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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 'SS'240.14a-11(c) or
'SS'240.14a-12
EQUIDYNE 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)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies: ________
2) Aggregate number of securities to which transaction
applies: ________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined): ________
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5) Total fee paid: ________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________
2) Form, Schedule or Registration Statement No.: ________
3) Filing Party: ________
4) Date Filed: ________
EQUIDYNE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 2003
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Equidyne Corporation ("Equidyne" or the "Company") will be held at the
offices of Richards, Layton & Finger, P.A., One Rodney Square, 3rd Floor,
Wilmington, Delaware 19899, on September 9, 2003, at 10:00 a.m., local time. The
purposes of the Meeting are to:
o Elect four (4) directors to serve for a term expiring at the next
annual meeting of stockholders or until their respective successors
are duly elected and shall qualify. YOUR BOARD UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ELECTION OF EACH OF THE BOARD'S NOMINEES ON THE
ENCLOSED WHITE PROXY CARD.
WE URGE YOU NOT TO VOTE FOR ANY INDIVIDUALS THAT MAY BE NOMINATED
BY MFC BANCORP LTD. ("MFC") AND NOT TO EXECUTE ANY PROXY CARD
OTHER THAN A WHITE PROXY CARD.
o Consider and act upon a proposal to ratify the appointment of KBA
Group LLP as Equidyne's independent public accountants for fiscal
2003. YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
o Transact such other business as may properly come before the Meeting
or any postponement or adjournment of the Meeting.
A Proxy Statement describing the matters to be considered at the Meeting is
attached to this Notice. Only stockholders of record at the close of business on
July 14, 2003, which has been fixed as the record date for the Meeting, shall be
entitled to notice of, and to vote at, the Meeting and any adjournments of the
Meeting.
All stockholders are cordially invited to attend the Meeting in person.
THIS MEETING IS OF PARTICULAR IMPORTANCE TO ALL STOCKHOLDERS OF EQUIDYNE IN
LIGHT OF THE ATTEMPT BY MFC BANCORP LTD. ("MFC") TO SEIZE CONTROL OF YOUR
COMPANY BY STARTING A PROXY SOLICITATION TO ELECT ITS OWN HAND-PICKED NOMINEES
AS NEW DIRECTORS. THIS PROXY SOLICITATION HAS BEEN BOTH COSTLY AND DISTRACTING
TO EQUIDYNE AND ITS STOCKHOLDERS. YOUR BOARD STRONGLY OPPOSES THE PROXY
SOLICITATION BY MFC. ACCORDINGLY, PLEASE COMPLETE, SIGN AND DATE YOUR ENCLOSED
WHITE PROXY CARD AND RETURN IT TO US IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. DISCARD ANY GREEN PROXY CARDS THAT ARE SENT TO YOU
BY MFC. THE BOARD URGES YOU NOT TO MAIL, SIGN OR VOTE ANY GREEN PROXY CARDS SENT
TO YOU BY MFC EVEN AS A VOTE OF PROTEST BECAUSE A SUBMISSION OF A GREEN PROXY
CARD WILL REVOKE YOUR PREVIOUSLY VOTED PROXY CARD IN SUPPORT OF THE BOARD'S
NOMINEES. YOU CAN REVOKE ANY GREEN MFC PROXY CARD PREVIOUSLY SIGNED BY YOU BY
SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED.
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE WITH VOTING, PLEASE CONTACT
MACKENZIE PARTNERS, INC., TOLL FREE AT 1-800-322-2885 OR COLLECT AT
1-212-929-5500.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR PROXY IS IMPORTANT. PLEASE
ACT TODAY.
By order of the Board of Directors,
/s/ Mark C. Myers
---------------------------------------
San Diego, California Mark C. Myers
August [__], 2003 President and Secretary
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TABLE OF CONTENTS
Page
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GENERAL INFORMATION..................................................................1
Questions and Answers about the Annual Meeting and Voting.......................1
BACKGROUND OF PROXY CONTEST..........................................................5
Nominations by MFC..............................................................5
Delaware Litigation.............................................................7
Actions of Your Board and Management............................................8
Your Board's Plan to Enhance Stockholder Value.................................10
PROPOSAL 1 ELECTION OF DIRECTORS....................................................12
Nominees for Directors.........................................................12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.....................................14
BOARD AND MANAGEMENT OWNERSHIP......................................................15
PARTICIPANTS IN EQUIDYNE'S SOLICITATION.............................................16
Transactions in Our Common Stock During the Past Two Years.....................17
BOARD AND COMMITTEE INFORMATION.....................................................17
Board Meetings and Committees..................................................17
Non-Employee Director Compensation.............................................18
Report of the Audit Committee..................................................19
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS....................................21
Summary Compensation Table.....................................................21
Option Grants..................................................................21
Stock Option Plans.............................................................22
Aggregate Option Exercises in Fiscal 2003 and Fiscal Year-End Option Values....23
Equity Compensation Plan Information...........................................23
Incentive Option Plans....................................................24
Non-Plan Options and Warrants.............................................24
Employment Agreements..........................................................24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.........................26
REPORT OF THE COMPENSATION COMMITTEE................................................26
Philosophy................................................................27
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.............................30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................30
PROPOSAL 2 INDEPENDENT PUBLIC ACCOUNTANTS...........................................30
Audit Fees.....................................................................31
Audit Related Fees.............................................................31
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TABLE OF CONTENTS
(continued)
Page
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Financial Information Systems Design and Implementation Fees...................31
All Other Fees.................................................................31
PROXY SOLICITATION..................................................................31
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING.......................................31
OTHER BUSINESS......................................................................32
ANNUAL REPORT ON FORM 10-KSB........................................................32
APPENDIX A..........................................................................A-1
AUDIT COMMITTEE CHARTER........................................................A-1
-ii-
TABLE OF CONTENTS
(continued)
Page
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APPENDIX B..........................................................................B-1
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER..........................B-1
APPENDIX C..........................................................................C-1
WHITE PROXY CARD...............................................................C-1
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EQUIDYNE CORPORATION
11300 Sorrento Valley Road, Suite 255
San Diego, California 92121
August [__], 2003
----------
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 2003
GENERAL INFORMATION
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
This Proxy Statement and the accompanying WHITE proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors (the
"Board") of Equidyne Corporation ("Equidyne") for use at the 2003 Annual Meeting
of Stockholders of Equidyne (the "Meeting") to be held at the offices of
Richards, Layton & Finger, P.A., One Rodney Square, 3rd Floor, Wilmington,
Delaware 19899, on September 9, 2003 at 10:00 a.m., local time, or at such other
time or place to which the Meeting may be postponed or adjourned, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders
and in this Proxy Statement. The approximate date on which the accompanying
Notice of Annual Meeting of Stockholders, this Proxy Statement and the White
proxy card are first being mailed to stockholders is August [__], 2003.
Q: Why did I receive this proxy statement?
A: The Board is soliciting your proxy to vote at the Meeting because you are a
stockholder as of the close of business on July 14, 2003, the record date,
and are entitled to vote at the Meeting. There were 14,984,803 shares of
common stock outstanding on July 14, 2003.
Q: On what am I being asked to vote?
A: You are being asked to vote on:
o The election of four (4) nominees as directors of Equidyne: Dr.
James R. Gavin, III, Harry P. Yergey, Mark C. Myers and Marcus R.
Rowan. YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE BOARD'S NOMINEES ON THE ENCLOSED WHITE PROXY CARD.
1
WE URGE YOU NOT TO VOTE FOR ANY INDIVIDUALS THAT MAY BE NOMINATED BY
MFC BANCORP LTD. ("MFC") AND NOT TO EXECUTE ANY PROXY CARD OTHER THAN
A WHITE PROXY CARD.
o The ratification of the appointment of KBA Group LLP as
Equidyne's independent public accountants for 2003. YOUR BOARD
UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
o Such other business as may properly come before the Meeting or
any postponement or adjournment of the Meeting.
As you are most likely aware, MFC, a merchant bank with offices in Vienna
and Berlin, has acquired voting control of shares held by Concord Effekten
AG, and is intending to seize control of Equidyne by starting a proxy
solicitation to elect its own hand-picked nominees as new directors and
to adopt a stockholders' proposal to repeal any amendments to Equidyne's
bylaws since May 1, 2003. This proxy solicitation has been both costly to
and distracting to Equidyne and its stockholders.
Your Board unanimously recommends that you reject MFC's nominees and vote
"FOR" the election of your Board's nominees on the enclosed WHITE proxy
card. We urge you not to vote for any individuals nominated by MFC. If you
have previously signed a Green proxy card sent to you by MFC, you can
revoke that proxy by signing, dating and mailing the enclosed WHITE proxy
card in the envelope provided.
Q: What is the voting requirement to elect directors and to approve each of
the proposals?
A: In the election of directors, the four persons receiving the highest number
of affirmative votes will be elected.
The proposal to ratify KBA Group LLP as Equidyne's independent public
accountants for 2003 requires the affirmative vote of a majority of the
votes cast.
Q: How many shares am I entitled to vote?
A: On all matters, you are entitled to vote the number of shares you held as
of the close of business on July 14, 2003, the record date.
Q: How many votes can I cast?
A: On all matters, you are entitled to one vote per share. With respect to the
election of directors, proxies cannot be granted with respect to votes for
more than four persons, which is the number nominated for election.
Q: How will the proxies vote?
A: All properly executed proxies, unless previously revoked, will be voted at
the Meeting in accordance with the directions given. If no specific
instructions are given with regard to
2
the matters to be voted upon, the shares of common stock represented by a
signed proxy card will be voted "FOR" the election of the Board's four
nominees as directors of Equidyne and "FOR" the ratification of the
appointment of KBA Group LLP as Equidyne's independent public accountants
for fiscal 2003. If any other matters properly come before the Meeting of
which we had not received notice a reasonable time before we began mailing
this Proxy Statement and the accompanying White proxy card (including any
proposal to postpone or adjourn the Meeting to allow Equidyne to solicit
additional proxies), the persons named as proxies will vote upon such
matters according to their judgment. Other than the proposals set forth
in MFC's Preliminary Proxy Statement, filed with the Securities and
Exchange Commission (the "SEC") on July 18, 2003 (the "MFC Preliminary
Proxy"), Equidyne does not know of any other business to be considered
at the Meeting.
