SCHEDULE 14A
(RULE 14a-101)
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (a)(A) OF THE
SECURITIES EXCHANGE ACT OF 193 4
1934 Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] ] Preliminary proxy statement
[ ]
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule14aRule 14a 6(e)(2))
NATIONAL SCIENTIFIC CORPORATION
------------------------------------------------ (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Payment of Filing Fee
[X] (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11:
(1) Title of each class of securities to which transaction applies; (2) Aggregate number of securities to which transaction applies; (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing fee is calculated and state how it was determined.); (4) Proposed maximum aggregate value of transaction; (5) Total fee paid. [ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number or the Form or Schedule and the date of its filing.
PRELIMINARY COPYFor Information of the Securitiesand Exchange Commission Only
NATIONAL SCIENTIFIC CORPORATION
4455 EAST CAMELBACK ROAD,
14455 N. HAYDEN RD., SUITE E-160
PHOENIX,202
SCOTTSDALE, ARIZONA 85018
85260 NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD FEBRUARY 26, 2002 To the Shareholders of National Scientific Corporation:
Notice is hereby given that the annual meetingAnnual Meeting of shareholdersShareholders of National
Scientific Corporation, a Texas corporation (NSC), will be held on Tuesday,
February 14, 200126, 2002, at the Wells Fargo Conference Center, 100 W. Washington, Phoenix,Chaparral Suites Hotel, 5001 North Scottsdale Rd.,
Scottsdale, Arizona 8500385250, at 10:8:00 a.m., local time, for the following purposes:
The Board of Directors has fixedto serve for a
one-year term.
2. To ratify the appointment of Hurley & Company to serve as the auditors
for the Company for the fiscal year ending September 30, 2002.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on January 2,December 31, 2001 as(the
"Record Date"), are entitled to vote at the record date forAnnual Meeting or any adjournment
or postponement thereof. Shares may be voted at the determinationAnnual Meeting only if the
holder is present or represented by proxy. A list of shareholders entitled to
notice of and to vote at the meeting andAnnual Meeting will be available for inspection at the Company's
corporate headquarters for any adjournment thereof.
purpose germane to the Annual Meeting during
ordinary business hours for ten (10) days prior to the Annual Meeting.
A copy of NSC’sNSC's Annual Report to Shareholders, which includes audited financial
statements, is included with this mailing, which is being first mademailed on
approximately the date shown below.
| Management and the Board of Directors
cordially invite you to attend the Annual Meeting.
By Order of the Board of Directors
/s/ Sam H. Carr
Sam H. Carr, Secretary
Phoenix, Arizona
January 21, 2002
SHAREHOLDERS ARE ENCOURAGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY. A
PRE-ADDRESSED ENVELOPE IS PROVIDED FOR THEIR CONVENIENCE. SHAREHOLDERS ARE
ENCOURAGED TO VOTE REGARDLESS OF WHETHER OR NOT THEY ATTEND THE ANNUAL MEETING
OF SHAREHOLDERS.
| |||
IF YOU ARE UNABLE TO ATTEND THE MEETING, YOU ARE URGED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE POSTAGE-PAID ENVELOPE ENCLOSED HEREWITH FOR YOUR CONVENIENCE
PROXY STATEMENT
The annual meeting of shareholders of National
Scientific Corporation, (NSC)a Texas corporation (the "Company" or "NSC"), in
connection with the solicitation of proxies to be used for the purposes of
voting at the 2002 Annual Meeting of Shareholders (the "Annual Meeting") of the
Company. The Annual Meeting will be held on Tuesday, February 14, 200126, 2002, at 8:00
a.m., local time at the Wells Fargo Conference Center, 100 W. Washington St., Phoenix,Chaparral Suites Hotel, 5001 North Scottsdale Road,
Scottsdale, Arizona 85003 for the purposes set forth in the Notice of Annual Meeting.85250.
SOLICITATION AND VOTING OF PROXIES
The accompanying form ofenclosed proxy for use at the Meeting and any adjournments thereof is solicited by the Board of Directors of NSC and may be revoked by written noticethe Company.
The proxy materials related to the SecretaryAnnual Meeting were mailed on or about
January 21, 2002, to shareholders of NSCrecord at the close of business on December
21, 2001 (the "Record Date"). Only shareholders of record at the close of
business on the Record Date will be entitled to vote at the Annual Meeting, or
any time prior to its exercise, by votingadjournment or postponement thereof, either in person or by valid proxy. As
of the Record Date, there were outstanding 48,328,067 shares of common stock,
$.01 par value per share (the "Common Stock") of the Company.
Shareholders are entitled to one vote for each share of Common Stock held
of record on each matter of business to be considered at the Annual Meeting.
Ballots cast at the Annual Meeting orwill be counted by givingthe Inspector of Elections
and determinations of whether a later dated proxyquorum exists and whether the proposals are
approved will be announced at any timethe Annual Meeting. The five nominees receiving a
plurality of votes by shares represented and entitled to vote at the Annual
Meeting, if a quorum is present, will be elected as a director of the Company.
All valid proxies received before voting. Sharesthe Annual Meeting and not revoked will
be exercised. All shares represented by a proxy will be voted, for the electionand where a
shareholder specifies by means of the nominees for directors named and for the other proposals described in this Proxy Statement. Abstentions and broker non-votes will be counted as presenthis, her or represented at the Meeting for purposes determining whetherits proxy a quorum exists. Abstentions and broker non - -voteschoice with respect to
any matter brought to a vote atbe acted upon, the Meetingshares will be treatedvoted in accordance with the
specifications so made. If no specification is indicated and authority to vote
is not specifically withheld, the shares will be voted (i) "for" the election of
the persons named in the proxy to serve as Directors; and (ii) "for" the
ratification of Hurley & Company as the independent auditors of the Company. The
Inspector of Elections will treat abstentions and broker non-votes received as
shares that are present but not votedand entitled to vote for purposes of determining whether requisitea
quorum, but as unvoted for purposes of determining the approval of any matter.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote has been obtained. This Proxy Statementon a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
The Company will bear the accompanying formcost of proxy are being mailed to shareholders commencing on or about January 2, 2001.
All expenses in connection with the solicitation of this proxy will be paid by NSC,proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation materials to the beneficial owners.owners of the outstanding Common Stock.
