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SCHEDULE 14A
(RULE 14A-101)
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:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
Ampersand Medical Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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AMPERSAND MEDICAL CORPORATION
414 N. Orleans
Suite 305
Chicago, Illinois 60610
312-222-9550
----------------------
NOTICE OF ANNUAL MEETING
To the Shareholders of
Ampersand Medical Corporation
You are cordially invited to attend the annual meeting (the "Annual
Meeting") of the holders of Common Stock, par value $0.001, of Ampersand Medical
Corporation, a Delaware corporation (the "Company"), to be held on MAY 23, 2000
AT 9:00 A.M., LOCAL TIME, AT 414 N. ORLEANS, SUITE 300, CHICAGO, ILLINOIS, for
the following purposes:
1. To elect five (5) directors of the Company, each to hold office until the
next annual meeting of the Company's shareholders or otherwise as provided in
the Bylaws of the Company.
2. To approve Amendment No. 1 to the Ampersand Medical Corporation 1999 Equity
Incentive Plan for officers, directors, key employees, and consultants of the
Company.
3. To ratify the appointment of Ernst & Young LLP as independent auditors for
the Company for the year ended December 31, 2000.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
A Proxy Statement and proxy card accompany the Notice of Annual
Meeting.
The Board of Directors of the Company has fixed the close of business
on May 5, 2000 as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. All such shareholders are
cordially invited to attend the Annual Meeting in person. However, TO ASSURE
YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A pre-addressed, postage
paid envelope is enclosed for that purpose. Any shareholder attending the Annual
Meeting may vote in person even if he or she has returned a proxy. Please note,
however, that if your shares are held of record by a broker, bank, or other
nominee and you wish to vote at the Annual Meeting, you must obtain from the
record holder a proxy issued in your name.
Sincerely,
/s/ Leonard R. Prange
- --------------------------------------
Leonard R. Prange
President, Chief Operating Officer,
Chief Financial Officer, and Secretary
Chicago, Illinois
May 10, 2000
THE COMPANY'S 1999 ANNUAL REPORT ON FORM 10-K IS BEING MAILED TO
SHAREHOLDERS CONCURRENTLY WITH THIS NOTICE AND ATTACHED PROXY STATEMENT.
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AMPERSAND MEDICAL CORPORATION
PROXY STATEMENT
ITEM 1. DATE, TIME AND PLACE INFORMATION.
This Proxy Statement is furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors (the "Board") of Ampersand
Medical Corporation (the "Company"), for use at the annual meeting of
shareholders of the Company (the "Annual Meeting") scheduled to be held on May
23, 2000, at 9:00 a.m., local time, at 414 N. Orleans, Suite 300, Chicago,
Illinois. The Company intends to mail this Proxy Statement and the accompanying
proxy card to all shareholders entitled to vote at the Annual meeting on or
about May 10, 2000.
At the Annual Meeting, holders of the Company's Common Stock, $0.001
par value (the "Common Stock"), will be asked to consider and vote upon the
following proposals (the "Proposals"):
1. To elect five (5) directors of the Company, each to hold
office until the next annual meeting of the Company's
shareholders or otherwise as provided in the Bylaws of the
Company.
2. To approve Amendment No.1 to the Ampersand Medical Corporation
1999 Equity Incentive Plan for officers, directors, key
employees, and consultants of the Company.
3. To ratify the appointment of Ernst & Young LLP as independent
auditors for the Company for the year ended December 31, 2000.
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
RECORD DATE
The Board has fixed the close of business on May 5, 2000 as the record
date (the "Record Date") for the determination of holders of Common Stock
entitled to notice of and to vote at the Annual Meeting. As of April 28, 2000,
there were 29,058,228 shares of Common Stock issued and outstanding, held of
record by 1,130 persons.
VOTING
Each share of Common Stock is entitled to one vote. At all meetings of
stockholders, except where otherwise provided by statute or by the Certificate
of Incorporation, or by the By-laws, the presence, in person or by proxy duly
authorized, of the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business.
Except as otherwise provided by law, the Certificate of Incorporation or the
By-laws, all action taken by the holders of a majority of the votes cast,
excluding abstentions, at a meeting at which a quorum is present shall be valid
and binding upon the Corporation; provided, however, that Directors shall be
elected by a plurality of the votes of shares present in person or represented
by proxy at the meeting and entitled to vote on the election of Directors.
ITEM 2. REVOCABILITY OF PROXIES
When a shareholder has signed and returned a proxy in the form of the
accompanying proxy card, that proxy may be revoked by: (i) a writing delivered
to the Secretary of the Company at the address set forth above, stating that the
proxy is revoked; (ii) by attendance at the Annual Meeting and voting in person
by the shareholder who executed the proxy; (iii) a subsequent proxy executed by
the same shareholder and presented at the Annual Meeting; or (iv) written notice
to the Company of the death or incapacity of the shareholder.
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ITEM 4. SOLICITATION
The Company will bear the entire cost of the solicitation of proxies
from its shareholders, including preparation, assembly, printing and mailing of
this Proxy Statement, the proxy card and any additional information furnished to
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries, and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
facsimile or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to these
persons for such services.
Continental Stock Transfer and Trust Company, transfer agent and
registrar for the Common Stock, will be paid its customary fee, estimated to be
$1,500.
