SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting material Pursuant to Rule 14a-11(c) or Rule 14a-12
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
Cardiodynamics International Corporation
6175 Nancy Ridge Drive, Suite 300
San Diego, CA 92121
June 14, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
CardioDynamics International Corporation which will be held at the Del Mar
Country Club, 6001 Clubhouse Drive, Rancho Santa Fe, California on Thursday,
July 15, 1999 at 9:00 a.m.
Additional details relating to the business to be conducted at the Annual
Meeting are given in the attached Notice of Annual Meeting of Shareholders and
Proxy Statement.
In order for us to have an efficient meeting, please promptly sign, date and
return the enclosed proxy in the accompanying reply envelope. If you are able to
attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
On behalf of the Board of Directors,
/s/ MICHAEL K. PERRY
Michael K. Perry
Director and Chief Executive
Officer
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and
return it in the enclosed envelope. No postage need be affixed if mailed in
the United States.
- --------------------------------------------------------------------------------
CARDIODYNAMICS INTERNATIONAL CORPORATION
6175 Nancy Ridge Drive, Suite 300
San Diego, CA 92121
Notice of Annual Meeting of Shareholders
To be held July 15, 1999
The Annual Meeting of Shareholders of CardioDynamics International Corporation,
a California corporation ("CardioDynamics"), will be held at the Del Mar Country
Club, 6001 Clubhouse Drive, Rancho Santa Fe, California 92067, on Thursday, July
15, 1999 at 9:00 a.m., to consider and act upon the following matters:
1. To elect a Board of Directors for the following year. Management has
nominated the following persons for election at the meeting: Louis P. Ferrero,
Cam L. Garner, James C. Gilstrap, Richard O. Martin, Allen E. Paulson and
Michael K. Perry;
2. To ratify the selection of KPMG LLP as our independent accountants for the
fiscal year ending November 30, 1999;
And to transact any other business which may properly come before the meeting or
any postponement(s) or adjournment(s) thereof. We have no information of any
such other matters.
Shareholders of record at the close of business on May 28, 1999 will be entitled
to vote at the Annual Meeting. A list of shareholders entitled to vote at the
Annual Meeting is available for inspection at our offices. Whether or not you
plan to attend the meeting in person, please sign, date and return the enclosed
proxy in the reply envelope provided. If you attend the Annual Meeting and vote
by ballot, your proxy will be revoked automatically and only your vote at the
meeting will be counted. The prompt return of your proxy will assist us in
preparing for the Annual Meeting.
By Order of the Board of
Directors,
/s/ MICHAEL K. PERRY
Dated: June 14, 1999 Michael K. Perry
Director and Chief Executive Officer
Cardiodynamics International Corporation
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held July 15, 1999
These proxy materials are being mailed in connection with the solicitation of
proxies by the Board of Directors of CardioDynamics International Corporation, a
California corporation ("CardioDynamics"), for the Annual Meeting of
Shareholders to be held at the Del Mar Country Club, 6001 Clubhouse Drive,
Rancho Santa Fe, California at 9:00 a.m. on July 15, 1999 and at any adjournment
or postponement of the Annual Meeting. These proxy materials were first mailed
to shareholders of record beginning on approximately June 14, 1999.
The address of our principal executive office is 6175 Nancy Ridge Drive, Suite
300, San Diego, California 92121.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting are
summarized in the accompanying Notice of Annual Meeting of Shareholders. Each
proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Any shareholder executing a proxy has the power to revoke it at any time before
it is voted by delivering written notice of such revocation to our Corporate
Secretary before the Annual Meeting or by properly executing and delivering a
proxy bearing a later date. You may also revoke your proxy at the Annual Meeting
by voting your shares in person. We will pay for the cost of soliciting proxies
and may reimburse brokerage firms and others for their expense in forwarding
solicitation material. Solicitation will be made primarily through the use of
the mail but regular employees of the Company may, without additional
compensation, solicit proxies personally by telephone.
The record date for determining those shareholders who are entitled to notice
of, and to vote at, the Annual Meeting is May 28, 1999. At the close of business
on the record date, we had 38,215,960 outstanding shares of common stock (the
"Common Stock"). Each share of Common Stock is entitled to one vote on matters
brought before the Annual Meeting. In voting for Directors, each shareholder has
the right to cumulate his or her votes and give one nominee a number of votes
equal to the number of Directors to be elected, multiplied by the number of
shares he or she holds, or to distribute his or her votes on the same principle
among the nominees to be elected in such manner as he or she may see fit. For
example, a shareholder owing 10 shares of Common Stock would have 60 votes (six
Directors multiplied by 10 shares) to allocate among as few as one, or as many
as six candidates. A shareholder may cumulate his or her votes, however, only if
his or her candidate or candidates have been placed in nomination prior to the
voting and if any shareholder gives notice at the Annual Meeting prior to the
voting of that shareholder's intention to cumulate his or her votes. The shares
represented by the proxy will be voted at the Annual Meeting by the proxy holder
as specified by the person solicited. Discretionary authority to cumulate votes
is, however, being solicited by the Board of Directors.
