UNITED STATES
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.)
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|X| Definitive Proxy Statement
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|_| Soliciting Material Pursuant to Rule 14a-12
DOBI MEDICAL INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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TABLE OF CONTENTS
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Introduction..................................................................1
Outstanding Securities and Voting Rights......................................1
Item 1: Election of Directors........................................4
Legal Proceedings, Relationships, and Indebtedness............................6
The Board of Directors and Corporate Governance...............................7
Report of Audit Committee Made on March 11, 2005..............................9
Compensation of Directors and Executive Officers..............................10
Item 2: Ratification of the Appointment of Independent Auditors......16
Form 10-KSB...................................................................17
Deadline for Future Proposals of Stockholders.................................17
Item 3. Other Matters Which May Come Before the Annual Meeting.......17
Solicitation of Proxies.......................................................18
2005 DOBI MEDICAL INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June 30, 2005
TO THE STOCKHOLDERS OF DOBI MEDICAL INTERNATIONAL:
You are cordially invited to the 2005 Annual Meeting of Stockholders of
DOBI Medical International, Inc., which will be held at the offices of MB
Investment Partners, Inc., located at 825 Third Avenue, 31st Floor, New York,
New York 10022-9506 (phone number 212-370-7300), on Thursday June 30, 2005,
beginning at 1:30 p.m., eastern daylight savings time. The Annual Meeting will
be held for the following purposes:
1. To elect seven members to our Board of Directors, each to hold office
until the 2006 Annual Meeting and until his successor is elected and
qualified;
2. To consider, approve and ratify the appointment of Marcum & Kliegman
LLP as our independent auditors for the fiscal year ending December 31,
2005; and
3. To transact such other business as may properly come before the meeting
or any postponements or adjournments of the meeting.
Our Board of Directors has fixed May 12, 2005 as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any postponements or adjournments of the meeting, and only
stockholders of record at the close of business on that date are entitled to
this notice and to vote at the Annual Meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available at the meeting and at our
offices for ten days prior to the meeting.
We hope that you will use this opportunity to take an active part in
our affairs by voting on the business to come before the Annual Meeting, either
by executing and returning the enclosed Proxy Card or by casting your vote in
person at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT B. MACHINIST
Chairman of the Board of Directors
Mahwah, New Jersey
May 30, 2005
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED TO DATE
AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN ONE PROXY
CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES,
EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
DOBI MEDICAL INTERNATIONAL, INC.
1200 MACARTHUR BLVD.
MAHWAH, NEW JERSEY 07430
(201)760-6464
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 2005
INTRODUCTION
This Proxy Statement is furnished to the stockholders by the Board of
Directors of DOBI Medical International, Inc. for solicitation of proxies for
use at the 2005 Annual Meeting of Stockholders to be held at the offices of MB
Investment Partners, Inc., located at 825 Third Avenue, 31st Floor, New York,
New York 10022-9506 (phone number 212-370-7300) on Thursday June 30, 2005,
beginning at 1:30 p.m., eastern daylight savings time, and at any and all
adjournments of the meeting.
The purpose of the Annual Meeting and the matters to be acted upon are
set forth in the following Proxy Statement. As of the date of this Proxy
Statement, our Board of Directors knows of no other business which will be
presented for consideration at the Annual Meeting. A stockholder giving a proxy
pursuant to this solicitation may revoke it at any time before it is exercised
by submitting a duly executed proxy bearing a later date or by delivering to our
Secretary a written notice of revocation prior to the Annual Meeting or by
appearing at the meeting and expressing a desire to vote his or her shares in
person. Subject to such revocation, all shares represented by a properly
executed proxy received prior to or at the Annual Meeting will be voted by the
proxy holders whose names are set forth in the accompanying proxy in accordance
with the instructions on the proxy. If no instruction is specified with respect
to a matter to be acted upon, the shares represented by the proxy will be voted
"FOR" the election of the nominees for director and "FOR" each other matter set
forth in this Proxy Statement. If any other business properly comes before the
meeting, votes will be cast in accordance with the proxies in respect of any
such other business in accordance with the judgment of the persons acting under
the proxies.
It is anticipated that the mailing to stockholders of this Proxy
Statement and the enclosed proxy will commence on or about May 30, 2005.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only stockholders of record at the close of business on the record date
of May 12, 2005 are entitled to notice of and to vote at the Annual Meeting. At
that date our only outstanding voting securities were 65,257,155 outstanding
shares of our common stock, par value $.0001 per share. Holders of our series A
convertible preferred stock are not entitled to vote on any matters as to which
holders of common stock or any future shares of capital stock are entitled to
vote. At the Annual Meeting, each share of common stock will be entitled to one
vote.
The representation, in person or by properly executed proxy, of the
holders of a majority of the voting power of the shares of stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum for the
transaction of business at the meeting. Abstentions and broker non-votes (shares
held by a broker or nominee which are represented at the Annual Meeting, but
with respect to which such broker or nominee is not empowered to vote on a
particular proposal) are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. In the election of
directors, holders of Common Stock are entitled to elect seven directors with
the seven candidates who receive the highest number of affirmative votes being
elected. Votes against a
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nominee and broker non-votes have no legal effect. In matters other than the
election of directors, abstentions have the effect of votes against a proposal
in tabulations of the votes cast on proposals presented to stockholders, while
broker non-votes do not have any effect for purposes of determining whether a
proposal has been approved.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information to our knowledge and SEC
filings regarding the number of shares of our common stock beneficially owned on
May 12, 2005 by:
o each person who is known by us to beneficially own 5% or more of
our common stock;
o each of our directors and executive officers; and
o all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Shares of our common stock which may be acquired upon exercise of
stock options or warrants which are currently exercisable or which become
exercisable within 60 days after the date indicated in the table are deemed
beneficially owned by the optionees. Subject to any applicable community
property laws, the persons or entities named in the table above have sole voting
and investment power with respect to all shares indicated as beneficially owned
by them.
Except as otherwise set forth below, the address of each of the persons
listed is c/o DOBI Medical International, Inc., 1200 MacArthur Blvd., Mahwah,
New Jersey 07430.
NUMBER OF PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED OWNED (1)
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Lake Worth Ventures, Inc. 8,305,712 12.4%
c/o Mr. David H. Clarke
777 South Flagler Drive - Suite 1100
West Palm Beach, FL 33401
David H. Clarke 10,854,562 (2) 16.2%
777 South Flagler Drive
Suite 1112
West Palm Beach, FL 33401
Brad Baker 63,000 *
Steven M. Barnett 50,000 *
William Li, M.D. 63,000 *
Robert B. Machinist 760,189 1.2%
Phillip C. Thomas 3,212,930 4.9%
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NUMBER OF PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED OWNED (1)
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Webb W. Turner 2,689,003 (3) 4.1%
400 East 50th Street
New York, NY 10022
Michael R. Jorgensen 442,500 *
Sam Belzberg 3,460,456 5.2%
Gibralt Capital
2600-1075 West Georgia St.
