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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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 [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
CAS MEDICAL SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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.
[_] 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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CAS MEDICAL SYSTEMS, INC.
44 East Industrial Road
Branford, Connecticut 06405
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 2006
TO THE STOCKHOLDERS OF CAS MEDICAL SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CAS
MEDICAL SYSTEMS, INC., a Delaware corporation (the "Company"), will be held on
Wednesday, June 14, 2006, at 10:00 a.m., Eastern Daylight Time, at the offices
of the Company, 44 East Industrial Road, Branford, Connecticut 06405, for the
following purposes:
(1) To elect four directors of the Company, each for a term of one year;
(2) To approve an amendment to the Certificate of Incorporation to
increase the authorized number of shares of common stock;
(3) To ratify the selection of UHY LLP as independent auditors for the
Company's fiscal year ending December 31, 2006;
(4) To transact such other business as may properly come before the annual
meeting.
Only stockholders of record at the close of business on April 21, 2006 are
entitled to notice of and to vote at the annual meeting or any adjournments
thereof.
By Order of the Board of Directors
Jeffery A. Baird
SECRETARY
Branford, Connecticut
April __, 2006
IF YOU DO NOT PLAN TO ATTEND THE ANNUAL MEETING TO VOTE YOUR SHARES, PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE RETURN
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES. ANY
PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME, AND STOCKHOLDERS
WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON.
1
CAS MEDICAL SYSTEMS, INC.
44 EAST INDUSTRIAL ROAD
BRANFORD, CONNECTICUT 06405
_______________
PROXY STATEMENT
_______________
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of CAS Medical Systems, Inc., a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders of the
Company (the "Meeting") to be held on Wednesday, June 14, 2006, at 10:00 a.m.
Eastern Daylight Time, at the offices of the Company, 44 East Industrial Road,
Branford, Connecticut 06405, and at any and all postponements or adjournments
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting.
This Proxy Statement, Notice of Annual Meeting and accompanying proxy
card are first being mailed to stockholders on or about April _, 2006.
GENERAL
Proxies duly executed and received will be voted on all matters
presented at the Meeting in accordance with the instructions given by the person
executing such proxy or, in the absence of specific instructions, will be voted
in favor of election to the Board of Directors of the four (4) candidates
nominated by the board and in favor of the other proposals indicated on the
proxy. Management does not know of any other matter which may be brought before
the Meeting, but in the event that any other matter should properly come before
the Meeting or any nominee should not be available for election, the persons
named as proxies will have authority to vote all proxies not marked to the
contrary in their discretion as they deem advisable. Any stockholder may revoke
his or her proxy at any time before the Meeting by written notice to such effect
received by the Company at the address shown above, Attention: Corporate
Secretary, by delivery of a subsequently dated proxy, or by attending the
Meeting and voting in person.
The Common Stock is the only class of security entitled to vote at the
meeting, each share being entitled to one vote. The total number of shares of
Common Stock outstanding as of April 21, 2006, the record date established by
the Company's Board of Directors for stockholders entitled to notice of the
Meeting and to vote at the Meeting, were _________. A majority of the issued and
outstanding shares of Common Stock, or _________ shares, must be present at the
Meeting in person or by proxy in order to constitute a quorum for the
transaction of business. Assuming the presence of a quorum, the affirmative vote
of a majority of the shares present and entitled to vote on the matter at the
Meeting is required to approve proposals 1 and 3. The affirmative vote of
holders of a majority of the outstanding shares of Common Stock is required to
approve proposal 2.
A list of stockholders entitled to vote at the Meeting will be available
for examination by any stockholder at the Company's offices, 44 East Industrial
Road, Branford, Connecticut 06405, for a period of ten days prior to the Meeting
and at the Meeting itself.
Proxies will be solicited chiefly by mail. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to the beneficial owners of the
shares and will reimburse them for their expenses in so doing. Should it appear
desirable to do so in order to ensure adequate representation of shares at the
meeting, the Company's officers, agents and employees may communicate with
stockholders, banks, brokerage houses and others by telephone, e-mail,
facsimile, or in person to request that proxies be furnished. The Company will
pay all expenses incurred in connection with this solicitation.
2
STOCK OWNERSHIP
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial
ownership of each person who is not a director or executive officer, known to
the Company to own more than 5% of the outstanding Common Stock as of April 3,
2006:
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership (1) of Class
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BMI Capital Corporation 1,706,325 16.5%
570 Lexington Avenue
New York, NY 10022
J. Sanford Davis 1,015,500 9.8%
14 Longview Terrace
Madison, CT 06443
Estate of Myron L. Cohen, Ph.D. 650,453 6.3%
401 Three Corners Road
Guilford, CT 06437
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reflects shares of Common Stock beneficially owned
(or deemed to be beneficially owned pursuant to the rules of the Securities and
Exchange Commission) as of April 3, 2006 by each director of the Company, each
of the executive officers named in the Summary Compensation Table included
elsewhere herein and the current directors and executive officers of the Company
as a group.