1
California statutes and case law do not give specific instructions regarding the
treatment of abstentions and broker non-votes for corporations such as ours on
matters which require the affirmative vote of a majority of the shares
represented and voting at the Annual Meeting; however, we believe that
California law provides that if shares are represented and vote on any issue at
the Annual Meeting their failure to vote yes on any other issue (through either
abstention or a broker non-vote) has the same effect as a negative vote on that
other issue and we will treat such abstentions or broker non-votes accordingly.
On matters which require the affirmative vote of a majority of the outstanding
shares, abstentions and broker non-votes have the same effect as a negative
vote.
PROPOSAL 1
ELECTION OF DIRECTORS
As of the date of Annual Meeting our Board will be reduced from 10 to six
directors. The six individuals below have been nominated for election to our
Board. Unless you specify otherwise, your proxy will be voted for the election
of the nominees of the Board of Directors who are listed below, distributed
among the nominees as the proxy holders see fit.
If, however, any of the nominees are unable to serve, or for good cause decline
to serve at the time of the Annual Meeting, the proxy holders will exercise
discretionary authority to vote for substitutes. The Board of Directors is not
aware of any circumstances that would render any nominee unavailable for
election. Discretionary authority to cumulate votes is being solicited by the
Board of Directors, and it is intended that the proxies received by the proxy
holders pursuant to the solicitation will be voted in a manner designed to cause
the election of the maximum number of the Board of Directors' nominees. The
following schedule sets forth certain information concerning the nominees for
election as Directors.
The Company's Board of Directors recommends a vote FOR the nominees listed
---
herein.
First Year
Elected
Name Director Age
-------- ---
Louis P. Ferrero 1997 56
Cam L. Garner 1997 51
James C. Gilstrap 1995 63
Richard O. Martin 1997 59
Allen E. Paulson 1995 77
Michael K. Perry 1998 38
-------------------------------------------------------
2
Louis P. Ferrero. Mr. Ferrero has served as a Director of our Company since July
1997. Mr. Ferrero has been Chairman and Chief Executive Officer of Conseco
Global Investments since 1991. Conseco Global Investments is an investment
company, which identifies emerging investment opportunities for Conseco, Inc., a
major insurance holding company. Before joining Conseco Global Investments, Mr.
Ferrero was Chairman and Chief Executive Officer of Anacomp, Inc., a full-
service provider of computer and micrographics equipment, service and supplies.
Mr. Ferrero holds a Bachelor of Economics and Marketing degree from the
University of Florida.
Cam L. Garner. Mr. Garner has served as a Director of our Company since July
1997. Mr. Garner has been Chief Executive Officer of Dura Pharmaceuticals, Inc.,
a respiratory products company since 1990, Chairman of its Board since 1995, and
served as its President from 1990 to 1998. Prior to joining Dura
Pharmaceuticals, Inc., Mr. Garner was Senior Vice President of Sales and
Marketing with Hybritech, Inc., a division of Eli Lilly & Co. Mr. Garner serves
as Director for Nanogen, Inc., Safeskin Corporation and Spiros Development
Corporation II, Inc., as well as for Dura Pharmaceuticals. Mr. Garner earned a
Masters Degree in Business Administration from Baldwin-Wallace College and a
Bachelor of Arts degree in Biology from Virginia Wesleyan.
James C. Gilstrap. Mr. Gilstrap served as Chairman of the Board of our Company
from May 1995 to June 1996, and has been Co-Chairman of the Board since June
1996. Mr. Gilstrap is retired from Jefferies & Company, where he served as
Senior Executive Vice President, Partner, and Member of the Executive Committee.
Mr. Gilstrap serves on the Board of Full House Resorts, Inc. and is past
President of the Dallas Securities Dealers as well as a past member of the Board
of Governors of the National Association of Securities Dealers, Inc.
Richard O. Martin, Ph.D. Dr. Martin has served as a Director of our Company
since July 1997. Dr. Martin is currently President of Medtronic-Physio-Control
Corporation, a medical device company which designs, manufactures and sells
external defibrillators and heart monitors. Until Medtronic's acquisition in
1998 of Physio-Control International Corporation, Dr. Martin was Chairman and
CEO of Physio-Control International. Prior to that he was Vice President of
Cardiovascular Business Development with SULZERmedica, Inc. and has held several
management positions at Intermedics, Inc. and Medtronic, Inc. Dr. Martin serves
on the Boards of Maxxim Medical, Inc., SeaMED Corporation and Encore Medical
Corporation. Dr. Martin earned a Doctorate in Electrical/ Biomedical Engineering
at Duke University.
Allen E. Paulson. Mr. Paulson has been Co-Chairman of our Board since June 1996
and a Director since February 1995. Mr. Paulson owns numerous companies having
substantial investments in diverse industries, including aircraft; energy
exploration; horse breeding, training, and racing; automobile dealerships;
gaming and entertainment; and real estate and resorts. Mr. Paulson is the
founder and Chairman Emeritus of Gulfstream Aerospace Corporation, the world's
leading designer, manufacturer and marketer of large corporate jets. He has
earned numerous awards including the Horatio Alger Award for Distinguished
Americans, and the American Academy of Achievement's Golden Plate Award, as well
as five honorary doctorates.