In addition to solicitationsoliciting proxies by mail, officers, directorsproxies may be solicited by personal
interview or telephone. A person giving the enclosed proxy has the power to
revoke it at any time before it is exercised by: (i) attending the Annual
Meeting and regular employeesvoting in person; (ii) duly executing and delivering a proxy bearing
a later date; or (iii) sending a written notice of NSC who will receive no extra compensation for their services may solicit proxies byrevocation to the Secretary
of the Company at its corporate offices. The corporate offices of the Company
are located at 14455 North Hayden Road, Suite 202, Scottsdale, Arizona 85260 and
its telephone fax, e-mail or personal calls.
number is (480) 948-8324. The information included herein should be reviewed in conjunction with the financial statements, notes to financial statements, independent accountants' report and other information included in the Company's 2001 Annual Report to Shareholders that was mailed with this Proxy Statement to all shareholders of record on the Record Date. The Board of Directors knows of no other matters that may be brought before the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, persons named in the enclosed proxy or their substitutes will vote in accordance with their best judgment on such matters.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only the holders of NSC Common Shares whose names appear of record on NSC’s books at the close of business on January 2, 2001 (“ Record Date”) will be entitled to vote at the Meeting. At the close of business on the Record Date, NSC had xxxxxxx Common Shares (NSC’s only voting securities) outstanding and entitled to vote. Each Common Share entitles the holder thereof to one vote upon each matter to be voted upon.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of a majority of the Common Shares issued and outstanding and entitled to vote will be necessary and sufficient to constitute a quorum to transact business. Each Common Share represented at the Meeting in person or by proxy will be counted toward a quorum. In deciding all questions and other matters, a holder of Common Share on the Record Date shall be entitled to cast one vote for each Common Share registered in his or her name. Abstentions and broker non-votes will not be counted in the election of directors, the proposal to amend the Articles of Incorporation or the proposal to approve the 2000 Stock Option Plan (the “2000 Plan”).
The following table sets forth, as of the Record Date for the Meeting, certain information with respect to beneficial share ownership by the directors and nominees individually, by all officers and directors as a group and by all persons known to management to own more than five percent (5%) of NSC’s outstanding Common Shares. Except as otherwise indicated, the shareholders listed have sole investment and voting power with respect to their shares.
| Name of Beneficial Owner | Number of Common Shares Beneficially Owned | Percent of Outstanding Shares | |||||
| Lou L. Ross | 3,455,040 | (1) | |||||
| Majid Hashemi, Ph.D. | 1,425,000 | ||||||
| Michael A. Grollman | 600,000 | (2) | |||||
| Sam H. Carr | 600,000 | (3) | |||||
| Richard Kim | 20,000 | ||||||
| All officers and directors as a group (5 persons) | 6,100,040 | ||||||
______________
(1) Includes 1,000,000 shares held by Mr. Ross’ wife
(2) Includes 500,000 shares underlying stock options currently exercisable
(3) Includes 600,000 shares underlying stock options currently exercisable
The Board of Directors of NSC (the “Board”"Board") has recommended the number of
directors to be elected for the coming year be set at five.four. The Board recommends
that the shareholders elect the nominees named below as directors of NSC for the
ensuing year and until their successors are elected and have qualified. The persons
named in the enclosed form of proxy intend to vote for the election of the five
nominees listed below. Mr. Ross is currently the Chairman of the Board, and Dr. Kim, Mr.
Grollman, Mr. Martin and Mr. Carr also currently serve as directors. Each
nominee has indicated a willingness to serve, but in the event any one or more
of such nominees for any reason should not be available as a candidate for
director, votes cast will be cast pursuant to authority granted by the enclosed
proxy for such other candidate or candidates as may be nominateddetermined by management.the holders
of such proxy. The Bo ardBoard knows of no reason to anticipate that any of the
nominees will not be a candidate at the Meeting.
NAME CURRENT POSITION WITH NSC AGE - ---- ------------------------- --- Lou L. Ross
Mr. Ross has over 35 years of experience in the manufacture Chief Executive Officer and sale of electronic components for various Fortune 500 companies including Lockheed Aircraft, Fairchild Camera and Instrument Co. and Intel Corporation. At Fairchild Camera and Instrument Co., he was General ManagerChairman of the Digital Instrument Division. At Lockheed Aircraft, he was Manager of Electronic Planning. AsBoard 72
Michael A. Grollman President, and CEO of Intel Corporation (Malaysia), he established that company’s first offshore manufacturing operation in Penang, along with another facility in Manila. Mr. Ross was a founder and Executive Vice President for Advance Semiconductor Engineering in the Far East and established manufacturing facilities for what is considered one of the most advanced semiconductor assembly houses in the world. He has established other major manufacturing facilities, from start up to full production, in such locations as Mal aysia, Singapore and Taiwan. Since December 1998,Director 40
Sam H. Carr Chief Financial Officer, Secretary, Director 45
Charles E. Martin Director 42
William J. Keilen Director 61
LOU L. ROSS
Mr. Ross has served as the Chairman of the Board of National Scientific Corporation,Directors since 1996 and
devoted significant time toward the coordination of its proprietary technologies and overseeing infrastructure development. For approximately three years priorassumed President & CEO duties in March 1998. From 1970 to December 1998,1975, Mr. Ross served
as Chairman & CEO of Intel Malaysia, established Intel's Manila plant and
started Intel's military products operation. From 1976 to 1996, Mr. Ross served
in a membertechnical consulting capacity for various electronics manufacturing firms,
including Labelab and Advanced Semiconductor Engineering.
MICHAEL A. GROLLMAN
Mr. Grollman became Chief Operation Officer of NSC in October 2000 and
was elected to its Board in November 2000. Prior to joining NSC, Mr. Grollman
was Regional Service Director of MicroAge, Inc. in Phoenix, Arizona beginning in
1998. He served as General Manager, Executive Vice President and Chief
Technology Officer for Advanced Information Systems from 1987 to 1998.
SAM H. CARR
Mr. Carr joined NSC as its Chief Financial Officer in October 2000 and was
elected to its Board in November 2000. From 1997 to 2000, he served as Senior
Vice President of Finance and Chief Financial Officer for e-dentist.com,
formerly known as the BoardPentegra Dental Group, Inc. Prior to that, Mr. Carr was
Chief Financial Officer and an independent consultant to two high technology companies, Intercell Corporation and Intercell Technologies, Inc.
Richard C. Kim, Ph.D.
Richard Kim, Ph.D.Chief Development Officer for a consolidator of
podiatry practices.
CHARLES E. MARTIN
Mr. Martin was the founder andappointed Director of NSC in December 2000. Since November
1999 he has been the President of OHost Corporation since September 1999.Kinetic Thinking, a technology consulting
firm. He is also currently a Director and CEO of its parent, KoreaStation Corporation. From 1994 to 1999, he was Executive Vice President of Engineering (and Interim President) of Technical Systems Integrators, Inc. (“TSI”). As a founder of TSI, he was responsible for all technologies and products developed by TSI including laser marking systems, vision inspection systems and various automated part-handling systems.