Vancouver, B.C. V6E 3C9
Canada
Martin Solomon 4,633,636 (4) 7.0%
1643 Brickell Ave.
Suite 4902
Miami, FL 33129
Basso Multi-Strategy 4,964,450 7.4%
Holding Fund Ltd. (5)
1266 S. Main Street, 4th Floor
Stamford, CT 06902
All directors and executive officers as a 18,135,184 27.3%
group (8 persons)
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*Less than 1% of outstanding shares.
(1) Based upon 65,257,155 shares of common stock outstanding on May
12, 2005, as calculated in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. Unless otherwise indicated, this
includes shares owned by a spouse, minor children and any
entities owned or controlled by the named person. It also
includes shares that any named person has the right or option to
acquire within 60 days of the date of this prospectus. Unless
otherwise noted, shares are owned of record and beneficially by
the named person.
(2) Includes 6,503,197 shares of common stock warrants to purchase
common stock and series A preferred stock convertible into
1,802,515 shares of common stock owned by Lake Worth Ventures,
Inc., 19,500 shares of common stock owned by affiliates of Lake
Worth Ventures, which are controlled by David H. Clarke and stock
options to purchase 73,750 shares of common stock granted to
David H. Clarke.
(3) Includes 2,600,003 shares of common stock owned by Dynamics
Imaging, Inc. Mr. Turner is the Chairman of the Board of Dynamics
Imaging, Inc.
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(4) Includes 1,745,454 shares of common stock and warrants to
purchase 486,364 shares of common stock owned by Haslemere
Partners LTDA, of which Mr. Solomon is the general partner.
(5) Basso Capital Management, L.P. or Basso, is the Investment
manager to each of Basso Multi-Strategy Holding Fund Ltd. and
Basso Private opportunity Holding Fund Ltd. Howard I. Fischer is
a manageing member of Basso GP, LLC, the General Partner of
Basso, and as such has investment power and voting control over
the secutires held by each fund. The funds benefically own a toal
of 6,430,500 shares or 9.8% of the shares listed in note 1 above.
ITEM 1: ELECTION OF DIRECTORS
Pursuant to our Certificate of Incorporation, the holders of our common
stock may elect our seven directors. All nominees have advised us that they are
able and willing to serve as directors. However, if any nominee is unable to or
for good cause will not serve, the persons named in the accompanying proxy will
vote for any other person nominated by our Board of Directors.
No arrangement or understanding exists between any nominee and any
other person or persons pursuant to which any nominee was or is to be selected
as a director or nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE NOMINEES LISTED BELOW.
The following table sets forth the names and ages of the nominees to
our Board of Directors.
NAME AGE POSITION
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Robert B. Machinist 52 Chairman of the Board
Phillip C. Thomas 56 Co-Founder, Chief Executive Officer and Director
David H. Clarke 63 Co-Founder and Director
Brad Baker 45 Director
Steven M. Barnett 63 Director
William Li, M.D. 42 Director
Webb W. Turner 67 Director
DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
The following shows principal occupations and business experience for
the past five years (and, in some instances, for prior years) of our directors,
executive officers, and significant employees are as follows:
ROBERT B. MACHINIST became a director of DOBI Medical Systems in
October 2003 and became a member of our board in December 2003. Mr. Machinist
has served as Chairman and managing partner of MB Investment Partners in New
York since August, 2004, and as managing partner of M Capital, LLC, a private
equity investment firm based in Rye, New York, since January 2002. From November
1998 to December 2001, Mr. Machinist served as Managing Director and Head of
Investment Banking for the Bank of New York and its Capital Markets division.
Mr. Machinist received a B.A. degree from Vassar College and did graduate work
at the Weizmann Institute in Rehovot, Israel. He is the Chairman of the American
Committee for the Weizmann Institute of Science and a
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member of its International Board of Governors. Mr. Machinist is also a member
of the board of directors of Traffix, Inc., a NasdaqNM on-line marketing and
advertising company.
PHILLIP C. THOMAS is a co-founder of DOBI Medical Systems and became a
member of our board and our Chief Executive Officer in December 2003. Mr. Thomas
has been the Chief Executive Officer and a director of DOBI Medical Systems
since December 1999, and for more than one year prior thereto, he was the Chief
Executive Officer of Dynamics Imaging, Inc., a Delaware corporation from which
DOBI Medical Systems acquired the DOBI technology and its other non-financial
assets. Over the past 25 years, Mr. Thomas has served in a number of public and
private high technology senior executive positions. From September 1992 to
January 1997, Mr. Thomas was the Chief Executive Officer for Medication Delivery
Devices, Inc. (MDD), a medical device start-up. MDD was sold to Baxter
Healthcare in 1997, four years after its inception. Mr. Thomas received his B.A.
degree from Brigham Young University and has completed executive development
courses at Harvard Business School and Stanford Business School.
DAVID H. CLARKE is a co-founder of DOBI Medical Systems and became a
member of our board in December 2003. Mr. Clarke had been a director of DOBI
Medical Systems since December 1999. Mr. Clarke is the controlling stockholder
of Lake Worth Ventures, Inc., which was the largest stockholder of DOBI Medical
Systems and, as a result of the merger, is our largest single stockholder. Since
1995, Mr. Clarke has been the Chairman and Chief Executive Officer of Jacuzzi
Brands, Inc, a New York Stock Exchange-listed company. Prior to joining Jacuzzi
Brands, Mr. Clarke was Deputy Chairman and Chief Executive Officer of Hanson
Industries, Inc., as well as Vice Chairman of Hanson plc. Mr. Clarke also serves
on the Board of Fiduciary Trust Company International and serves as an Advisory
Director for Sterling Financial Group of Companies, Inc., an investment banking
firm which served as the placement agent in the private placement which we
completed in connection with the reverse merger and served DOBI Medical Systems
as placement agent in four previous private placements. Mr. Clarke also serves
on the board of United Pacific Industries Limited, a manufacturing company
listed on the Hong Kong stock exchange.
BRAD BAKER joined the DOBI Medical Systems board of directors in
October 2003 and became a member of our board in December 2003. From April 2000
to February 2002, Mr. Baker served as head of the online division of Sterling
Financial Investment Group, an investment company banking firm which served as
the placement agent in the private placement which we completed in connection
with the merger. From September 1989 to January 1990, Mr. Baker served as
Corporate Secretary and one of four members of the Executive Board of the
Resolution Trust Corporation, a federal agency formed to restructure and
reorganize the thrift industry. At various times since 1989, Mr. Baker has
served as the Acting Executive Secretary of the United States Treasury
Department.