Michael K. Perry. Mr. Perry has been our Chief Executive Officer and a Director
of our Company since April 1998. From November 1994 until June 1996, Mr. Perry
served as Vice President of Operations at Pyxis Corporation, a publicly traded
company that provides healthcare automation and information management services
as well as pharmacy management services to hospitals and outpatient facilities.
In 1996, Pyxis was acquired by Cardinal Health, Inc. Prior to that, Mr. Perry
held the positions of Director of Quality for the Hewlett Packard DeskJet Group
and Business Manager for the Hewlett Packard Medical Products Group. Mr. Perry
holds a Bachelor of Science in Mechanical Engineering from General Motors
Institute and a Masters in Business Administration from Harvard Business School.
3
Board Meetings and Committees
The Company's Board of Directors held ten meetings during the fiscal year ended
November 30, 1998. Each incumbent Director attended at least 75% of the
aggregate of the total meetings of the Board and of all his Board committees
held during the period in which he served as a Director, except Nicholas Diaco,
M.D. who participated in 70% of the meetings of the Board, and Stephenson M.
Dechant who participated in 63% and 50% of the Compensation and Audit Committee
meetings, respectively.
The Board of Directors has established a standing Compensation Committee
currently composed of Messrs. Garner, Dechant and Gilstrap. The Compensation
Committee reviews and acts on matters relating to compensation levels and
benefit plans for executive officers and key employees of the Company. The
Committee held eight meetings during the fiscal year ended November 30, 1998.
The Board of Directors has established a standing Audit Committee currently
composed of Messrs. Gilstrap, Dechant and Ferrero. The Audit Committee reviews
all matters relating to oversight of the Company's internal control structure,
selection of the independent auditors and oversight of the Company's financial
reporting. The committee held two meetings during the fiscal year ended November
30, 1998.
The Board of Directors has also established a standing Nominating Committee
currently composed of Messrs. Gilstrap, Garner and Perry. The Nominating
Committee reviews matters pertaining to Board Composition and screens and
recommends to the Board potential candidates for election as a Director.
Directors' Fees
Each Director who has not been an employee of CardioDynamics in the preceding
two years receives 1,000 automatic monthly stock options granted at fair market
value (or, in the case of 10% shareholders Mr. Paulson and Mr. Gilstrap, at 110%
of fair market value) on the last day of the month for each full month of
service as a Director of the Company, pursuant to the 1995 Stock Option/Stock
Issuance Plan. On August 1, 1997, Cam L. Garner, a Director of the Company,
entered into a consulting agreement with us whereby Mr. Garner is paid a monthly
fee of $2,083.33 and received a one-time grant of 5,000 stock options to
purchase our Common Stock in exchange for consulting services. Total fees paid
to Mr. Garner in fiscal 1998 were $25,000.00. Mr. Martin and Mr. Ferrero each
received a one-time grant of 10,000 stock options to purchase our stock. The
options vest in equal thirds on August 20, 1998, 1999 and 2000.
4
PROPOSAL 2
RATIFICATION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
Ratification and approval by the shareholders is sought for the selection of
KPMG LLP by the Board of Directors as independent accountants to audit our
accounts and records for the fiscal year ending November 30, 1999, and to
perform other appropriate services.
KPMG LLP have been our auditors since 1997. Our financial statements for the
fiscal year ended November 30, 1996, 1997 and 1998 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles. In the event that a majority
of the shares voted at the Annual Meeting do not vote for ratification of the
selection of KPMG LLP, the Board of Directors will reconsider such selection.
A representative of KPMG LLP is expected to be present at the Annual Meeting and
will have an opportunity to make a statement if he or she desires to do so, and
is expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the selection
---
of KPMG LLP as our independent accountants for fiscal 1999.
5
PRINCIPAL SHAREHOLDERS
The following are the only persons known by us to own beneficially, as of May
28, 1999, five percent (5%) or more of the outstanding shares of our Common
Stock.
Name and Address of Shares Beneficially Owned
--------------------------------
Beneficial Owner Number/(1)/ Percentage/(2)/
- --------------------- ------------- -----------------
Allen E. Paulson/(3)/ 17,869,233 46.6%
P.O. Box 9660
Rancho Santa Fe, CA 92067
James C. Gilstrap/(4)/ 7,371,144 19.2%
5067 Shore Drive
Carlsbad, CA 92008
Nicholas V. Diaco, M.D./(5)/ 4,785,796 12.4%
1302 - 20th Street, Suite 400
Santa Monica, CA 90404
Joseph F. Diaco, M.D./(6)/ 4,529,796 11.8%
4700 North Habana Ave., Suite 403
Tampa, FL 33614
CardioDynamics Holdings, LLC/(7)/ 4,124,490 10.5%
P.O. Box 9660
Rancho Santa Fe, CA 92067
Edge Financial Group, Inc./(8)/ 2,214,059 5.7%
16225 Park Ten Place, Suite 380
Houston, TX 77084
Joe C. Richardson, Jr./(9)/ 1,994,038 5.1%
P.O. Box 8246
Amarillo, TX 79114
__________________
/1)/ Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable.