From 1991 to 1994, Dr. Kim was a Director of Research and Development at General Scientific Corp. He was responsible for the research and development of optical, electro-optical and instrumentation technology. Dr. Kim has also held key positions as the applied holography group leader for Physical Optics Corporation, 1990-1991; as a technical staff member for Rockwell International’ s Advanced Optical Systems Department, 1998-1990; as a technical founder of CyberOptics Corporation, 1984-1988. At CyberOptics, Dr. Kim developed laser range sensors and systems for 3-D vision, non-contact metrology and profiling applications for semiconductor and electronics manufacturing. Prior to being a founding principal of CyberOptics, he began his distinguished career with the Ampex Corporation in 1981. Dr. Kim received his Bachelor of Science degree in Electrical Engineering and Computer Science from the University of California at Berkley, and his Master of Science Electrical Engineering and Doctorate degrees from the University of Minnesota.
Michael A. Grollman
Mr. Grollman has served as NSC’s Chief Operating Officer since December 1, 2000 and as a Director of NSC since December 1, 2000. Mr. Grollman has over fifteen years of management experience in technology development and sales for firms that range in revenue from $9 million a year to over $6 billion a year. From November 1997 to September 2000, Mr. Grollman worked as a Regional Manager for MicroAge, Inc. in Phoenix, Arizona. From January 1995 until November 1997, he worked as a Regional Director with MTS of Tempe, a Chief Technology Advisor and Executive Vice President with AIS of Scottsdale, and a General Manager and Area Vice President with Margre, Inc. of Portland (Oregon). In each of these positions, Mr. Grollman handled strategy, P&L management, new business development, and oversight of numerous engineering teams across wide geographies, both inside an d outside the continental United States. Mr. Grollman holds a BS degree in Chemistry from the State University of New York, and will complete his MBA at Arizona State University over the next 12 months.
Sam H. Carr
Mr. Carr has served as NSC’s Chief Financial Officer and Secretary since December 1, 2000 and as a Director of the Company since December 1, 2000. Mr. Carr most recently served as Chief Financial Officer of e-dentist.com (“EDT”), formerly Pentegra Dental Group, Inc. from September 1997 until August 2000. He also served as a member of the Board of Directors of e-dentist.com from April 1998 until August 2000. As a co-founder of EDT, he was an essential part of the difficult but successful Initial Public Offering of EDT in March 1998. From August 1996 until September 1997, Mr. Carr served as the Chief Financial Officer of Ankle and Foot Centers of America, LLC, a podiatry practice management company. Mr. Carr worked with Arthur Andersen for the first 12 years of his professional career in the audit division. In 1990, Mr. Carr became the Chief Financ ialTechnology Officer for a large hospital in Santa Fe, New Mexico, then served as the Chief Financial Officer of a Columbia/HCA hospital located in Houston. He then returned to Arthur Andersen in 1994 where he headed the Houston Office Healthcare Consulting practice. Mr. Carr holds an executive MBA from the University of New Mexico and a BBA in Accounting from the University of Texas at Austin. Mr. Carr is a Certified Public Accountant.
Charles E. Martin
Charles E. Martin is a co-founder of Kinetic Thinking and has been President since its inception in November 1999. Mr. Martin specializes in eBusiness strategy development, business process enablement through technology and cross-functional business integration. Prior to founding Kinetic Thinking, Mr. Martin served as Chief Information Officer for MicroAge Inc. from July 1997
until November 1999. He also held the position of Vice President of Professional Services in ECadvantage, MicroAge’s electronic commerce subsidiary. Before MicroAge, Mr. Martin was employed by Solutions Consulting from July
1996 until July 1997, Ernst & Young, LLP from1997. From February 1995 until July 1996 and Digital Equipment Corporation for the two years prior. His experience crosses the breadthhe worked as a
consultant with Ernst & Young.
WILLIAM J. KEILEN
Mr. Keilen has been nominated to serve as a Director of the computing electronics channel from semi-conductor manufacturing to client systems integration. His focus has been on electronic commerce, order management, materialCompany. Mr.
Keilen served as Vice President and manufacturing planning, data warehousing & financial planning systems. Mr. Martin earned his Bachelors degree in Accounting at Arizona State University and served in the US Navy Submarine Service.
Vote Required
In order to be elected a director, a nominee must receive the affirmative voteDirector of the holdersSemiconductor Products
Sector of Motorola since 1985. In 2001, Mr. Keilen retired in Phoenix, Arizona
from Motorola. Mr. Keilen currently serves on several non-profit organization
boards. He holds a majoritybachelors degree from Michigan State University.
The nominees receiving a plurality of thevotes by Common ShareShares present,
in person or by proxy, at the Meeting.
Annual Meeting, if a quorum is present, will be
elected as a director of the Company.
2
Meetings; Committees of the Board of Directors
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The business of NSC is managed under the direction of the Board. The Board
meets on a regularly scheduled basis to review significant developments
affecting NSC and to act on matters requiring Board approval. It also holds
special meetings when an important matter requires Board action between
scheduled meeting.meetings. The Board met fifteen (15)eight (8) times during fiscal 20002001 and did not
act by unanimous consent in lieu of any meetings.
Each director attended in
excess of 75% of the meetings held in 2001 by the Board and the committees of
the Board on which such director served.
At September 30, 20002001, there were no committeeswas one committee of the Board. In December
2000, the Board established an audit committee (the “Audit Committee”"Audit Committee") was appointed,, whose
membership nowcurrently consists of Dr. Richard C. Kim, Mr. Charles E.Messrs. Martin and Mr. Michael A. Grollman. NSC believes that
Dr. Kim and Mr. Martin are “independent”is "independent" as that term is used in Sections 303.01(B)(2)(a) and
(3) of the New York Stock Exchange Listing Standards, but that Mr. Grollman is
not “independent”"independent" as that term is used in thosesuch standards.
The Audit Committee of
the Board of Directors (the "Audit Committee") is responsible for, among other
things, reviewing and discussing the audited financial statements with
management, discussing with the Company's auditors information relating to the
auditors' judgments about the quality of the Company's accounting principles,
recommending to the Board of Directors that the Company include the audited
financials in its Annual Report on Form 10-KSB and overseeing compliance with
the Securities and Exchange Commission requirements for disclosure of auditors'
services and activities. Currently, the Audit Committee does not have a charter. NSC anticipates that the Audit Committee will review and discuss with NSC’s management and independent auditors NSC’s audited financial statements at and for the year ended September 30, 2001. However, the Audit Committee was appointed following the completion of the audit of NSC’s financial statements at and for the year ended September 30, 2000 (the “2000 Financial Statements”). Therefore, the Audit Committee has not reviewed and discussed the 2000 Financial Statements with management or NSC’s independent accountants or received the written disclosures and the letter from independent accountants required by Independence Standards Board No. 1 or discussed with NSC’s independent accountants the independent accountants’ independence.