Amount and Nature of Percentage
Name Beneficial Ownership (1) of Class
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Louis P. Scheps 1,094,925 (2) 9.8%
Lawrence S. Burstein 245,625 (3) 2.3%
Jerome Baron 235,450 (4) 2.3%
Saul S. Milles, M.D. 71,250 (5) *
Andrew E. Kersey 121,968 (6) 1.2%
Jeffery A. Baird 83,483 (7) *
All officers and directors
as a group (6 persons) 1,852,701 (8) 15.9%
___________________
* Under 1% of the outstanding shares of Common Stock.
(1) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
beneficially owned and outstanding for the purpose of computing the
percentage ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table. Except as otherwise indicated, the persons
named herein have sole voting and dispositive power with respect to the
shares beneficially owned.
(2) Includes warrants to purchase 819,000 shares and options to purchase 50,000
shares.
(3) Includes options to purchase 3,750 shares and warrants to purchase 157,500
shares. Also includes 75,000 shares held in Mr. Burstein's IRA rollover
account and 9,375 shares owned directly and indirectly by a family member.
(4) Includes options to purchase 3,750 shares.
(5) Includes options to purchase 3,750 shares and warrants to purchase 67,500
shares.
(6) Includes options to purchase 120,000 shares.
(7) Includes options to purchase 80,000 shares.
(8) Includes warrants to purchase 1,044,000 shares and stock options to
purchase 261,250 shares.
3
ITEM 1 - ELECTION OF DIRECTORS
Four directors are to be elected at the Meeting to serve for a term of
one year or until their respective successors are duly elected and qualify. The
shares represented by the proxies will be voted in favor of the election as
directors of the persons named below unless authority to do so is withheld. If
any nominee is not a candidate for election at the Meeting, an event which the
Board of Directors does not anticipate, the proxies will be voted for a
substitute nominee and the others named below.
LOUIS P. SCHEPS - DIRECTOR SINCE 1990
Mr. Scheps, 74, was appointed President and CEO of the Company in
September 1990. He had held the position of Director of Manufacturing since
1986. Prior thereto, Mr. Scheps was employed by Posi-Seal International as Vice
President from 1969 to 1985. Mr. Scheps received his engineering degree from
Purdue University and his business education from the GE Management Program.
LAWRENCE S. BURSTEIN - DIRECTOR SINCE 1985
Mr. Burstein, 63, has been President and principal stockholder of Unity
Venture Capital Associates, Ltd. since March 1996. Prior thereto he was
President, a director and principal stockholder of Trinity Capital Corporation
since October 1982. Mr. Burstein is a director of five other public companies:
THQ, Inc., a manufacturer of video game cartridges, Medical Nutrition USA, Inc.,
a company that markets nutritional supplements, I.D. Systems, Inc., which
designs, develops and produces a wireless monitoring and tracking system and
Traffix, Inc., which is principally an internet direct marketing company. In
addition, Mr. Burstein is the President and a director of Trinity Partners
Acquisition Company, Inc., a publicly traded acquisition vehicle. Mr. Burstein
received an L.L.B. from Columbia Law School.
JEROME S. BARON - DIRECTOR SINCE 1986
Mr. Baron, 79, has been in the securities industry since 1944. He was a
Vice President in the International Department at Loeb Rhoades & Company, a
Partner at Andreson & Company, and Chairman and Chief Executive Officer of
Foster Securities, Inc., which he founded in 1974. In 1977, Foster Securities
merged with Brean Murray Securities Inc. Mr. Baron is Vice-Chairman of Brean
Murray and Company, Inc. He is a Director of Haulbowline Ltd., a private
offshore company. He attended Kings Point Merchant Marine Academy and Pace
University.
SAUL S. MILLES, M.D. - DIRECTOR SINCE 1991
Dr. Milles, 75, served as Medical Director of the General Electric
Company from 1984 to 1998. Prior to that, he was in active medical practice in
New Haven, Connecticut, as an internist and gastroenterologist from 1961 to
1984. He had served as Attending Physician at the Yale Medical Center and had
been appointed a Clinical Associate Professor of Medicine at the Yale Medical
School, as well as President of the Medical staff. He has been involved in
issues related to medical ethics, health screening and employment of the
handicapped. Dr. Milles was active in developing policies for smoking abatement
and substance abuse treatment. He has served as an advisor to the Office of
Technology Assessment of the U.S. Congress. Dr. Milles attended Cornell
University and received his M.D. degree from the University of Rochester. He
received post-graduate medical education at Yale Medical Center.
MEETINGS OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended December 31, 2005, the Board of
Directors held five meetings and acted five times by unanimous written consent.
Each director attended at least 75% of the meetings of the Board of Directors
held and of all committees of the Board of Directors on which he served while he
was director or a member of a committee of the Board of Directors with the
exception of Dr. Milles who attended three of the Board of Directors meetings,
three of the Compensation Committee meetings and four of the Audit Committee
meetings.
4
We have not established a formal policy regarding director attendance at
our annual meetings of stockholders, but our directors generally do attend the
annual meeting. The Board of Directors holds one of its regular meetings in
conjunction with the annual meeting of stockholders. Accordingly, unless one or
more members of the Board are unable to attend, all members of the Board are
present for the annual meeting. All of the four members of the Board at the time
of the Company's 2005 Annual Meeting of Stockholders attended that meeting.
COMMITTEES OF THE BOARD
The Board has standing Compensation and Audit Committees.