ITEM. 6 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
FIVE-PERCENT (5%) BENEFICIAL OWNERS. The following table sets forth,
certain information regarding the beneficial ownership of Common Stock as of
April 28, 2000 by persons who beneficially owned more than five percent (5%) of
the Common Stock. The number of shares of Common Stock shown for each listed
person is based on information contained in Statements on Schedule 13D filed
with the Securities and Exchange Commission (the "SEC") on behalf of the listed
persons, or on information obtained from the stockholder records of the Company.
As of April 28, 2000, there were 29,058,228 shares of Common Stock outstanding.
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
- ------------------------------------ ------------------ ------------
Alexander M. Milley
3600 Rio Vista Boulevard, Suite A
Orlando, FL 32805 (1)(6) 2,861,560 9.8%
Winchester National, Inc.
3600 Rio Vista Boulevard, Suite A
Orlando, FL 32805 (6) 148,655 .5%
Milley Management Incorporated
3600 Rio Vista Boulevard, Suite A
Orlando, FL 32805 (2)(6) 1,988,000 6.8%
Cadmus Corporation
3600 Rio Vista Boulevard, Suite A
Orlando, FL 32805 (6) 1,484,667 5.1%
Azimuth Corporation
3600 Rio Vista Boulevard, Suite A
Orlando, FL 32805 (3) 556,250 1.9%
Robert C. Shaw
1800 Industrial Drive
Libertyville, IL 60048 (4)(6) 520,417 1.8%
Peter P. Gombrich
414 N. Orleans, Suite 305
Chicago, IL 60610 (6) 3,670,895 12.6%
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Theodore L. Koenig
5 Revere Drive, Suite 206
Northbrook, IL 60062 (5)(6) 1,870,036 6.4%
Monroe Investments, Inc.
5 Revere Drive, Suite 206
Northbrook, IL 60062 (6) 298,586 1.0%
William J. Ritger
623 Ocean Avenue
Sea Girt, NJ 08750 (6) 1,155,090 4.0%
Fred H. Pearson
10 South LaSalle Street
Chicago, IL 60603 (6) 221,616 .8%
Walter Herbst
355 N. Canal Street
Chicago, IL 60610 (6) 597,171 2.1%
AccuMed International, Inc
920 N. Franklin St., Suite 402 (7)
Chicago, IL 60610 (6) 63,517 .2%
Northlea Partners Ltd.
2365 NW 41st Street
Boca Raton, FL 33431 (6) 186,616 .6%
Seaside Partners, L.P.
623 Ocean Avenue
Sea Girt, NJ 08750 (7) 4,208,333 14.5%
(1) Includes: (i) 503,333 shares owned by MMI, of which Mr. Milley is the sole
director and executive officer; (ii) 1,484,667 shares owned by Cadmus
Corporation of which Mr. Milley is a director and executive officer; (iii)
506,250 shares owned by Azimuth Corporation and 50,000 shares issuable to
Azimuth Corporation under a warrant exercisable within sixty days, of which Mr.
Milley is a director and executive officer; (iv) 148,655 shares owned by
Winchester National, Inc. of which Mr. Milley is a director; (v) 148,655 shares
owned directly by Mr. Milley; and (vi) 20,000 shares underlying an option
exercisable by Mr. Milley within sixty days.
(2) Includes: (i)503,333 shares owned by Milley Management Incorporated,
("MMI"); and (ii) 1,484,667 shares owned by Cadmus, of which MMI is a principal
shareholder. MMI has shared voting and investment power with respect to the
1,484,667 shares owned by Cadmus.
(3) Includes: (i) 506,250 shares owned by Azimuth; and (ii) 50,000 underlying a
warrant exercisable by Azimuth within 60 days. Mr. Milley is a director and
executive officer of Azimuth.
(4) Includes 20,000 shares underlying an option exercisable within sixty days.
(5) Includes: (i) 479,827 shares owned by The EAG Trust, 479,827 shares owned by
The CMC Trust, 479,827 shares owned by The MDG Trust, and 410,555 shares owned
by The MSD Trust, for each of which Mr. Koenig serves as sole Trustee; (ii)
298,586 shares owned by Monroe Investments, Inc., of which Mr. Koenig controls;
and (iii) 20,000 shares underlying an option exercisable by Mr. Koenig within
sixty days. Mr. Koenig disclaims beneficial ownership of all such shares except
those owned by Monroe, The MSD Trust, and those shares underlying the option.
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(6) Each of the indicated shareholders may be deemed to be members of a "group"
for purposes of Rule 13d-5 under the Securities Exchange Act of 1934 pursuant to
a Stockholders Agreement (the "Agreement") dated December 4, 1998. Under the
terms of this Agreement, the respective shareholders agreed to vote their
shares, at the Annual Meeting held on May 25, 1999, in favor of the ratification
of certain transactions related to the acquisition of InPath, L.L.C. ("InPath")
by Bell National Corporation ("Bell") the predecessor company to Ampersand,
including approval of the InPath acquisition, the settlement of certain claims
against Bell for amounts owed for services provided to Bell, the merger of Bell
into the Company, and the election of an agreed slate of directors and officers.