** 1
Directors of NSC who are not employees of NSC are compensated at a rate of
$2,000 per month and $100 per Board meeting. In addition, Board members are
granted 5,000 restricted Common Shares upon their election to the Board, and are
entitled to receive an additional 5,000 options which vest in 12 months from the date of grant, to purchase Common Shares at the
current market value in NSC at the end of each complete year serving as a
Director. These options vest 12 months from the date of grant. The options
granted under the 2000 Plan to directors who are not employees of the Company
are intended to be “nonqualified options”"nonqualified options" under the Internal Revenue Code of
1986, as amended (the “Code”).
** 2 Theseamended.
The above standards of Board compensation were formally established in
December 2000. Prior to thisthe adoption of a formal policy, 20,000 restricted
Common Shares were issued by NSC to Dr. Richard Kim, a former board member, in
consideration of his services as a Director of NSC. Dr. Kim’s compensation for serviceKim resigned from the
Board in October 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information, as of the Record Date,
concerning the beneficial ownership by (i) each director and nominee of the
Company, (ii) each of the Company's executive officers, (iii) each person known
to the Company to be the beneficial owner of more than five percent (5%) of
NSC's outstanding Common Shares, and (iv) all directors and executive officers
of the Company as a Director will followgroup. To the policy guidelines describedknowledge of the Company, all persons listed
in the table have sole voting and investment power with respect to their shares,
except to the extent that authority is shared by their respective spouses under
applicable law.
NUMBER OF
COMMON SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER(1) OWNED(2) SHARES
- ------------------------------------ ------------ -----------
Lou L. Ross 3,455,040(3) 8%
Majid Hashemi, Ph.D -- *
Michael A. Grollman 781,000(4) 2%
Sam H. Carr 750,000(5) 2%
Charles E. Martin 5,000(6) *
All executive officers and directors
as a group (5 persons) 4,999,040 12%
- ---------
* Less than 1%
(1) The business address for all directors and officers of the Company is c/o
the Company, 14455 North Hayden Road, Suite 202, Scottsdale, Arizona 85260.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above prospectively.
through the exercise
of any option, warrant or right. Shares of Common stock subject to options,
warrants or rights that are currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage of the person
3
The following table lists the totalsets forth certain information regarding annual and
long-term compensation for NSC’sservices rendered to the Company during the fiscal
years ended September 30, 2001, 2000 and 1999 by the Chief Executive Officer and Corporate Secretary,of
the Company and each other executive officer whose total salary and non-cash
compensation exceeded $100,000 for the applicable fiscal 2000, 1999 and 1998.
periods. SUMMARY COMPENSATION TABLE
| Name And Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Other Annual Compensation ($) | |||||||||
| Lou L. Ross, CEO, Chairman of the Board | 2000 | 110,591 | 0 | 0 | |||||||||
| 1999 | 14,600 | 0 | 0 | ||||||||||
| 1998 | 2,500 | 0 | 0 | ||||||||||
| Majid Hashemi, President | 2000 | 238,500 | 0 | 4,847,265 | (1) | ||||||||
| Vernon M. Traylor | 2000 | 117,591 | 0 | 36,000 | (1) | ||||||||
| 1999 | 68,700 | 0 | 240,000 | (1) | |||||||||
| 1998 | 22,500 | 0 | 55,000 | (1) | |||||||||
______________
COMPENSATION/
(3) Dr. Hashemi served as the Company's President from September 1, 2000 to
November 30, 2000. Dr. Hashemi is no longer employed by the Company.
(4) Includes 100,000 shares of restricted stock granted to Mr. Grollman in
connection with his employment agreement.
EMPLOYMENT AGREEMENTS
Throughout fiscal 2000, Mr. Ross was engaged as an independent contractor.contractor
for the Company. As such, Mr. Ross is party towas paid a contract with NSC that includes compensationmonthly fee of $9,500, per month, subject to
cash availability. Effective December 1, 2001, Mr. Ross became an employee of
the Company. Throughout fiscal 2001 and continuing into the current fiscal year,
Mr. Ross served without a written contract and was paid $9,500 monthly. In
addition, in connection with an equity transaction involving Mr. Ross and his
spouse in September 1999, the Board provided forgranted Mr. Ross the right to receive 4%
of
the gross revenues of NSC. Effective December 1, 2000,In partial consideration for the forgiveness of this
right to 4% of NSC's future revenues, the Company agreed to issue 500,000
restricted shares of common stock in NSC to Mr. Ross became an employee of NSC. NSC is in the process of negotiatingRoss. The 500,000 shares are
subject to the terms of a Restricted Stock Award Agreement, which requires that
the shares issued will be released only when the market price of the stock
exceeds $2.50 per share.
Subsequent to fiscal year end 2001, the Company granted Mr. Ross options to
purchase an employment agreementaggregate of 750,000 shares of common stock. These options consist
of ten separate tranches of 75,000 shares each, whose exercise prices range from
$1 to $10 per share, which vest when the previous five day average market price
exceeds even dollar levels beginning with Mr. Ross.
$1 per share through $10 per share.
Dr. Hashemi was appointed President of NSC on September 1, 2000. Effective
that date, Dr. Hashemi was contracted as an independent contractor to receive
annual base compensation of $240,000, plus $12,000 annually to assist in the
purchase of health insurance and other benefits. On September 1, 2000, he was
paid $100,000 as an initial payment for contracting with NSC. In addition, he
received 1.0one million restricted shares of Common SharesStock on September 1, 2000. His
contract also callscalled for three additional grants of Common Shares of 250,000
each on December 1, 2000, February 1, 2001 and April 1, 2001. The contract is a
one yearone-year contract with automatic renewals for one year unless either party
chooses to terminate the contract. The stock issued and to be issued to Dr.
Hashemi is to be returned to NSC should his contract be terminated by either
party for a nyany reason other than death on or before January 1, 2003.