The proxies' authority to vote according to their judgment applies only to
shares you own as the stockholder of record. You are a "stockholder of
record" if your shares are registered directly in your name with Equidyne's
transfer agent, American Stock Transfer & Trust Company. If you hold your
shares indirectly in the name of a bank, broker or other nominee, you are
considered the "beneficial owner" of your shares as a "street-name
stockholder."
Q: How do I vote?
A: The enclosed WHITE proxy card contains instructions for voting by mail. Be
sure to sign and date the WHITE proxy card and return it in the prepaid
envelope. Stockholders who hold their shares through an intermediary must
provide instructions on voting as requested by their banks or brokers. You
may also vote in person at the meeting.
Q: How does the Board recommend I vote?
A: The Board recommends that you vote FOR each of the Board's nominees to the
Board indicated on the WHITE proxy card and FOR the ratification of KBA
Group LLP as Equidyne's independent public accountants for fiscal 2003.
Q: What is a "quorum"?
A: A quorum is the number of shares that must be present to have the Meeting.
The quorum requirement for the Meeting is a majority of the outstanding
shares as of the record date, present in person or represented by proxy. If
you submit a valid proxy card or attend the Meeting, your shares will be
counted to determine whether there is a quorum.
Abstentions and broker non-votes count toward the quorum. A "broker
non-vote" occurs when a nominee (such as a bank or broker) does not have
discretionary voting authority for shares held on behalf of a beneficial
owner and does not receive voting instructions from the beneficial owner by
ten days before the Meeting.
As you may be aware, MFC commenced an action against Equidyne in the Court
of Chancery of the State of Delaware, New Castle County (C.A. No. 20386)
seeking an order to, among others, require Equidyne to schedule its 2003
annual meeting for the
3
election of directors pursuant to Section 211 of the Delaware General
Corporation Law. See "BACKGROUND OF PROXY CONTEST -- Delaware Litigation,"
below. If the Court rules against us, the shares of stock represented at
such Meeting, either in person or by proxy, and entitled to vote at the
Meeting, shall constitute a quorum for purposes of the Meeting,
notwithstanding any provision of the certificate of incorporation or bylaws
to the contrary.
Q: Will abstentions or broker non-votes affect the voting results?
A: Abstentions will be treated as being present at the Meeting for purposes of
establishing a quorum and will also be treated as not voting at the
Meeting. Broker non-votes will be counted for purposes of establishing a
quorum but will not be counted for purposes of determining the number of
votes cast or entitled to be cast with respect to the particular proposal
on which the broker has expressly not voted. Because directors are elected
by a plurality of the votes cast and all other matters are determined by a
majority of the votes cast, abstentions and broker non-votes will have no
impact once a quorum exists.
Abstentions and broker non-votes will have the effect of reducing the
absolute number of shares required to approve other matters to be voted on
at the Meeting.
Q: What shares of common stock are included on my proxy card?
A: Your proxy card represents all shares of common stock registered in your
name.
Q: What can I do if I change my mind after I vote my shares?
A: You can revoke your proxy and change your vote by:
o Submitting a new proxy card after the date of an earlier signed
proxy card;
o Giving written notice before the Meeting to the Secretary of
Equidyne, stating that you are revoking your prior proxy card; or
o Attending the Meeting and voting your shares in person. Mere
attendance at the Meeting, without voting at the Meeting,
however, will not cause your proxy to be revoked.
IF YOU WISH TO VOTE YOUR SHARES IN SUPPORT OF THE BOARD'S NOMINEES PLEASE
VOTE ONLY USING THE ENCLOSED WHITE PROXY CARD. DISCARD ANY GREEN PROXY
CARDS THAT ARE SENT TO YOU BY MFC. THE BOARD STRONGLY URGES YOU NOT TO
MAIL, SIGN OR VOTE ANY GREEN PROXY CARDS SENT TO YOU BY MFC EVEN AS A VOTE
OF PROTEST BECAUSE A SUBMISSION OF A GREEN PROXY CARD WILL REVOKE YOUR
PREVIOUSLY VOTED PROXY CARD IN SUPPORT OF THE BOARD'S NOMINEES. YOU CAN
REVOKE ANY GREEN MFC PROXY CARD
4
PREVIOUSLY SIGNED BY YOU BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE
PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
Q: What does it mean if I get more than one WHITE proxy card?
A: Your shares are probably registered in more than one account. You should
vote each WHITE proxy card you receive from Equidyne.
Q: Who will count the votes?
A: IVS Associates will tabulate the votes and act as the inspector of
elections.
Q: What happens if a nominee for director is unable to serve as a director?
A: If any of the nominees for director becomes unavailable for election, which
Equidyne does not expect, proxies will be voted for such substitute nominee
or nominees as may be designated by the Board, unless the Board reduces the
number of directors.
Q: What if I have any questions or require assistance in voting?
A: If you have any questions or require any assistance in the voting of your
proxy, please contact MacKenzie Partners, Inc. at (800) 322-2885 (call
toll-free) or at (212) 929-5500 (call collect).
BACKGROUND OF PROXY CONTEST
NOMINATIONS BY MFC
In March 2002, Equidyne was informed that Concord Effekten AG ("Concord"),
a German investment-banking firm, nominated Dr. Johannes Mauser, Managing
Director of Concord, to serve on the Board in connection with a proxy contest by
a stockholder group represented by Mr. Charles Kusche. Mr. Kusche has been
charged by the U.S. Attorney's Office, Federal Bureau of Investigation and U.S.
Postal Inspection Service and indicted in the U.S. for securities fraud and
conspiracy to commit securities fraud.
After Concord abandoned its attempt to participate in the alternate Board
slate, Concord proposed to effect a merger between Equidyne and Rosch AG
Medizintechnik ("Rosch"), a financially troubled German company for which
Concord was both the investment banker and largest stockholder. The Board
rejected Concord's proposal on August 19, 2002, because the Board believed that
Rosch's "ability to continue as a going concern [was] threatened by its current
burn rate and critical cash position." On January 3, 2003, Rosch declared
bankruptcy, and has since been liquidated.
According to Concord's 2002 Annual Report, Concord sustained losses of
approximately Euro 31,549,000 (or US$35,498,414, based on an exchange rate of
1,12519 on August 1, 2003) and Euro 28,408,000 (or US$31,964,382, based on an
exchange rate of 1.12519 on August 1, 2003) in 2002 and 2001 respectively.
Furthermore, during the period of
5
January 2, 2001 to July 31, 2003, Concord's share price on the Frankfurt Stock
Exchange has declined from $120 per share to $1.14 per share, a decline of
approximately 99%.
Subsequently, on May 2, 2003, Concord gave MFC voting control of the shares
held by Concord, representing approximately 8.7% of Equidyne's issued and
outstanding shares, and MFC informed Equidyne that it intended to launch a proxy
solicitation to replace your entire Board and nominate its own slate of
directors.
The Board believes that the election of the slate of directors nominated by
MFC would not be in the best interests of Equidyne and its stockholders. Despite
their proxy to vote the shares owned by Concord, MFC's direct ownership interest
in Equidyne is a mere 100 shares of Equidyne's common stock, which represents an
investment of less than $100 in Equidyne and represents a direct economic
interest of only 0.0000067% based on 14,985,595 shares of common stock
outstanding as of the date of this Proxy Statement. In the aggregate, your
current Board has a substantial interest in Equidyne with an aggregate
beneficial ownership of approximately 11% of Equidyne's common stock as of the
date of this Proxy Statement.
Although according to MFC Preliminary Proxy, MFC has stated that it will
not draw any salary initially from Equidyne until a transaction involving
Equidyne is complete or until Equidyne has entered a new business venture,
Michael Smith, President and CEO of MFC (and one of MFC's nominees to the
Board) has received generous compensation packages. In addition to the
$691,507 that Michael Smith received as the President of MFC in the year
ended December 31, 2002,(1) Mr. Smith's compensation as President of Cybernet
Internet Services International, Inc. was $267,534 during the nine-and-a-half
month period that followed MFC's "take-over" of that company in March of
2002.(2) In the year ended December 31, 2001, Mr. Smith received $215,000
for serving as President of Trimaine Holdings in addition to his $724,173
compensation as President of MFC during the same period, despite Trimaine
generating only $300,000 in revenue that year (down from $8.9 million the
year before).(3)
In addition, MFC has a history of charging substantial advisory fees
to previous targets:
- ----------
(1) See MFC's Annual Report on Form 20-F for the year ended December 31, 2002,
filed with the SEC on April 28, 2003.
(2) See Cybernet's Annual Report on Form 10-K for the year ended December 31,
2002, filed with the SEC on May 8, 2003.
(3) See Trimaine's Definitive Proxy Statement on Schedule 14A filed with the
SEC on April 10, 2002 and MFC's Annual Report on Form 20-F for the year
ended December 31, 2001, filed with the SEC on April 12, 2002.
6
o After MFC took control of Cybernet Services International, Inc.
in 2002, they entered into an advisory agreement that pays MFC
$175,000 a month in addition to a percentage of certain
transactions. Total fees paid by Cybernet Services to MFC
(excluding Mr. Smith's compensation) in the year ended December
31, 2002 were Euro 2,289,000 (or US$2,575,559, based on an
exchange rate of 1.12519).(4)
o During the fiscal year ended June 30, 2002, Drummond Financial
Corp. paid $300,000 in fees to MFC, in addition to paying
$300,000 in dividends on its preferred stock to a subsidiary of
MFC.(5) The same arrangement prevailed in prior years. In 1998
and 1999, MFC was charging Drummond $600,000 per year in fees.(6)
o In 2001, Trimaine Holdings, Inc. paid $541,000 to MFC for
investment management services. In addition, MFC charged Trimaine
Holdings, Inc. a management fee of $150,000 during each of 2002,
2001 and 2000.(7)
o In 2002, Euro Trade paid Euro 155,000 (or US$175,150 at the
current exchange rate) under a management agreement with MFC.
In 2001, MFC was reimbursed $300,000 in expenses (plus a 15%
service charge) by Euro Trade.(8)
In addition, if MFC prevails in this proxy contest, it has stated that it
will seek to have Equidyne reimburse it for $275,000 for its estimated costs
associated with this proxy contest. See MFC Preliminary Proxy.