/2)/ Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
/3)/ Includes 4,124,490 shares of Common Stock beneficially owned by
CardioDynamics Holdings, LLC ("CDH"), of which Mr. Paulson is a member
with a majority interest. Mr. Paulson disclaims beneficial ownership of
these shares except to the extent of his individual ownership interest in
CDH. See footnote (7). Also includes 45,000 shares of Common Stock Mr.
Paulson beneficially owns, by virtue of his right to acquire such shares
from CardioDynamics under stock options now exercisable or exercisable
within 60 days. Excludes 3,000,000 shares of Common Stock owned by Mr.
Paulson's sons; Mr. Paulson disclaims beneficial ownership of such shares.
6
/4)/ Includes 4,124,490 shares of Common Stock beneficially owned by CDH, of
which Mr. Gilstrap is a member with a minority interest. Mr. Gilstrap
disclaims beneficial ownership of these shares except to the extent of his
individual ownership interest in CDH. See footnote (7). Includes 3,195,654
shares held in the Jim and Sue Gilstrap Family Limited Partnership. Mr.
Gilstrap disclaims beneficial ownership of these shares except to the
extent of his and his wife's ownership interest in the Jim and Sue
Gilstrap Family Limited Partnership. Also includes 45,000 shares of Common
Stock Mr. Gilstrap beneficially owns, by virtue of his right to acquire
such shares from CardioDynamics under stock options now exercisable or
exercisable within 60 days. Excludes 665,000 shares of Common Stock owned
by Mr. Gilstrap's daughters; Mr. Gilstrap disclaims beneficial ownership
of such shares.
/5)/ Includes 4,124,490 shares of Common Stock beneficially owned by CDH, of
which Dr. Nicholas Diaco is a member with a minority interest. Dr. Diaco
disclaims beneficial ownership of these shares except to the extent of his
individual ownership interest in CDH. See footnote (7). Also includes
150,000 shares of Common Stock Dr. Diaco beneficially owns, by virtue of
his right to acquire such shares from CardioDynamics under stock options
now exercisable or exercisable within 60 days.
/6)/ Includes 4,124,490 shares of Common Stock beneficially owned by CDH, of
which Dr. Joseph Diaco is a member with a minority interest. Dr. Diaco
disclaims beneficial ownership of these shares except to the extent of his
individual ownership interest in CDH. See footnote (7).
/7)/ Includes 2,243 shares of Common Stock over which CDH exercises sole voting
and investment power, and 4,022,247 shares of Common Stock over which CDH
exercises sole voting power, but no investment power. Also includes
100,000 shares of Common Stock issuable upon conversion of a Note issued
by CardioDynamics.
/8)/ Includes 1,209,049 shares of Common Stock beneficially owned by Medical
Assets, LLC, of which Edge Financial Group, Inc. is a member. Edge
Financial Group, Inc. disclaims beneficial ownership of these shares
except to the extent of its ownership interest in Medical Assets, LLC.
Medical Assets, LLC exercises sole investment power, but no voting power,
over all its shares of Common Stock. See footnote 9. Edge Financial Group,
Inc. has investment power, but not voting power, with respect to all its
shares.
/9)/ Includes 1,209,049 shares of Common Stock beneficially owned by Medical
Assets, LLC, of which Mr. Richardson is a member. Mr. Richardson disclaims
beneficial ownership of these shares except to the extent of his ownership
interest in Medical Assets, LLC. See footnote (8). Also includes 25,109
shares held by Vital Energy, Inc. of which Mr. Richardson is CEO and
majority shareholder. Mr. Richardson has investment power, but not voting
power, with respect to all his shares.
7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
CardioDynamics as of May 28, 1999 by each Director and each officer of
CardioDynamics named in the Summary Compensation Table set forth below, and by
all Directors and executive officers of our Company as a group. Each such person
has a business address, care of CardioDynamics.
Shares Beneficially Owned
-----------------------------
Name Number (1) Percent (2)
- --------------------- ---------- -----------
Stephenson M. Dechant (3) 55,000 *
Nicholas V. Diaco, M.D. (4) 4,785,796 12.4%
Louis P. Ferrero (5) 174,334 *
Cam L. Garner (6) 84,001 *
James C. Gilstrap (7) 7,371,144 19.2%
Stephen P. Loomis 10,000 *
Richard O. Martin, Ph.D. (8) 74,334 *
Richard E. Otto (9) 76,667 *
Michael D. Padilla (10) 56,000 *
Allen E. Paulson (11) 17,869,233 46.6%
Rhonda F. Pederson (12) 141,250 *
Michael Perry (13) 178,875 *
Richard E. Trayler 101,000 *
All Directors and executive
officers as a group - (13 persons) (14) 22,728,654 58.2%
- --------------------------
*Less than 1%
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable. Share ownership in each case includes
shares issuable on exercise of certain outstanding options as described in
the footnotes below.
(2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)1.
(3) Includes 55,000 shares of Common Stock Mr. Dechant beneficially owns, by
virtue of his right to acquire such shares under stock options now
exercisable or exercisable within 60 days. Mr. Dechant will not be standing
for re-election at the meeting.