Effective December 1, 2000,In the first quarter of fiscal 2001, Dr. Majid Hashemi and the Company
executed an employment agreement that superceded his independent contractor
agreement. Under his employment agreement Dr. Hashemi became an employeeagreed to serve as the
Division President of NSC under a one year, self-renewing employment agreement.the California Division. His employment agreement contains
the same terms as the previous contractor agreement, including a base annual
salary of $252,000, the continuation of the stock awards, and thea provision
requiring return of the shares should his employment be terminated by either
party for any reason other than death prior to January 1, 2003. As part of his
employment agreement, he received 2,766,667 common stock options in exchange for
1,325,000 previously issued shares of common stock. This employment agreement
represented a modification of his September 1, 2000 consulting agreement. The
stock options, as valued under the Black-Scholes model, had a fair value of
$3,478,000, and the returned stock had a fair value of $2,672,500 on the date of
the exchange, resulting in a net charge to operations of $805,500. Additionally,
$3,712,500 in deferred stock compensation, arising from the initial consulting
agreement and being amortized over a 3-year service period, was expensed in
full. In the event that NSC terminates Dr. Hashemi’sfourth quarter of fiscal 2001, the Company rescinded the employment
followingagreement, which included the stock option grant. As a changeresult, the Company
reversed the charge to compensation expense representing the original grant of
vested options by $3,478,000. The net compensation expense associated with these
transactions recognized in control or a salethe financial statements during the fiscal year ended
September 30, 2001 was $1,040,000, the difference between the amortization of
substantially all the assetsdeferred stock compensation and the market value of NSC,the returned stock. Dr.
Hashemi is to receive one hundred fifty percent (150%) ofno longer employed by the then current year’s annual salary.
Company. Mr. Traylor served as an independent contractor for NSC until August 1, 2000. The terms of his agreement included a base compensation of $8,500 per month. Mr. Traylor is no longer affiliated with NSC.
Mr. Grollman servedwas engaged by NSC as an independent contractor from October
7, 2000 until November 30, 2000. He was paid $15,000 monthly for his services.services as
an independent contractor. Effective December 1, 2000, Mr. Grollman was employedbecame an
employee of NSC under a one year contract to serve as NSC’sNSC's Chief Operating
5
one yearone-year terms unless either party chooses
to terminate. Mr. Grollman’sGrollman's contract calls for an annual gross salary of
One Hundred Eighty Thousand Dollars ($180,000.00),$180,000, payable semi-monthly. Also in accordance with the contract, on
December 1, 2000, NSC granted Mr. Grollman 100,000 restricted Common Shares.
Also on December 1, 2000, NSC granted Mr. Grollman 500,000 fully vested options to
purchase Common Shares at the closing sales price of the shares on December 1, 2000. On December 1, 2001, the contract calls for Mr. Grollman to be granted an additional 500,000 fully vested options at the closing sales price for the Common Shares on
December 1, 2001, provided that during2000. Additional option grants are included in Mr. Grollman's
employment contract for each whole dollar amount increase in the preceding twelve months, cash generated from financing activitiesmarket value of
NSC's Common Shares. The whole dollar amount increase is equal or greater than $10 million.measured over a moving
two-week average. For each whole dollar amount attained between $1 and $15
inclusive, Mr. Grollman will receive 75,000 options at the whole dollar amount
option price. Mr. Grollman is also entitled to additional options at various but
declining levels for increases in stock value up to $50 per Common Share. In the
event that NSC terminates Mr. Grollman’s employment followingof a change in control or sale of substantially all the assets of NSC, the
employment agreement between Mr. Grollman and NSC automatically terminates, and
Mr. Grollman is to receive one hundred fifty percent (150%) of the then current
year’syear's annual salary.
Mr. Carr served NSC as an independent contractor from October 15, 2000
until November 30, 2000. He was paid $13,750 monthly for his services. Effective
December 1, 2000, Mr. Carr wasbecame employed under a one year contract to serve as
NSC’sNSC's Chief Financial Officer. The contract automatically renews for additional
one yearone-year terms unless either party chooses to terminate. Mr. Carr’sCarr's contract
calls for an annual gross salary of one hundred sixty five thousand dollars ($165,000.00),$180,000, payable semi-monthly. Also in
accordance with the contract, on December 1, 2000, NSC granted Mr. Carr 100,000
vested options to purchase Common Shares at a price equal to twenty five percent (25%)25% of the closing
price per share on December 1, 2000. Also on December 1, 2000, NSC granted Mr.
Carr 500,000 fully vested options to purchase Common Shares at the closing sales pric eprice
of the shares on December 1, 2000. On December 1, 2001,Additional option grants are included in Mr.
Carr's employment contract for each whole dollar amount increase in the contract calls formarket
value of NSC's Common Shares. The whole dollar amount increase is measured over
a moving two-week average. For each whole dollar amount attained between $1 and
$15 inclusive, Mr. Carr to be granted an additional 500,000 fully vestedwill receive 75,000 options at the closing sales price on December 1, 2001, provided that during the preceding twelve months, cash generated from financing activitieswhole dollar amount
option price. Mr. Carr is equal or greater than $10 million.also entitled to additional options at various but
declining levels for increases in stock value up to $50 per Common Share. In the
event that NSC terminates Mr. Carr’s employment followingof a change in control or sale of substantially all the assets of NSC, the
employment agreement between Mr. Carr and NSC automatically terminates, and Mr.
Carr is to receive one hundred fifty percent (150%)150% of the then current year’syear's annual salary.
PROPOSAL 2 — APPROVAL
REPORT OF THE NATIONAL SCIENTIFIC CORPORATION 2000 STOCK OPTION PLAN
The Board proposes that the shareholders of NSC approve the 2000 Plan. The 2000 Plan was adopted by the Board on December 1, 2000. The 2000 Plan terminates on December 1, 2010 unless previously terminated by the Board. The 2000 Plan is being implemented to encourage ownership of Common Shares by certain officers, directors, employees and advisors of NSC or its subsidiaries. The 2000 Plan also provides additional incentive for eligible persons to promote the success of the business of NSC or its subsidiaries, and to encourage them to remain
in the employ of NSC or its subsidiaries by providing such persons an opportunity to benefit from any appreciation of the Common Shares through the issuance of stock options in accordance with the terms of the 2000 Plan.
Eligible participants in the 2000 Plan include full time employees, of NSC and its subsidiaries, as well as directors and advisors of NSC and its subsidiaries. Options granted under the 2000 Plan are intended to qualify as “incentive stock options” pursuant to the provisions of Section 422 of the Code or options which do not constitute incentive stock options (“nonqualified options”) as determined by NSC’s Compensation Committee (the “Committee”) or the Board.
The Board is of the opinion that it would be in the best interest of NSC to reserve for issuance under the 2000 Plan not less than 7,000,000 Common Shares to provide adequate Common Shares for issuance to qualified individuals under the 2000 Plan, and to encourage such individuals to remain in the service of NSC in order to promote its business and growth strategy. NSC may also utilize the granting of options under the 2000 Plan to attract qualified individuals to become employees and non-employee directors of NSC, as well as to ensure the retention of management of any acquired business operations. The maximum aggregate number of Common Shares which may be issued under the 2000 Plan shall initially be 7,000,000 shares, which amount may, at the discretion of the Board, be increased from time to time to a number not to exceed 15% of the number of shares of Common Stock outstanding from time to time .