STEVEN M. BARNETT joined the board of directors in April, 2005. He is
an investor in, as well as an advisor to senior management of, marketing,
manufacturing and distribution companies on improving operations. For more than
two decades, Mr. Barnett has been President and Chairman of CDC, Inc. whose
principal activity is the acquisition and management of small to mid-sized
manufacturing and distribution companies. Since April 2000, Mr. Barnett has
served as a Director and Chairman of the Audit Committee of UCN, Inc., a
technology-based telephone company specializing in automated call distribution
and call-center management, including a wide range of long distance, data
transmission and related communication services. As well, since October 2004,
Mr. Barnett has served as a Director of Medis Technologies Ltd., a company
specializing in advanced technology regarding unique fuel cell power packs for
portable electronic devices. Mr. Barnett has also served as an advisor to senior
management of Grayhill, Inc., a manufacturer of electrical systems, since May
1993, and Joseph A. Freed & Associates, a national real estate development
company, since June 1998. He has been a Director of Bank Leumi USA since October
2001. He has also served as Vice-Chairman of the Board and Director of Chicago's
Jewish Federation since 1997, and as a member of the Board of Governors for the
Reconstructionist Rabbinical College
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since 2003. Mr. Barnett received a J.D. degree from the University of Chicago
Law School and holds a bachelor's degree in Chemistry and Biology from Carleton
College.
WILLIAM LI, M.D. joined the DOBI Medical Systems board of directors in
October 2003 and became a member of our board in December 2003. Dr. Li is also a
member of our Scientific Advisory Board. Dr. Li is a co-founder of the
Angiogenesis Foundation in Cambridge, Massachusetts, of which he has been the
President since April 1990 and Medical Director since December 1994. Dr. Li has
extensive expertise in tumor angiogenesis, in vivo angiogenesis models,
angiogenesis therapeutic development, and clinical trial analysis. He trained
with Dr. Judah Folkman, who pioneered the field of angiogenesis research. Dr. Li
works in association with the National Institutes of Health, the Veterans
Administration and other major governmental and academic institutions on
angiogenesis-related programs. Dr. Li received an M.D. degree from University of
Pittsburgh School of Medicine. He completed his clinical training in internal
medicine at the Massachusetts General Hospital in Boston. Dr. Li also serves on
the faculties of Harvard Medical School, Tufts University School of Veterinary
Medicine and the teaching staff at Dartmouth Medical School.
WEBB W. TURNER joined the DOBI Medical Systems board of directors in
June 2000 and became a member of our board in December 2003. Mr. Turner is the
Chairman of the Board of Dynamics Imaging, Inc. Since November 2003, Mr. Turner
has been self employed as a financial consultant. From July 2003 to October,
2003, Mr. Turner was Senior Area Manager for International Profit Associates, a
Chicago-based management consulting firm. From September 1998 to May 2001, Mr.
Turner was a consultant with Spencer Trask & Company, an investment banking
firm. Mr. Turner has over 20 years' experience with investment banking and
advisory firms, and 10 years' experience as the chief executive officer of a
furniture manufacturing company. Mr. Turner holds an A.B. degree in economics
from Duke University.
MICHAEL R. JORGENSEN, 52, became Executive Vice President and Chief
Financial Officer of DOBI Medical Systems in February 2003, and our Executive
Vice President and Chief Financial Officer in December 2003 following the
completion of the reverse merger. In February 1997, he joined AXS-One, Inc., a
multinational financial software company, as Executive Vice President and Chief
Financial Officer, Treasurer and Secretary and became its Executive Vice
President, North America, in March 2001 and Executive Vice President, Chief
Administrative Officer in June 2001 until February 2003.
SAL LUCIA, 54, joined us as Director, Operations, in December 2003. Mr.
Lucia was a private consultant from September, 2002, and from 1994 to September,
2002, he served as Director of Operations for Lorad, a subsidiary of Hologic
Corporation, a medical device imaging where he directed manufacturing
operations. Prior to this, he held management positions with several industry
leading firms, including Unimation, a division of Westinghouse. Mr. Lucia has
over 20 years operational experience in the medical imaging and capital
equipment industries. He holds a B.A. in Economics from Clemson University and
is past president and current board member of the National Association of
Purchasing Management, Seven Counties Affiliate.
FRANK M. PUTHOFF, 59, joined DOBI Medical Systems as General Counsel in
February 2003 and became our General Counsel and Secretary in December 2003. Mr.
Puthoff was Executive Vice President, Chief Legal Officer and Secretary of
ProxyMed, Inc., a healthcare claims electronic transaction NasdaqNM public
company, from 1996 to 2001. From 1994 to 1996, he was Vice President, General
Counsel and Secretary for Miami Subs Corporation, a NasdaqNM public company.
Prior to this, he held executive positions with Ground Round Restaurants, Inc.
and NasdaqNM public company and an affiliate of Hanson PLC, PepsiCo, Inc. and
Marriott Corporation. He holds a B.A. degree in Philosophy from Borromeo
College, a J.D. degree from the University of Toledo, and an M.A. degree from
Barry University. He is a licensed attorney in Ohio and the District of
Columbia.
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MICHAEL S. SILVER, PH.D., 50, joined us as Vice President, Clinical
Research in January 2005. Dr. Silver has over 25 years of experience in various
aspects of the medical and pharmaceutical industries. Of this time, ten years
were in the pharmaceutical and medical device industries, implementing
biomarkers in clinical trials for oncology, CNS, and cardiovascular
therapeutics. Additionally, he has over fifteen years experience in medical
imaging systems research and development, working with several international
medical device manufacturers on MR applications and development. He received his
masters degree in biophysics in 1979 and his Ph.D. in Electrical Engineering and
Computer Science in 1985, both from Johns Hopkins University. Dr. Silver has
co-authored over 40 peer-reviewed publications and presentations.
A. ROBERT SOHVAL, PH.D., 55, joined us as Vice President, Research and
Development in March 2004. Dr. Sohval has worked in the diagnostic imaging
industry for more than 25 years and has held executive leadership positions in
several private and public companies. Dr. Sohval has been involved in system
design and product development of innovative digital radiography detectors,
advanced breast imaging systems, and high performance CT scanners, and holds 10
patents in medical imaging. He received a B.S. degree and Ph.D. in Physics from
Massachusetts Institute of Technology and has completed the Advanced Management
Program at the Harvard Business School.
LEGAL PROCEEDINGS, RELATIONSHIPS, AND INDEBTEDNESS
There are no legal proceedings to which any of our directors, officers
or affiliates, any owner of record or beneficially of more than 5% of any class
of our voting securities, or security holder is a party which is adverse to us
or which has a material interest adverse to us. However, in the ordinary course
of business, we may become a party to legal or regulatory proceedings resulting
from litigation, claims, or other disputes. There can be no assurance that one
or more future actions, if they occur, would not have a material adverse effect
on our business. Currently there is no material litigation threatened or pending
any matters involving us, except that, on April 15, 2005, we filed suit in the
Supreme Court of the State of New York, County of New York, Index No. 601348/05,
against Brian Vodicka, a former member of our board of directors, alleging
breach of contract and breach of fiduciary duty and seeking specific performance
and injunctive relief preventing the disclosure and requiring the return of
certain confidential and proprietary documents. In addition, we have received a
copy of a Verified Petition to Take Depositions before Suit from a Robin
Chiswell allegedly filed in the District Court of Harris County, Texas District
Court, apprising us that the petitioner wishes to take the deposition of a
custodian of our records to investigate whether there have been possible
violations of the Texas Securities Act. We will aggressively defend any
proceedings and suits brought against us.
