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Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by 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 Section 240.14a-11(c) or Section
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)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
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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:
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.
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.
Transact such other business as may properly come before the Meeting or any
postponement or adjournment of the Meeting.
Grant the authority to adjourn the meeting to solicit additional proxies.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
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. MFC'S 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.
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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
....................................
MARK C. MYERS
President and Secretary
San Diego, California
August [18](1), 2003
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(1) Subject to change.
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
General Information......................................... 1
Questions and Answers about the Annual Meeting and
Voting................................................. 1
Background of Proxy Contest................................. 5
Nominations by MFC...................................... 5
Delaware Litigation..................................... 6
Actions of Your Board and Management.................... 7
Your Board's Plan to Enhance Stockholder Value.......... 8
Proposal 1 -- Election of Directors......................... 10
Nominees for Directors.................................. 10
Security Ownership of Certain Beneficial Owners............. 11
Board and Management Ownership.............................. 12
Participants in Equidyne's Solicitation..................... 13
Transactions in Our Common Stock During the Past Two
Years.................................................. 13
Board and Committee Information............................. 13
Board Meetings and Committees........................... 13
Non-Employee Director Compensation...................... 14
Report of the Audit Committee........................... 14
Executive Compensation and Employment Agreements............ 16
Summary Compensation Table.............................. 16
Option Grants........................................... 16
Stock Option Plans...................................... 16
Aggregate Option Exercises in Fiscal 2003 and Fiscal
Year-End Option Values................................. 17
Equity Compensation Plan Information.................... 17
Incentive Option Plans..............................
Non-Plan Options and Warrants....................... 17
Employment Agreements................................... 18
Compensation Committee Interlocks and Insider
Participation............................................. 19
Report of the Compensation Committee........................ 19
Philosophy.............................................. 20
Section 16(a) Beneficial Ownership Reporting Compliance..... 22
Certain Relationships and Related Transactions.............. 22
Proposal 2 -- Independent Public Accountants................ 22
Audit Fees.............................................. 22
Audit Related Fees...................................... 23
Financial Information Systems Design and Implementation
Fees................................................... 23
All Other Fees.......................................... 23
Proxy Solicitation.......................................... 23
Stockholder Proposals for Next Annual Meeting............... 23
Other Business.............................................. 23
Annual Report on Form 10-KSB................................ 24
Appendix A.................................................. A-1
Audit Committee Charter................................. A-1
Appendix B.................................................. B-1
Nominating and Corporate Governance Committee Charter... B-1
Appendix C.................................................. C-1
White Proxy Card........................................ C-1
</Table>
-i-
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EQUIDYNE CORPORATION
11300 SORRENTO VALLEY ROAD, SUITE 255
SAN DIEGO, CALIFORNIA 92121
August [18](1), 2003
--------------------------
PROXY STATEMENT
--------------------------
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 [18](1), 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:
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. 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.
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.
Such other business as may properly come before the Meeting or any
postponement or adjournment of the Meeting.
Grant authority to adjourn the Meeting to solicit additional proxies. YOUR
BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
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
- ---------
(1) Subject to change.
1
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bylaws on or after May 1, 2003 through the Meeting. MFC's 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 and all other matters require 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 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, 'FOR' the
ratification of the appointment of KBA Group LLP as Equidyne's independent
public accountants for fiscal 2003 and 'FOR' the authority to adjourn the
Meeting to solicit additional proxies. 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, THE PERSONS NAMED AS PROXIES WILL VOTE UPON SUCH MATTERS IN ACCORDANCE
WITH THE RECOMMENDATION OF THE BOARD OR, IN THE ABSENCE OF SUCH A
RECOMMENDATION, IN ACCORDANCE WITH THEIR JUDGMENT IN THE INTEREST OF
EQUIDYNE. Other than the proposals set forth in MFC's Preliminary Proxy
Statement, filed with the Securities and Exchange Commission (the 'SEC') on
August 12, 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.
2
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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, FOR the ratification of KBA Group
LLP as Equidyne's independent public accountants for fiscal 2003 and FOR the
authority to adjourn the Meeting to solicit additional proxies.
Q: WHAT IS A 'QUORUM'?
A: A quorum is the number of shares that must be present to have 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 election of directors pursuant to Section 211 of the Delaware
General Corporation Law. See 'Background of Proxy Contest -- Delaware
Litigation,' below. On August 13, 2003, the Court granted MFC's request for
judgment pursuant to Section 211. Accordingly, 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 not voting at the Meeting. Broker non-votes
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. 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:
Submitting a new proxy card after the date of an earlier signed proxy card;
Giving written notice before the Meeting to the Secretary of Equidyne,
stating that you are revoking your prior proxy card; or
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
PREVIOUSLY SIGNED BY YOU BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE
PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED.