Summary of 2000 Plan
The following is a summary of certain of the provisions of the 2000 Plan. The full text of the 2000 Plan is set forth as Exhibit A to this Proxy Statement.
Administration
The 2000 Plan will be administered, in the discretion of the Board, by the Committee or the entire Board. Under the terms of the 2000 Plan, the Committee shall consist of not less than two members of the Board who are appointed by the Board, and are nonemployee directors. The Board has the power from time to time to add or substitute members of the Committee and to fill vacancies, however caused.
The Committee or the Board, as applicable, has the authority to interpret the 2000 Plan, to determine the persons to whom, and the basis upon which, options will be granted, the exercise price, duration, and other terms of the options to be granted, subject to the authority of the entire Board and specific provisions contained in the 2000 Plan.
Eligibility
Nonqualified Options. Nonqualified options may be granted only to officers, directors (including non-employee directors of NSC or a subsidiary), employees and advisors of NSC or a subsidiary who, in the judgment of the Committee, are responsible for the management or success of NSC or a subsidiary and who, at the time of the granting of the nonqualified options, are either officers, directors, employees or advisors of NSC or a subsidiary.
Incentive Options. Incentive stock options may be granted only to employees of NSC or a subsidiary who, in the judgment of the Committee or the Board, are responsible for the management or success of NSC or a subsidiary and who, at the time of the granting of the incentive stock option, are either an employee of NSC or a subsidiary. No incentive stock option may be granted under the 2000 Plan to any individual who would, immediately before the grant of such incentive stock option, directly or indirectly, own more than ten percent (10%) of the total combined voting power of all classes of stock of NSC unless (i) such incentive stock option is granted at an option price not less than one hundred ten percent (110%) of the fair market value of the shares on the date the incentive stock option is granted and (ii) such incentive stock option expires on a date not later than five years from the date the i ncentive stock option is granted.
Option Price
The purchase price as represented by Common Shares offered under the 2000 Plan must be one hundred percent (100%) of the fair market value of the Common Shares (in the case of incentive stock options), twenty five percent (25%) of the fair market value of the Common Shares at the time the option is granted (in the case of
nonqualified options), or such higher purchase price as may be determined by the Committee or the Board at the time of grant; provided, however, if an incentive stock option is granted to an individual who would, immediately before the grant, directly or indirectly own more than ten percent (10%) of the total combined voting power of all classes of stock of NSC, the purchase price of the shares of the Common Shares covered by such incentive stock option may not be less than one hundred ten percent (110%) of the fair market value of such shares on the day the incentive stock option is granted. As the price of the Common Shares is currently quoted on the NASD Electronic Bulletin Board, the fair market value of the Common Shares underlying options granted under the 2000 Plan shall be the last closing sales price of the Common Shares on the day the options are granted. If there is no market price for the Common Shares, then the Board and the Committee may, after taking all relevant fac ts into consideration, determine the fair market value of the Common Shares.
Exercise of Options
Options are exercisable in whole or in part as provided under the terms of the grant, but in no event shall an option be exercisable after the expiration of ten years from the date of grant. Except in case of disability or death, no option shall be exercisable after an optionee ceases to be an employee of NSC, provided that the Committee shall have the right to extend the right to exercise for a specified period, generally three months, following the date of termination of an optionee’s employment. If an optionee’s employment is terminated by reason of disability, the Committee or the Board may extend the exercise period for a specified period, generally one year, following the date of termination of the optionee’s employment. If an optionee dies while in the employ of NSC and the optionee has not fully exercised his options, the options may be exercised in whole or in part at any time with in one year after the optionee’s death by the executors or administrators of the optionee’s estate or by any person or persons who acquired the option directly from the optionee by bequest or inheritance.
In the event of the death of an employee or consultant while in the employ of NSC, the Committee or the Board is authorized to accelerate the exercisability of all outstanding options under the 2000 Plan.
Under the 2000 Plan, an individual may be granted one or more options, provided that the aggregate fair market value (determined at the time the option is granted) of the shares covered by incentive options which may be exercisable for the first time during any calendar year shall not exceed $100,000.
Acceleration and Exercise upon Change of Control
Any option granted under the 2000 Plan which provides for either (a) an incremental vesting period whereby such option may only be exercised in installments as each such incremental vesting period is satisfied or (b) a delayed vesting period whereby such option may only be exercised after the lapse of a specified period of time, such vesting period shall be accelerated upon the occurrence of a “Change in Control” of NSC (as that term is defined in the 2000 Plan) so that such option shall become exercisable immediately in part or in its entirety by the optionee, as such optionee shall elect subject to the condition that no option shall be exercisable after the expiration of ten years from the date it is granted.
Payment for Option Shares
Options may be exercised by the delivery of written notice to NSC at its principal office setting forth the number of shares with respect to which the option is to be exercised, together with cash or certified check payable to the order of NSC for an amount equal to the option price of such shares. No Common Shares subject to options granted under the 2000 Plan may be issued upon exercise of such options until full payment has been made of any amount due. A certificate or certificates representing the number of shares purchased will be delivered by NSC as soon as practicable after payment is received. The Board or Committee may, in its discretion, permit the holder of an option to pay all or a portion of the exercise price by a simultaneous sale of the Common Shares to be issued pursuant to such exercise pursuant to a brokerage or similar arrangement.
Termination of the 2000 Plan
The 2000 Plan will terminate on December 1, 2010, unless sooner terminated by the Board. Any option outstanding under the 2000 Plan at the time of termination shall remain in effect until the option shall have been exercised or shall have expired.
Amendment of the 2000 Plan
The Board may at any time modify or amend the 2000 Plan without obtaining the approval of the shareholders of NSC in such respects as it shall deem advisable to comply with Section 422 of the Code or Securities Exchange Act Rule 16b-3 or in any other respect.
Transferability of Options
Except as may be agreed upon by the Board or Committee, options granted under the 2000 Plan shall be exercisable only by the optionee during his lifetime and shall not be assignable or transferable other than and by will or the laws of descent and distribution.
Vote Required
The affirmative vote of the holders of a majority of the Common Shares present in person or by proxy at the Meeting is necessary to approve the 2000 Plan.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR NSC’S PROPOSAL TO APPROVE THE NATIONAL SCIENTIFIC CORPORATION 2000 STOCK COMPENSATION PLAN
The members of the Board are interested in the approval of the 2000 Plan because members of the Board are eligible to receive options under the 2000 Plan. Additionally, NSC notes that Mr. Grollman and Mr. Carr have received grants of options under the 2000 Plan. See “Management.”