COMPENSATION COMMITTEE. The Compensation Committee, composed of Messrs.
Burstein, Baron and Dr. Milles, met five times during the year ended December
31, 2005. Its functions are to review the Company's general compensation
strategy; establish salaries and review benefit programs, and certain other
compensation plans; administer our equity compensation plans; and approve
certain employment contracts.
The Board of Directors has adopted a written charter for our
Compensation Committee, a copy of which is available on our website at
www.casmed.com.
AUDIT COMMITTEE. The Audit Committee, composed of Messrs. Burstein,
Baron and Dr. Milles, met five times during the year ended December 31, 2005.
Its primary responsibilities are to insure directors, regulators and
shareholders that the Company's financial accounting and reporting practices and
its business controls are adequate and effective and that the Company is
complying with applicable related rules and regulations. The Audit Committee is
directly responsible for the appointment, compensation and oversight of the
audit and related work of our independent auditors. The Audit Committee reviews
the degree of their independence; approves the scope of the audit engagement,
including the cost of the audit; approves any non-audit services rendered by the
auditors and the fees for these services; reviews with the auditors and
management our policies and procedures with respect to internal accounting and
financial controls and, upon completion of an audit, the results of the audit
engagement; and reviews internal accounting and auditing procedures with our
financial staff and the extent to which recommendations made by the independent
auditors have been implemented.
The Board of Directors has adopted a written charter for our Audit
Committee, a copy of which is attached to this Proxy Statement as Exhibit A and
which is available on our website at www.casmed.com. All members of the Audit
Committee are independent as defined in the listing standards of the Nasdaq
Stock Market. The Board of Directors has determined that Messrs Baron and
Burstein are each an "audit committee financial expert" as that term is defined
in Item 401(e) of Regulation S-B of the Securities and Exchange Commission.
NOMINATION OF DIRECTORS
Due to the small size of the Company's Board of Directors, the Board of
Directors has determined that it is appropriate for director nominations to be
made by a majority of the independent directors. Three of the four Board members
are independent as set forth in the rules of the Nasdaq Stock Market. The Board
has adopted specifications applicable to members of the Board of Directors, and
nominees for the Board of Directors recommended by the Board of Directors must
meet these specifications. The specifications provide that a candidate for
director should:
o Have a reputation for industry, integrity, honesty, candor, fairness
and discretion;
o Be an acknowledged expert in his or her chosen field of endeavor,
which area of expertise should have some relevance to our businesses;
o Be knowledgeable, or willing and able to become so quickly, in the
critical aspects of our businesses and operations; and
o Be experienced and skillful in serving as a competent overseer of,
and trusted advisor to, senior management of a publicly held
corporation.
5
In addition, nominees for the Board of Directors should contribute to
the mix of skills, core competencies and qualifications of the Board through
expertise in one or more of the following areas: accounting and finance, the
healthcare industry, international business, mergers and acquisitions,
leadership, business and management, strategic planning, government relations,
investor relations, executive leadership development, and executive
compensation.
The Board of Directors will consider nominees recommended by
stockholders for election at the 2007 Annual Meeting of Stockholders that are
submitted prior to the end of 2006 to our Secretary at CAS Medical Systems'
offices, 44 East Industrial Road, Branford, Connecticut 06405. Any
recommendation must be in writing and must include a detailed description of the
business experience and other qualifications of the recommended nominee as well
as the signed consent of the nominee to serve if nominated and elected, so that
the candidate may be properly considered. All stockholder recommendations will
be reviewed in the same manner as other potential candidates for Board
membership.
The Board of Directors has not received any nominees for election to the
Board from any stockholder or group that has held more than 5% of our Common
Stock for a period of one year.
COMMUNICATIONS WITH DIRECTORS
In order to provide our security holders and other interested parties
with an open line of communication to the Board of Directors, the Board of
Directors has adopted the following procedures for communications to directors.
CAS Medical Systems, Inc security holders and other interested persons may
communicate with the chairmen of the Company's Board committees or with the
non-management directors of the Company as a group by written correspondence to
our Secretary. The correspondence should specify which of the foregoing is the
intended recipient.
All communications received in accordance with these procedures will be
reviewed initially by our Secretary. He shall relay all such communications to
the appropriate director or directors unless he determines that the
communication:
o does not relate to the business or affairs of CAS Medical Systems,
Inc. or the functioning or constitution of the Board of Directors or
any of its committees;
o relates to routine or insignificant matters that do not warrant the
attention of the Board of Directors;
o is an advertisement or other commercial solicitation or
communication;
o is frivolous or offensive; or
o is otherwise not appropriate for delivery to directors.
The director or directors who receive any such communication will have
discretion to determine whether the subject matter of the communication should
be brought to the attention of the full Board of Directors or one or more of its
committees and whether any response to the person sending the communication is
appropriate. Any such response will be made only in accordance with applicable
law and regulations relating to the disclosure of information.
Our Secretary will retain copies of all communications received pursuant
to these procedures for a period of at least one year. The Board of Directors
will review the effectiveness of these procedures from time to time and, if
appropriate, recommend changes.