3
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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).
4
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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 proposed hostile proxy
contest in which Concord was participating.
After the proposed hostile proxy contest was abandoned, 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. Rosch was previously a wholly-owned subsidiary
of Equidyne prior to July 1999. In February 2000, Rosch was listed on the German
Neur Market, a segment of the Frankfurt Stock Exchange. Equidyne sold all of its
shares in Rosch by the end of October 2000. The Board rejected Concord's
proposal with Equidyne's Chairman, Dr. James Gavin, III stating in a press
release on August 19, 2003 that '[w]e cannot see the advantage to Equidyne's
shareholders of receiving shares of a company whose ability to continue as a
going concern is threatened by its current burn rate and critical cash
position.' On January 3, 2003, Rosch declared bankruptcy and is in the process
of liquidating.
According to Concord's 2002 Annual Report, Concord sustained losses of
approximately Euro 31,549,000 (or US$35,498,619, based on an exchange rate of
1.12519 on August 1, 2003 (the 'Current Exchange Rate')) and Euro 28,408,000 (or
US$31,964,398, based on the Current Exchange Rate) in 2002 and 2001
respectively. Furthermore, during the period of 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, a merchant bank with offices
in Vienna and Berlin, 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
its 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% and an aggregate beneficial ownership of
approximately 8.7% 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 the MFC Preliminary Proxy, MFC has stated that it will
not draw any salary initially from Equidyne until Equidyne consummates a
transaction or until Equidyne becomes active in a new business venture or
activity, 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
- ---------
(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.
5
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$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:
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$2,575,560, based on the
Current Exchange Rate).(4)
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)
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)
In 2002, Euro Trade paid Euro 155,000 (or US$174,404, based on 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 the MFC Preliminary Proxy, MFC has not promised that it will not charge
similar fees to Equidyne if it is successful in this proxy contest. If MFC
prevails in this proxy contest, it has stated that it will seek to have Equidyne
reimburse its estimated $275,000 of costs associated with this proxy contest.
See MFC Preliminary Proxy.
The information related to MFC and its nominees was obtained from public
filings by MFC and others. 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, its nominees or others 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 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
- ---------
(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.
(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.
6
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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. On August 13, 2003, the Court
granted an order pursuant to Section 211 directing that Equidyne hold its 2003
annual meeting for the election of directors on September 9, 2003 and setting a
record date of July 14, 2003. Because the Court has issued an order under
Section 211, the statutory quorum for the Meeting shall consist of the shares of
stock represented at the 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.
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 now being proposed by MFC in its
proxy statement:
Preserving Equidyne's cash -- We reduced selling, general and
administrative expenses approximately 72% from approximately $2.3
million(1) in the 2nd fiscal quarter of 2002 to approximately $641,000(2)
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;
Discontinuing certain investments and expenses related to the needle-free
industry -- Your Board already discontinued research and development in the
needle-free industry in February 2003 and 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
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 business opportunities and strategic alternatives
designed to enhance stockholder value. See ' -- Your Board's Plan to
Enhance Stockholder Value' below.
- ---------
(1) See Equidyne's Quarterly Report on Form 10-QSB for the quarter ended
January 31, 2002 filed with the SEC on March 18, 2002.
(2) See Equidyne's Quarterly Report on Form 10-QSB for the quarter ended
April 30, 2003 filed with the SEC on June 13, 2003.
7
<Page>
In addition to the foregoing, during the last 19 months, your Board and
Equidyne's current executive management team have:
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;
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;
settled various litigation claims potentially seeking millions of dollars
at a fraction of the total initial amount claimed; and
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:
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;
obtained patent protection for the Low-Cost, Disposable Needle-Free
Injector System on December 29, 2002;
filed for patent protection of the Multi-Component Ampule technology in the
U.S., and implemented the process of protecting Equidyne's patents in key
international markets; and
obtained 510(k) clearance from the Food and Drug Administration to market
the needle-free INJEX 30 System for insulin administration 'over the
counter.'
STOCK PERFORMANCE IN NEEDLE-FREE INDUSTRY
Although our stock price has decreased from $0.95 to $0.50 since new
executive management arrived on January 1, 2002, the decline in our stock price
has been less than other public needle-free companies during the comparable
period as indicated in the following chart.