(4) Includes 4,124,490 shares of Common Stock beneficially owned by CDH, of
which Dr. Nicholas Diaco is a member with a minority interest. Dr. Diaco
disclaims beneficial ownership of these shares except to the extent of his
individual ownership interest in CDH. See footnote (14). Also includes
150,000 shares of Common Stock Dr. Diaco beneficially owns, by virtue of
his right to acquire such shares from CardioDynamics under stock options
now exercisable or exercisable within 60 days. Dr. Diaco will not be
standing for re-election at the meeting.
(5) Includes 24,334 shares of Common Stock Mr. Ferrero beneficially owns, by
virtue of his right to acquire such shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days.
8
(6) Includes 26,001 shares of Common Stock Mr. Garner beneficially owns, by
virtue of his right to acquire such shares under stock options now
exercisable or exercisable within 60 days.
(7) Includes 4,124,490 shares of Common Stock beneficially owned by CDH, of
which Mr. Gilstrap is a member with a minority interest. Mr. Gilstrap
disclaims beneficial ownership of these shares except to the extent of his
individual ownership interest in CDH. See footnote (14). Includes
3,195,654 shares held in the Jim and Sue Gilstrap Family Limited
Partnership. Mr. Gilstrap disclaims beneficial ownership of these shares
except to the extent of his and his wife's ownership interest in the Jim
and Sue Gilstrap Family Limited Partnership. Also includes 45,000 shares of
Common Stock Mr. Gilstrap beneficially owns, by virtue of his right to
acquire such shares from CardioDynamics under stock options now exercisable
or exercisable within 60 days. Excludes 665,000 shares of Common Stock
owned by Mr. Gilstrap's daughters; Mr. Gilstrap disclaims beneficial
ownership of such shares.
(8) Includes 24,334 shares of Common Stock Dr. Martin beneficially owns, by
virtue of his right to acquire such shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days.
(9) Includes 36,667 shares of Common Stock Mr. Otto beneficially owns, by
virtue of his right to acquire such shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days. Mr. Otto will not be
standing for re-election at the meeting.
(10) Includes 45,000 shares of Common Stock Mr. Padilla beneficially owns, by
virtue of his right to acquire such shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days. Mr. Padilla will not
be standing for re-election at the meeting.
(11) Includes 4,124,490 shares of Common Stock beneficially owned by CDH, of
which Mr. Paulson is a member with a majority interest. Mr. Paulson
disclaims beneficial ownership of these shares except to the extent of his
individual ownership interest in CDH. See footnote (14). Also includes
45,000 shares of Common Stock Mr. Paulson beneficially owns, by virtue of
his right to acquire such shares from CardioDynamics under stock options
now exercisable or exercisable within 60 days. Excludes 3,000,000 shares
of Common Stock owned by Mr. Paulson's sons; Mr. Paulson disclaims
beneficial ownership of such shares.
(12) Includes 112,500 shares of Common Stock Ms. Pederson beneficially owes by
virtue of her right to acquire shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days
(13) Includes 161,875 shares of Common Stock Mr. Perry beneficially owes by
virtue of his right to acquire shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days
(14) Shares beneficially owned include shares held by entities affiliated with
certain Directors and named Officers as described above in the footnotes.
EXECUTIVE OFFICERS
The Company's executive officers and their ages as of May 28, 1999 are as
follows:
Name Age Position
------------------- --- --------
Allen E. Paulson 77 Co-Chairman of the Board of Directors
James C. Gilstrap 63 Co-Chairman of the Board of Directors
Michael K. Perry 38 Chief Executive Officer
Rhonda F. Pederson 38 President
Stephen P. Loomis 39 Chief Financial Officer
Richard E. Trayler 49 Chief Operating Officer
Dennis G. Hepp 50 Chief Technology Officer
9
Business Experience of Executive Officers
Allen E. Paulson. See description under "Election of Directors."
James C. Gilstrap. See description under "Election of Directors."
Michael K. Perry. See description under "Election of Directors."
Rhonda F. Pederson. Ms. Pederson has been the President of our Company since
June 1997. She served as Vice President of Operations from June 1995 to January
1996 and as Chief Operating Officer from February 1996 to May 1997. Ms. Pederson
has over 15 years of healthcare experience, including medical product
development, rapid growth transitions, sales and marketing, and executive
management. From July 1992 until May 1995, Ms. Pederson held the positions of
President/Chief Executive Officer, Vice President of Sales and Marketing, and
Board member at Culture Technology, Inc., a privately held biotechnology company
specializing in culturing autologous skin for burn patients. Ms. Pederson has
also held positions at General Electric Medical Systems and Quinton Instrument
Company, both medical device subsidiaries of publicly held companies. Ms.
Pederson holds a Bachelor of Pharmacy from Washington State University and is
completing a Masters in Business Administration, Executive Program, at UCLA
Anderson School of Business in Los Angeles.
Stephen P. Loomis. Mr. Loomis joined our Company in September 1996 as Vice
President of Finance and has held the positions of Vice President of Finance,
Chief Financial Officer and Corporate Secretary since April 1997. Mr. Loomis is
a Certified Public Accountant with more than 13 years experience in finance and
business development with both publicly traded and privately held companies.