There are no family relationships among our directors, executive
officers, and significant employees. There are no directors, executive officers,
significant employees, or any member of these individuals' immediate families or
any corporation or organization with whom any of these individuals is an
affiliate, that is or has been indebted to us since the beginning of our last
fiscal year. No director, executive officer or significant employee has been a
director or executive officer of any business which has filed a bankruptcy
petition or had a bankruptcy petition filed against it. No director, executive
officer or significant employee has been convicted of a criminal offense or is
the subject of a pending criminal proceeding. No director, executive officer or
significant employee has been the subject of any order, judgment or decree of
any court permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities. No director, executive officer or significant employee has been
found by a court to have violated a federal or state securities or commodities
law.
In connection with the engagement of Sterling Financial Investment
Group, Inc. as placement agent in two private placements of DOBI Medical
securities in 2000 and 2001, we agreed to nominate one person designated by
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Sterling Financial to our board of directors so long as stockholders introduced
to us by Sterling Financial own at least 10% of all our outstanding equity
securities. Mr. Baker is the current director designee of Sterling Financial.
THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our Board of Directors is responsible for establishing broad corporate
policies and for overseeing our overall management. In addition to considering
various matters which require Board approval, the Board provides advice and
counsel to, and ultimately monitors the performance of, our senior management.
The Board, its committees and our management strive to perform and
fulfill their respective duties and obligations in a responsible and ethical
manner. We have adopted a comprehensive Code of Business Ethics for all
directors, officers and employees, which is available at our website,
www.dobimedical.com.
During 2004, the Board of Directors met seven times. Each incumbent
director attended no less than 75% of the board of directors meetings and the
meetings of board committees on which he served. The board has determined that
the following directors are independent directors as defined by the American
Stock Exchange Company Guide: Steven M. Barnett, Brad Baker, Robert B.
Machinist, William Li, M.D., and Webb W. Turner.
We believe that it is important for and encourages the members of the
Board of Directors to attend annual meetings of stockholders. To facilitate
this, and to the extent reasonably practicable, we endeavor to schedule a
regular meeting of the Board of Directors on the same date as the annual meeting
of stockholders.
We have established an Audit Committee, a Compensation Committee, and a
Nominations and Corporate Governance Committee. The charter for each committee
is available at our website, www.dobimedical.com and the charter for the Audit
Committee is also attached to this proxy statement as Exhibit 1.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Audit Committee of our board of directors
currently consists of Brad Baker, Chairman, Robert Machinist, and Steven M.
Barnett. Mr. Barnett was appointed to the Audit Committee on April 28, 2005. The
board determined that Mr. Baker and Mr. Barnett are "financially sophisticated"
and "audit committee financial experts," as those terms are defined by the
American Stock Exchange ("Amex") Section 121 of its Company Guide and by
Regulation S-B of the Securities Exchange Act of 1934, respectively. Our Audit
Committee is composed of directors who are, in the opinion of our board of
directors, free from any relationship which would interfere with the exercise of
independent judgment and who possess an understanding of financial statements
and generally accepted accounting principles. Thus, each member is an
"independent" director, as that term is defined by Amex and by the regulations
of the Securities Exchange Act of 1934. Pursuant to our Audit Committee Charter,
which was filed as Exhibit 99.1 to our 2003 Annual Report, our Audit Committee's
Charter specifies the scope of the Audit Committee's responsibilities and the
means by which it carries out those responsibilities; the outside auditor's
accountability to the board and the Audit Committee; and the Audit Committee's
responsibility to ensure the independence of the outside auditors, including
their recommendations to improve the system of accounting and internal controls.
During 2004 the Audit Committee met five times.
COMPENSATION COMMITTEE. The Compensation Committee of the board of
directors consists of Webb Turner, Chairman, William Li, M.D., and Steven M.
Barnett. Mr. Barnett was appointed to the Compensation Committee on April 28,
2005. Pursuant to our Compensation Committee Charter, which was filed as Exhibit
99.2 to the 2003 Annual Report, the Compensation Committee is responsible for
reviewing and approving the salary and benefits policies, including compensation
of our Chief Executive Officer and the other executive officers. Our
Compensation Committee also administers the 2000 Stock Incentive Plan as adopted
and assumed by us, and recommends and approves grants of stock options under
that plan. Mr. Turner and Dr. Li and Mr. Barnett are, in the
8
opinion of our board of directors, "independent" directors, as that term is
defined under Amex rules and by the regulations of the Securities Exchange Act
of 1934. During 2004 the Compensation Committee met two times and informally on
numerous occasions.
NOMINATIONS AND CORPORATE GOVERNANCE COMMITTEE. The Nominations and
Corporate Governance Committee was formed in October, 2004 and consists of Brad
Baker, Chairman, and Robert Machinist. Pursuant to the Nominations and Corporate
Governance Committee Charter, which was filed as Exhibit 99.1 to the 2004 Annual
Report, the Nominations and Corporate Governance Committee is responsible for
board member qualification and nomination to the full board as well as matters
relating to corporate governance. Both Mr. Baker and Mr. Machinist are, in the
opinion of our Board of Directors, "independent" directors, as that term is
defined under Amex rules and by the regulations of the Securities Exchange Act
of 1934. During 2004 the Nominations and Corporate Governance Committee did not
formally meet.
SELECTION OF NOMINEES FOR THE BOARD OF DIRECTORS
Our Board of Directors is responsible for evaluating potential
candidates to serve on our Board of Directors, and for selecting nominees to be
presented for election to the Board at our Annual Meeting of Stockholders. In
evaluating potential director candidates, the Board considers the skills and
characteristics possessed by each candidate in the context of the perceived
needs of the Board at that point in time. Among the factors considered by the
Board in considering a potential nominee are the following: independence;
diversity, age, background, skills, and experience; personal qualities and
characteristics, accomplishments and reputation in the business community;
knowledge and contacts in the communities in which we conduct business and our
business industry or other industries relevant to our business; ability and
willingness to devote sufficient time to serve on the Board and committees of
the Board; knowledge and expertise in various activities deemed appropriate by
the Board, such as marketing, production, distribution, technology, accounting,
finance, and law; fit of the individual's skills, experience, and personality
with those of other directors in maintaining an effective, collegial, and
responsive Board.
Nominees for directors will be made or recommended by any member of the
Board in accordance with the policies and principles in its charter and as
determined by the Board of Directors. Such nominee shall be selected as the
recommended nominee to the full Board by a majority of the independent
directors. In addition, any contractual obligation we may enter into which is
intended to include our obligation to exercise best efforts to nominate a
designate to serve on the Board must be approved by the Board, and such
designate nominee must thereafter be approved by the Board in accordance with
the qualifications set forth in this document, except that the selection and
nomination of such directors is not subject to approval by the Nominating
Committee or a majority of independent directors.
In identifying potential candidates for the Board, the Board relies on
recommendations from a number of possible sources, including current directors.
The Board may also retain outside consultants or search firms to help in
identifying potential candidates for membership on the Board.