CODE OF ETHICS
Our Board of Directors has approved a Code of Ethics in accordance with
the rules of the Securities and Exchange Commission that governs the conduct of
each of our senior executive officers, including our principal executive
officer, principal operating officer, principal financial officer, principal
accounting officer and controller, or persons performing such functions. Our
Code of Ethics is maintained on our website at www.casmed.com.
6
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
during the last three fiscal years of the executive officers of the Company
(hereinafter referred to as the "named executive officers").
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Warrants All Other
Position Year Salary Bonus Options/SARs Compensation
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Louis P. Scheps, President, CEO 2005 $ 267,088 $ 50,000 0 $ 7,473
2004 254,547 100,000 0 6,740
2003 219,855 0 0 5,090
Andrew E. Kersey, COO 2005 158,973 25,000 60,000 2,438
2004 150,101 20,000 20,000 2,373
2003 125,386 0 20,000 --
Jeffery A. Baird, CFO (1) 2005 135,820 25,000 60,000 3,351
2004 130,025 20,000 50,000 3,263
2003 -- -- -- --
(1) Mr. Baird joined the Company in January 2004.
The following grants of stock options were made to executive officers
during the year ended December 31, 2005.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to For Option Term
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date 5% 10%
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Louis P. Scheps 0 -- -- -- -- --
Jeffery A. Baird 20,000 6.3% $ 2.30 2/17/15 $ 28,929 $ 73,312
40,000 12.6% 3.10 6/15/15 77,983 197,624
Andrew E. Kersey 20,000 6.3% 2.30 2/17/15 28,929 73,312
40,000 12.6% 3.10 6/15/05 77,983 197,624
7
AGGREGATED WARRANTS/OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END WARRANTS/OPTIONS VALUES
Number of Unexercised Value of Unexercised
Warrants/Options at In-the-Money Options at
December 31, 2005 December 31, 2005 (1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------
Louis P. Scheps 869,000 100,000 $ 7,206,055 $ 765,000
Andrew E. Kersey 80,000 70,000 634,500 420,500
Jeffery A. Baird 25,000 85,000 181,250 530,250
(1) Computation based upon the difference between the closing price of the
Company's Common Stock on December 31, 2005 ($8.65) and the exercise price.
No stock options or warrants were exercised by the named executive officers
during 2005.
EMPLOYMENT CONTRACTS AND TERMINATION BENEFITS
The Company and Mr. Scheps have entered into an employment agreement
pursuant to which Mr. Scheps serves as President and Chief Executive Officer of
the Company. The employment agreement, dated September 1, 2000, has been
amended, most recently on November 8, 2005 (the "Amendment"). Pursuant to the
Amendment, Mr. Scheps shall be employed by the Company as President and Chief
Executive Officer, and shall serve as a director of the Company if elected by
the stockholders, through March 31, 2007. Mr. Scheps will then serve as a
part-time employee in a senior executive role from April 1, 2007 through March
31, 2009 and will remain as a director of the Company if elected by the
stockholders. Mr. Scheps will continue to serve as Chairman of the Board during
the term of the employment agreement if elected as such by the Board of
Directors. Pursuant to the Amendment, as of October 1, 2005, Mr. Scheps is
compensated at an annual salary of $275,000. Commencing April 1, 2007 through
March 31, 2009 Mr. Scheps will be compensated at an annual salary of $100,000.
From October 1, 2005 to October 1, 2007 the Company will maintain life insurance
coverage for Mr. Scheps naming Mr. Scheps as the insured party in an amount not
less than $250,000. Further, the Company will use commercially reasonable
efforts to secure continuation of Mr. Scheps Company paid life insurance for the
period October 1, 2007 to March 31, 2009 in amounts commensurate with existing
coverage of $250,000.
The change of control provisions of the employment agreement were
revised pursuant to the Amendment such that if a Change of Control (as defined)
occurs and Mr. Scheps' employment terminates for any reason after such Change of
Control occurs, including termination by Mr. Scheps, Mr. Scheps will be paid a
lump sum of $275,000 within ten (10) days of such termination. Notwithstanding
the foregoing if the Change of Control occurs on or after April 1, 2007, Mr.
Scheps will be entitled to $100,000, rather than $275,000, except that if an
agreement of sale or merger agreement is executed while Mr. Scheps is being paid
at the $275,000 rate but the Change of Control is not consummated until after
April 1, 2007 then his payment under this provision will be equal to $275,000
rather than $100,000.
The Amendment defines "Change of Control" as (i) a sale of all or
substantially all of the Company's assets, (ii) a merger involving the Company
in which the Company's stockholders prior to the merger control less than fifty
percent of the voting stock of the surviving entity, (iii) a sale by the
Company's stockholders to an acquirer or acquirers acting in concert of more
than a majority of the then outstanding stock of the Company owned by the
Company's stockholders, or (iv) any event similar to any of the foregoing.
During October 1998, Mr. Scheps was granted a warrant to purchase
100,000 shares of the Company Common Stock at an exercise price of $1.00 per
share. This warrant is exercisable solely in the event of a Change of Control.