From 1993 until joining CardioDynamics, he served as Director of Financial
Reporting at the Kinko's Inc. group of companies. From 1988 to 1993, Mr. Loomis
was the Chief Financial Officer for Terminal Data Corporation, a publicly traded
high-speed document imaging company. Prior to that, Mr. Loomis was with Peat
Marwick Main & Co. He earned his Bachelor of Science Degree in Business
Administration from California State University at Northridge.
Richard E. Trayler. Mr. Trayler joined our Company in July 1997 as Chief
Operating Officer. From 1982 to 1997, Mr. Trayler held positions of regional and
divisional sales manager at Quinton Instrument Company, a medical device
subsidiary of American Home Products Corporation. He has also held positions at
the Heart Institute for CARE, the University of Washington, and the Boeing
Company where he assisted cardiologists in the clinical assessment of cardiac
patients. Mr. Trayler was also the founder of the Health Enrichment Institute
and the Amarillo Cardiopulmonary Rehabilitation Program, specializing in
cardiology/health hazard appraisals and the development of cardiopulmonary
exercise programs. Mr. Trayler earned a Bachelor of Science Degree from Texas
A&M University, a Master of Science Degree from the University of Washington,
and a Master of Christian Leadership Degree from Western Conservative Baptist
Seminary (Phoenix Seminary).
Dennis G. Hepp. Mr. Hepp was appointed Chief Technology Officer of our Company
in June 1997. Mr. Hepp has served as a consultant to us since July 1995. He has
over 29 years experience in cardiovascular clinical medicine and the medical
device industry. From 1974 to 1986, Mr. Hepp held various engineering and
management positions at Medtronic, Inc. In 1989, Mr. Hepp founded and he
continues to serve as Managing Director of Rivertek Medical Systems, Inc., in
Minneapolis, Minnesota, which serves as an engineering consulting firm to
medical device manufacturers, including Guidant Corporation and Medtronic, Inc.,
as well as emerging medical technology companies such as CardioDynamics. Mr.
Hepp holds a Bachelor of Electrical Engineering from the University of Detroit.
10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table provides information regarding the annual and long-term
compensation earned for services rendered in all capacities to CardioDynamics
for the fiscal years ended November 30, 1996, 1997 and 1998 of those persons who
were, at November 30, 1998 (i) the Chief Executive Officer and (ii) the other
executive officers of CardioDynamics whose aggregate direct remuneration from
CardioDynamics during the fiscal year ended November 30, 1998 exceeded $100,000
(collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Awards
Annual Compensation(1) ------------
------------------------------------------ Securities
Other Underlying
Name and Annual Options/
Principal Position Year Salary($) Bonus($) Compensation($) SARs(#)
- ------------------ ---- --------- -------- --------------- -------------
Michael K. Perry 1998 $ 1 $ 750 $ 4,000 (2) 1,295,000
Chief Executive 1997 n/a n/a n/a n/a
Officer(3) 1996 n/a n/a n/a n/a
Rhonda F. Pederson 1998 127,833 751 18,000 (4) -0-
President 1997 111,308 17,228 15,000 (4) 75,000
1996 95,000 -0- -0- 150,000
Stephen P. Loomis 1998 116,583 1,663 -0- 120,000 (5)
Chief Financial 1997 103,416 22,849 -0- 70,000 (6)
Officer(7) 1996 18,025 -0- -0- 80,000 (6)
Richard E. Trayler 1998 123,750 1,502 -0- 80,000 (5)
Chief Operating 1997 60,000 -0- -0- 100,000 (6)
Officer(8) 1996 n/a n/a n/a n/a
- ------------------
(1) Employee benefits provided to each of the Named Officers under various
Company programs do not exceed the disclosure thresholds established under
the SEC rules and are therefore not included.
(2) Amount represents Company paid allowance for automobile expenses.
(3) Represents compensation earned by Mr. Perry from his employment with our
Company commencing April of 1998.
(4) Amounts represent Company paid lodging of $12,000 in each year and the
balance is for automobile expenses.
(5) Amounts represent options granted under Company Stock Option
Cancellation/Regrant program.
(6) In conjunction with our Stock Option Cancellation/Regrant program in 1998,
these options were cancelled.
(7) Represents compensation earned by Mr. Loomis from his employment with our
Company commencing September of 1996.
(8) Represents compensation earned by Mr. Trayler from his employment with our
Company commencing July of 1997.
11
The following table provides information regarding option exercises during the
fiscal year ended November 30, 1998, as well as information with respect to
unexercised options to purchase our Common Stock granted to the Named Officers
in fiscal 1998. None of the Named Officers exercised any stock options during
fiscal 1998. CardioDynamics has not granted any Stock Appreciation Rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------------------------
Number of % of Total
Securities Underlying Options Granted
Options to Employees Exercise Expiration
Name Granted in Fiscal 1998 Price($/Sh)(1) Date
- ----------------------------------------------------------------------------------------------------
Michael K. Perry 1,295,000 46% $1.625 10/16/2008
Rhonda F. Pederson 250,000 9% $2.250 3/19/2008
Stephen P. Loomis 120,000 4% $1.625 10/16/2008
Richard E. Trayler 80,000 3% $1.625 10/16/2008
___________________________________________
(1) All options were granted at fair market value (closing sale price for our
Common Stock on the NASDAQ/AMEX Stock Market on the date of grant).