It was the intention of the parties that the Agreement would terminate as of the
completion of the agreed to transactions. However, no formal termination of the
Agreement was completed prior to the filing of this document. Such formal
termination and the related amendment to Form 13D is anticipated to be completed
during May 2000. Accordingly, for purposes of this Proxy Statement, the Company
has reported information based on the Form 13D currently on file and its
stockholder records even though the parties consider the Agreement no longer in
effect. The aggregate number of shares of Common Stock beneficially owned by all
members of such group is 11,445,504, or 39.3% of the outstanding shares of
Common Stock. Each such person disclaims beneficial ownership of all shares not
shown as beneficially owned by such person in the table.
(7). Includes 1,533,333 shares owned directly by Seaside and 2,675,000 shares
issuable as a result of the automatic conversion of the $500,000 principal and
accrued interest due on a 6% Convertible Promissory Note Due 2000.
ITEM 7. DIRECTORS, NOMINEE FOR DIRECTOR AND EXECUTIVE OFFICERS
DIRECTORS, NOMINEE FOR DIRECTOR AND EXECUTIVE OFFICERS. The following
table sets forth certain pro forma information, based on shareholdings as of
April 28, 2000, with respect to the beneficial ownership of Common Stock that is
held by each (i) director of the Company, (ii) each nominee for director of the
Company; (iii) each executive officer of the Company, and (iii) all directors,
nominee for director, and executive officers as a group. Each of the persons
listed below has sole voting and investment power with respect to such shares,
unless otherwise indicated. As of April 28, 2000 there were 29,058,228 shares
of Common Stock outstanding.
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT
------------------------ AGE BENEFICIAL OWNERSHIP OF CLASS
--- -------------------- --------
Peter P. Gombrich, Chairman of the Board, CEO and
a director of the Company 62 3,670,895 12.6%
Alexander M. Milley, Chairman of the Board and
CEO of ELXSI Corporation and a director of the
Company (1) 46 2,861,560 9.8%
Leonard R. Prange, President, COO/CFO, and
Secretary (2) 54 1,096,688 3.7%
Robert C. Shaw, President of Contempo Design and
a director of the Company (3) 46 520,417 1.8%
John Abeles, M.D., President of MedVest, Inc. and
a director of the Company (4) 55 206,616 .7%
Denis M. O'Donnell, M. D., Managing Director of
Seaside Advisors, L.L.C. and a director of the
Company (5) 46 175,455 .6%
Richard A. Domanik, Ph.D., Vice President, and
CTO (6) 53 66,667 .2%
All directors, and executive officers as a group
(7 persons) 8,598,298 28.8%
(1) Includes: (i) 503,333 shares owned by MMI, of which Mr. Milley is the sole
director and executive officer; (ii) 1,484,667 shares owned by Cadmus
Corporation of which Mr. Milley is a director and
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executive officer; (iii) 506,250 shares owned by Azimuth Corporation and 50,000
shares issuable to Azimuth Corporation under a warrant exercisable within sixty
days, of which Mr. Milley is a director and executive officer; (iv) 148,655
shares owned by Winchester National, Inc. of which Mr. Milley is a director; (v)
148,655 shares owned directly by Mr. Milley; and (vi) 20,000 shares underlying
an option exercisable by Mr. Milley within sixty days.
(2) Includes: (i) 396,688 shares issuable as a result of the automatic
conversion of the principal and accrued interest due on a $75,000 6% Convertible
Promissory Note Due 2000 held by Mr. Prange; (ii) 300,000 shares owned directly
by Mr. Prange; and (iii) 400,000 shares underlying an option exercisable by Mr.
Prange within sixty days.
(3) Includes 20,000 shares underlying an option exercisable by Mr. Shaw within
sixty days.
(4) Includes: (i) 186,616 shares held by Northlea Partners, Ltd., of which Dr.
Abeles is the general partner; and (ii) 20,000 shares underlying an option
exercisable by Dr. Abeles within sixty days. Dr. Abeles disclaims ownership of
all shares except 1,862, which number are attributable to his 1% interest in
Northlea as general partner and those shares underlying the option.
(5) Includes: (i) 155,455 shares underlying warrants due to Westgate Partners,
L.L.C., exercisable within sixty days, of which Dr. O'Donnell is a member; and
(ii) 20,000 shares underlying an option exercisable by Dr. O'Donnell within
sixty days.
(6) Includes 66,667 shares underlying an option exercisable by Dr. Domanik
within sixty days.
(7) Includes: (i) 479,827 shares owned by The EAG Trust, 479,827 shares owned by
The CMC Trust, 479,827 shares owned by The MDG Trust, and 410,555 shares owned
by The MSD Trust, for each of which Mr. Koenig serves as sole Trustee; (ii)
298,586 shares owned by Monroe Investments, Inc., of which Mr. Koenig controls;
and (iii) 20,000 shares underlying an option exercisable within sixty days. Mr.
Koenig disclaims beneficial ownership of all such shares except those owned by
Monroe, The MSD Trust, and those shares underlying the option.
NOMINEES
PETER P. GOMBRICH has been Chairman of the Board and Chief Executive
Officer of the Company since December 1998. Since March of 1998, when he founded
the company, Mr. Gombrich has served as Chairman of the Board and Chief
Executive Officer of InPath, L.L.C., a bio-molecular medical testing company,
which became a subsidiary of the Company in December 1998. In 1994, Mr. Gombrich
founded AccuMed International, Inc. ("AccuMed"), a cytopathology products
company, and served as Chairman, President and CEO until January 1998. From 1990
until he founded AccuMed, he was a consultant in the
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cytology and microbiology industries. From July 1985 until September 1989, Mr.