8
COMPENSATION OF DIRECTORS
During 2004, the Company paid an annual fee of $10,000 to each of the
Directors, other than those also serving as officers, and paid no other fee for
attendance at Board or committee meetings. On June 15, 2005, each non-employee
director of the Company was awarded a ten-year non-qualified stock option to
purchase 7,500 shares of Company common stock at an exercise price of $3.10 per
share.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth the names and positions of the executive
officers of the Company:
Name Position
---- --------
Louis P. Scheps President, Chairman of the Board, and
Chief Executive Officer
Jeffery A. Baird Chief Financial Officer & Secretary
Andrew E. Kersey Chief Operating Officer
Louis P. Scheps, 74, was appointed President and CEO of the Company in
September 1990. He had held the position of Director of Manufacturing since
1986. Prior thereto, Mr. Scheps was employed by Posi-Seal International as Vice
President from 1969 to 1985. Mr. Scheps received his engineering degree from
Purdue University and his business education from the GE Management Program.
Jeffery A. Baird, 52, joined the Company during January 2004. From April
2003 to December 2003, Mr. Baird was CFO of QDx, Inc., a startup venture engaged
in the development of novel medical diagnostic products. Mr. Baird was employed
by Novametrix Medical Systems, Inc. from 1988 to 2002 and held various positions
including Controller, Treasurer and CFO. Prior to joining Novametrix, Mr. Baird
was employed by Philips Medical Systems, Inc., a medical diagnostic imaging
company.
Andrew E. Kersey, 45, was named Chief Operating Officer during January
2004. Prior to that date, Mr. Kersey held the position of Director of
Engineering since joining the Company during October 2001. Mr. Kersey was
employed by Novametrix Medical Systems as OEM Engineering Manager between 1997
and 2001 and between 1985 and 1996 in various engineering capacities. From 1996
to 1997, Mr. Kersey was employed by Corometrix Medical Systems, a division of GE
Marquette Medical as Engineering Manager.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership with the SEC. Executive officers,
directors and greater than ten percent beneficial owners are required by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
the Company believes that during fiscal 2005 all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
ten percent beneficial owners were complied with, except that Messrs. Baird and
Kersey each failed to file Form 4 on a timely basis with respect to an option
grant.
9
ITEM 2 - AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK
We are asking our stockholders to approve an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock from 19,000,000 to 40,000,000. As of April 21, 2006, _________
shares of common stock were issued and outstanding. An aggregate of _________
shares of common stock are reserved for issuance upon conversion of outstanding
warrants, upon conversion of options outstanding or to be granted under the
Company's stock option plans, and under the Company's Employee Stock Purchase
Plan. In addition, there currently are, and will continue to be, 1,000,000
authorized shares of preferred stock. As of April 21, 2006, no shares of
preferred stock were outstanding. Each additional share of common stock will
have the same rights and privileges as each share of currently authorized common
stock. Subject to stockholder approval, the first paragraph of Article 4 of the
Company's Certificate of Incorporation, as amended, will read as follows:
"4. The total number of shares of all classes of stock which the Company
shall have authority to issue shall be forty-one million
(41,000,000), of which one million (1,000,000) shares with a par
value of $0.001 per share are to be of a class designated "Preferred
Stock" and forty million (40,000,000) shares with a par value of
$0.004 per share are to be of a class designated "Common Stock"."
The Board of Directors unanimously approved this amendment to our
Certificate of Incorporation in April 2006. The Board of Directors believes it
is in the best interests of the Company to increase the number of authorized
shares of common stock in order to give the Company greater flexibility in
considering and planning future business needs. The purposes for which
additional authorized stock could be issued include, but are not limited to,
funding of the Company's capital needs and corporate growth, corporate mergers
and acquisitions, grants under employee stock plans, purchases under the
Company's employee stock purchase plan, and for stock splits and stock
dividends. If this proposal is not adopted, the Company's flexibility in raising
capital and pursuing acquisitions may be limited.
The Board of Directors will determine whether, when and on what terms
the issuance of shares of common stock may be warranted. The Company will be
permitted to issue the additional shares of common stock without further action
by the stockholders unless such action is required by applicable law or by the
rules of the Nasdaq Capital Market or any applicable stock exchange.
Stockholders do not have pre-emptive rights with respect to the issuance of
additional shares of common stock. The Company currently has no arrangements,
commitments or understandings with respect to the sale or issuance of any
additional shares of common stock, except in connection with the options
outstanding or to be granted under the Company's stock option plans and
outstanding warrants.
If this proposal is approved, we will file an amendment to our
Certificate of Incorporation with the Delaware Secretary of State containing the
language set forth above as soon as practicable after the annual meeting to
effect the increase in the authorized shares of our common stock.
Except in certain cases such as a stock dividend, the issuance of
additional shares of common stock would have the effect of diluting the voting
power and ownership of existing stockholders. In addition, another effect of the
approval of this proposal, although not a factor in the Board of Directors'
decision to propose the amendment, may be to enable the Board to issue shares of
common stock in a manner that might have the effect of discouraging or making it
more difficult for a third party to obtain control of the Company by means of a
merger, tender offer, proxy contest or other approach.
The Board of Directors recommends that stockholders vote "FOR" the
amendment to the certificate of incorporation of the Company increasing its
authorized number of shares of common stock.
10
ITEM 3 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Unless otherwise instructed, the persons named in the enclosed proxy
intend to vote the same in favor of the ratification of the selection by the
Audit Committee of UHY LLP ("UHY") to serve as the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2006.
