under which the Company acquired
certain software developed by Dr. Furnary and agreed to pay royalties to Dr.
Furnary initially equal to 7.5% of gross revenues. Dr. Furnary also received an
option to purchase 26,000 shares of Common Stock at an exercise price of $4.50
per share. In 1995, the Company paid no royalties to Dr. Furnary under this
agreement. In 1996, the Company accrued $46,169 in royalties, of which amount
$10,000 has been paid to Dr. Furnary. In March 1997, the Company and Dr. Furnary
modified this agreement. Under the terms of the modified agreement, beginning in
1999 (or sooner if the Company reaches $20,000,000 of cumulative revenues) the
Company will pay royalties in the amount of 3% on all gross revenues (as defined
in the agreement) up to $100,000,000, and thereafter, 3.6% on all gross
revenues. The existing royalty rate of 7.5% of gross revenues remained in place
through March 31, 1997. In addition, among other things, under the modification
the Company has agreed (i) to make certain milestone payments totaling $450,000
when the Company reaches certain revenue levels; (ii) to issue options to Dr.
Furnary, for services previously rendered to the Company, to purchase 550,000
shares of the Company's common stock at an exercise price of $2.625 per share
and to reprice outstanding options to purchase 36,333 shares held by Dr. Furnary
to $2.625 per share (which represents the closing price of the Company's stock
on the date the Company and Dr. Furnary reached agreement in principle on the
modification agreement); (iii) to enter into a consulting agreement with Dr.
Furnary; and (iv) to appoint Dr. Furnary to the Company's board of directors
within 90 days. The consulting agreement, which has an initial term of five
years, with two-year renewal rights upon mutual agreement, provides that Dr.
Furnary will provide consulting services to the Company in the area of system
design and development as the Senior Advisor and System Architect for an annual
fee of $100,000. The agreement also contains agreements by Dr. Furnary relating
to confidentiality and non-competition.
In February 1996, the Company entered into a Separation Agreement and
Release with each of Donald B. Olson and Merry M. Olson. Under the terms of the
agreements the Olson's each resigned all offices and directorships held with the
Company. Also, the Company and each of the Olsons granted to each other mutual
releases of all claims and potential claims. Pursuant to the terms of their
agreement, the Company agreed to pay each of the Olsons severance payments in
the amount of $5,000 per month and COBRA benefits until April 30, 1997. In
connection with the separation agreements, the Company granted certain
registration rights to the purchasers of 330,342 shares of Common Stock of the
Company previously owned by the Olsons.
In June 1996, the Company entered into an agreement with David W.
Haskin, formerly the Chief Executive Officer of the Company, whose employment
with the Company terminated effective April 24, 1996. Pursuant to the terms of
this agreement, the Company agreed to pay or reimburse Mr. Haskin up to $10,000
per year for premiums on health insurance coverage for himself and his spouse
until Mr. Haskin reaches age 65. In addition, the Company agreed to use its
reasonable efforts to cause the release of shares owned by Mr. Haskin from the
"cheap stock" escrow with the Commissioner of Commerce for the State of
Minnesota and certain lock-up arrangements with Miller, Johnson & Kuehn, Inc.
and granted Mr. Haskin certain registration rights with respect to certain
shares of the Company's Common Stock. The Company and Mr. Haskin also executed
mutual releases of any and all claims relating to Mr. Haskin's employment by the
Company or the termination of his employment.
In June 1996, the Company entered into an agreement with Jeffrey B.
Comer, a former executive officer of the Company, whose employment with the
Company terminated effective April 24, 1996. Pursuant to the terms of this
agreement, the Company entered into a consulting agreement with Mr. Comer,
pursuant to which Mr. Comer provided consulting services for a period of six
months and received an aggregate of $160,000 for such consulting services. The
consulting agreement also included a covenant against competition for 12 months
following the expiration of the term of the consulting agreement, which occurred
on December 1, 1996. In addition, Mr. Comer received an option to purchase
51,000 shares of the Company's common stock for an exercise price per share
equal to the fair market value per share on the date of such grant, which was
$8.625 per share, and the Company granted him certain registration rights with
respect to certain shares owned or subject to options held by Mr. Comer. The
Company and Mr. Comer also executed mutual releases of any and all claims
relating to Mr. Comer's employment by the Company or the termination of his
employment.