Gombrich was President and CEO, and from July 1985 until November 1990 was
Chairman of the Board of CliniCom Incorporated, a bedside clinical information
systems company, which he founded. From 1982 until 1985, Mr. Gombrich was
Executive Vice President of the ventures group of ADC Telecommunications. In
1976, Mr. Gombrich co-founded St. Jude Medical, a life support medical device
company, where he served as Executive Vice President until 1980, when he became
President of the pacemaker division of the company, serving in that position
until 1982. Mr. Gombrich has a B.S. in Electrical Engineering from the
University of Colorado and a M.B.A. from the University of Denver.
ALEXANDER M. MILLEY has been a director of the Company since 1989. Mr.
Milley is President and Chairman of the Board of ELXSI Corp. a holding company
with subsidiaries operating in the restaurant and environmental inspection
equipment industries. He is also President and Chairman of the Board of Azimuth
Corporation ("Azimuth"), a holding company with subsidiaries operating in the
trade show exhibit and retail environment design and the distribution of
electrical components and fasteners industries. Mr. Milley was Chairman of the
Board and Chief Executive Officer of Bell from September 25, 1989 until its
acquisition of InPath, LLC, in December 1998 and was President of Bell from
August 1990 until December 1998. Mr. Milley is the founder, President, sole
director and majority shareholder of Milley Management Inc. ("MMI"), a private
investment and management consulting firm. Mr. Milley is also the President of
Cadmus Corporation ("Cadmus"), another private investment and management
consulting firm. Mr. Milley was Senior Vice President-Acquisitions from December
1983 until July 1986 of the Dyson-Kissner-Moran Corporation, a private
investment company.
DENIS M. O'DONNELL, M.D. has been a director of the Company since
December 1998. Since 1997, he has been Managing Director of Seaside Advisors,
L.L.C., an investment advisor to Seaside Partners, L.L.P, a fund specialization
in small capitalization private placements. Prior to Seaside Advisors, Dr.
O'Donnell was President of Novavax, Inc. ("Novavax), a company engaged in the
development of pharmaceutical products, from its inception in 1995 to 1997. Dr.
O'Donnell currently serves as a director and Vice Chairman of Novavax. From 1991
to 1995, Dr. O'Donnell served as Corporate Vice President of Medical Affairs of
IGI, Inc. Prior to joining IGI, Inc., Dr. O'Donnell was Director of the Clinical
Research Center at MTRA, Inc. a company engaged as investigator in human
clinical trails. He has been a director of ELXSI Corporation since 1996 and
Columbia Laboratories, Inc., a pharmaceutical company, since 1999. Dr. O'Donnell
is a Fellow of the American College of Clinical Pharmacology and serves on the
Scientific Advisory Board of the Associates of Clinical Pharmacology.
JOHN H. ABELES, M.D. has been a director of the Company since May 1999.
Dr. Abeles is President of MedVest, Inc. a venture capital and consulting firm
he founded in 1980. He is also General Partner of Northlea Partners, Ltd., a
family investment concern. He was a senior medical executive at Sterling Drug,
Pfizer, and Revlon Healthcare and subsequently was a medical analyst at Kidder,
Peabody & Co. Dr. Abeles is a director of a number of companies operating in the
medical device or healthcare fields, including I-Flow Corporation, Oryx
Technology Corp., Encore Medical Corporation, and DUSA Pharmaceuticals, Inc. Dr.
Abeles received his medical degree and degree in pharmacology at the University
of Birmingham in England and is currently a director at the Higuchi BioSciences
Institute at the University of Kansas.
ROBERT C. SHAW has been a Director of the Company since November 1989.
Mr. Shaw is President of Contempo Design, a firm specializing in the design of
exhibits and retail environments. Mr. Shaw was Chief Financial Officer of Bell
from November 20, 1989 to June 17, 1990. Mr. Shaw has been a Vice President of
MMI since March 1989, an officer and/or director of Azimuth and/or certain
subsidiaries thereof since November 1990, a director of Cadmus since January
1992 and an officer and/or director of ELXSI since September 1989. Prior to that
he was Vice President of Berkeley Softworks, Incorporated from September 1987 to
March 1989. From January 1987 to September 1987, he was Vice President, and from
July 1985 until January 1987, he was Director of Finance and Operations, at Ansa
Software, Incorporated. Berkeley and Ansa developed and produced personal
computer software.
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EXECUTIVE OFFICERS
LEONARD R. PRANGE has been President, Chief Operating Officer and Chief
Financial Officer of the Company since December 1998. Mr. Prange was appointed
Secretary of the Company in January 2000. From March 1997 until December 1998
Mr. Prange was Corporate Vice President and Chief Operating Officer, and from
September 1996 until December 1998 Corporate Vice President and Chief Financial
Officer of AccuMed. From July 1995 until September 1996 he served as a Managing
Director of Lovett International, Inc., and international trading and consulting
firm. Mr. Prange was Group Vice President from June 1994 until July 1995, Vice
President and Chief Financial Officer from December 1984 until June 1994, and
Treasurer from December 1981 until December 1984 of Richardson Electronics,
Ltd., a global electronics manufacturing and distribution company. Mr. Prange
has a B.S. in Accounting from DePaul University and is a certified public
accountant.