Equidyne is not responsible for the accuracy of any information provided by
or relating to MFC and its nominees contained in any proxy materials filed or
disseminated by MFC or its nominees or in any other statement any of them may
make.
DELAWARE LITIGATION
On June 24, 2003, MFC commenced an action against Equidyne in the Court of
Chancery of the State of Delaware, New Castle County (C.A. No. 20386) seeking an
order to require Equidyne to schedule its 2003 annual meeting for the election
of directors pursuant to Section 211 of Delaware's General Corporation Law, and
an order to require Equidyne to produce to
- ----------
(4) See Cybernet's Annual Report on Form 10-K for the year ended December 31,
2002, filed with the SEC on May 8, 2003.
(5) See Drummond's Definitive Proxy Statement on Schedule 14A, filed with the
SEC on October 28, 2002.
(6) See Drummond's Additional Definitive Proxy Materials on Schedule 14A, filed
with the SEC on October 27, 1999.
(7) See Trimaine's Definitive Proxy Statement on Schedule 14A filed with the
SEC on April 10, 2002.
(8) See Euro Trade's Proxy Statement on Schedule 14A filed with the SEC on
October 29, 2001.
7
MFC certain information regarding Equidyne's shareholders pursuant to Section
220 of Delaware's General Corporation Law. On June 26, 2003, Equidyne
independently scheduled the Meeting for September 9, 2003 and set a record date
for the Meeting of July 14, 2003.
On or about July 22, 2003, the parties executed and submitted to the court
a Stipulation and Order reflecting a resolution of the Section 220 claim.
Pursuant to that stipulation, Equidyne agreed to provide to MFC by July 25, 2003
at MFC's expense, a copy of Equidyne's stock ledger with addresses and
shareholdings as of the record date; a magnetic computer tape or disk containing
the list of holders of Equidyne's common stock with the coding data necessary
for its use; the daily transfer sheets; a breakdown of the various brokerage
firms holding stock in the names of Cede & Co. and any other depositories or
stock clearing organizations; and a list of non-objecting beneficial owners to
the extent such list is requested by, or otherwise becomes in the custody or
control of Equidyne. Accordingly, MFC withdrew its Section 220 claim.
Oral argument on MFC's Section 211 claim was scheduled for July 30, 2003 at
9:00 a.m. Following the hearing on July 30, 2003 the Court granted Equidyne's
motion to dismiss the Section 211 action, but did so on a without prejudice
basis, and granted MFC leave to file a new Section 211 action by 5 p.m. that
day. The Court directed that Equidyne file an answer to any such new action by
noon on July 31, 2003 and indicated that the action likely would be decided on
the basis of the record in the earlier action.
Later on July 30, 2003, MFC filed an action seeking (a) an order pursuant
to Section 211 directing that Equidyne hold its 2003 annual meeting for the
election of directors on September 9, 2003 and set a record date of July 14,
2003 (the dates Equidyne selected in its June 26 press release), (b) an order
that the shares of stock represented at any such court scheduled 2003 Meeting,
either in person or by proxy, shall constitute a quorum, whether or not such
shares constitute a quorum under the Company's bylaws or certificate of
incorporation and (c) an award of MFC's costs and expenses in bringing the
action, including its reasonable attorneys fees. Equidyne filed an answer on
July 31, 2003 asserting that, among other things, MFC has shown no basis for the
Court to exercise its equitable discretion to divest the Equidyne board of
directors of its right to set the annual meeting date or to impose the quorum
requirements of Section 211(c), which are inconsistent with the quorum
requirements set forth in Equidyne's bylaws.
ACTIONS OF YOUR BOARD AND MANAGEMENT
Your Board does not believe that MFC has proposed any concrete business
plan that will deliver stockholder value apart from what your current Board and
current executive management implemented in the last 19 months. Your Board has
already taken the following actions, which are currently being proposed by MFC
in its proxy statement:
8
o Preserving Equidyne's capital - We reduced operating expenses
approximately 70% from $2.3 million in the 2nd fiscal quarter of
2002 to $700,000 in the 3rd fiscal quarter of 2003 and reduced
office locations under lease from four to two and square feet
occupied from approximately 17,000 to 3,000;
o Discontinuing certain investments and expenses related to the
needle-free industry - Your Board is actively seeking to sell or
license the remaining needle-free technology that Equidyne holds
through ongoing discussions and negotiations with potential
bidders, or otherwise utilize such technology in a strategic
transaction; and
o Seeking new business opportunities, investments and acquisitions
- Your Board, with the assistance of Cypress Associates LLC
("Cypress"), Equidyne's independent financial advisor and
investment banker, is currently evaluating strategic alternatives
designed to enhance stockholder value. See "-- Your Board's Plan
to Enhance Stockholder Value" below.
In addition to the foregoing, during the last 19 months, your Board and
Equidyne's current executive management team have:
o resolved contractual matters with Rosch partly arising in
connection with a licensing agreement with Pharmacia AB
which resulted in the receipt of a licensing fee and profit
participation totaling $265,000;
o renegotiated Equidyne's long-term contractual manufacturing
commitments entered into by prior management thereby mitigating
significant liabilities and allowing Equidyne to take physical
possession of production tooling and equipment thereby
positioning Equidyne to either sell or otherwise dispose of the
equipment and additionally seek a significant tax refund related
to such sale or disposition of equipment;
o settled various litigation claims potentially seeking millions of
dollars at a fraction of the total initial amount claimed; and
o improved corporate governance by forming a Nominating and
Corporate Governance Committee and by enacting a new Code of
Ethics.
Furthermore, during the last 19 months, your Board and Equidyne's current
executive management team have taken the following steps to enhance Equidyne's
technology portfolio available for licensing or other strategic transactions:
9
o completed targeted product development involving disposable
injector and pre-filled ampule technology, thereby enhancing
Equidyne's technology portfolio available for licensing or other
strategic transactions;
o obtained patent protection for the Low-Cost, Disposable
Needle-Free Injector System on December 29, 2002;
o filed for patent protection of the Pre-Filled Ampule Technology
in the U.S., and implemented the process of protecting Equidyne's
patents in key international markets; and
o obtained 510(k) clearance from the Food and Drug Administration
(FDA) to market the needle-free INJEX 30 System for insulin
administration "over the counter".
YOUR BOARD'S PLAN TO ENHANCE STOCKHOLDER VALUE
The completion of the foregoing actions has allowed your Board to focus
on evaluation of business opportunities and stragegic alternatives designed to
enhance stockholder value. As part of its plan to enhance stockholder value,
your Board has, and will continue to have, meetings and discussions with its
advisors to review and evaluate business opportunities and strategic
alternatives. Your Board has been engaged in this process for some time and is
committed to completing this evaluation, which includes, but is not limited to,
the following potential alternatives:
o A STRATEGIC ACQUISITION;
o A SALE OR MERGER;
o A SALE OR LICENSE OF ASSETS, INCLUDING EQUIDYNE'S
NEEDLE-FREE TECHNOLOGY; AND
o A LIQUIDATION.
Upon completion of this evaluation, the Board plans to recommend to
stockholders or implement the action or actions deemed most likely to
enhance stockholder value.
Recent Board actions to implement further the evaluation process include,
but are not limited to, the following:
At a special meeting of the Board on June 18, 2003, the Board discussed
with current executive management the need to engage an independent financial
advisor to assist Equidyne in further evaluating business opportunities already
under consideration locating other potential business opportunities and
evaluating strategic alternatives designed to enhance stockholder value. The
Board and current executive management were already engaged in discussions with
interested third parties relating to the infusion of cash into Equidyne for a
strategic transaction and a potential sale or license of assets, including
Equidyne's needle-free technology. To assist the Board in this process, the
Board authorized current executive management to search for an independent
financial advisor and investment bank.
During the next week, current executive management interviewed several
different independent financial advisors and investment banks. With the
assistance of Equidyne's special
10
counsel, current management narrowed the choice of independent financial
advisors down to two.
At a special meeting of the Board on June 27, 2003, the Board discussed the
two independent financial advisors and unanimously determined to engage Cypress,
a New York City based specialty financial services firm providing advisory
services across a broad range of disciplines including mergers and acquisitions,
fairness opinions, valuations, restructurings and reorganizations, and private
placements.
On June 30, 2003, the Board appointed Harry Yergey as an independent
director. Mr. Yergey is an international banking veteran and is currently Senior
Vice President and Branch Manager for Commerzbank in Atlanta, Georgia, who
oversees major corporate relationships. Mr. Yergey has a degree in economics, is
fluent in German and lived abroad for more than 15 years. The Board believes
that Mr. Yergey brings substantial value to Equidyne and its stockholders
through his valuable global perspective, strong financial insight and ability to
aid the Board in its evaluation of business opportunities and strategic
alternatives.
Throughout July 2003, the Board and current executive management have met
with Cypress and Equidyne's special counsel to discuss with Cypress potential
business opportunities and the parameters of other strategic alternatives.
The Board discussed with Cypress its desire to explore further the
following potential alternatives: strategic acquisition, a sale or merger, a
sale or license of assets, including Equidyne's needle-free technology, and a
liquidation. Cypress presented the Board with approximately 20 potential
business opportunities and strategic alternatives. Over the course of these
meetings, the Board further narrowed its criteria for a strategic acquisition
or merger or acquisition target and, the Board, current executive management
and Cypress engaged in discussions with interested third parties that met the
Board's criteria.
During July 2003, the Board also reviewed a non-binding proposal involving
an infusion of cash into Equidyne to better position Equidyne to consummate a
strategic acquisition and the appointment of investor representation in
connection with the cash investment.
11
Cypress has reported to the Board that it has significantly narrowed the
opportunities to be considered by the Company by focusing on both strategic
acquisitions in accordance with the Board's criteria and certain acquisitions in
the medical field.
Your Board remains committed to completing this evaluation process with
the aim of maximizing stockholder value.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, four directors are to be elected. Presently, all directors
are elected annually for a one year term expiring at the next Annual Meeting of
Stockholders, or until their respective successors are duly elected and
qualified.
It is intended that shares represented by proxies on the WHITE proxy card
will be voted for the election of the four nominees named below unless authority
to so vote is withheld. The current size of the Board is four directors and all
nominees are presently directors of Equidyne. At the 2002 Annual Meeting of
Stockholders five persons were elected as directors.