That firm has reported to the Company that none of its members has any direct
financial interest or material indirect financial interest in the Company or any
of its subsidiaries, nor has any member of such firm had any such connection
during the past three years.
UHY has a continuing relationship with UHY Advisors, Inc. ("Advisors")
from which it leases staff who are full time permanent employees of Advisors and
through which its partners provide non-audit services. There were no non-audit
services provided to the Company in 2004. As a result of UHY's arrangement with
Advisors, UHY has no full time employees and, therefore, all audit services
performed for the Company by UHY for 2005 were provided by permanent, full time
employees of Advisors leased to UHY. UHY manages and supervises the audit
engagement and the audit staff, and is exclusively responsible for the report
rendered in connection with its audit of the Company's 2005 consolidated
financial statements.
A representative from UHY is expected to attend the Meeting and will be
afforded the opportunity to make a statement or respond to appropriate questions
from stockholders or both.
Stockholder ratification of the selection of UHY as our independent
auditors is not required by our Bylaws or otherwise. However, the Audit
Committee is submitting the selection of UHY to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the Audit Committee will reconsider whether or not to
retain that firm. Even if the selection were ratified, the Audit Committee in
its discretion may direct the appointment of a different independent accounting
firm at any time during the year if the Audit Committee determines that such a
change would be in the best interests of the Company and its stockholders.
The Board of Directors recommends that stockholders vote "FOR"
ratification of the appointment of UHY as the Company's independent auditors for
the year 2006.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the CAS Medical Systems financial reporting
process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process. The
Company's independent auditors are responsible for expressing an opinion on the
conformity of its audited financial statements to generally accepted accounting
principles.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the audited financial statements for the
fiscal year ended December 31, 2005. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). In addition,
the Audit Committee has received from the independent auditors the written
disclosures required by Independence Standards Board No. 1 (Independence
Discussions with Audit Committees) and discussed with them their independence
from CAS Medical Systems, Inc. and its management. The Audit Committee has also
considered whether the independent auditors provision of non-audit services to
CAS Medical Systems, Inc. is compatible with the auditor's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements for the fiscal year ended December 31,
2005 be included for filing in CAS Medical Systems, Inc.'s annual report on SEC
Form 10-KSB for the year ended December 31, 2005.
11
Audit Committee of the Board of Directors
- Jerome Baron
- Lawrence Burstein
- Saul S. Milles, M.D.
AUDIT FEES
Aggregate fees billed by UHY for the audit of our interim consolidated
financial statements included in quarterly reports on Form 10-QSB, for the audit
of our annual consolidated financial statements included in the annual report on
Form 10-KSB and for the review and audit of the application of new accounting
pronouncements and SEC releases were $105,000 in 2005 and $81,500 in 2004.
TAX FEES
Aggregate fees billed by UHY for professional services rendered to the
Company for tax compliance, tax advice and tax planning were $25,500 for the
year ended December 31, 2005 and $14,000 for the year ended December 31, 2004.
The tax related services include primarily federal and state income tax
services.
AUDIT-RELATED FEES AND ALL OTHER FEES
The Company incurred $8,245 of fees billed by UHY for audit-related
services pertaining to the Company's acquisition of Statcorp, Inc, during 2005.
The Company did not incur any audit-related fees during 2004 and incurred no
other fees to UHY during 2005 or 2004.
PRE-APPROVAL POLICIES
The Audit Committee has adopted a policy under which certain audit,
non-audit and tax related services to be performed by the Company's independent
auditors are required to be pre-approved by the Audit Committee in order to
assure that they do not impair the auditor's independence from the Company.
Included in, but not limited to, those pre-approved services are, required
interim quarterly reviews; local, state and federal tax compliance, planning,
preparation and filing services; due diligence services pertaining to potential
business acquisitions and dispositions; accounting consultations related to
accounting, financial reporting or disclosure matters not classified as "Audit
Services"; assistance with understanding and implementing new accounting and
financial reporting guidance from rulemaking authorities; financial audits of
employee benefit plans; agreed-upon or expanded audit procedures related to
accounting and or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements. All of the audit-related and tax
services provided by UHY in fiscal year 2005 were approved in advance by the
Audit Committee.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the judgment of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 2007
Annual Meeting of Stockholders pursuant to the provisions of Rule 14a-8,
promulgated under the Exchange Act, must be received at the Company's offices
12
not later than December __, 2006, for inclusion in the Company's Proxy Statement
and form of proxy relating to that meeting. Stockholder proposals submitted
outside the process provided in Rule 14a-8 shall be considered untimely in
accordance with Rule 14a-5(e) if made after March __, 2007.
___________________________
A COPY OF THE COMPANY'S 2005 ANNUAL REPORT ACCOMPANIES THIS PROXY
STATEMENT. ADDITIONAL COPIES OF SUCH REPORT, AS WELL AS COPIES OF THE COMPANY'S
FORM 10-KSB, INCLUSIVE OF SCHEDULES THERETO, FOR THE YEAR ENDED DECEMBER 31,
2005, FILED WITH THE COMMISSION, WILL BE PROVIDED WITHOUT CHARGE TO ANY
STOCKHOLDER UPON WRITTEN REQUEST. REQUESTS SHOULD BE ADDRESSED TO JEFFERY A.