The Board will consider any written suggestions of stockholders for
director nominations. The recommendation must include the name and address of
the candidate, a brief biographical description and a description of the
person's qualifications. Recommendations should be mailed to DOBI Medical
International, Inc., 1200 MacArthur Blvd., Mahwah, New Jersey 07430 Attn:
Secretary. The Board will evaluate in the same manner candidates suggested in
accordance with this policy and those recommended by other sources. The
Committee has full discretion in considering all nominations to the Board of
Directors. Stockholders who would like to nominate a
9
candidate for director must comply with the requirements described in our Proxy
Statement. See "Deadline for Future Proposals of Stockholders" below.
REPORT OF THE AUDIT COMMITTEE MADE ON MARCH 11, 2005
The following report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any of our other filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended.
In accordance with its written charter adopted by our Board of
Directors, the Audit Committee's role is to act on behalf of the Board of
Directors in the oversight of our accounting, auditing and financial reporting
practices. The Audit Committee presently consists of two members: Messrs. Brad
Baker and Robert Machinist. (Mr. Brian Vodicka served on the Audit Committee
from October 7, 2004, and resigned from the board of directors as of February 7,
2005, citing disagreement over the adequacy of our corporate governance, to
which we responded that we believe our corporate governance is adequate. See our
current report filed with the SEC on Form 8-K on February 9, 2005.) In the
Board's business judgment, Mr. Baker and Mr. Machinist meet the definition of an
"independent director" under SEC rules and as that term is currently defined in
the American Stock Exchange's listing standards. Further, in the Board's
business judgment, at least one of the members of the Audit Committee meet the
definition of an "Audit Committee financial expert" as that term is currently
defined in the American Stock Exchange's listing standards. Although our common
stock is not listed on the American Stock Exchange, we have chosen the
independence standard currently defined in the American Stock Exchange listing
standards. A copy of the Audit Committee's written charter appears on our
website at dobimedical.com. The Audit Committee continues to assess the adequacy
of the Audit Committee's charter.
Management is responsible for our financial reporting process,
including our system of internal controls, and for the preparation of our
financial statements in accordance with generally accepted accounting
principles. Our independent auditors are responsible for auditing those
financial statements. It is the Audit Committee's responsibility to monitor and
review these processes. It is not the Audit Committee's duty or responsibility
to conduct auditing or accounting reviews or procedures. The Audit Committee
does not consist of our employees and it may not be, and may not represent
itself to be or serve as accountants or auditors by profession or experts in the
fields of accounting or auditing. Therefore, the Audit Committee has relied,
without independent verification, on management's representation that the
financial statements have been prepared with integrity and objectivity and in
conformity with accounting principles generally accepted in the United States
and on the representations of the independent auditors included in their report
on our financial statements. The Audit Committee's oversight does not provide it
with an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or policies, or
appropriate internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions with management and the independent
auditors do not assure that our financial statements are presented in accordance
with generally accepted accounting principles, that the audit of our financial
statements has been carried out in accordance with generally accepted auditing
standards or that our independent accountants are in fact "independent."
In fulfilling its oversight responsibilities, the Audit Committee
reviewed the audited financial statements for fiscal 2004 with management,
including a discussion of the quality of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements. The Audit Committee reviewed the financial statements for
fiscal 2004 with the independent auditors and discussed with them all of the
matters required to be discussed by Statement of Auditing Standards No. 61
(Communications with Audit Committees), as amended, including the auditors'
judgments as to the quality, not just the acceptability, of our
10
accounting principles. In addition, the Audit Committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standard No. 1 (Independence Discussions with Audit Committees) and
has discussed with the independent auditors their independence from our
management and us. Finally, the Audit Committee has considered whether the
provision by the independent auditors of non-audit services to us is compatible
with maintaining the auditors' independence. The Audit Committee discussed with
the independent accountants any relationships that may have an impact on their
objectivity and independence and satisfied itself as to the accountants'
independence.
The Audit Committee also discussed with management the process used to
support certifications by our chief executive officer and director of finance
and administration that are required by the Securities and Exchange Commission
and the Sarbanes-Oxley Act of 2002 to accompany our periodic filings with the
Securities and Exchange Commission.
Consistent with the Securities and Exchange Commission's policies
regarding auditor independence, our Audit Committee has established a policy to
pre-approve all audit and permissible non-audit services provided by the
independent auditor.
Based on its review and discussions with management and the independent
accountants, and subject to the limitations on its role and responsibilities
described above, the Audit Committee recommended to our Board of Directors, and
the Board of Directors has approved, that the audited financial statements be
included in our Annual Report on Form 10-KSB for the year ended December 31,
2004. The undersigned members of the Audit Committee have submitted this report
to us.
The Audit Committee
March 11, 2005
Brad Baker, Chairman
Robert B. Machinist
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors are expected to timely and fully participate in all regular
and special board meetings, and all meetings of committees that they serve on.
Commencing January 1, 2004, we pay each non-employee director a retainer fee of
$1,000 per quarter, plus a participation fee of $500 for each regular and/or
special meeting of the board of directors, not to exceed $1,000 per quarter,
regardless of the number of meetings. We also pay a committee participation fee
of up to $250 for each meeting of a committee of the board, not to exceed $500
per quarter, regardless of the number of meetings. Fees are accrued and paid
annually, in arrears, following the end of each year's audit. We will also
reimburse each director for reasonable accommodations, coach travel and other
miscellaneous expenses relating to each director's attendance at board meetings
and committee meetings promptly upon submission of actual receipts to the Chief
Financial Officer and approval by the Chairman of the Board and/or the Chief
Executive Officer.
Effective April 28, 2005, non-employee directors new to the board are
awarded an incentive grant of an option to purchase 250,000 shares of our common
stock, and existing non-employee directors were awarded an option to purchase
250,000 shares, except that the Chairman was awarded an option grant for 300,000
shares due to anticipated greater levels of oversight and work effort.
Thereafter, upon appointment each new committee chair will receive an initial
grant of 50,000 shares. Upon each subsequent annual stockholders' meeting in
which a director
11
has been reelected, each non-employee director will be awarded an option to
purchase 25,000 shares. Upon reappointment, each committee chairman will be
awarded an option to purchase 25,000 shares, and the Chairman of the Board will
be granted an option to purchase 75,000 shares. Such option awards will be
non-qualified and will have an exercise price equal to the fair market value of
the common stock, based on the closing price at the end of trading on the date
of the award, vest on the first anniversary date of the grant if the director
has continued to serve until that date, and have a term of five years from the
date of award. These options will be for our common stock under the same terms
as indicated above, subject to any adjustments as may be necessary. Other terms
and conditions of the option grants are on the standard terms and conditions as
option grants to employees.
COMPENSATION OF EXECUTIVES
The following table sets forth, for the years indicated, all cash
compensation paid, distributed or accrued for services, including salary and
bonus amounts, rendered to us by our Chief Executive Officer and all other
executive officers in such years who received or are entitled to receive
remuneration in excess of $100,000 during the stated periods.