NOMINEES FOR DIRECTORS
The names and certain information concerning the persons being nominated by
the Board to become directors at the Meeting are set forth below. YOUR BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THIS PROPOSAL 1 ON THE ATTACHED WHITE
PROXY CARD TO ELECT EACH OF THE NOMINEES NAMED BELOW. Although each of the
persons nominated has consented to serve as a director if elected and your Board
has no reason to believe that any of the nominees will be unable to serve as a
director, if any nominee withdraws or otherwise becomes unavailable to serve,
the persons named as proxies will vote for any substitute nominee designated by
the Board.
Year
Became
Name & Age of Director Director Principal Occupation and Business During Last Five Years
- --------------------------- -------- --------------------------------------------------------
Dr. James R. Gavin, III, 57 2000 Dr. Gavin has served as Equidyne's Non-Executive Chairman
of the Board since July 2001. Dr. Gavin has served as the
President of the Morehouse School of Medicine since July
12
2002 and was the Senior Scientific Officer of Howard
Hughes Medical Institute ("HHMI") from 1991 to 2002 where
he served as Director of the HHMI-National Institutes of
Health Research Scholars Program. From 1989 to 1991, he was
the William K. Warren Professor for Diabetes Studies at the
University of Oklahoma Health Sciences Center and served as
acting chief of the Section on Endocrinology, Metabolism and
Hypertension. Dr. Gavin is Chairman of the National Diabetes
Education Program and served as past President of the
American Diabetes Association. Dr. Gavin is a director of
Baxter International Inc., serves as a reserve officer in
the U.S. Public Health Service and is a Trustee of Duke
University, Anastasia Marie Laboratories, Microislets, Inc.
and the Robert Wood Johnson Foundation, where he is the
National Program Director of the Minority Medical Faculty
Development Program. Dr. Gavin is a graduate of Livingstone
College and holds a Ph.D. in biochemistry from Emory
University and an M.D. degree from Duke University.
Mark C. Myers, 49 2001 Mr. Myers has served as Equidyne's President since December
2001. Prior to joining Equidyne, Mr. Myers was President and
Chief Operating Officer of Background Information Systems,
Inc. from 2000 to 2001 and was Chief Financial Officer and
General Counsel of MigraTec, Inc. ("MigraTec") from 1998 to
2000. Mr. Myers has a Bachelor's Degree in Business
Administration from Wichita State University and a Masters
of Business Administration and a Juris Doctorate from
Southern Methodist University.
Marcus R. Rowan, 42 1996 Mr. Rowan has served as Equidyne's Chief Executive Officer
since December 2001. Mr. Rowan has also served as President
of Berkshire Interests, Inc., Dallas, Texas, a company
involved in business consulting and financing activities,
since 1993. Mr. Rowan was a member of the board and served
as Vice Chairman of MigraTec from 1998 to 2000 and was a
member of the board of Bluegill Technologies, Inc. from 1997
to 1999. Mr. Rowan graduated from Hartwick College with a
Bachelor of Arts Degree.
Harry P. Yergey, 40 2003 Mr. Yergey has served as Senior Vice President and Branch
Manager for Commerzbank in Atlanta, Georgia, overseeing
major corporate relationships since September 1, 1997,
and has been with Commerzbank in a variety of positions
since 1985. Mr. Yergey graduated from Hartwick College
with a Bachelor of Arts Degree in economics and German.
There is no family relationship among Equidyne's directors or executive
officers.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of Equidyne's common stock as of July 31, 2003 by persons, other than
members of the Board and management of Equidyne, known to Equidyne to own, or
deemed to own, beneficially 5% or more of Equidyne's outstanding common stock.
Name and Address Status Shares* Percentage
---------------- ------ ------- ----------
Concord Effekten AG Stockholder 1,304,133(1) 8.7%
MFC Bancorp Ltd. Stockholder 1,304,233(2) 8.7%
Jim Fukushima Stockholder 1,206,800(3) 7.9%
Lloyd J. Miller Stockholder 863,500(4) 5.8%
- ----------
* Includes voting and investment power, except where otherwise noted. The
number of shares beneficially owned includes shares each beneficial owner
and the group has the right to acquire within 60 days of July 31, 2003,
pursuant to stock options, warrants and convertible securities.
(1) Information with respect to Concord was obtained from a Schedule 13D/A
filed with the SEC on May 9, 2003 by Concord. The business address of
Concord Effekten AG ("Concord") is ("Concord") Grosse Gallusstrasse 9
60311 Frankfurt am Main, Germany. These are the same shares beneficially
owned by MFC. On April 30, 2003, MFC and Concord entered into an agreement
pursuant to which Concord agreed that, with relation to the Meeting and any
other meeting of Equidyne or the adjournment or postponement of any such
meeting held prior to June 30, 2004, Concord would provide to MFC, upon
request, any proxies or otherwise take such actions as may be required or
desirable to allow MFC to vote the common stock of Equidyne owned by
Concord at the time of such meeting. In addition to being granted voting
rights over the shares held by Concord, MFC was also granted an option to
purchase up to 485,844 of the shares held by Concord, which option is
exercisable at any time until the earlier of the date that is 60 days after
the date of the Meeting or August 31, 2003, for an exercise price of $0.45
per share. MFC was also granted a right of first refusal pursuant to and
for the term of the agreement to purchase all, but not less than all, of
any shares which Concord proposes to sell to an arm's length purchaser.
(2) Information with respect to MFC was obtained from a Schedule 13D/A filed
with the SEC on July 11, 2003 by MFC. The business address of MFC is
Floor 21, Millennium Tower, Handelskai 94-96, A-1200, Vienna, Austria.
Except for 100 shares which MFC holds directly, these are the same shares
beneficially owned by Concord. See footnote 1 above for a description of
the terms of the agreement pursuant to which Concord granted MFC the
voting rights over these shares.
14
(3) The business address of Mr. Fukushima and HNS is 17662 Irvine Blvd., Suite
#20 Tustin CA 92720. Mr. Fukushima was previously a director of Equidyne.
Mr. Fukushima resigned from the Board on July 25, 2003. Information with
respect to Mr. Fukushima was obtained from a Schedule 13D filed with the
SEC on January 14, 2001. Includes 899,800 shares held by HNS International,
Inc. in which Mr. Fukushima is the sole stockholder and presently
exercisable options for 307,000 shares of common stock.
(4) The address of Mr. Miller is 4550 Gordon Drive, Naples, Florida 34102.
BOARD AND MANAGEMENT OWNERSHIP
The following table sets forth certain information as to the beneficial
ownership of Equidyne's common stock as of July 31, 2003 for (i) each director
and nominee, including Marcus R. Rowan, Chief Executive Officer, and Mark C.
Myers, President and Secretary; (ii) the "Named Executive Officers" as defined
in Item 402 of Regulation S-K; and (iii) all directors and nominees, and
executive officers as a group (5 persons). Information with respect to
beneficial ownership is based upon information furnished to Equidyne by each
security holder.
Name and Address Status Shares* Percentage
------------------- ------ ------- ----------
Dr. James R. Gavin, III Director and Non- 155,000(1) 1.0%
Executive Chairman
Harry P. Yergey Director 7,000(2) 0%
Marcus R. Rowan Chief Executive Officer 1,195,500(3) 7.5%
and Director
Mark C. Myers President and Director 378,000(4) 2.5%
Jeffery B. Weinress Chief Financial Officer 120,313(5) 0.8%
All executive officers and 1,856,113(6) 11.1%
directors as a group
(5 persons)
- ----------
* Includes voting and investment power, except where otherwise noted. The
number of shares beneficially owned includes shares each beneficial owner
and the group has the right to acquire within 60 days of July 31, 2003
pursuant to stock options, warrants and convertible securities.
15
(1) Includes presently exercisable options for 155,000 shares of common stock.
The business address of Dr. Gavin 720 Westview Drive S.W. Atlanta, GA
30310-1495. Dr. Gavin does not own any shares of common stock of record.
(2) Includes presently exercisable options for 7,000 shares of common stock.
The business address for Mr. Yergey is 1230 Peachtree Street NE, Atlanta,
GA 30309. Mr. Yergey does not own any shares of common stock of record.
(3) Includes presently exercisable options for 1,047,000 shares of common
stock. The business address of Mr. Rowan is 4514 Travis Street, Suite 328,
Dallas, Texas 75205. Mr. Rowan owns 148,300 shares of common stock of
record.
(4) Includes presently exercisable options for 378,000 shares of common stock.
The business address of Mr. Myers is 4514 Travis Street, Suite 328, Dallas,
Texas 75205. Mr. Myers does not own any shares of common stock of record.
(5) Includes presently exercisable options for 120,313 shares of common stock.
The business address of Mr. Weinress is 11300 Sorrento Valley Road, Suite
255, San Diego, California 92121. Mr. Weinress does not own any shares of
common stock of record.
(6) Includes presently exercisable options for common stock listed in notes 1,
2, 3, 4 and 5 above.
PARTICIPANTS IN EQUIDYNE'S SOLICITATION
Under applicable regulations of the SEC, each of the directors and nominees
and officers of Equidyne is deemed a "participant" in Equidyne's solicitation of
proxies. The following information about each director is provided under
"Proposal 1 - Election of Directors" and "Board and Management Ownership": name,
business address, principal occupation and the name and principal business of
the organization in which the director's employment is carried on.
On July 1, 2003, Equidyne engaged Cypress to act as its independent
financial advisor in connection with exploring strategic alternatives for
Equidyne, for which Equidyne has agreed to pay Cypress certain fees and to
reimburse Cypress for out-of-pocket expenses related to its services. In
addition, Equidyne has agreed to indemnify Cypress against certain liabilities,
including liabilities under the federal securities laws, arising out of its
engagement. Cypress is an investment banking firm that provides a full range of
financial services for institutional and individual clients. In connection with
Cypress's role as independent financial advisor to Equidyne, certain employees
of Cypress may communicate in person, by telephone or otherwise with a limited
number of institutions, brokers or other persons who are stockholders of
Equidyne. Cypress does not admit that it or any of its directors, officers or
employees is a "participant" as defined in Schedule 14A promulgated under the
Securities Act of 1934, as amended, in the solicitation, or that Schedule 14A
requires the disclosure of certain information concerning Cypress.