In September 1996, the Company entered into an agreement with William
D. Knopf, M.D., a director of the Company, relating to the termination of Dr.
Knopf's employment by the Company. Pursuant to this agreement, the Company
entered into a consulting agreement with Dr. Knopf, under which Dr. Knopf has
agreed to provide certain consulting and advisory services to the Company and
will receive an annual consulting fee of $60,000. The consulting agreement also
includes a covenant against competition for 12 months following the expiration
of the term of the consulting agreement, which expires by its terms on September
1, 1997. In addition, Dr. Knopf received an option to purchase 50,000 shares at
an exercise price equal to the fair market value on the date of grant, which was
$6.625 per share. This option was exercisable with respect to one-third of such
shares on the date of grant and will become exercisable with respect to
one-third of such shares on each of the first two anniversaries of the date of
grant. The option is exercisable for a period of ten years from the date of
grant. The Company and Dr. Knopf also executed mutual releases of any and all
claims relating to Dr. Knopf's employment by the Company or the termination of
his employment.
In September 1996, the Company entered into an agreement with Donna J.
Edmonds, a former director and executive officer of the Company, whose
employment with the Company terminated effective April 24, 1996. Pursuant to
such agreement, the Company agreed to pay Ms. Edmonds an aggregate of $190,000
and granted Ms. Edmonds an option to purchase 80,000 shares of the Company's
common stock, at an exercise price of $5.00 per share, which was the closing bid
price on September 12, 1996. This option is exercisable for a period of ten
years following the date of grant. The Company and Ms. Edmonds also agreed to
execute a stipulation of dismissal with prejudice to resolve the then pending
litigation brought by Ms. Edmonds against the Company and the Company and Ms.
Edmonds also executed mutual releases of any and all other claims relating to
Ms. Edmonds' employment by the Company or the termination of her employment.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY
PROPOSAL 2
INTRODUCTION
At present, the Articles of Incorporation of the Company authorize the
issuance of 10,000,000 shares of Common Stock, no par value. As of April 17,
1997, 3,819,708 shares of the Company's authorized shares of Common Stock were
issued and outstanding and 6,180,292 shares were authorized but unissued. Of the
6,180,292 shares of Common Stock that were authorized and unissued, 2,287,395
shares are reserved for issuance pursuant to outstanding options, warrants and
other convertible securities of the Company. Accordingly, as of April 17, 1997,
there were 3,892,897 shares of Common Stock available for issuance or sale by
the Company other than those issuable as described above.
The Board of Directors has unanimously proposed that the Company's
Articles of Incorporation be amended to increase the authorized number of shares
of common stock from 10,000,000 to 20,000,000 and that this amendment should be
presented to the Company's shareholders at the Annual Meeting. If this amendment
is approved by the shareholders, 13,892,897 shares of Common Stock will be
authorized for issuance and unreserved immediately after the Annual Meeting. The
number of shares of preferred stock authorized under the Amended and Restated
Articles of Incorporation, which is currently 1,000,000 shares, will not be
changed by this amendment. At the Annual Meeting, the shareholders of the
Company are being asked to approve this amendment.
PURPOSE AND EFFECTS OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is necessary and desirable to
increase the number of shares of Common Stock the Company is authorized to issue
to give the Board additional flexibility to declare stock splits or dividends,
adopt additional future employee benefit plans, make acquisitions through the
use of stock and raise equity capital. The Company will be required to raise
additional capital in the second quarter in order to continue operations and it
currently expects to complete a private sale of Common Stock to raise such
capital. The Board of Directors has no other immediate plans, understandings or
agreements or commitments to issue additional shares of Common Stock for any of
these purposes, except for the one planned financing discussed above and except
as permitted or required by outstanding options, warrants, convertible
securities and additional options which may be granted from time to time under
the 1993 Stock Option Plan. The flexibility inherent in having the authority to
issue shares of Common Stock will, in the opinion of the Board of Directors, be
advantageous to the Company in any negotiations involving the issuance of such
stock. If the shareholders failed to approve the proposed amendment and
authorization of the additional shares of Common Stock were deferred until a
specific need existed, the time and expense required in connection with
obtaining the necessary shareholder action for each proposed issuance could
deprive the Company of flexibility that the Board of Directors believes will
result in the most efficient use of such shares. If this proposed amendment is
adopted, no additional action or authorization by the Company's shareholders
will be necessary prior to the issuance of such additional shares, unless
required by applicable law or regulation, or unless deemed desirable or
advisable by the Board of Directors.
If adopted, the proposal will not, by itself, have any effect on the
rights of holders of presently issued and outstanding shares of Common Stock.
Under the Company's Amended and Restated Articles of Incorporation, the
shareholders of the Company do not have preemptive rights with respect to the
Common Stock. Thus, should the Board of Directors elect to issue additional
shares of Common Stock, existing shareholders would not have any preferential
rights to purchase such additional shares of Common Stock.