12
SUMMARY COMPENSATION TABLE
OTHER ANNUAL LONG TERM AWARDS
COMPENSATION SECURITIES
($) UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1) OPTIONS/SARS
Phillip C. Thomas 2004 248,462 - - -
Chief Executive Officer 2003 210,888 12,231 - 75,000
2002 180,938 67,713 - -
Michael R. Jorgensen (2) 2004 200,000 - - 250,000
Executive Vice President and 2003 179,428 10,962 - 387,500
Chief Financial Officer 2002 37,500 - -
Denis O'Connor (3) 2004 166,734 - 250,000
Senior Vice President 2003 - - 3,336 200,000
Sales and Marketing 2002 - - - -
<FN>
- ----------------
(1) Other compensation does not include the cost for health and welfare benefits received by the above-named officers. The
aggregate amounts of personal benefits did not exceed the lesser of $50,000 of 10% of the total annual compensation of such
officer, other than for Mr. O'Connor, who received $33,336 in relocation expenses.
(2) Mr. Jorgensen joined us as a consultant in November 2002 and became an employee in February 2003.
(3) Mr. O'Connor joined us December 2003 and resigned effective March 11, 2005.
</FN>
OPTIONS/SAR GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2004
During 2004, we granted stock options under the DOBI Medical 2000 Stock
Incentive Plan to purchase 2,367,750 shares of common stock, including the
options described in the table below.
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS GRANTED
UNDERLYING OPTIONS/ TO EMPLOYEES EXERCISE
NAME SARS GRANTED IN FISCAL YEAR OR BASE PRICE EXPIRATION
- ---- ------------ -------------- ------------- ----------
(#) ($/SH)
Phillip C. Thomas - - - -
Chief Executive Officer
Michael R. Jorgensen 75,000 3.2 0.74 12/13/14
Executive Vice President and 175,000 7.4 1.54 12/13/14
Chief Financial Officer
13
Denis O'Connor 75,000 3.2 0.74 12/13/14
Senior Vice President 175,000 7.4 1.54 12/13/14
Sales and Marketing
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR ENDED DECEMBER 31, 2004 AND
FISCAL YEAR END OPTION/ SAR VALUES
NUMBER OF SECURITIE
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS/SARS AT FISCAL MONEY OPTIONS/SARS AT FISCAL
ACQUIRED VALUE YEAR END YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(#) ($) (#) ($)
Phillip C. Thomas - - 252,500/50,000 250/500
Chief Executive Officer
Michael R. Jorgensen
Executive Vice President and - - 96,875/540,625 562/2,438
Chief Financial Officer
Denis O'Connor
Senior Vice President
Sales and Marketing - - 50,000/400,000 500/2,250
EMPLOYMENT AGREEMENTS
Phillip C. Thomas, Co-Founder, Director and Chief Executive Officer,
entered into an employment agreement with us dated December 9, 2003 to continue
serving as Chief Executive Officer for a term of three years through December 8,
2006, with automatic one-year extensions on each anniversary of the commencement
date under certain conditions. Pursuant to the employment agreement, Mr. Thomas
will devote all of his business time and efforts to us and will report directly
to the board of directors. The employment agreement provides that as long as Mr.
Thomas serves as Chief Executive Officer, the board of directors will nominate
him for election to the Board.
The employment agreement currently provides that Mr. Thomas will
receive a fixed base salary at an annual rate of $260,000. On March 10, 2005,
Mr. Thomas' employment agreement was amended. For the years 2004 and 2005, he
has agreed to waive his annual "cost-of-living" increases and his annual
incentive bonus which for 2004 would have been $130,000. Mr. Thomas' employment
agreement provides that if and upon FDA approval of the ComfortScan system, Mr.
Thomas will participate significantly in a bonus pool of $500,000 to key
employees as determined by the Compensation Committee.
Mr. Thomas' employment agreement also provides for termination by us
upon death or disability (defined as 180 days of incapacity during any 365 day
period) or upon conviction of a felony crime of moral turpitude or a material
breach of his obligations to us. In the event Mr. Thomas' contract is terminated
by us without cause or for disability, he will be entitled to compensation for
the greater of two years or the balance of the term, plus health and disability
and life insurance. In the event of a "change of control," as that term is
defined under Mr. Thomas'
14
employment agreement, all his options shall vest, and if he is terminated three
months before or 24 months after such event, he and his spouse shall be
entitled, under specified circumstances, to receive health, disability and life
insurance benefits for 24 months after such event. If he voluntarily terminates
as an employee after 12 months after the change of control, he will be entitled
to the same post-termination benefits as if he had been terminated by the
acquirer within the first 24 months. Payments made or to be made Mr. Thomas
under his employment agreement are not intended to be non-deductible to us by
reason of the operation of Section 280G of the Internal Revenue Code of 1986,
relating to golden parachute payments. Should any such payment otherwise be
taxable to Mr. Thomas, we have agreed to gross up such payments. By amendment to
Mr. Thomas' employment agreement, we and Mr. Thomas also agreed to eliminate any
payments that may have been due him under his employment agreement upon a change
of control event in consideration for a cash payment to Mr. Thomas of $125,000,
payable within five business days after the completion of the financing that was
completed on March 30, 2005 and the grant of an option to purchase 75,000 shares
of common stock at $0.66, the closing price of our stock on the date this
amendment was approved by our board of directors.
The employment agreement also contains covenants (a) restricting Mr.
Thomas from engaging in any activities competitive with our business during the
term of his employment agreement and for two years thereafter, (b) prohibiting
him from disclosure of confidential information regarding us, and (c) confirming
that all intellectual property developed by him and relating to our business
constitutes our sole and exclusive property.
Since he first commenced service to us and our predecessors as Chief
Executive Officer, our board of directors has also awarded him options to
purchase an aggregate of 377,500 shares of common stock under our 2000 Stock
Incentive Plan at exercise prices ranging from $.66 per share to $2.31 per
share, as adjusted in accordance with the terms of the merger.
All our other employees are employees at will under law, most of whom
would receive separation pay if terminated without cause ranging from one month
to 12 months. Separation pay would not be deemed to be material. In November
2004, our board of directors approved a resolution providing that upon a change
of control event of the company (as defined our 2000 Stock Incentive Plan), all
options issued pursuant to that Plan will immediately vest.