PROPOSAL 3 — AMENDMENTS TO ARTICLES OF INCORPORATION
Description of the Proposal
On December 1, 2000, the Board approved, subject to the consideration and approval of the shareholders of NSC, a proposed amendment to NSC’s Articles of Incorporation to increase the authorized capital stock of NSC by increasing the number of Common Shares available for issuance from 80,000,000 to 120,000,000. The number of shares of Preferred Stock available for issuance shall remain at 4,000,000 shares.
On December 14, 2000, the Board approved, subject to the consideration and approval of the shareholders of NSC, a proposed amendment to NSC’s Articles of Incorporation to provide that any action required under the provisions of the Texas Business Corporation Act to be authorized by the affirmative vote of the holders of any specified portion of the shares of NSC will require the approval of a majority of the shares of NSC entitled to vote on that matter.
Rationale for the Proposal
The proposal to increase NSC’s authorized Common Shares is intended to ensure that NSC has sufficient Common Shares that could be used in connection with mergers and acquisitions and to raise additional capital, which could include public offerings or private placements of Common Shares or securities convertible into Common Shares and to ensure that NSC has sufficient Common Shares to provide additional authorized shares that could be issued in connection with the exercise of stock options or possible future stock splits or stock dividends.
While the Board believes it to be important that NSC have the flexibility that would be provided by having available additional authorized Common Shares, NSC does not now have any commitments, arrangements or understandings which would require the issuance of such additional Common Shares other than the shares reserved for issuance pursuant to outstanding options and warrants. The availability of additional authorized Common Shares would simply permit the Board to respond in a timely manner to future opportunities and business needs of NSC as they may arise and would avoid the possible necessity and expense of a special meeting of shareholders to increase the authorized Common Shares.
If the authorized Common Shares are increased as proposed, the authorized Common Shares would be available for issuance from time to time upon such terms and for such purposes as the Board may deem advisable without further action by the shareholders of NSC except as may be required by law or the rules of any stock
exchange on which the Common Shares may be listed. Such an issuance may decrease or increase the book value per Common Share presently issued and outstanding, depending upon whether the consideration paid for such newly issued shares is less or more than the book value per Common Share prior to such issuance. The issuance of additional Common Shares could dilute the voting power and equity of the holders of outstanding Common Shares and may have the effect of discouraging attempts by a person or group to take control of NSC.
In addition to increasing the number of authorized Common Shares, the approval of the proposed amendments to NSC’s Articles of Incorporation would have the affect of reducing the number of Common Shares required to approve (i) any amendment to or restatement of NSC’s Articles of Incorporation; (ii) any merger, consolidation, share exchange or plan therefor; (iii) any sale, lease, exchange or other disposition of all, or substantially all, of the property or assets of NSC; or (iv) the dissolution of NSC, from two-thirds (2/3) of the outstanding Common Shares to a majority of the outstanding Common Shares. The members of the Board believe that this change is desirable and in the interest of NSC because it will facilitate NSC’s ability to obtain shareholder approval of the foregoing types of transactions. The members of the Board note, however, that proposed changes may also have the effect of reducing the influence of minority shareholders in approving the foregoing types of transactions. This amendment will be affected by the addition of a new Article 9 to NSC’s Articles of Incorporation, the complete text of which can be found in the proposed Articles of Amendment to Articles of Incorporation in the form of Exhibit B attached hereto.
Vote Required
Adoption of the proposal to amend NSC’s Articles of Incorporation as described in this proxy statement requires the affirmative vote of the holders of two-thirds (2/3) of the Common Shares outstanding on the Record Date. If approved by the shareholders, such amendment will become effective on the filing with the Secretary of State of Texas of the Articles of Amendment of Articles of Incorporation in the form of Exhibit B attached hereto.
RecommendationAudit Committee of the Board of Directors
THE BOARD (the "Audit Committee") is
responsible for, among other things, reviewing and discussing the audited
financial statements with management, discussing with the Company's auditors
information relating to the auditors' judgments about the quality of the
Company's accounting principles, recommending to the Board of Directors that the
Company include the audited financials in its Annual Report on Form 10-KSB and
overseeing compliance with the Securities and Exchange Commission requirements
for disclosure of auditors' services and activities.
REVIEW OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR NSC’S PROPOSAL TO AMEND NSC’S ARTICLES OF INCORPORATION TO (i) INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES FROM 80,000,000 TO 120,000,000AUDITED FINANCIAL STATEMENTS
The Audit Committee, which was established in December 2000, does not yet
have a charter. The Audit Committee met once during fiscal 2001, and again
subsequent to the end of fiscal 2001. The Audit Committee has reviewed the
Company's financial statements for the fiscal year ended September 30, 2001, as
audited by Hurley & Company, the Company's independent auditors, and has
discussed these financial statements with management. In addition, the Audit
Committee has discussed the audit process and results with Hurley & Company.
6
(ii) PROVIDE THAT ANY ACTION REQUIRED UNDER THE TEXAS BUSINESS CORPORATION ACT TO BE AUTHORIZED BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF ANY SPECIFIED PORTION OF THE SHARES OF NSC WILL REQUIRE THE APPROVAL OF A MAJORITY OF THE SHARES OF NSC ENTITLED TO VOTE ON THAT MATTER.
IMPLEMENTATION FEES The Company did not engage Hurley & Company to provide services to the Company regarding financial information systems design and implementation during the fiscal year ended September 30, 2001. ALL OTHER FEES Hurley & Company billed the Company and its subsidiary approximately $21,474 for other services for the fiscal year ended September 30, 2001, for audit services in connection with the filing of a registration statement on Form SB-2 with the Securities and Exchange Commission. OTHER The Board of Directors has considered whether the provision of non-audit services is compatible with maintaining Hurley & Company's independence. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2000, NSC loaned Lou L. Ross, the Company's Chairman,
$200,000, for which he signed a ten percent (10%) note payable to NSC, with a
due date of December 1, 2000. As ofAt September 30, 2000, NSC had recorded interest
income and accrued interest receivable of $9,275. In December 2000, the Board
authorized the extension of the loan to officer until December 1, 2001. At
September 30, 2001, the Company had recorded interest income of $20,000 and
accrued interest receivable of $29,275. In December 2001, the Board authorized
the extinguishment of such indebtedness in return for 250,000 shares of NSC
Common Stock held by Mr. Ross, together with the assignment to NSC of all rights
to pursue recovery from an investment Mr. Ross made in a local manufacturer of
firewall hardware, in exchange for the note and accrued interest. The 250,000
shares have a market value of $100,000 at September 30, 2001. As a result,
compensation expense of $129,275 has extendedbeen recorded for the termyear ended September
30, 2001 for the difference of the note with Mr. Rossincluding accrued interest and the value
of common stock at September 30, 2001 to December 1, 2001.
be returned.