RICHARD A. DOMANIK, PH.D. has been Vice President and Chief Technology
Officer of the Company since December 1998. From August 1994 until December 1995
Dr. Domanik was Vice President of Engineering, from December 1995 until May 1996
Vice President of Technology and from May 1996 until November 1998 Senior Vice
President of Technology of AccuMed. From June 1979 until August 1994, Dr.
Domanik served in several positions, including Laboratory Manager and Research
and Development Manager, related to research and development of healthcare
products at Abbott Laboratories. Dr. Domanik has a B.A. in Chemistry from Ripon
College and a Ph.D. in Biochemistry from Northwestern University.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In January of 1999, the Board of Directors authorized the Company to
raise up to $1,500,000 in new equity or debt in order to provide operating
capital for the Company. Between March 1, 1999 and June 30, 1999, the Company
issued a series of 6% Convertible Subordinated Notes to a group of accredited
investors in exchange for $994,600 in cash. The Notes, including accrued
interest due thereon automatically converted into shares of Common Stock, at a
conversion price of $0.20 per share as of April 28, 2000, when the Company
completed the raising of $5,000,000 in new equity or debt, not including the
$1,500,000 in equity or debt, of which the Notes are a part, authorized to be
raised by the Board in January.
Included in the above series of Notes is a Note issued to Seaside
Partners, L.P. in the principal amount of $500,000. Dr. Denis. M. O'Donnell, who
is a director of the Company, is a member and manager of Seaside Advisors,
L.L.C., a firm, which provides investment management services to Seaside
Partners. Also included in the above series of Notes is a Note issued to Leonard
R. Prange in the principal amount of $75,000. Mr. Prange is President, COO, CFO,
and Secretary of the Company. Both the Seaside and Prange Notes were issued
under the same terms and conditions as all of the other Notes in the series.
The Company has contracted with several advisory groups to assist it in
conjunction with the sale of the Notes and Private Placements of Common Stock
during 1999. Accordingly, the Company has recorded an accrual for cash
commissions amounting to $41,040 due to one of the advisory groups, and is
required to issue warrants to purchase 542,474 shares of Common Stock at an
average exercise price of
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$0.25. In addition the Company has recorded an estimated accrual of $50,000 to
cover "out of pocket" expenses reimbursable to one group. Denis M. O'Donnell,
M.D., a director of the Company, is a member of Westgate Partners, L.L.C, an
advisory group entitled to receive $41,040 in commissions, 155,455 warrants to
purchase Common Stock at $0.363 per share, and the reimbursement of up to
$50,000 in "out of pocket" expenses.
On November 29, 1999, the Company sold 250,000 of Common Stock to
Azimuth Corporation ("Azimuth"), a company controlled by Alexander Milley, a
director and significant shareholder of the Company, in conjunction with a
Private Placement Offering. The shares were sold to Azimuth under the same terms
and conditions as those of the other participants in the Private Placement,
including a purchase price of $0.20 per share.
On December 10, 1999, the Company issued a Senior Convertible
Promissory Note to Azimuth Corporation ("Azimuth"), a company controlled by
Alexander M. Milley, a director and significant shareholder of the Company, in
exchange for $50,000 in cash. The note bore interest at the rate of 12% per
annum and was convertible into Common Stock at a conversion price of $0.20 per
share. As additional compensation for the note, the Company issued Azimuth a
warrant to purchase 50,000 shares of Common Stock at an exercise price of $0.33
per share. On February 22, 2000 Azimuth exercised its right to convert the note
and accrued interest due thereon into 256,250 shares of Common Stock of the
Company.
On January 6, 2000 and April 28, 2000, the Company sold 200,000 shares
and 1,333,333 shares respectively of Common Stock to Seaside Partners, L.P. in
conjunction with Private Placement Offerings. The shares were sold to Seaside
under the same terms and conditions as those of the other participants in the
Private Placements, including the purchase prices of $0.33 per share and $1.50
per share. Denis M. O'Donnell, who is a director of the Company, is a member
and manager of Seaside Advisors, L.L.C., a firm, which provides investment
management services to Seaside Partners.
BOARD MEETINGS AND COMMITTEES
The Board held eight meetings during the fiscal year Ended December 31,
1999. Each of the directors was in attendance personally or telephonically at
all meetings except director Robert Shaw, who did not attend three meetings.
The Board currently has no standing committees. The Board does not have
a nominating committee or any committee performing the function of a nominating
committee. The functions related to nomination, audit review, and compensation
structures are undertaken by the Board as a group.
ITEM 8. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.
COMPENSATION OF DIRECTORS
The Company compensates its non-management directors through the grant
of an annual option to purchase 20,000 shares of Common Stock of the Company.
The options are granted at the first directors meeting following the Annual
Meeting. The exercise price of the option is set at fair market value as
determined in accordance with the provisions of the 1999 Equity Incentive Plan.
The Company also reimburses directors for expenses incurred in the connection
with their attendance at meetings.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Annual Compensation Long -Term Compensation
------------------- -----------------------
Securities
Restricted Under-
Stock Lying
Name and Principal Position Year Salary Bonus Other (3) Awards Options
- --------------------------- ---- ------ ----- --------- ------ -------
Peter P. Gombrich, Chairman of
The Board and CEO (1) 1999 $200,000 Nil $9,000 Nil Nil
1998 $43,750 Nil $2,250 Nil Nil
1997 -- -- -- -- --
Leonard R. Prange, President,
COO, CFO, and Secretary (2) 1999 $139,583 Nil $3,500 Nil 400,000
1998 -- -- -- -- --
1997 -- -- -- -- --
(1) Mr. Gombrich employment with the Company commenced at the inception of
InPath, L.L.C. on March 16, 1998. Mr. Gombrich did not take any salary until
October 1998.