STOCK INCENTIVE PLAN
Our 2000 Stock Incentive Plan, as amended December 10, 2003, was
approved by a written consent of the holders of a majority of our outstanding
common stock. In connection with our reverse merger transaction, Lions Gate
adopted and assumed all of DOBI Medical Systems' obligations under its 2000
Stock Incentive Plan and increased the number of shares issuable under stock
option grants to 9,788,573 shares. As of May 11, 2005, there were outstanding
stock options to purchase 6,231,500 shares of our common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lake Worth Ventures, Inc., or LWVI, was the largest single stockholder
of DOBI Medical Systems prior to the reverse merger (based on information filed
with the SEC), and continues to be our largest stockholder. From time to time
since January 1, 2001, it lent funds to DOBI Medical Systems pursuant to demand
notes, which bore interest at rates ranging from 1.2% to 6.0% per year. The
aggregate principal amount lent was $1,443,299, none of which was repaid in
cash, and all of which, including accrued interest, was exchanged for capital
stock and warrants of DOBI Medical Systems at prices equal to the offering
prices in DOBI Medical Systems then pending private placements. No cash interest
was paid on account of such loans. LWVI also lent $250,000 to DOBI Medical
Systems shortly before the merger by purchasing Series 2 Notes and Series 2
Warrants, which have been converted into common stock and warrants of Lions Gate
in the merger. David H. Clarke, a director of DOBI Medical
15
Systems who became a member of our board at the effective time of the merger, is
the controlling stockholder of LWVI. In connection with a conversion of $370,837
of demand notes held by LWVI in December 2002 into 370,837 shares of DOBI
Medical Systems common stock, LWVI was granted "weighted average" anti-dilution
protection with respect to such common stock, and we are obligated to provide
such anti-dilution protection to the such common stock held by LWVI for which
such DOBI Medical Systems common stock was exchanged in the merger. The
anti-dilution provisions are triggered by a subsequent stock offering by us at a
lower price per share than a protected price level ($1.00 per share) and take
into account both the lower price and the number of shares issued at the lower
price. The anti-dilution protection with respect to LWVI expires at the earlier
of 18 months after the merger or upon the closing of a $5.0 million equity
financing. Additionally, in the event of a secondary public offering of our
securities in which we receive gross proceeds of at least $10.0 million, LWVI
may exercise a limited waiver from its lock-up restrictions under specified
circumstances. In the event of a secondary public offering of our securities to
the public pursuant to an effective registration statement, LWVI may sell a
limited number of shares of its common stock up to a maximum of $5.0 million in
such offering, conditioned on (i) the written approval of the underwriter
selected by us for any such offering, provided such approval is not unreasonably
withheld, (ii) us receiving gross proceeds of at least $10.0 million from any
such offering, and (iii) compliance with applicable securities laws.
Mr. Thomas was indebted to DOBI Medical Systems pursuant to a limited
recourse promissory note which was paid in full in December 2002. As of January
1, 2001, the principal amount of the note was $225,000, and from inception to
payment of the note in full, the note bore interest at the annual rate of 6%,
payable annually in arrears. The original amount of the note, $225,000, was used
by Mr. Thomas to purchase 2,925,003 shares of the common stock of DOBI Medical
Systems.
In connection with the merger, Mr. Jorgensen, our Chief Financial
Officer, agreed not to sell 50,000 of his shares of his common stock received in
the merger until December 9, 2005.
From August 2000 to October 2003, Alexis C. Korybut, the President of
Sterling Financial Investment Group, was a director of DOBI Medical Systems.
Sterling Financial has served as placement agent and provided investment banking
and financial advisory services to DOBI Medical Systems from time to time over
the past four years on a cash and equity fee basis. Cash fees paid to Sterling
Financial amounted to $1,420,855, and Sterling Financial and/or its designees
(including a former director of DOBI Medical Systems, Mr. Alexis Korybut) have
received warrants to purchase DOBI Medical Systems securities which have been
exchanged in the merger for warrants to purchase an aggregate of 2,062,494
shares of our common stock. Certain officers and directors of Sterling Financial
own shares of our common stock and/or warrants to purchase our common stock,
aggregating less than 5% of its outstanding shares. Sterling Financial also
served as placement agent for us in connection with the private placement of our
common stock and warrants that closed at the same time as the merger. Sterling
Financial received cash fees and expense reimbursements or allowances of
$155,000, and Sterling Financial and its designees received warrants to purchase
an aggregate of 340,000 shares of our common stock, at an exercise price of
$1.54 per share, for a term of three years.
In connection with the engagement of Sterling Financial as placement
agent in two private placements of securities in 2000 and 2001, DOBI Medical
Systems agreed to nominate one person designated by Sterling Financial to the
Board of Directors of DOBI Medical so long as stockholders introduced to DOBI
Medical by Sterling Financial own at least 10% of all outstanding equity
securities of the DOBI Medical. That agreement now applies to us under the terms
of the Merger Agreement. Brad Baker is the current designee of Sterling
Financial.
Brad Baker, a director of DOBI Medical Systems who became a member of
our board, was designated for nomination to the Board pursuant to the
above-described agreement with Sterling Financial. From April 2000 to February
2002, Mr. Baker served as an officer of Sterling Financial, which was the
placement agent in our private
16
placement of common stock and warrants in December 2003. Sterling Financial was
also a financial advisor to DOBI Medical and acted as a placement agent in
connection with four offerings of the securities of DOBI Medical in the period
from April 2000 through October 2003.
At the closing of the reverse merger, we entered into an investor
relations/public relations services agreement with Strategic Initiatives, Inc.
pursuant to which we (i) issued an option to Strategic Initiatives to purchase
up to 250,000 shares of our common stock at a price of $1.54, for a term of
three years, and (ii) advanced an aggregate of $750,000 to Strategic Initiatives
to cover costs and expenditures which Strategic Initiatives anticipates it will
incur during the one-year term of the agreement. Keith A. Ebert, a former
director, is a principal of Strategic Initiatives.
Immediately prior to the closing of the reverse merger and the private
placement, we purchased all 1,000,000 shares of common stock held by Mr. Ebert,
a director and formerly the Chief Financial Officer, Treasurer and Secretary of
Lions Gate Investment Limited, for $143,805.27. At the same time, we also
purchased 738,462 shares of our common stock owned by Graham Crabtree, Beverly
Strench and Renata Kubicek for an aggregate consideration of $106,194.73. All
shares were then cancelled at the closing of the reverse merger. Funds to effect
such redemptions were provided by a capital contribution from Verus Support
Services, Inc. At the same time, N. Desmond Smith also agreed to the
cancellation of 400,000 shares of the company's common stock owned by him in
consideration for the release of an assignment of a number of oil and gas leases
by Mr. Smith to the company, and the termination of receivables due from Mr.
Smith to the company in the amount of $10,109.
Dynamics Imaging, Inc., a holder of more than 5% of the our common
stock following the merger, agreed not to sell its common stock for up to two
years following the merger, provided that Dynamics Imaging, Inc., will be
permitted to sell its shares of its common stock at a rate of 1% per month of
the total number of shares of common stock issued in the merger, subject to
applicable securities laws, from six months until 12 months after the merger;
thereafter, the applicable percentage increases to 1.3% of those shares per
month until 24 months after the merger. Mr. Turner, a member of our board, is
the Chairman of the Board and Chief Executive Officer of Dynamics Imaging, Inc.
We have no policy with respect to entering into transactions with
members of management or affiliated companies. Any non-arm's length transaction
we consider will be reviewed and voted on by disinterested members of our board
of directors and be in accordance with our certificate of incorporation, by-laws
and Delaware law.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers and directors, and persons who own more than 10% of our common stock,
to file reports of ownership and changes in ownership with the SEC. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us,
or written representations from certain reporting persons, we believe that
during the year ended December 31, 2004, all filing requirements applicable to
our executive officers and directors and greater than 10% shareholders were
complied with, except that Mr. Clarke in March 2004, July 2004 and December 2004
failed to timely file a Form 4, but subsequently timely filed a Form 5
disclosing such transactions, and Mr. Vodicka in December 2004 failed to timely
file a Form 4, but subsequently timely filed a Form 5 disclosing such
transaction. On February 7, 2005, we received notice from Mr. Vodicka that he
resigned from the board. Mr. Vodicka failed to timely file a Form 5, and we
believe he has yet not done so, following notice. In making these statements, we
have relied on the written representations of our directors, officers and our
10% holders and copies of the reports that they have filed with the Commission.