No participant has been convicted in a criminal proceeding (excluding
traffic violations) during the past ten years.
16
TRANSACTIONS IN OUR COMMON STOCK DURING THE PAST TWO YEARS
None of the participants in Equidyne's solicitation have made any purchases
or sales of Equidyne's common stock during the last two years except for the
grant of options for common stock.
BOARD AND COMMITTEE INFORMATION
BOARD MEETINGS AND COMMITTEES
The Board of Equidyne held a total of 17 meetings during fiscal 2002 and 17
meetings during fiscal 2003, including actions by unanimous written consent.
During fiscal 2002 and 2003, no Director attended fewer than 75% of the total
number of meetings of the Board and applicable committee meetings during the
time such Director served on the Board or the applicable committee. During
fiscal 2002 and 2003, the Board had three standing committees: an Audit
Committee, an Executive Committee and a Compensation Committee. In addition,
the Board established a Nominating and Corporate Governance Committee.
Audit Committee. Pursuant to its charter, which is attached hereto as
Appendix A, the Audit Committee oversees Equidyne's accounting and financial
reporting policies and internal controls, reviews annual audit reports
and management letters and determines the appointment or termination of
independent auditors. All members of the Audit Committee are "independent"
(as is defined in the current American Stock Exchange listing standards). The
Audit Committee currently consists of Mr. Yergey (Chairman) and Dr. Gavin. The
Audit Committee held a total of 4 meetings during fiscal 2002 and 5 meetings
during fiscal 2003, including actions by written consent.
Compensation Committee. The Compensation Committee recommends to the Board
the compensation of directors and officers of Equidyne, oversees the
administration of Equidyne's stock option plans and performs such other duties
regarding compensation for employees and consultants as the Board may delegate
from time to time. The Compensation Committee currently consists of Mr. Yergey
(Chairman) and Dr. Gavin. The Compensation Committee held a total of 3 meetings
during fiscal 2002 and 4 meetings during fiscal 2003, including actions by
written consent.
Nominating and Corporate Governance Committee. On June 18, 2003, the Board
established a Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee is composed of at least two directors who are
independent under applicable laws and regulations. Pursuant to its charter,
which is attached hereto as Appendix B, the Nominating and Corporate Governance
Committee is responsible for developing the criteria for selection of new
director positions, defining qualifications for candidates, evaluating qualified
candidates, recommending candidates to the Board for election as directors and
proposing a slate of directors for election by stockholders at each annual
meeting. The Nominating and Corporate Governance Committee is also responsible
for developing, recommending and monitoring its corporate governance principles.
The Nominating
17
and Corporate Governance Committee is responsible for developing and overseeing
an annual self-examination program for the Board and its Committees. The
Nominating and Corporate Governance Committee currently consists of Mr. Yergey
(Chairman) and Dr. Gavin. The Nominating and Corporate Governance Committee did
not hold any meetings during fiscal 2003.
NON-EMPLOYEE DIRECTOR COMPENSATION
Non-employee Directors receive stock options for (a) 1,000 shares under
Equidyne's stock option plans for each meeting attended telephonically and
written consents and (b) 2,000 shares under Equidyne's stock option plans for
each meeting attended in person. In addition, non-employee Directors receive
stock options for 2,500 shares for each annual meeting of stockholders that they
attend in person. Such options vest immediately and have a life of five to ten
years from the date of grant. In addition, Dr. Gavin has received $6,000 per
month compensation for his services as Non-Executive Chairman of the Board since
August 1, 2001. Mr. Yergey receives $2,083 per month for his services as a Board
member, Compensation Committee member and the Chairman of the Audit Committee.
All non-employee directors are reimbursed for reasonable travel expenses.
18
REPORT OF THE AUDIT COMMITTEE
The Audit Committee, pursuant to its Charter, oversees Equidyne's financial
reporting process on behalf of the Board. Management has the primary
responsibility for the financial statements and the reporting process, including
the systems of internal controls. In fulfilling its oversight responsibilities,
the Audit Committee reviewed with management the audited financial statements
contained in Equidyne's Annual Reports on Form 10-KSB for the fiscal years ended
July 31, 2002 and will review with management the audited financial statements
to be included in Equidyne's Annual Report on Form 10-KSB for the fiscal year
ended July 31, 2003 and will review with management the audited financial
statements to be included in Equidyne's Annual Report on Form 10-KSB for the
fiscal year ended July 31, 2003, including a discussion of the quality, not just
the acceptability, of the accounting principles and Equidyne's capital
accounting policies, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements. The Audit Committee is
comprised solely of independent directors as defined by the current listing
standards of the American Stock Exchange. Equidyne believes Mr. Yergey
qualifies as a member with financial expertise as required by Item 309 of
Regulation SB.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments on the quality, not just the acceptability, of Equidyne's accounting
principles and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards. In addition, the Audit
Committee discussed with the independent auditors, the auditors' independence
from management and Equidyne, including the matters in the written disclosures
required by the Independence Standards Board.
The Audit Committee discussed with Equidyne's independent auditors the
overall scope and plans for the audit. The Audit Committee met with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of Equidyne's internal
controls, and the overall quality of Equidyne's financial reporting.
The Audit Committee reviewed and discussed the audited financial statements
with management. The Audit Committee discussed with the independent auditors the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Section 380), as may be modified or supplemented. The
Audit Committee received the written disclosures and the letter from the
independent public accountants required by Independence Standards Board Standard
No. 1 (Independence Standards Board Standard No. 1, "Independence Discussions
with Audit Committees"), as may be modified or supplemented, and discussed with
the independent auditors their independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board approved) that the audited
financial statements be included in the Annual Report on Form 10-KSB for the
fiscal year ended July 31, 2002 for filing with the SEC. The Audit
Committee and the Board also recommended, and, if needed, subject to Board or
stockholder approval, the selection of Equidyne's independent auditors.
19
Harry P. Yergey, Audit Committee Chair
Dr. James Gavin, III, Audit Committee Member
August __ 2003
20
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning all cash and
non-cash compensation awarded to, earned by, or paid to, Equidyne's former Chief
Executive Officer and the other executive officers whose total compensation was
in excess of $100,000 during the fiscal year ended July 31, 2003:
Long-Term
Annual Compensation Compensation
---------------------------------------------------------------
Awards
---------------------------------------------------------------
Fiscal Other Annual Securities
Name and Principal Position Year Salary Bonus Compensation Underlying Options
- --------------------------------------------------------------------------------------------------
Marcus R. Rowan 2003 $256,425 $99,026 $ -- 450,000
Chief Executive Officer (1) 2002 144,231 66,667 124,000(2) 750,000
2001 -- -- 12,000 --
Mark C. Myers 2003 194,615 74,167 $ -- 180,000
President (3) 2002 109,615 50,000 --(4) 300,000
Jeffery B. Weinress 2003 174,144 5,000 -- 75,000
Chief Financial Officer (5) 2002 153,577 5,000 5,000(6) 125,000
- ----------
Mr. Rowan was appointed Chief Executive Officer in December 2001.
Other compensation consists of amounts paid related to his services as a
Director of the Company prior to his employment in December 2001.
Mr. Myers was appointed President in December 2001.
From June 2001 to December 2001, Mr. Myers served as a consultant to the Board
from which he was paid approximately $73,500.
Mr. Weinress was appointed Chief Financial Officer in August 2001.
Other compensation for Mr. Weinress consists of certain relocation payments made
pursuant to his Employment Letter.
21
OPTION GRANTS
The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended July 31, 2003 to the named
executive officers.
Individual Grants
-----------------------------------------------------------------
Name Number of % of Total Exercise or Expiration Date
- ----------------------------------------------------------------------------------------
Securities Options Granted
Underlying to Employees in Base Price
Options Granted Fiscal Year (1) ($/Share)
- ---------------------------------------------------------------------------------------
Marcus R. Rowan 450,000 40% $0.34 January 2013
Mark C. Myers 180,000 16% $0.34 January 2013
Jeffery B. Weinress 75,000 7% $0.31 December 2012
- ----------
Based on an aggregate of 1,128,500 options granted by Equidyne to employees
and directors in the fiscal year ended July 31, 2003.
STOCK OPTION PLANS
In May 2002, Equidyne's stockholders approved the 2002 Long Term
Incentive and Share Award Plan providing for the issuance of up to 1,000,000
shares of Equidyne's common stock. The plan is administered by the Board or,
at its request, an Option Committee. Options granted under this plan would be
either incentive stock options or non-qualified stock options which would be
granted to employees, officers, directors or consultants of Equidyne. Options
are exercisable as determined at the time of grant, and the exercise price of
all the options cannot be less than the fair market value at the date of grant.
In October 1996, Equidyne's stockholders approved the 1996 Stock Option
Plan providing for the issuance of up to 300,000 shares of the Company's Common
Stock, which amount was increased to 700,000 shares in December 1999, and then
to 1,500,000 shares in January 2001. The 1996 Stock Option Plan is administered
by the Board or, at its request, an Option Committee. Options granted under this
plan are either incentive stock options or non-qualified stock options which
would be granted to employees, officers, directors and other persons who perform
services for or on behalf of Equidyne and its subsidiaries. Options are
exercisable as determined at the time of grant except options to officers or
directors which may not vest earlier than six months from the date of grant, and
the exercise price of all the options cannot be less than the fair market value
at the date of grant.
As of July 31, 2003, options for an aggregate of 1,551,264 shares were
granted under these plans, of which options for 108,972 shares were exercised
and options for 1,424,375 remaining outstanding. The 1,424,375 outstanding
options have an exercise price ranging from $0.31 to $7.00 per share and
expire from August 2003 through July 2013. As of July 31, 2003, 966,653 options
remain available for future issuance.
22
AGGREGATE OPTION EXERCISES IN FISCAL 2003 AND FISCAL YEAR-END OPTION VALUES
The following table provides information on options exercised during the
fiscal year ended July 31, 2003, and the value of unexercised stock options
owned by the executive officers named in the Summary Compensation Table as of
July 31, 2003.