BAIRD, CAS MEDICAL SYSTEMS, INC., 44 EAST INDUSTRIAL ROAD, BRANFORD, CONNECTICUT
06405.
13
Exhibit A
---------
CAS MEDICAL SYSTEMS, INC.
CHARTER OF THE AUDIT COMMITTEE
I. Purposes
--------
The Audit Committee is appointed by the Board of Directors of CAS
Medical Systems, Inc. (the "Company") to assist the Board in fulfilling it
oversight responsibilities with respect to financial reporting and the other
matters listed below. The Audit Committee's primary purposes are to:
o Assist Board oversight of the integrity of the Company's financial
statements.
o Assist Board oversight of the Company's compliance with legal and
regulatory requirements, including monitoring the integrity of the
Company's reporting standards and systems of internal controls
regarding finance, accounting and legal matters.
o Recommend to the Board of Directors for stockholder approval
independent auditors to conduct the annual audit.
o Assist Board oversight by monitoring the qualifications,
independence, performance and scope of examination of the Company's
independent external auditors.
o Provide an avenue of communication among the company's independent
external auditors, management and the Board of Directors.
o Review the quarterly and annual financial statements and the annual
audit report.
o Annually prepare a report for inclusion in the Company's proxy
statement, in accordance with applicable rules and regulations.
The Company's independent external auditors should promptly consult with
the Chair of the Audit Committee if, at any time, any material concern or matter
arises which has not been promptly or appropriately addressed by the management
of the Company or which involves any illegal act or conflict of interest or
self-dealing on the part of the Company's senior management.
The Company's independent external auditors are directly accountable to
the Audit Committee. The Audit Committee has the authority to conduct any
investigation appropriate to fulfill its responsibilities and has direct access
to the independent external auditors as well as anyone in the organization.
While the Audit Committee has the responsibilities and powers set forth
in the Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent external auditors.
Nor is it the duty of the Audit Committee to conduct investigations or to assure
compliance with laws and regulations. Members of the Audit Committee shall not
be deemed to have accepted a duty of care that is greater than the duty of the
directors generally.
The Chairman of the Board and the Chief Executive Officer shall provide
the Audit Committee with all of the resources, both internal and external, which
the Audit Committee deems necessary or advisable to meet its duties and
responsibilities and carry out its function. Without limiting the foregoing, the
Audit Committee may retain, at the Company's expense and without seeking
approval from the Board of Directors, such special legal, accounting or other
consultants or experts as it deems necessary in the performance of its duties.
The Audit Committee shall inform an executive officer of the Company promptly of
any actions by the Audit Committee, of which an executive officer of the Company
is not otherwise aware, that would result in the commitment or payment of
Company funds.
II. Composition and Meetings
------------------------
The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors, each of whom shall meet the independence
criteria set forth in Rule 10A-3 of the Securities Exchange Act of 1934 and the
independence and understanding of fundamental financial statements requirements
of the Nasdaq Stock Market. At
14
least one member of the Audit Committee shall be financially sophisticated as
required by the Nasdaq Stock Market. No member of the Audit Committee shall have
participated in the preparation of the financial statements of the Company at
any time during the prior three years.
Audit Committee members shall be appointed by the Board of Directors,
shall serve at the will of the Board of Directors, and may be removed with or
without cause by the affirmative vote of a majority of the members of the Board
of Directors. No Audit Committee member may simultaneously serve on the audit
committees of more than three public companies unless the Board of Directors
affirmatively determines that such service would not impair the ability of such
member to effectively serve on the Audit Committee. The Audit Committee Chair
may be rotated among members periodically at the discretion of the Board of
Directors. If practicable, the immediate past chair will continue as a member of
the Audit Committee for at least one year to ensure an orderly transition. If an
Audit Committee Chair is not designated or present at a meeting, the members of
the Audit Committee may designate a Chair for such meeting by majority vote.
The Audit Committee shall meet on at least a quarterly basis, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting.
The Chair of the Audit Committee will regularly report the Audit
Committee's findings, conclusions and recommendations to the Board of Directors.
III. Responsibilities and Duties
---------------------------
In discharging its duties, the Audit Committee shall:
Review Procedures
-----------------
1. Review and reassess the adequacy of this Charter on at least an
annual basis and have the Charter published in accordance with SEC
regulations.
2. Review and discuss with management and the independent auditors the
Company's annual audited financial statements and related footnotes,
quarterly financial statements, and the Company's disclosures under
"Management's Discussion and analysis of Financial Condition and
Results of Operations."
3. Periodically meet separately with management, with internal auditors
(or other personnel responsible for the internal audit function) and
with the independent external auditors to discuss any matters that
the Audit Committee or each of these groups believe should be
discussed.
4. Discuss with management and the independent external auditors any
significant issues regarding accounting principles, practices and
judgments reflected therein prior to any public release, filing or
distribution.
5. In consultation with management and the independent external
auditors, consider the integrity of the Company's financial
reporting processes and controls. Review significant findings
prepared by the independent external auditors together with
management's responses and the status of management's response to
previous recommendations.