(2) Mr. Prange was appointed President of the Company on December 4, 1998 but
did not take any salary until January 1999.
(3) Consists of an automobile allowance.
OPTION/ GRANTS IN LAST FISCAL YEAR
Individual Grants
- ----------------------------------------------------------------------------
Potential Realizable Value
Number of Percent of At Assumed Annual Rate of
Securities Total Options Exercise Stock Price Appreciation
Underlying Granted or Base For Option Term (1)
Options/ To Employees Price Expiration --------------------------
Name Granted In Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ------- -------------- ------ ---- ------- --------
Peter P. Gombrich Nil -- -- --
Leonard R. Prange 400,000 38.6% $157,480 5/27/09 $99,038 $250,982
(1) The Company uses the stock price appreciation rates as recommended by the
SEC. Such rates may not be indicative of the actual market price of the Common
Stock at the time the option is exercised.
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FISCAL YEAR END OPTION / SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In - The - Money
Options / SARs Options / SARs
At Fiscal Year End At Fiscal Year End
------------------ ------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Peter P. Gombrich Nil Nil Nil Nil
Leonard R. Prange (1) 133,333 266,667 $55,840 $111,680
Alexander M. Milley (2) 450,000 -- $230,625 --
(1) On May 27, 1999 Mr. Prange was granted an option to purchase 400,000 shares
of Common stock at an exercise price of $0.3937 per share, the fair market value
as of the date of the grant determined in accordance with the provisions of the
1999 Equity Incentive Plan. One-third of the option vested on the date of grant
and the remainder is scheduled to vest in equal amounts on the first and second
anniversaries of the grant date. Mr. Prange's employment contract provides that
should a change in control, defined as a change of 20% or more in the combined
voting power of Ampersand's outstanding securities, all unvested options
outstanding as of the occurrence of a change in control shall immediately vest
and become exercisable. As of April 30, 2000, all options granted to Mr. Prange
are vested and exercisable.
(2) The SARs issued in 1989 are held by Cadmus Corporation, which is controlled
by Mr. Milley.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a Compensation Committee and the entire Board
participated in deliberations concerning executive compensation. Mr. Gombrich,
Chairman of the Board and CEO does not participate in any of the Board's
deliberations concerning his own compensation.
EMPLOYMENT AGREEMENTS
MR. GOMBRICH is employed as Chairman and Chief Executive Officer of the
Company pursuant to an Employment Agreement ("Agreement") with InPath dated May,
1, 1998 and amended on December 4, 1998 to reflect changes related to the
acquisition of InPath by the Company. Under the Agreement, Mr. Gombrich
receives annual compensation consisting of a $200,000 base salary, a bonus
determined at the discretion of the Board, and a monthly automobile allowance of
$750. The Agreement has a term of three (3) years, beginning May 1, 1998 and
ending April 30, 2001. After such period, the Agreement automatically renews for
consecutive terms of two (2) years unless either Mr. Gombrich or the Company
elects not to renew it. For two (2) years following the termination of the
Agreement, Mr. Gombrich may not participate in a business that substantially and
directly competes with the Company. If there is a "Change of Control" as defined
in the Agreement and the Company thereafter terminates the Agreement without
cause, or Mr. Gombrich terminates the Agreement for Good Reason as defined in
the Agreement, Mr. Gombrich is entitled to a lump-sum severance payment equal to
three (3) times the sum of: his annual base salary, his annualized monthly
automobile allowance, and the highest incentive compensation paid to him in any
of the previous (2) year incentive compensation periods. If Mr. Gombrich is
terminated without cause or resigns for Good Reason, and no change of control
has occurred, he is entitled to a lump-sum severance payment equal to two (2)
times the sum of the foregoing amounts.
MR. PRANGE is employed by the Company as President under an Employment
Agreement ("The Agreement") dated June 1, 1999. Under The Agreement, Mr. Prange
receives annual compensation consisting of a$150,000 base salary, a bonus as
determined at the discretion of the Board, and a monthly automobile allowance of
$500. The Agreement has a term of three (3) years, beginning June 1, 1999 and
ending May 31, 2002. After such period, The Agreement automatically renews for
additional one (1) year
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terms unless either Mr. Prange or the Company elects not to renew it. For two
(2) years following the termination of The Agreement, Mr. Prange may not
actively participate in the management of a business that substantially or
directly competes with the Company. If there is a "Change of Control" as defined
in The Agreement and the Company terminates The Agreement or Mr. Prange resigns
after a "Change of Control" or for Good Reason as defined by The Agreement, Mr.
Prange is entitled to receive a lump-sum severance payment equal to the sum of
his annual base salary, twelve (12) times his monthly automobile allowance, and
the highest incentive compensation paid to him in any of two consecutive annual
incentive compensation periods. In addition, any unvested stock options,
restricted stock awards, or other equity based incentives held by or owed to Mr.
Prange vest fully and become immediately exercisable.