Shares
Acquired Value of Unexercised
On Value Number of Unexercised In-The-Money Options
Name Exercise Realized Options at July 31, 2003 at July 31, 2003(1)
- -----------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Marcus R. Rowan -- -- 965,000 360,000 337,500 112,500
Mark C. Myers -- -- 347,000 133,000 135,000 45,000
Jeffery B. Weinress -- -- 103,125 96,875 28,125 46,875
- ----------
(1) Fair market value of the Common Stock on the last trading date of the
fiscal year ended July 31, 2003, less the applicable exercise prices,
multiplied by the number of shares underlying the options.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes the equity compensation plans under which
the Company's securities may be issued as of July 31, 2003. The securities that
may be issued consist solely of the Company's Common Stock:
Number of securities remaining
Number of securities to Weighted-average available for future issuance
be issued upon exercise exercise price of under equity compensation
of outstanding options, outstanding options, plans (excluding securities
Plan Category warrants and rights warrants and rights reflected in the first column)
- ----------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 1,424,375 $0.63 966,653
Equity compensation
plans not approved by
security holders 1,395,000 $1.70 --
--------- ----- -------
Total 2,819,375 $1.16 966,653
========= ===== =======
23
Non-Plan Options and Warrants
From time to time the Company has issued non-qualified stock options and
warrants to key employees, directors and consultants of the Company. Such
options and warrants carry features similar to the Company's Plans, however,
such options and warrants provide certain accelerated vesting and expiration
features which do not coincide with the Company's stockholder approved Plans.
EMPLOYMENT AGREEMENTS
Marcus R. Rowan. On December 26, 2001, we entered into an employment
agreement with Marcus Rowan, pursuant to which Mr. Rowan serves as our Chief
Executive Officer. On January 28, 2003, we amended certain terms of Mr. Rowan's
original employment agreement. The amended agreement provides that Mr. Rowan is
entitled to a base salary of $260,500 per year, subject to annual increases
based on a number of factors including job performance and inflation, and an
annual bonus, both determinable by the Compensation Committee. The agreement
further provides that Mr. Rowan is entitled to customary employee benefits. In
addition, Mr. Rowan was paid a bonus of $102,583, of which $51,915.50 paid was
paid immediately with the balance being paid in three equal installments during
2003 contingent upon continued employment. Mr. Rowan's employment may be
terminated by him or by us at any time for any reason, with or without "cause"
or "good reason." If Mr. Rowan is terminated without "cause" or terminates for
"good reason," he is entitled to a severance payment equal to six full months
of his base salary, as in effect at the time of termination, plus insurance
benefits until the earlier of (i) the expiration of 12 months following the
date of termination, (ii) the expiration of continuation of coverage and
(iii) the date on which he receives substantially equivalent coverage.
Upon joining us, Mr. Rowan received options to purchase 750,000 shares of
our common stock, including options with respect to 90,000 shares governed by
our 1996 Stock Option Plan and options with respect to 660,000 shares governed
by the terms and conditions set forth in a separate stock option agreement. In
addition, Mr. Rowan was granted an additional option to purchase 450,000 shares
of our common stock under governed under our 2002 Long Term
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Incentive and Share Award Plan. In the event of a "change in control," all
options granted to Mr. Rowan which have not already vested will vest and are
exercisable for the remainder of the term of such options.
Mark C. Myers. On December 26, 2001, we entered into an employment
agreement with Mark Myers, pursuant to which Mr. Myers serves as our President.
On January 28, 2003, we amended certain terms of Mr. Myer's employment
agreement. The amended agreement provides that Mr. Myers is entitled to a base
salary of $198,000 per year, subject to annual increases based on a number of
factors including job performance and inflation, and an annual bonus, both
determinable by the Compensation Committee. The agreement further provides that
Mr. Myers is entitled to customary employment benefits. In addition, Mr. Myers
was paid a bonus of $77,000, of which $38,500 was paid immediately with the
balance being paid in three equal installments during 2003 contingent upon
continued employment. Mr. Myers's employment may be terminated by him or by
us at any time for any reason, with or without "cause" or "good reason." If
Mr. Myers is terminated without "cause" or terminates for "good reason," he
is entitled to a severance payment equal to six full months of his base salary,
as in effect at the time of termination, plus insurance benefits until the
earlier of (i) the expiration of 12 months following the date of termination,
(ii) the expiration of continuation of coverage and (iii) the date on which he
receives substantially equivalent coverage.
Upon joining us, Mr. Myers received options to purchase 300,000 shares of
our common stock, including options with respect to 90,000 shares governed by
our 1996 Stock Option Plan and options with respect to 210,000 shares governed
by the terms and conditions set forth in a separate stock option agreement. In
addition, Mr. Myers was granted an additional option to purchase 180,000 shares
of our common stock under the 2002 Long Term Incentive and Share Award Plan. In
the event of a "change in control," all options granted to Mr. Myers which have
not already vested will vest and are exercisable for the remainder of the term
of such options.
Jeffery Weinress. On August 13, 2001, we entered into an employment
agreement with Jeffery Weinress, pursuant to which Mr. Weinress will serve as
Chief Financial Officer. On January 28, 2003, we amended certain terms of Mr.
Weinress's employment agreement. The amended agreement provides that Mr.
Weinress is entitled to a base salary of $175,000, subject to annual adjustment
after review by the Compensation Committee. The agreement further provides that
Mr. Weinress is entitled to customary employee benefits, including up to $5,000
for relocation expenses. In addition, Mr. Weinress was paid a bonus of $5,000 in
2002. Mr. Weinress's employment may be terminated by him or by us at any time,
with or without "cause" and with or without notice. If Mr. Weinress is
terminated without "cause," he is entitled to a severance payment equal to six
full months of his base salary, as in effect at the time of termination, and he
is entitled to exercise the option to sell all shares that would otherwise have
vested during the nine months following termination.
Upon joining us, Mr. Weinress received options to purchase 125,000 shares
of our common stock under our 1996 Stock Option Plan. These options vest on a
quarterly basis at the rate of 12,500 shares per quarter through September 1,
2004. In the event of a change of ownership and Mr. Weinress's subsequent
termination without "cause," all of such unvested
25
options will immediately become exercisable. In addition, Mr. Weinress was
granted an additional option to purchase 75,000 shares of our common stock under
the 2002 Long Term Incentive and Share Award Plan. In the event of a "change in
control," such options granted to Mr. Weinress which have not already vested
will vest and are exercisable for the remainder of the term of such options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Yergey, Chairman, and
Dr. Gavin. None of the members of the Compensation Committee are also employees
or officers of Equidyne and no executive officer of Equidyne serves as a member
of the Board or Compensation Committee of any entity which has one or more
executive officers serving as a member of the Equidyne's Board or Compensation
Committee.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee administers Equidyne's compensation programs and
policies applicable to its executive officers and key personnel. During fiscal
2002, the Compensation Committee was composed of three independent members of
the Board, Mr. Davenport, Dr. Gavin and Mr. Rowan. Mr. Rowan resigned from the
Compensation Committee in December 2001, effective upon his appointment as Chief
Executive Officer of Equidyne. Mr. Davenport resigned from the Compensation
Committee upon his resignation from the Board in February 2003. After Mr.
Davenport resigned, Mr. Yergey was appointed to the Compensation Committee. The
Compensation Committee currently consists of two independent members of the
Board, Mr. Yergey and Dr. Gavin. The Compensation Committee meets as required
and is responsible for reviewing all significant employment actions, as well as
setting the salaries, levels of incentive awards, and stock options for the
officers and key personnel of Equidyne. The Compensation Committee is chartered
to review and approve the various officer and general employee compensation and
benefits philosophy, strategy and program design. It oversees the administration
of Equidyne's stock option plans, and performs such other duties regarding
compensation for executives and key employees as the Board may delegate from
time to time. The Compensation Committee held 3 meetings during fiscal 2002 and
4 meetings during fiscal 2003, including actions taken by unanimous written
consent.
Equidyne's executive compensation program reflects input from executive
management. The Compensation Committee or the Board reviews such proposals
concerning executive compensation and makes a final determination concerning the
scope and nature of compensation arrangements. The actions of the Compensation
Committee are reported to the full Board of Equidyne.
26
Equidyne believes it important that its stockholders understand Equidyne's
philosophy regarding executive compensation, and how this philosophy manifests
itself in Equidyne's various compensation plans.
Philosophy
All of Equidyne's compensation programs are designed to attract and retain
key employees, motivating them to achieve and rewarding them for superior
company performance. Different programs are geared to short and longer term
performance with the goal of increasing stockholder value over the long term.
Executive compensation programs impact all employees by setting general
levels of compensation and helping to create an environment of goals, rewards
and expectations. Because Equidyne believes the performance of every employee is
important to the success of Equidyne, it is mindful of the effect of its
executive compensation and incentive programs on all employees.
The Compensation Committee and the Board believe that the compensation of
Equidyne's executives should reflect their success in achieving strategic
objectives and attaining key operating objectives. The Compensation Committee
believes that the performance of Equidyne's executives in the management of
Equidyne, considered in the light of general economic and specific company,
industry and competitive conditions, should be the basis for the determination
of executive compensation, bonuses and stock option awards. It believes
executive compensation should not be based on the short-term performance of
Equidyne's stock, whether favorable or unfavorable, but rather that the price of
Equidyne's stock will, in the long-term, reflect the operating performance of
Equidyne, and ultimately, the management of Equidyne by its executives. Equidyne
seeks to have the long-term performance of Equidyne's stock reflected in
executive compensation through Equidyne's stock option and other equity
incentive programs.
Executive compensation is broken into the following components (base
salaries, stock options and other incentive compensation):
(1) Base Salaries. Base salaries for executive management and officers
of Equidyne are intended to be competitive for executive officers with
comparable qualifications, experience and responsibilities at
companies of similar market capitalization and revenue levels. The
base salaries are also intended to recognize individual achievements
and assist Equidyne in attracting and retaining qualified executives.
The base salaries of Equidyne's executive officers and subsequent
adjustments to base salaries are determined relative to the following
factors: (1) the strategic importance to Equidyne of the executive
officer's job function; (2) the individual's performance in his or her
position; and (3) the individual's potential to make a significant
contribution to Equidyne in the future. The Compensation Committee
believes that all of these factors are important and the relevance of
each factor varies from individual to individual.