The following table provides further information regarding the Named Officers'
outstanding stock options as of November 30, 1998. No stock appreciation rights
were granted or exercised, and no stock options were exercised during fiscal
1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
Number of
Securities
Underlying Value(1) of
Unexercised Unexercised
Options/SARs In-the-Money
At FY-End (#) Options/SARs at FY-
Shares Acquired Value Exercisable/ End ($) Exercisable/
on Exercise (#) Realized ($) Unexercisable Unexercisable(2)
Name --------------- ------------ ------------- ----------------
Michael K. Perry - 0 - - 0 - - 0 - / 1,295,000 - 0 - / 1,214,063
Rhonda F. Pederson - 0 - - 0 - 25,000 / 450,000 - 0 - / 312,500
Stephen P. Loomis - 0 - - 0 - - 0 - / 120,000 - 0 - / 112,500
Richard E. Trayler - 0 - - 0 - - 0 - / 80,000 - 0 - / 75,000
______________________
(1) Represents the difference between the closing sale price of our Common
Stock on the NASDAQ/AMEX Stock Market on November 30, 1998 and the exercise
price of the options.
(2) The respective Named Officers as of November 30, 1998 could not exercise
these options and future exercisability is subject to certain vesting
provisions including specific stock price thresholds and/or remaining in
the employ of the Company for up to three additional years.
12
Stock Options
On October 16, 1998, we adopted a Stock Option Cancellation/Regrant program.
Each employee was given the opportunity to exchange his or her existing options
for new options, exercisable at $1.625 per share. All accrued vesting under the
old stock options was forfeited, and the optionee began a new vesting schedule
(over the same number of years as the old option's vesting schedule). For all
employees other than executive officers, the new options were granted for the
same number of shares as the old options. For executive officers, the new
options were granted for a fewer number of shares. The reduction in option
shares for the executive officers was calculated by a formula based on the
Black-Scholes option valuation model.
Under the program, 2,267,000 options were cancelled with an average exercise
price of $2.74. In exchange, 1,968,000 new options were granted with an exercise
price of $1.625 per share and 299,000 options were forfeited with an average
exercise price of $2.75. Eligible optionees representing 678,000 options with an
average exercise price of $1.75 elected not to participate in the program.
Employment Agreements
On March 23, 1998, we entered into an employment agreement with Michael Perry
who succeeded Mr. Otto as Chief Executive Officer. Under the terms of the
agreement, Mr. Perry was granted 1,500,000 non-transferable stock options (not
under our Stock Option Plan) at an exercise price of $2.55 per share, subject to
vesting requirements. The first tranche vested on September 23, 1998, and the
final tranche was not scheduled to vest until March 23, 2002. Under the October
16, 1998 Stock Option Cancellation/Regrant program, Mr. Perry cancelled his
1,500,000 options in exchange for a new grant of 1,295,000 options. The new
options have an exercise price of $1.625 per share, and all accrued vesting was
forfeited. The new options vest over the same four-year period with a
commencement date of October 16, 1998. At May 28, 1999, 161,875 of the options
were vested. The options expire on October 15, 2008.
We entered into a Compensation and Employment Agreement, dated June 16, 1995,
with its then Chief Executive Officer, Richard E. Otto. Under the terms of the
agreement, Mr. Otto was granted 500,000 non-transferable stock options (not
under our Stock Option Plan) at an exercise price of $0.50 per share. The
agreement provided for a salary of $150,000 per year and standard fringe
benefits. In January 1996, Mr. Otto and the Company agreed to reduce his annual
salary to $120,000 per year and then again in June 1997, they agreed to reduce
it to $72,000 per year and reduced the number of stock options to 250,000. The
options vest when and if the quoted market price of our Common Stock attains and
holds the following stock prices:
50,000 options vest at $5.00
50,000 options vest at $6.00
50,000 options vest at $7.00
50,000 options vest at $8.00
50,000 options vest at $9.00
At May 28, 1999, none of the options were vested. The options expire June 15,
2005. Upon the appointment of Mr. Perry as Chief Executive Officer in April of
1998, Mr. Otto's salary ceased and he and the CardioDynamics agreed that the
250,000 stock options would continue to be outstanding, subject to the same
vesting requirements.
Long Term Incentive Plans
We do not have any long-term incentive plans (as defined in the Securities and
Exchange Commission regulations).
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1996, CardioDynamics Holdings, LLC ("CDH") and its members engaged
in several significant transactions with us, substantially all resulting in the
issuance of unregistered Common Stock or notes convertible (and later converted)
into Common Stock. As of May 28, 1999, CDH owns 2,243 shares of our Common Stock
and has the right under a $25,000 note bearing interest at 7.5% to obtain an
additional 100,000 shares upon conversion. Members of CDH individually own
18,058,009 shares of CardioDynamics Common Stock (aside from CDH's own
holdings); of the members' shares, Allen E. Paulson owns 13,744,743, James C.