In September 1999, Mr. Ross purchased from NSC 1,580,040 shares of
restricted Common Stock in exchange for 840,000 free trading shares of Common Stock.Stock then held
by him. In connection with this transaction, NSC agreed to pay to Mr. Ross 4% of
NSC’sNSC's gross revenues.
In partial consideration for the forgiveness of this right
to future revenues, the Company agreed to issue 500,000 restricted shares of NSC
common stock to Mr. Ross. These shares are subject to a Restricted Stock Award
Agreement that restricts the transfers of such shares until such time as the
market price of the stock exceeds $2.50 per share. Subsequent to the fiscal year
ended September 30, 2001, the Company granted Mr. Ross options to purchase an
aggregate of 750,000 shares of common stock. These options consist of ten
separate tranches, which vest when the previous five-day average market price of
NSC common stock exceeds even dollar levels beginning with $2 per share through
$10 per share. The option grants are for 75,000 shares each when the five-day
average stock price exceeds even dollar amounts from $1 per share through $10
per share.
APPROVAL AND RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
NSCAUDITORS
(PROPOSAL NO. 2)
The Board of Directors has not yet selected Hurley & Company ("Hurley") as the
independent public accountants for the ensuingCompany for fiscal 2002, and recommends
that the shareholders vote for ratification of such appointment. Shareholder
ratification of the selection of Hurley as the Company's independent auditors is
not required by the Company's Bylaws or otherwise. However, the Board is
submitting the selection of Hurley for shareholder ratification as a matter of
good corporate practice. Hurley has audited the Company's financial statements
since fiscal 1998. Notwithstanding the selection, the Board, in its discretion,
7
because it has determined to wait until laterif the Board feels that such a change would be in the fiscal year to do so. Hurley &best
interests of the Company served as NSC’s independent public accountants for fiscal 2000. Representativesand its shareholders. A representative of Hurley & Company areis
expected to be present at the Annual Meeting will havewith the
opportunity to make a
statement if they desire to dohe so desires and are expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder who wishes to present any proposal by afor shareholder to be presentedaction
at the next annual meetingAnnual Meeting of Shareholders to be held in 2003, must behave been
received by the Company's Secretary, at NSC’s principalthe Company's offices, 4455 East Camelback Road, E-160, Phoenix, Arizona 85018 not later than
Friday, October 31, 2001.
18, 2002, in order to be included in the Company's proxy statement and form of proxy for that meeting. Such proposals should be addressed to the Corporate Secretary, 14455 North Hayden Road, Suite 202, Scottsdale, Arizona 85260. If a shareholder proposal is introduced at the 2001 Annual Meeting of Shareholders without any discussion of the proposal in the Company's proxy statement, and the shareholder does not notify the Company on or before Wednesday, November 20, 2002, as required by SEC Rule 14(a)-4(c)(1), of the intent to raise such proposal at the Annual Meeting of Shareholders, then proxies received by the Company for the 2003 Annual Meeting will be voted by the persons named as such proxies in their discretion with respect to such proposals. Notice of such proposal is to be sent to the above address. By Order of the Board of Directors /s/ Sam H. Carr, Secretary Sam H. Carr, Secretary Dated January 21, 2002 REQUESTS FOR FORM 10-KSB
UPON WRITTEN REQUEST, NATIONAL SCIENTIFIC CORPORATION WILL FURNISH, WITHOUT
CHARGE TO PERSONS SOLICITED BY THIS PROXY STATEMENT, A COPY OF OUR REPORT ON
FORM 10-KSB FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 2000.2001. REQUESTS SHOULD BE ADDRESSED TO: NATIONAL
SCIENTIFIC CORPORATION, 4455 EAST CAMELBACK14455 NORTH HAYDEN ROAD, E-160, PHOENIX,SUITE 202, SCOTTSDALE, ARIZONA
85018,85260, ATTENTION: SAM H. CARR.
PRELIMINARY COPYFor Information of the Securitiesand Exchange Commission Only
NATIONAL SCIENTIFIC CORPORATIONANNUAL MEETING OF STOCKHOLDERSFEBRUARY 14, 2001
The undersigned hereby appoints Lou L. Ross and Sam H. Carr, or either of them, with power of substitution, as proxies to vote all stock of National Scientific Corporation (the “Company”) owned by the undersigned at the Annual Meeting of Stockholders to be held at 4455 E. Camelback Rd., Suite E-160, Phoenix, AZ 85018 at 10:00 a.m. on February 14, 2001, and any adjournment thereof, on the following matters as indicated below and such other business as may properly come before the meeting.
| 1. | [ ] | FOR the election as director of all nominees listed below (except as marked to the contrary below). | 2. | Proposal to approve an amendment to the Articles of Incorporation to (i) increase the number of authorized shares of common stock and (ii) provide that any action required under the provisions of the Texas Business Corporation Act to be authorized by the affirmative vote of the holders of any specified portion of the shares of NSC will require the approval of a majority of the shares of NSC entitled to vote on that matter. [ ] FOR [ ] AGAINST [ ] ABSTAIN | |||
| [ ] | WITHHOLD AUTHORITY to vote for all nominees listed below. Lou L. Ross, Richard C. Kim, Michael A. Grollman, Sam H. Carr, and Charles E. Martin. | ||||||
| INSTRUCTION: To withhold authority to vote for individual nominees, write their names in the space provided below. | 3. | Proposal to approve the National Scientific 2000 Stock Option Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN | |||||
| 4. | To transact such other business as may properly come before the meeting or any adjournments thereof. |
THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE
PRELIMINARY COPYFor Information of the Securitiesand Exchange Commission Only
This Proxy is solicited on behalf of the Company’s Board of Directors.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this Proxy will be voted FOR all nominees as directors, FOR the proposal to approve an amendment to the Articles of Incorporation to (i) increase the number of authorized shares of common stock and (ii) provide that any action required under the provisions of the Texas Business Corporation Act to be authorized by the affirmative vote of the holders of any specified portion of the shares of NSC will require the approval of a majority of the shares of NSC entitled to vote on that matter, and FOR the proposal to approve the National Scientific 2000 Stock Option Plan.
Please sign exactly as your name appears on this Proxy Card. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
PLEASE mark, sign, date and return the Proxy Card promptly using the enclosed envelope.