27
(1) Stock Options. The Compensation Committee and the Board believe
that equity ownership by executive officers provides incentive to
build stockholder value and aligns the interests of officers with the
stockholders. The Compensation Committee typically recommends or
awards an option grant upon hiring executive officers, subject to a
maximum four-year vesting schedule. After the initial stock option
grant, the Compensation Committee considers additional grants, under
the stock option plans. Options are granted at the current market
price for Equidyne's common stock and, consequently, have value only
if the price of the common stock increases over the exercise price for
the period during which the option is exercisable. The size of the
initial grant is usually determined with reference to the position and
qualifications of the officer and the contribution the officer is
expected to make to Equidyne. In determining the size of the periodic
grants, the Compensation Committee considers prior option grants to
the officer, independent of whether the options have been exercised,
the executive's past performance and his or her expected future
contributions. The Compensation Committee believes that periodic
option grants provide incentives for executive officers to remain with
Equidyne.
(2) Bonus Program. Cash bonuses are awarded periodically as
appropriate. The bonus awards are based on the performance of Equidyne
as well as the individual with respect to specific goals and
contributions to Equidyne's performance and strategic progress. All
executive officers are eligible to receive incentive bonus
compensation on a discretionary basis as determined by the
Compensation Committee or Board.
The Compensation Committee or the Board oversees all of Equidyne's
bonus plans by evaluating and approving each plan's design as well as
the targets and objectives to be met by Equidyne and its executive
officers and the amount of incentive payable for specified attainment
of those targets and objectives. The Compensation Committee or the
Board periodically determines the extent to which the targets and
objectives have been met and awards incentive payments accordingly. In
addition, the Compensation Committee or the Board reviews and approves
all significant discretionary bonuses proposed by Equidyne's executive
management.
(1) Executive Officer Compensation. The salary and other incentive
compensation of the Chief Executive Officer and other executive
officers and key personnel is set by and subject to the discretion of
the Board or the Compensation Committee with Board of Director
approval.
The Compensation Committee currently does not have a policy that requires
Equidyne's executive compensation programs to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code, which disallows
a tax deduction for public companies for compensation in excess of $1 million
paid to the corporation's Chief Executive Officer and four other most highly
paid executive officers. The design and administration of Equidyne's stock
28
option plans qualify under Section 162(m) of the Internal Revenue Code as
performance-based compensation. However, the Compensation Committee reserves the
right to use its judgment to authorize compensation payments that do not comply
with the exemptions in Section 162(m) when the Compensation Committee believes
that such payments are appropriate and in the best interests of the
stockholders, after taking into consideration changing business conditions or
the officer's performance.
Dr. James Gavin, III, Compensation Committee Chair
Harry P. Yergey, Compensation Committee Member
___________, 2003
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
as amended, requires Equidyne's officers and directors, and persons who
beneficially own more than 10% of a registered class of Equidyne's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the SEC. Such officers, directors and 10% stockholders are
also required by SEC rules to furnish Equidyne with copies of all Section 16(a)
forms they file. Based solely on its review of the copies of such forms received
by it, or representations from certain reporting persons, Equidyne believes
Equidyne's current executive officers and directors are currently in compliance
with all of their Section 16(a) filing requirements, with the exception of Harry
Yergey, who inadvertently filed a Form 3 10 days late and a Form 4, for a grant
of options on June 30, 2003, 17 days late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PROPOSAL 2
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has selected KBA Group LLP, Dallas, Texas
("KBA"), as Equidyne's independent public accountants for the fiscal years
ending July 31, 2003 and 2004. KBA has served as Equidyne's independent
accountants, through its predecessor entity King Griffin & Adamson P.C., (the
"KGA Group") since December 2001, succeeding Ernst & Young LLP ("E&Y") which had
audited the consolidated financial statements of Equidyne for the years ended
July 31, 2001 and 2000.
Effective March 1, 2003, Equidyne's independent public accountants, the KGA
Group merged with BDA&K Business Services, Inc. and formed a new entity, KBA
Group LLP. Accordingly, on March 1, 2003, the KGA Group resigned to allow its
successor entity KBA Group LLP to be engaged as Equidyne's independent public
accountants. The personnel that Equidyne has interfaced with at the KGA Group
are now employees of KBA Group LLP.
Representatives of KBA have been invited to the Meeting where such
representatives will be provided with an opportunity to make a statement. They
will also be available to answer appropriate questions from stockholders.
Stockholder ratification is not required for the selection of KBA, since
the Audit Committee has the responsibility for selecting Equidyne's independent
auditors. The selection, however, is being submitted to the stockholders for
ratification at the Meeting as a matter of good corporate practice. If the
appointment of KBA is not ratified by the Stockholders, the Audit Committee will
reevaluate its decision.
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AUDIT FEES
During the fiscal years ended July 31, 2002 and 2003, the aggregate fees
billed for professional services rendered by KBA and the KGA Group for the audit
of Equidyne's annual financial statements for the fiscal years ended July 31,
2002 and 2003, and for the reviews of the financial statements included in
Equidyne's Quarterly Reports on Form 10-QSB for such fiscal years, were
approximately $30,000 and $62,000, respectively.
AUDIT RELATED FEES
KBA and the KGA Group did not render professional services in connection
with registration statements during the fiscal years ended July 31, 2002 and
2003.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KBA and the KGA Group did not render professional services relating to
financial information systems design and implementation for the fiscal years
ended July 31, 2002 and 2003.
ALL OTHER FEES
The aggregate fees billed by KBA and the KGA Group for services rendered to
Equidyne, other than the services described above under "Audit Fees" for the
fiscal years ended July 31, 2002 and 2003 were $21,000 and $17,000,
respectively. These fees related to tax services, tax planning and consulting
and research.
The Audit Committee has determined that the provision of services described
above was compatible with maintaining KBA's independence.
PROXY SOLICITATION
Equidyne will bear the cost of this solicitation of proxies, which is
estimated to be $100,000. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone, telegram, facsimile, advertisements
in periodicals and postings on Equidyne's website, www.equidyne.com. Equidyne
has hired MacKenzie Partners, Inc. to assist in the distribution of proxy
materials and solicitation of votes for an estimated fee of $75,000 plus
out-of-pocket expenses. Equidyne will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
for forwarding proxy and solicitation materials to stockholders. In addition,
the directors, officers and employees of Equidyne and its subsidiaries may
solicit proxies for which they will receive no special compensation.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholder proposals to be included in Equidyne's proxy materials for the
next Annual Meeting of Stockholders must be received at Equidyne's principal
executive offices not later than ___________, 2004. In addition, all stockholder
proposals for inclusion in Equidyne's proxy
31
materials for the next Annual Meeting of Stockholders must comply with the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934.
With respect to any other stockholder proposals, the By-Laws of Equidyne
currently provide that no business, including the nomination for election as a
director, may be brought before an annual meeting unless a stockholder of record
has given written notice of the business to Equidyne and the notice has been
received by Equidyne at its principal executive offices not less than 60 days
and not more than 90 days prior to the date of the annual meeting (or, if less
than 50 days' notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, not later than the close of business
on the tenth day following the date on which such notice of the date of the
annual meeting was mailed or such public disclosure was made). Such notice must
contain certain information specified in Equidyne's By-Laws. A copy of
Equidyne's By-Laws (as such may be amended from time to time) may be obtained
from the Secretary of Equidyne at the address set forth on the first page of
this Proxy Statement.
OTHER BUSINESS
As of the date of this Proxy Statement, Equidyne does not intend to bring
any other matter before the Meeting requiring action of the stockholders, nor
does it have any information that any other matter will be brought before the
Meeting (including any motion to postpone or adjourn the Meeting to allow
Equidyne to solicit additional proxies). However, if any other matter requiring
the vote of the stockholders properly comes before the meeting, it is the
intention of the proxies named on the back of the WHITE proxy card to vote the
proxy in accordance with the recommendation of the Board or, in the absence of
such a recommendation, in accordance with their best judgment in the interest of
Equidyne.
ANNUAL REPORT ON FORM 10-KSB
The Annual Report (the "Annual Report") on Form 10-KSB for the fiscal year
ended July 31, 2003, in the form filed with the SEC, which will include
financial statements, will be furnished to holders of Equidyne's common stock
on the Record Date. Equidyne will provide the Annual Report without charge to
each beneficial holder of its common stock on the Record Date who did not
receive such Annual Report on the written request of such person. Any such
request should be made in writing to the Secretary of Equidyne at the address
set forth on the first page of this Proxy Statement. The Annual Report does not
form any part of the material for solicitations of proxies.
The WHITE proxy card and this Proxy Statement have been approved by the
Board and are being mailed and delivered to holders of Equidyne Common Stock on
the Record Date by its authority.
32
BY ORDER OF THE BOARD
OF DIRECTORS
Mark C. Myers
Secretary
August __, 2003
STOCKHOLDERS ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED WHITE PROXY IN
THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED. DISCARD ANY GREEN PROXY CARDS THAT ARE SENT TO YOU BY MFC. THE
BOARD URGES YOU NOT TO MAIL, SIGN OR VOTE ANY GREEN PROXY CARDS SENT TO YOU BY
MFC EVEN AS A VOTE OF PROTEST BECAUSE A SUBMISSION OF A GREEN PROXY CARD WILL
REVOKE YOUR PREVIOUSLY VOTED PROXY CARD IN SUPPORT OF THE BOARD'S NOMINEES. YOU
CAN REVOKE ANY GREEN MFC PROXY CARD PREVIOUSLY SIGNED BY YOU BY SIGNING, DATING
AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
33
APPENDIX A
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee assists the Board of Directors (the "Board") of
Equidyne Corporation (the "Company") in fulfilling its oversight
responsibilities to the stockholders for (1) the integrity of the Company's
financial statements, (2) the Company's compliance with legal and regulatory
requirements, (3) the selection, evaluation and, where appropriate, replacement
of the independent auditors (or nomination of the independent auditors to be
proposed for stockholder approval in any proxy statement), (4) the independent
auditor's qualifications and independence, and (4) the performance of the
Company's independent auditors. In addition, the Audit Committee serves as a
communication link among the Board, management, and the independent auditors.
COMPOSITION
The Audit Committee is a standing committee of the Board. Audit Committee
members are elected annually by the Board. The responsibilities of Audit
Committee members are in addition to those duties set out for a member of the
Board. Meetings will be held whenever deemed necessary by the Audit Committee
Chairman, provided however, that the Audit Committee shall meet once a quarter.