COMPARISON TO PERFORMANCE OF OTHER PUBLIC NEEDLE-FREE COMPANIES
(SINCE NEW EXECUTIVE MANAGEMENT ARRIVED ON JANUARY 1, 2002).
<Table>
<Caption>
STOCK PRICES WESTON(1) ROSCH(2) BIOJECT(3) ANTARES(4) EQUIDYNE(5)
- ------------ --------- -------- ---------- ---------- -----------
1/2/02 `L'2.06 'E'8.21 $12.98 $3.70 $0.95
8/12/03 `L'0.025 'E'0.60 $ 3.65 $1.65 $0.50
% DECLINE 99% 93% 72% 55% 47%
</Table>
- ---------
(1) Based on stock prices from the London Stock Exchange.
(2) Based on stock prices from the Frankfurt Stock Exchange.
(3) Based on stock prices from NASDAQ.
(4) Based on stock prices from NASDAQ.
(5) Based on stock prices from NASDAQ.
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
8
<Page>
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:
A STRATEGIC ACQUISITION;
A SALE OR MERGER;
A SALE OR LICENSE OF ASSETS, INCLUDING EQUIDYNE'S NEEDLE-FREE TECHNOLOGY;
AND
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 to help facilitate
potential strategic transactions. Discussions were also ongoing with respect to
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 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 and early August 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 initially presented the Board with approximately 20
potential business opportunities and strategic alternatives, which Cypress
subsequently expanded in conjunction with current executive management. Over the
course of these meetings, the Board further narrowed its criteria for strategic
acquisition or merger candidates based on minimum EBITDA and projected growth
targets and maximum price ranges. Since then, the Board, current executive
management and Cypress have been engaging in discussions with interested third
parties that met the Board's criteria.
9
<Page>
During July 2003, the Board also reviewed a non-binding proposal involving
an infusion of cash into Equidyne to better position Equidyne to consummate
potential strategic acquisitions and the appointment of investor representation
in connection with the cash investment.
Cypress is nearing completion of a liquidation analysis, which will be
compared to the evaluation of other business opportunities and strategic
alternatives being considered. In addition, Cypress has reported to the Board
that it has significantly narrowed the opportunities to be considered by the
Company by focusing on strategic acquisitions meeting the Board's criteria.
The Board is currently continuing to evaluate all of these alternatives and
working with Cypress to complete its examination of these alternatives. At
present, the Board has not made any final determination with respect to any of
the alternatives listed above. Your Board remains committed to completing this
evaluation process with the aim of maximizing stockholder value. Our plans and
proposals are subject to a number of risks and uncertainties, some of which are
beyond the control of our Board and management. As a result, we cannot guarantee
you that our plans or proposals will enhance stockholder value or that any of
these transactions will ultimately be consummated.
10
<Page>
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.
<Table>
<Caption>
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 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.................... 2002 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
</Table>
11
<Page>
<Table>
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 a Senior Vice President and
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.
</Table>
There is no family relationship among Equidyne's directors or executive
officers.
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.
<Table>
<Caption>
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 I. Miller III............................. Stockholder 863,500(4) 5.8%
</Table>
- ---------
* 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 is
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.
12
<Page>
(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.
(3) Information with respect to Mr. Fukushima was obtained from a Schedule 13D
filed with the SEC on January 14, 2001. 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. 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) Information with respect to Mr. Miller was taken from a Schedule 13G filed
by Mr. Miller on January 17, 2003. The address of Mr. Miller is 4550 Gordon
Drive, Naples, Florida 34102. Mr. Miller shares dispositive and voting power
with respect to 361,600 shares of common stock.
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.
<Table>
<Caption>
NAME AND ADDRESS STATUS SHARES* PERCENTAGE
---------------- ------ ------- ----------
Dr. James R. Gavin, III........... Director and Non-Executive 155,000(1) 1.0%
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
directors as a group (5
persons)........................ 1,856,113(6) 11.1%
</Table>
- ---------
* 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) 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.
13
<Page>
(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.
No participant has been convicted in a criminal proceeding (excluding
traffic violations) during the past ten years.
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
and Dr. Gavin (Chairman). 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
14
<Page>
Committee is also responsible for developing, recommending and monitoring its
corporate governance principles. The Nominating 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 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. All non-employee directors are reimbursed for reasonable travel
expenses.
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.
15
<Page>
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.