Gilstrap owns 3,246,654 and Nicholas V. Diaco, M.D. owns 661,306. At May 28,
1999, CDH and its members together are the beneficial owners of 56.3% of our
Common Stock.
In March 1998, we entered into an 18 month unsecured private line of credit
agreement with Allen E. Paulson and James C. Gilstrap. Under the terms of the
agreement we can borrow up to $3,000,000 on an as-needed basis with monthly
interest-only payments at an annual interest rate of 10.0%. In February 1999,
the term was extended one year, to September 2000.
Before and after becoming an executive officer of CardioDynamics in June 1997,
Dennis G. Hepp has served as a consultant and vendor to our Company since July
1995 through the company he founded in 1989, Rivertek Medical Systems, Inc.,
located in Minneapolis, Minnesota. Rivertek, which is 100% owned by Mr. Hepp and
his wife, provides engineering consulting to medical device manufacturers, and
continues to be one of our largest vendors. In fiscal 1997 and fiscal 1998, we
paid $238,278 and $454,801, respectively, to Rivertek.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that each person who, at any time during the fiscal year
ended November 30, 1998, was a Director, officer, or beneficial owner of more
than 10% of a class of registered equity securities of the Company filed on a
timely basis all reports required by Section 16(a) of the Securities Exchange
Act.
SHAREHOLDER PROPOSALS FOR 2000 PROXY STATEMENT
The deadline for shareholders to submit proposals to be considered for inclusion
in the Company's Proxy Statement for the next year's Annual Meeting of
Shareholders is February 14, 2000. Such proposals may be included in the next
year's Proxy Statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
If a shareholder wishes to have a proposal considered at the 2000 Annual Meeting
but does not seek to have the proposal included in the Company's Proxy Statement
and form of Proxy for that meeting, and if the shareholder does not notify
CardioDynamics of the proposal by April 30, 2000, then the persons appointed as
proxies by management may use their discretionary voting authority to vote on
the proposal when the proposal is considered at the 2000 Annual Meeting, even
though there is no discussion of the proposal in the Proxy Statement for that
meeting. It is recommended that shareholders submitting proposals or notices of
proposal direct them to the Secretary of the Company and utilize Certified Mail-
Return Receipt Requested. Shareholders' proposals should be submitted to
CardioDynamics International Corporation, 6175 Nancy Ridge Drive, Suite 300, San
Diego, California 92121.
14
FORM 10-KSB
The company will mail without charge, upon written request, to any shareholder
of the company a copy of the annual report on form 10-KSB, including the
financial statements, schedules and list of exhibits. Requests should be sent to
CardioDynamics International Corporation, 6175 Nancy Ridge Drive, Suite 300, San
Diego, California 92121, Attention: Shareholder Relations.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action at
the Annual Meeting other than the matters set forth in this Proxy Statement.
Should any other matter requiring a vote of the shareholders arise, the persons
named as proxy holders on the enclosed proxy card will vote the shares
represented thereby in accordance with their best judgment in the interest of
the Company. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed proxy card.
By Order of the Board of Directors
/s/ MICHAEL K. PERRY
--------------------------------------
Dated: June 14, 1999 Michael K. Perry
Director and Chief Executive Officer
15
Cardiodynamics International Corporation
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James C. Gilstrap and Michael K. Perry, jointly
and severally, as proxies, with full power of substitution, to vote all shares
of stock which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of CardioDynamics International Corporation to be held on
Thursday, July 15, 1999 or at any postponements or adjournments thereof, as
specified below, and to vote in their discretion on such other business as may
properly come before the Annual Meeting and any postponements or adjournments
thereof.
The Board of Directors recommends a vote FOR Proposals 1 and 2. To vote in
---
accordance with the Board of Directors recommendations just sign below, no boxes
need to be checked.
- --------------------------------------------------------------------------------
1. Election of Directors:
Nominees:
Louis P. Ferrero Cam L. Garner James C. Gilstrap
Richard O. Martin, Ph.D. Allen E. Paulson Michael K. Perry
[_] Vote FOR all nominees above (except as withheld in the space below)
[_] Vote WITHHELD from all nominees
Instruction: To withhold authority to vote for any individual nominee,
check the box "Vote FOR" and write the nominee's name for whom you wish to
withhold your vote on the line below.
- --------------------------------------------------------------------------------
2. To ratify the selection of KPMG LLP as our independent accountants for the
fiscal year ending November 30, 1999.
[_] Vote FOR [_] Vote AGAINST [_] ABSTAIN
- --------------------------------------------------------------------------------
Unless otherwise specified by the undersigned, this proxy will be voted FOR
Proposals 1 and 2 and will be voted by the proxy holders at their discretion as
to any other matters properly transacted at the Annual Meeting or any
postponements or adjournments thereof. To vote in accordance with the Board of
Directors recommendations just sign below, no boxes need to be checked.
Dated: ___________________________, 1999
_______________________________________________
Signature of Shareholder
_______________________________________________
Printed Name of Shareholder
_______________________________________________
Title (if appropriate)
Please sign exactly as name appears hereon. If
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such, and, if signing for a corporation, give your
title. When shares are in the names of more than
one person, each should sign.
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL
MEETING __________________________________________