The Audit Committee shall consist of at least two members, one of whom
shall be chairperson. All members shall be directors who have no relationship to
the Company that may interfere with the exercise of their independence from
management, who do not accept any consulting, advisory or compensatory fee from
the Company other than for Board service and who are not "affiliated persons"
within the meaning of SEC rules under Section 10A(m)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In addition each member
shall be an "independent director", as defined in the American Stock Exchange
("AMEX") Listed Company Manual.
Each member shall be "financially literate" (i.e. have the ability to read
and understand fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement) or will become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. In addition, at least one member of the Audit Committee shall be an
"audit committee financial expert" as defined by applicable SEC and AMEX rules.
No member of the Audit Committee shall simultaneously serve on the audit
committees of more than two other public companies.
Under exceptional and limited circumstances, the Board may appoint one
director to the Audit Committee who is not independent, as defined below, and is
not a current employee or an immediate family member of a current employee, if
the Board determines that membership on the Audit Committee by the individual is
required in the best interests of the corporation and its
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stockholders, and the Board discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the reasons
for that determination.
AUTHORITY
The Audit Committee has the sole authority to select, evaluate and, where
appropriate, replace the independent auditors (or nominate the independent
auditors to be proposed for stockholder approval in any proxy statement).
The Audit Committee has the authority to conduct or authorize
investigations into any activities it deems necessary and appropriate and are
within its scope of responsibility. The Audit Committee may retain independent
counsel, auditors, or others to conduct investigations or assist in the
accomplishment of its responsibilities.
ACCOUNTABILITY OF INDEPENDENT AUDITORS
The independent auditors are ultimately accountable to the Audit Committee,
as representatives of the Board and of stockholders.
RESPONSIBILITIES
The Audit Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditors (including resolution of
disagreements between management and the independent auditors regarding
financial reporting) for the purpose of preparing or issuing an audit report or
related work. The Audit Committee recognizes that management is responsible for
preparing the Company's financial statements and that the independent auditors
are responsible for auditing those financial statements. In addition, the Audit
Committee recognizes that financial management, as well as the independent
auditors, have more time, knowledge and more detailed information on the Company
than do the members; consequently, in carrying out its oversight
responsibilities, the Audit Committee is not providing any expert or special
assurance as to the Company's financial statements or any professional
certification as to the independent auditors' work.
The following functions shall be the common recurring activities of the
Audit Committee in carrying out its oversight function. These functions are set
forth as a guide with the understanding that the Audit Committee may diverge
from this guide as appropriate.
The Audit Committee has the authority to select, evaluate and, where
appropriate, replace the independent auditors (or nominate the independent
auditors to be proposed for stockholder approval in any proxy statement). The
independent auditors shall report directly to the Audit Committee. The Audit
Committee shall consider such matters, including, but not limited to, the
experience and qualifications of the senior members of the independent auditors'
team and the quality control procedures of the independent auditors.
The Audit Committee shall pre-approve the fees and expenses for all
auditing services and permitted non-audit services to be performed for the
Company by its independent auditors,
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subject to the de minimis exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior
to the completion of the audit. The Audit Committee may delegate to one or more
designated members, the authority to grant such pre-approvals, provided that
decisions of such member or members to grant pre-approvals shall be presented to
the full Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Audit Committee, for payment of compensation to the independent auditor for
the purpose of rendering or issuing an audit report and to any advisors employed
by the Audit Committee.
The Audit Committee shall make periodic reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee's own performance.
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
1. Review annually the overall audit plan as proposed by the independent
auditors and management, including the scope of the examination to be
performed, the assistance to be provided by the internal auditors and any
developments in accounting principles and auditing standards that may
affect either the financial statements or the audit.
2. Recommend to the Board whether the audited financial statements should be
included in the Company's Annual Report on Form 10-KSB.
3. Prior to release of the annual report to the stockholders, review and
discuss the audited financial statements and the results of the audit with
the independent auditors and management, which review and discussion shall
include the following, as applicable:
(a) any major problems encountered by the independent auditors and the
resolution thereof,
(b) the effect on the audit of any developments referred to in clause (a)
above,
(c) any unresolved differences between the independent auditors and
management,
(d) a discussion with the independent auditors of the matters required to
be discussed by Statement on Auditing Standards 61, as the same may be
modified or supplemented,
(e) the receipt of the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard
No. 1, as the same may be modified or supplemented, and a discussion
on the independent auditors' independence, and
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(f) any other significant comments or recommendations of the independent
auditors or management.
4. Review with management the unaudited quarterly financial information to be
included in the Company's Quarterly Report on Form 10-QSB, including the
results of the independent auditors' reviews of the quarterly financial
statements.
5. Review material pending legal proceedings involving the Company and
consider other contingent liabilities, as well as other risks and
exposures, that may have a material impact on the financial statements.
6. Review off-balance sheet structures on the Company's financial statements,
if any such structures exist.
7. With the independent auditors and management , review and analyze
periodically the Company's internal accounting control systems and related
corporate policies and control systems, and assess management's attitude
toward internal controls and the process for establishing and monitoring
internal controls.
8. Review annually the scope and results of the internal audit program and
meet with the internal audit managers periodically (out of the presence of
management and the independent auditors, as appropriate). Review with the
internal audit managers compliance with appropriate audit standards.
9. Ensure the rotation of the independent auditors lead and concurring audit
partner every five years and other audit partners every seven years.
10. Review and concur with management in the appointment or replacement of the
internal audit managers.
11. Meet with the independent auditors periodically (out of the presence of
management, as appropriate) with respect to any of the foregoing.
12. Report to the Board on the scope and results of the annual audit, including
a report prepared in accordance with Item 306 of SEC Regulation S-B, as the
same may be amended or replaced, to be included in the Company's proxy
statement and, from time to time, report on other activities of the Audit
Committee and recommend to the Board such changes, additions or variations
in the auditing, accounting and control functions as the Audit Committee
may deem desirable.
13. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information.
14. Require that the independent auditors submit to the Audit Committee a
formal written statement delineating all relationships between the
independent auditors and the Company, consistent with Independent Standards
Board Standard No. 1.
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15. Actively engage in a dialogue with the independent auditors with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the independent auditors and for taking, or recommending
that the full Board take, appropriate action to oversee the independence of
the independent auditors.
16. Consider the need for guidelines for the Company's hiring of employees of
the independent auditors who were engaged on the Company's account.
17. Establish procedures for the receipt, retention and treatment of complains
and concerns as set forth in Section 10A(m)(4) of the Exchange Act and
inquire into evidence of illegal conduct or non-compliance with the
Company's policies.
18. Review related-party transactions, if any such transactions exist.
19. Review disclosures made to the Audit Committee by the Company's CEO and CFO
during their certification process for the Form 10-KSB and Form 10-QSB
about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein or any fraud involving management
or other employees who have a significant role in the Company's internal
controls.
APPROVAL AND ADOPTION
This charter was approved and adopted, as amended by the Board of Directors
and the Audit Committee thereof on July 30, 2003.
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APPENDIX B
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
The purpose of the Nominating and Corporate Governance Committee (the
"Committee") of the Board of Directors (the "Board") of Equidyne Corporation
(the "Corporation") is to:
1. Identify and recommend to the Board for election and/or appointment,
qualified candidates for membership on the Board and the committees of the
Board.
2. Develop and recommend to the Board corporate governance principles.
3. Propose a slate of candidates for election as Directors at each Annual
Meeting.
The Committee shall consist entirely of at least two directors, each of
whom shall be free of any relationship that, in the opinion of the Board, would
interfere with his or her exercise of independent judgment in accordance with
applicable laws and regulations. The Chairperson shall be appointed by the
Board. The Board may at any time and in its complete discretion remove any
member of the Committee and may fill any vacancy in the Committee. The Committee
may seek the assistance and counsel of outside legal counsel at the
Corporation's expense, as the Committee determines is appropriate.
In addition to the purposes set forth above, the primary responsibilities
of the Committee shall be to:
1. Develop and recommend to the Board criteria for selecting new Directors and
qualifications for members of the committees of the Board.
2. Develop and recommend to the Board criteria to assess the independence of
members of the Board.
3. Oversee, on an annual basis, a self-examination of the Board and its
committees.
4. Review conflicts of interest of Directors, senior executives and consider
waivers or other action related thereto.
5. Annually review and report to the Board with respect to Director
compensation and benefits.
6. Review this Charter on an annual basis and update it as appropriate, and
submit it for the approval of the Board when updated.
7. Undertake such other responsibilities or tasks as the Board may delegate or
assign to the Committee from time to time.
B-1
Appendix C
WHITE PROXY CARD
ANNUAL MEETING OF STOCKHOLDERS
September 9, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Equidyne Corporation, a Delaware corporation
("Equidyne"), acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, dated August __, 2003, and hereby constitutes
and appoints Mark Myers or Marcus R. Rowan, and either jointly or severally,
to vote all shares of Common Stock of which the undersigned would be entitled
to vote at the Annual Meeting of Stockholders (the "Meeting"), and at any
adjournment or adjournments thereof, hereby revoking any proxy or proxies
heretofore given and ratifying and confirming all that said proxies may
do or cause to be done by virtue thereof with respect to the
following matters:
(Continued and to be signed on reverse side)
C-1
1. The election of four (4) directors nominated by the Board of Directors.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as indicated) [_] to vote for all nominees listed below [_]
NOMINEES: Dr. James R. Gavin, III, Harry P. Yergey, Marcus R. Rowan and Mark C.
Myers
(INSTRUCTION: To withhold authority to vote for any individual nominee or
nominees, write such nominee's or nominees' name(s) in the space provided
below.)
___________________________________________________________________________
2. To ratify the appointment of KBA Group LLP as the Equidyne's independent
accountants for fiscal 2003.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Other matters as may properly come before the Meeting or any adjournment or
adjournments thereof.
This Proxy, when properly executed, will be voted as directed. If no direction
is indicated, the Proxy will be voted "FOR" the above proposals.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
- --------------------------------
Signature of Stockholder
- --------------------------------
Signature if held jointly
Dated: __________________________________________, 2003
NOTE: Please sign your name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as it appears hereon. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a corporation, it should be
signed by an authorized officer and the corporate seal affixed. No postage is
required if returned in the enclosed envelope and mailed in the United States.
I/We will attend the Meeting. [_] YES [_] NO
C-2
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.................... 'SS'