HARRY P. YERGEY, Audit Committee Chair
DR. JAMES R. GAVIN, III, Audit
Committee Member
August [18](1), 2003
- ---------
(1) Subject to change.
16
<Page>
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 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:
<Table>
<Caption>
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
</Table>
- ---------
(1) Mr. Rowan was appointed Chief Executive Officer in December 2001.
(2) Other compensation consists of amounts paid related to his services as a
Director of the Company prior to his employment in December 2001.
(3) Mr. Myers was appointed President in December 2001.
(4) From June 2001 to December 2001, Mr. Myers served as a consultant to the
Board from which he was paid approximately $73,500.
(5) Mr. Weinress was appointed Chief Financial Officer in August 2001.
(6) Other compensation for Mr. Weinress consists of certain relocation payments
made pursuant to his Employment Letter.
OPTION GRANTS
The following table sets forth certain information regarding grants of stock
options made during the fiscal year ended July 31, 2003 to the named executive
officers.
<Table>
<Caption>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE
NAME GRANTED YEAR(1) ($/SHARE) EXPIRATION DATE
---- ------- ------- --------- ---------------
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
</Table>
- ---------
(1) 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.
17
<Page>
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.
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.
<Table>
<Caption>
SHARES VALUE OF UNEXERCISED
ACQUIRED VALUE NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
NAME ON 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
</Table>
- ---------
(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:
<Table>
<Caption>
NUMBER OF
SECURITIES
REMAINING
NUMBER OF AVAILABLE FOR
SECURITIES TO BE WEIGHTED- FUTURE ISSUANCE
ISSUED AVERAGE UNDER EQUITY
UPON EXERCISE EXERCISE PRICE OF COMPENSATION PLANS
OF OUTSTANDING OUTSTANDING (EXCLUDING
OPTIONS, OPTIONS, SECURITIES
WARRANTS WARRANTS REFLECTED IN THE
PLAN CATEGORY AND RIGHTS AND RIGHTS 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
--------- ----- -------
--------- ----- -------
</Table>
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
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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's
annual base salary be increased from $250,000 to $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 our 2002 Long Term 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' annual base salary be increased
from $190,000 to $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' annual base salary be increased from $165,000 to $175,000
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per year, 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 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 and Dr. Gavin
(Chairman). 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.
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.
20
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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.
(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
21
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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
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 R. GAVIN, III, Compensation
Committee Chair
HARRY P. YERGEY, Compensation Committee Member
August [18](1), 2003
- ---------
(1) Subject to change.
22
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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.
In connection with its audit for the 2002 fiscal year and through
February 28, 2003, there were no disagreements with the KGA Group on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of the KGA Group, would have caused the KGA Group to make reference
thereto in their report on the financial statements for such year or such
interim periods.
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 to approve the engagement of KBA.
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.
23
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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, $10,000 of which has been paid as of the date hereof.
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 May 12, 2004. In addition, all stockholder
proposals for inclusion in Equidyne's proxy 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. Other
than the proposals set forth in the MFC Preliminary Proxy, Equidyne does not
know of any other business to be considered at the
24
<Page>
Meeting. 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 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 concurrently with this Proxy Statement. 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.
By Order of the Board of Directors
MARK C. MYERS
Secretary
August [18](1), 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.
- ---------
(1) Subject to change.
25
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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 (5) 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 Company and its 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.
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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, 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:
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(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
(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.
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.
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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
complaints 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.
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APPENDIX 1
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 [18](1), 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, revokes any proxy or proxies heretofore
given and ratifies and confirms all that said proxies may do or cause to be done
by virtue thereof with respect to the following matters:
- ---------
(1) Subject to change.
(Continued and to be signed on reverse side)
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<Table>
1. The election of four (4) directors nominated by the Board of WITHHOLD AUTHORITY
Directors. FOR to vote for all
all nominees listed nominees
below (except as listed below
indicated) [ ]
[ ]
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 Equidyne's FOR AGAINST ABSTAIN
independent accountants for fiscal 2003. [ ] [ ] [ ]
3. Other matters as may properly come before the Meeting or any
adjournment or adjournments thereof.
4. To grant authority to adjourn the Meeting to solicit FOR AGAINST ABSTAIN
additional proxies. [ ] [ ] [ ]
</Table>
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.
<Table>
Signature of Stockholder Signature if held jointly
</Table>
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
STATEMENT OF DIFFERENCES
The British pound sterling sign shall be expressed as...........'L'
The Euro sign shall be expressed as.............................'E'
The section symbol shall be expressed as........................'SS'