6. The Audit Committee shall review with management and independent
external auditors the Company's quarterly financial results prior to
the public release thereof and/or the Company's quarterly financial
statements prior to any public release, filing or distribution.
7. Discuss generally the types of information to be disclosed in
earnings press releases, as well as the manner of presentation and
the types of financial information and earnings guidance provided to
analysts and rating agencies.
15
8. Review and discuss any significant changes in the Company's
accounting principles and practices and any items required to be
communicated by the independent external auditors in accordance with
Statements of Auditing Standards 61 and 71, as amended from time to
time.
9. Review annually the financial and accounting organizational
structure.
Independent Auditors
--------------------
10. Retain the Company's independent external auditors, who shall report
directly to the Audit Committee, and approve any discharge of
independent external auditors when circumstances warrant.
11. Review the qualifications, independence and performance of the
independent external auditors and annually recommended to the Board
of Directors the appointment of the independent external auditors.
12. Review and evaluate the lead audit partner of the independent
auditor and assure that the lead audit partner is rotated as
required by applicable law.
13. Pre-approve all audit engagement fees and terms, as well as all
non-audit engagements with the independent external auditors. The
Audit Committee shall have sole authority to approve such matters.
14. On at least an annual basis, ensure that the independent external
auditors submit a formal written statement delineating all of their
relationships with the Company consistent with Independent Standards
Board No. 1. Review and discuss with the independent external
auditors all significant relationships they have with the Company
that could impair their independence and, when warranted, recommend
appropriate action to the Board of Directors.
15. Review and discuss the independent external auditors' audit plan
with regard to its scope, staffing, locations, reliance upon
management and general audit approach.
16. Obtain and review, at least annually, a report by the independent
auditor describing: the firm's internal quality-control procedures;
any material issues raised by the most recent quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within
the preceding five years, respecting independent audits carried out
by the firm, and any steps taken to deal with any such issues.
17. Consider and discuss with management the independent external
auditors' judgments about the quality and appropriateness of the
Company's accounting principles and underlying estimates used to
prepare the Company's financial statements, the clarity of the
Company's financial disclosure and whether the Company's accounting
principles are common practices or minority practices.
18. Consider whether, in order to assure continuing auditor
independence, there should be regular rotation of the audit firm
itself.
19. Monitor hiring practices with respect to employees or former
employees of the Company's independent external auditors.
Legal Compliance
----------------
20. Review corporate policies relating to compliance with laws and
regulations, ethics, conflicts of interest and the investigation of
misconduct or fraud.
21. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters and the confidential,
anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
16
22. Review significant cases of employee conflict of interest,
misconduct or fraud.
23. Review in-house procedures for oversight of officers' expenses and
perquisites.
24. On at least an annual basis, meet with the Company's management and,
if necessary, the Company's outside counsel, to discuss any legal
matters that could have a significant impact on the financial
statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
Other Audit Committee Responsibilities
--------------------------------------
25. Annually prepare a report to shareholders as required by the SEC, to
be included in the Company's annual proxy statement.
26. Monitor the Company's risk assessment and risk management. Discuss
significant financial risk exposures and the steps managements taken
to monitor, control and report such exposures.
27. Perform any other activities consistent with this Charter, the
company's by-laws, and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.
17
CAS MEDICAL SYSTEMS, INC.
44 East Industrial Road, Branford, Connecticut 06405
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Louis P. Scheps and Jeffery A. Baird as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them, and each of them, to represent and vote, as designated on the reverse, all
the shares of Common Stock of CAS MEDICAL SYSTEMS, INC. (the "Company") held of
record by the undersigned on April 21, 2006, at the Annual Meeting of
Stockholders to be held on June 14, 2006, or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ANNUAL MEETING OF STOCKHOLDERS OF
CAS MEDICAL SYSTEMS, INC.
JUNE 14, 2006
PLEASE DATE, SIGN AND MAIL
YOUR PROXY CARD IN THE
ENVELOPE PROVIDED AS SOON
AS POSSIBLE.
.......Please detach along perforated line and mail in the envelope provided.....
.................................................................................
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
--------------------------------------------------------------------------------
1. Election of Directors.
NOMINEES:
[_] FOR ALL NOMINEES [_] Louis P. Scheps
[_] Lawrence S. Burstein
[_] WITHOLD AUTHORITY FOR ALL NOMINEES [_] Jerome Baron
[_] Saul S. Milles, M.D.
[_] FOR ALL EXCEPT
(See Instructions Below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withold, as shown here [X]
--------------------------------------------------------------------------------
2. To approve an amendment to the Certificate of Incorporation to increase the
authorized number of shares of common stock;
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To ratify the selection of UHY LLP as independent auditors for the
Company's fiscal year ending December 31, 2006;
FOR AGAINST ABSTAIN
[_] [_] [_]
To transact such other business as may properly come before the annual
meeting.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
proposals 1, 2 and 3. Please sign exactly as name appears on the left.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
--------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that [_]
changes to the registered name(s) on the account may not be submitted via this
method.
SIGNATURE OF STOCKHOLDER_________________________________ DATE_______________
SIGNATURE OF STOCKHOLDER_________________________________ DATE_______________
Note: Please sign exactly as your name or names appear on this proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.