EXECUTIVE COMPENSATION POLICIES
The Board's intent is to structure the compensation of the Company's
executive officers so as to attract and retain executives capable of leading the
Company to meet its business objectives and to motivate them to enhance
long-term shareholder value. The Company's executives officers receive annual
compensation consisting of cash salary as well as other forms of compensation
which the Board believes to be in the best interests of the Company and the
shareholders. Examples of such additional compensation are cash bonuses and
automobile allowances. In determining the level of total compensation to be paid
to an executive officer, the Board considers such factors as the officer's
responsibilities, qualifications and contribution to the Company, and the
compensation paid by comparable companies to individuals in comparable
positions. The Board's evaluation of executive officers, except the Chief
Executive Officer, may also be based on the Chief Executive Officer's assessment
of the officer's contribution to the Company. The Board also compensates
executive officers and other key employees by means of stock options or other
types of long-term, equity based awards, primarily under the terms of the 1999
Equity Incentive Plan.
In selecting new executive officers, the Board considers the specific
needs of the Company and the expertise and special skills offered by the
candidate. The Board then determines starting compensation based on its
assessment of the package needed to attract such an individual to the Company.
Compensation of continuing officers is also review periodically against this
assessment.
Policies with Respect to Deductibility of Compensation
Section 162(m) of the Code generally limits the Company to a deduction,
for federal income tax purposes, of no more than $1,000,000 in a taxable year of
compensation paid to the Chief Executive Officer, or to any of the four most
highly compensated officers of the Company, other than the Chief Executive
Officer. Compensation above $1,000,000 may be deducted if it is "qualified
performance-based compensation" within the meaning of the Code. The Board
believes that at the present time it is unlikely that the compensation paid to
any officer of the Company in a taxable year will exceed $1,000,000. Therefore,
the Board has not yet established a policy for determining which forms of
incentive compensation awarded to its executive officers shall be designed to
qualify as " qualified performance-based compensation." The Board intends to
continue to evaluate the effects of the statute and Treasury Regulations and to
comply with Section 162(m) of the Code in the future to the extent consistent
with the best interest of the Company.
PERFORMANCE GRAPH
The following graph compares the performance of the Common Stock with
the performance of the NASDAQ Composite (U.S.) Index and the NASDAQ Medical
Devices, Instruments and Supplies, Manufacturers and Distribution Index. The
graph covers the period from November 30, 1998 immediately prior to the
Company's acquisition of InPath on December 4, 1998, when the Company entered
into the medical-device industry, to December 31, 1999. The acquisition of
InPath was accounted for as a reverse acquisition whereby InPath was deemed to
have acquired the Company. Accordingly, information is shown as if InPath first
became a reporting entity on December 4, 1998. Historical information for the
Company prior to December 1998 is not reported. During the sixteen-month period
preceding the acquisition of InPath, the Company was not engaged in any
business, and immediately before this period of inactivity it was engaged in
designing and distributing drapery and upholstery fabrics. The graph shows the
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total cumulative return of an investment of $100 in the group of stocks that
comprise each index. All values assume reinvestment of the full amount of
dividends.
PERFORMANCE GRAPH
NASDAQ Composite U.S. NASDAQ Medical
Date Ampersand Composite U.S. Devices
---- --------- -------------- -------
11/30/1998 100 100 100
12/31/1998 625 112.8 107.17
12/31/1999 1625 209.65 128.39
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who beneficially own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Such executive officers,
directors and ten-percent (10%) beneficial owners are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on the Company's review of copies of such forms it has
received and of written representations from certain reporting persons
concerning their beneficial ownership of the Common Stock, the Company believes
that during the 1999 fiscal year, all of its executive officers, directors and
ten-percent (10%) beneficial owners complied with all applicable Section 16(a)
filing requirements, except that Peter P. Gombrich failed to file a Form 4
reporting purchase transactions in June 1999 (2,000 shares), July 1999 (1,000
shares), October 1999 (10,000 shares), November 1999 (6,000 shares), December
1999 (1,800 shares), and January 1999 (6,000). All such transactions were
reported instead on Form 4 covering the month of April 2000.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The affirmative vote of a plurality of shares of Common Stock voting
either in person or by proxy at the Annual Meeting is required to elect each of
the five (5) Nominees for director of the Company. Shareholders possessing the
power to vote approximately 39.3% of the shares of Common Stock outstanding
have agreed to vote all such shares in favor of electing the Nominees with the
exception of Mr. Shaw.
THE BOARD RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE "FOR" THE
NOMINEES.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT NO.1 TO THE 1999 AMPERSAND
MEDICAL CORPORATION 1999 EQUITY INCENTIVE PLAN
At the last Annual Meeting held on May 25, 1999, the shareholders
approved the Ampersand Medical Corporation 1999 Equity Incentive Plan (the
"Plan"). The purpose of the Plan is to benefit the Company by enabling it to
offer to certain present and future directors, officers, key employees and
consultants stock based incentives and other equity interests in the Company,
thereby giving them a stake in the growth of the Company and encouraging them to
continue in the service of the Company or affiliated companies. The Board
believes that the Plan provides substantial benefit to the Company and its
stockholders because it will allow the Company to reward its key employees and
to attract new employees in a manner that closely aligns the interests of
management with the interest of stockholders.
2,000,000 shares of Common Stock were allocated to the Plan to be used
by the Board to make incentive awards. As of April 30, 2000 the Board has
awarded options to purchase 1,145,000 shares of Common Stock and has made grants
of restricted of 100,000 restricted shares of Common Stock to directors,
officers, key employees, and consultants.