17
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the General Corporation Law of the State of Delaware, we can
indemnify our directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). Our amended and restated certificate of incorporation
provides that, pursuant to Delaware law, our directors shall not be liable for
monetary damages for breach of the directors' fiduciary duty of care to us and
our stockholders. This provision in the amended and restated certificate of
incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to us or our stockholders, for acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law, for any
transaction from which the director directly or indirectly derived an improper
personal benefit, and for payment of dividends or approval of stock repurchases
or redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
Our by-laws provide for the indemnification of our directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law. We are not, however, required to indemnify any director or officer in
connection with any (a) willful misconduct, (b) willful neglect, or (c) gross
negligence toward or on behalf of us in the performance of his or her duties as
a director or officer. We are required to advance, prior to the final
disposition of any proceeding, promptly on request, all expenses incurred by any
director or officer in connection with that proceeding on receipt of any
undertaking by or on behalf of that director or officer to repay those amounts
if it should be determined ultimately that he or she is not entitled to be
indemnified under our bylaws or otherwise.
We have been advised that, in the opinion of the SEC, any
indemnification for liabilities arising under the Securities Act of 1933 is
against public policy, as expressed in the Securities Act, and is, therefore,
unenforceable.
ITEM 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee expects to appoint Marcum & Kliegman LLP to serve
as our independent auditors for the year ending December 31, 2005. Marcum &
Kliegman LLP has served as our independent auditors since 2004, and is
considered by our management to be well qualified.
THE BOARD RECOMMENDS A VOTE FOR THE APPOINTMENT OF MARCUM & KLIEGMAN
LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2005.
The following table sets forth the aggregate fees billed or to be
billed to us by Marcum & Kliegman LLP for the fiscal years ended December 31,
2004 and 2003:
18
MARCUM & KLIEGMAN LLP
---------------------
2004 2003
---- ----
Audit Fees $53,250 $48,736
Audit-Related Fees 10,000 27,805
Tax Fees -- 18,803
All Other Fees -- 18,656
All services performed by Marcum & Kliegman LLP were pre-approved by
the Audit Committee in accordance with its pre-approval policy adopted in 2004.
The policy describes the audit, audit-related, tax, and other services permitted
to be performed by the independent auditors, subject to the Audit Committee's
prior approval of the services and fees. On an annual basis, the Audit Committee
will review and provide pre-approval for certain types of services that may be
provided by the independent auditors without obtaining specific pre-approval
from the Audit Committee. If a type of service to be provided has not received
pre-approval during this annual process, it will require specific pre-approval
by the Audit Committee. Any proposed services exceeding pre-approved cost levels
or budgeted amounts will also require separate pre-approval by the committee.
FORM 10-KSB
UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE MEETING, ADDRESSED TO
US, ATTENTION: SECRETARY, DOBI MEDICAL INTERNATIONAL, INC., 1200 MACARTHUR
BLVD., MAHWAH, NEW JERSEY, 07430, WE WILL PROVIDE WITHOUT CHARGE, A COPY OF OUR
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED COMMUNICATIONS WITH STOCKHOLDERS.
Anyone who has a concern about our conduct, including accounting,
internal accounting controls or audit matters, may communicate directly with our
Chief Executive Officer, our non-management directors or the audit committee.
Such communications may be confidential or anonymous, and may be submitted in
writing addressed care of Robert Machinist, Chairman of the Board of Directors,
DOBI Medical International, Inc., 1200 MacArthur Blvd., Mahwah, New Jersey
07430. All such concerns will be forwarded to the appropriate directors for
their review, and will be simultaneously reviewed and addressed by the proper
executive officers in the same way that other concerns are addressed by us.
DEADLINE FOR FUTURE PROPOSALS OF STOCKHOLDERS
Proposals that a stockholder desires to have included in our proxy
materials for our 2006 Annual Meeting of Stockholders must comply with the
applicable rules and regulations of the Commission, including that any such
proposal must be received by our Secretary at our principal office no later than
April 1, 2006. It is suggested that such proposals be sent by Certified Mail,
Return Receipt Requested. Any required written notices should be sent to DOBI
Medical International, Inc., 1200 MacArthur Blvd., Mahwah, New Jersey, 07430;
Attn: Secretary.
ITEM 3. OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
We know of no other matters to be presented at the Annual Meeting, but
if any other matters should properly come before the meeting, it is intended
that the persons named in the accompanying form of proxy will vote the same in
accordance with their best judgment and their discretion, and authority to do so
is included in the proxy.
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SOLICITATION OF PROXIES
The expense of this solicitation of proxies will be borne by us.
Solicitations will be made only by use of the mail except that, if deemed
desirable, our officers and regular employees may solicit proxies by telephone,
telegraph or personal calls. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the proxy soliciting material to the
beneficial owners of the stock held of record by such persons and we will
reimburse them for their reasonable expenses incurred in this effort.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT B. MACHINIST
Chairman of the Board of Directors
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DOBI Medical
International
ANNUAL MEETING OF STOCKHOLDERS OF
DOBI MEDICAL INTERNATIONAL, INC.
June 30, 2005
-- FOLD AND DETACH HERE AND READ THE REVERSE SIDE --
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DOBI MEDICAL INTERNATIONAL, INC.]
The undersigned appoints Robert B. Machinist and Phillip C. Thomas each
of them, as proxies, each with the power to appoint his or her substitute, and
authorizes each of them to represent and to vote at the Annual Meeting of
Shareholders, and at any adjournment thereof, as designated on the reverse side
hereof, all shares of Common Stock of DOBI Medical International, Inc., held of
record by the undersigned at the close of business on May 12, 2005 to be held at
the offices of MB Investment Partners, Inc., located at 825 Third Avenue, 31st
Floor, New York, New York 10022-9506 (phone number 212-370-7300), on Thursday
June 30, 2005, beginning at 1:30 p..m., eastern daylight savings time. Any and
all proxies heretofore given are hereby revoked.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
-- FOLD AND DETACH HERE AND READ THE REVERSE SIDE --
PROXY
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
1. ELECTION OF DIRECTORS: FOR WITHHOLD AUTHORITY
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, [ ] [ ]
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW)
Nominees are: Brad Baker, Steven M. Barnett, David H. Clarke, William Li, MD,
Robert B. Machinist, Phillip C. Thomas, Webb W. Turner
2. PROPOSAL TO RATIFY APPOINTMENT OF MARCUM & FOR AGAINST ABSTAIN
KLIEGMAN LLP AS INDEPENDENT AUDITORS. [ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote on such other
business as may property come before the meeting
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature: Signature: Date:
----------------------------- ---------------------------- --------------------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give 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 persons.
PLEASE RETURN THIS PROXY IN THE PRE-ADDRESSED ENVELOPE ENCLOSED FOR YOUR
CONVENIENCE.
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