Although the Board of Directors is proposing this amendment to the
Company's Amended and Restated Articles of Incorporation for the reasons stated
above, the amendment could, under certain circumstances, discourage or make more
difficult an attempt by a person or organization to gain control of the Company
by tender offer or proxy contest, or to consummate a merger or consolidation
with the Company after acquiring control, and to remove incumbent management,
even if such transactions were favorable to the shareholders of the Company.
Issuance of shares of Common Stock in a private placement to a person
sympathetic to management and opposed to any attempt to gain control of the
Company could make a change in control of the Company more difficult.
Accordingly, this proposal to amend the Company's Amended and Restated Articles
of Incorporation may be deemed (under certain circumstances which may or may not
occur) to be an anti-takeover measure. However, the proposal is not being
presented as an anti-takeover measure.
PROPOSED RESOLUTION
A resolution in substantially the following form will be submitted to
the shareholders at the Annual Meeting:
RESOLVED, that the second sentence of Article III of the Company's
Amended and Restated Articles of Incorporation is amended in its
entirety to read as follows:
"The total number of shares of all classes of capital stock
which the Corporation shall be authorized to issue is
21,000,000, consisting of 20,000,000 shares of common stock
and 1,000,0000 shares of preferred stock."
RESOLVED FURTHER, that the appropriate officers of the Company are
authorized and directed to make, execute, acknowledge and file such
certificates and documents as may be required by law with respect to
the foregoing resolutions.
BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors recommends a vote FOR approval of this
amendment. The affirmative vote of the holders of a majority of shares of Common
Stock of the Company present in person or by proxy at the Annual Meeting,
assuming a quorum is present, is necessary for approval. Unless a contrary
choice is specified, proxies solicited by the Board of Directors will be voted
FOR the approval of this amendment.
SELECTION OF INDEPENDENT AUDITORS
PROPOSAL 3
The Board of Directors has approved the selection of Ernst & Young LLP
as independent auditors to make an examination of the accounts of the Company
for the fiscal year ending December 31, 1997, and to perform other appropriate
accounting services. Ernst & Young LLP has acted as independent auditors of the
Company since December 1994.
Although it is not required to do so, the Board of Directors wishes to
submit the selection of Ernst & Young LLP to the shareholders for ratification.
The Board recommends a vote FOR ratification of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1997. Unless a contrary choice
is specified, proxies solicited by the Board will be voted FOR the ratification
of Ernst & Young LLP If the selection of Ernst & Young LLP is not ratified, the
Board of Directors will reconsider its selection.
The Company has requested and expects a representative of Ernst & Young
LLP to be present at the Annual Meeting to make a statement if he or she so
desires and to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Directors, executive
officers and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company during the year ended December 31, 1996, the Company's
directors, executive officers and greater than 10% shareholders complied with
all applicable Section 16(a) filing requirements.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholder proposals intended to be presented in the proxy materials
relating to the next Annual Meeting of Shareholders must be received by the
Company on or before December 25, 1997.
OTHER BUSINESS
The Company knows of no business that will be presented for
consideration at the Annual Meeting other than that described in this Proxy
Statement. As to other business, if any, that may properly come before the
Annual Meeting, it is intended that proxies solicited by the Board will be voted
in accordance with the judgment of the person or persons voting the proxies.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1996, accompanies this Notice of Annual Meeting and
Proxy Statement. The Annual Report describes the financial condition of the
Company as of December 31, 1996 and includes the Company's Annual Report on Form
10-KSB (exclusive of exhibits).
David D. Koentopf
CHAIRMAN OF THE BOARD OF DIRECTORS
PRELIMINARY COPY
LIFERATE SYSTEMS, INC.
7210 Metro Boulevard PROXY
Edina, Minnesota 55439
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LIFERATE SYSTEMS, INC.
The undersigned hereby appoints David D. Koentopf and William W.
Chorske, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all the shares of common stock of LifeRate Systems, Inc. held
of record by the undersigned on April 17, 1997, at the Annual Meeting of
Shareholders to be held on May 22, 1997 or any adjournment thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] AGAINST all nominees listed
(except as marked to the contrary below
below)
(INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.)
David D. Koentopf, William W. Chorske, Stanley R. Cowle,
William D. Knopf, M.D., Daniel A. Pelak, Kevin L. Roberg, Carl J. Schramm,
Donald C. Wegmiller
2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
[ ] For [ ] Against [ ] Abstain
3. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.
[ ] For [ ] Against [ ] Abstain
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 ABOVE.
(Please Sign on Reverse Side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS AND WILL GRANT AUTHORITY TO VOTE FOR ALL NOMINEES NAMED
IN PROPOSAL 1 ABOVE. 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.
Date: ___________________________, 1997.
________________________________________
Signature
________________________________________
Signature if held jointly
________________________________________
----------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
----------------------------------------