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The Board believes that as the Company continues to grow and expand its
need for additional officers, key employees, consultants and related
technologies, the Board and the Company must be in a position to attract and
motivate such individuals. Therefore, the Board believes that it is in the best
interests of the Company and the shareholders, to increase by 1,000,000 to a
total of 3,000,000, the number of shares of Common Stock allocated to the Plan.
It is not possible to determine the amount and type of individual awards that
will be made under the Plan in the future because such determinations are within
the discretion of the Board and are based on such factors as they deem pertinent
under the Plan in establishing awards.
The affirmative vote of the majority of shares of Common Stock voting
either in person or by proxy at the Annual Meeting is required to approve
Amendment No.1 to the Ampersand Medical Corporation 1999 Equity Incentive Plan
to increase the number of shares of Common Stock allocated to the Plan by
1,000,000 shares to a total of 3,000,000 shares.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF AMENDMENT NO.1 TO THE AMPERSAND MEDICAL CORPORATION 1999
EQUITY INCENTIVE PLAN.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, the Company's independent auditors for
the fiscal year ended December 31, 1999, was selected by the Board to act in the
same capacity for the fiscal year ended December 31, 2000. Neither the firm nor
any of its members has any relationship with the Company or any of its
affiliates except in the firm's capacity as the Company's auditor.
It is expected that representatives of Ernst & Young LLP will be
present at the Annual Meeting and will have the opportunity to speak if they so
desire and to respond to appropriate questions from shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE
"FOR" THE APPROVAL TO APPOINT ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
OTHER MATTERS
To the best of the knowledge of the Board, there are no other matters,
which are to be acted upon at the Annual Meeting. If such matters arise, the
signed proxy card confers discretionary authority on the proxy holders
designated therein to vote with respect to such matters.
SHAREHOLDER PROPOSALS
A shareholder intending to present a proposal for inclusion in the
Company's Proxy Statement and proxy card for the Company's next Annual Meeting
of shareholders must deliver such proposal in writing to the Company's principal
executive offices no later than March 10, 2001.
If a shareholder desires to bring business before the meeting which is
not the subject of a proposal timely submitted for inclusion in the Company's
Proxy Statement and proxy card as provided above, the shareholder must provide
notice of such business to the Company a reasonable time before the Company
mails its proxy materials for that meeting.
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INCORPORATION OF INFORMATION BY REFERENCE
The information in the Company's Annual Report of Form 10-K for the
fiscal year ended December 31, 1999, as filed with the SEC, is incorporated by
reference in the Proxy Statement.
By Order of the Board
---------------------------
Peter P. Gombrich
Chairman of the Board and
Chief Executive Officer
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AMPERSAND MEDICAL CORPORATION
414 N. ORLEANS, SUITE 305
CHICAGO, ILLINOIS 60610
PROXY
FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD THURSDAY, MAY 23, 2000
The undersigned hereby appoints Peter P. Gombrich and Leonard R. Prange and each
of them, Annual proxies, each with full power of substitution to vote all of the
stock of the undersigned at the Annual Meeting of Stockholders of Ampersand
Medical Corporation to be held on May 23, 2000 at 9:00 a.m. (Chicago time) at
the offices of Ampersand at 414 N. Orleans, Suite 300, Chicago, Illinois, and at
an adjournments thereof, in the manner indicated and in their discretion on any
other business which may properly come before said meeting, all in accordance
with and as more fully described in the Notice and accompanying Proxy Statement
for said meeting, receipt of which is hereby acknowledged. THE SHARES
REPRESENTED BY THIS PROXY SHALL BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL OF EACH OF THE PROPOSALS LISTED,
INCLUDING FOR THE ELECTION OF DIRECTORS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
Please mark your votes as in this example. ( X )
PROPOSALS.
PROPOSAL 1 Election of five (5) directors to serve until the next annual meeting
of stockholders or until their successors are dully elected and qualified.
FOR WITHHELD ABSTAIN
--- -------- -------
Peter P. Gombrich ( ) ( ) ( )
Alexander M. Milley ( ) ( ) ( )
Robert C. Shaw ( ) ( ) ( )
John Abeles, M. D. ( ) ( ) ( )
Denis M. O'Donnell, M. D. ( ) ( ) ( )
PROPOSAL 2 Approval of Amendment No. 1 to the Ampersand Medical Corporation 1999
Equity Incentive Plan to increase the number of shares of Common Stock allocated
to the Plan from 2,000,000 shares to 3,000,000 shares.
FOR AGAINST ABSTAIN
--- ------- -------
( ) ( ) ( )
PROPOSAL 3 Ratification of the appointment of Ernst & Young LLP as independent
auditors for the Company for the year ended December 31, 2000.
FOR AGAINST ABSTAIN
--- ------- -------
( ) ( ) ( )
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In their discretion the proxy holders are authorized to vote upon such
other business as may properly come before the meeting or any adjournments
thereof, if such business was not know to the Board Of Directors prior to the
solicitation of this proxy.
SIGNATURE (S) _________________________________ DATE ____________________, 2000
Please sign exactly as name appears hereon. Please date, sign and return the
proxy promptly in the enclosed envelope. When signing as attorney,
administrator, trustee, or guardian, please give full title. If the signature is
for a corporation, please sign full corporate name and authorized officer. If
the shares are registered in more than one name all holders must sign.
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