<PAGE>
GAMMA BIOLOGICALS, INC.
3700 MANGUM ROAD, HOUSTON, TEXAS 77092
JUNE 30, 1998
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Gamma Biologicals, Inc. (the
"Company") will be held August 11, 1998, at 3:00 p.m., Central time, at the
offices of the Company, 3700 Mangum Road, Houston, Texas 77092, for the
following purposes:
1. To elect directors; and
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Further information regarding the meeting and the nominees for election as
directors is set forth in the accompanying proxy statement. The Board of
Directors has fixed the close of business on June 22, 1998 as the record date
for the meeting, and only holders of Common Stock of record at such time will be
entitled to vote at the meeting or any adjournments thereof.
It will be a pleasure for the officers and directors to meet with you and
have an opportunity to answer any questions you may have about Company affairs.
The officers and directors will be available to talk individually with
shareholders before and after the meeting. Whether or not you plan to attend
the meeting, we urge you to sign and return the enclosed proxy so that your
shares will be represented at the meeting.
By order of the Board of Directors,
Lawrence E. Letwin
SECRETARY
June 30, 1998
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY
AT YOUR EARLIEST CONVENIENCE.
<PAGE>
GAMMA BIOLOGICALS, INC.
3700 MANGUM ROAD, HOUSTON, TEXAS 77092
JUNE 30, 1998
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the annual meeting of shareholders (the "Meeting") of Gamma
Biologicals, Inc. (the "Company") to be held at the time and place and for the
purposes set forth in the foregoing Notice of Annual Meeting of Shareholders
(the "Notice") and at any adjournments thereof.
SOLICITATION AND VOTING OF PROXIES
The solicitation will be conducted by mail. The Company will bear the
expense of the solicitation of proxies, including the charges and expenses of
brokerage firms and others incurred in forwarding solicitation material to
beneficial owners of stock. Further solicitation of proxies may be made by
telephone or oral communication with shareholders of the Company following the
original solicitation. All further solicitation will be by regular employees of
the Company who will not be additionally compensated therefor. Copies of the
Proxy, Notice and Proxy Statement are being mailed to shareholders on or about
June 30, 1998.
Proxies in the accompanying form are solicited by the management at the
direction of the Board of Directors. Execution and return of the proxy will not
in any way affect a shareholder's right to attend the Meeting and to vote in
person, and a shareholder giving a proxy has the power to revoke it at any time
before it is exercised by giving written notice to the Company at or prior to
the Meeting. A proxy may also be revoked by execution of a proxy bearing a
later date or by attendance at the Meeting and voting in person by ballot.
Properly executed proxies in the accompanying form, received in due time and not
previously revoked, will be voted as specified. A proxy received by management
which does not withhold authority to vote or on which no specification has been
indicated will be voted for the proposals set forth in this Proxy Statement and
for the nominees for the Board of Directors of the Company named in Proposal No.
1 of this Proxy Statement. A majority of the outstanding shares will constitute
a quorum at the Meeting. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted in tabulations of the votes cast on
proposals presented to shareholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
At the date of this Proxy Statement, management of the Company does not
know of any business to be presented at the Meeting other than those matters
which are set forth in the Notice accompanying this Proxy Statement. If any
other business should properly come before the Meeting, it is intended that the
shares represented by proxies will be voted with respect to such business in
accordance with the judgment of the persons named in the proxy.
1
<PAGE>
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
Only holders of Common Stock of the Company of record at the close of
business on June 22, 1998 are entitled to notice of and to vote at the Meeting.
At that date, there were outstanding 4,625,762 shares of the Company's Common
Stock, which is the only class of stock that has been issued by the Company.
Each shareholder is entitled to one vote for each share of Common Stock held of
record by the shareholder on that date for all matters coming before the Meeting
and, except as otherwise provided by applicable law, a favorable vote consists
of a simple majority of the votes cast. Shareholders are not entitled to
cumulate their votes in the election of directors, which means that the holders
of more than half of the shares voting for the election of directors can elect
all of the directors if they choose to do so.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of May 15, 1998, the ownership of the
Company's Common Stock by (i) each shareholder, if any, who is known by the
Company to own beneficially more than 5% of the outstanding Common Stock, (ii)
each director, (iii) each named executive officer and (iv) all directors and
executive officers as a group. Except as otherwise indicated, the shareholders
listed in the table have sole voting and investment power with respect to the
shares indicated. All information with respect to beneficial ownership has been
furnished by the shareholders to the Company.
<TABLE>
AMOUNT AND
NAME NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
OWNER OWNERSHIP OF CLASS
- ------------------------------------------- --------------- --------
<S> <C> <C>
Betty F. Hatcher . . . . . . . . . . . . . . 218,674(1) 4.7%
David E. Hatcher . . . . . . . . . . . . . . 144,599(2) 3.1%
H.H. "Will" Hardee . . . . . . . . . . . . . 88,578(3) 1.9%
Dr. Richard H. Aster . . . . . . . . . . . . 17,540(4) *
Bryan J. Brieden . . . . . . . . . . . . . . 22,671(5) *
Hayle B. Randolph . . . . . . . . . . . . . . 20,100(6) *
Jimmie L. Turner . . . . . . . . . . . . . . 27,897(7) *
John Case . . . . . . . . . . . . . . . . . . 22,599(8) *
Raul F. Alvarez . . . . . . . . . . . . . . . 4,875(9) *
All executive officers and directors as a
group (14 persons). . . . . . . . . . . . . 626,317(10) 12.9%
Dimensional Fund Advisors Inc. . . . . . . . 277,400(11) 6.0%
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
</TABLE>
- --------------------
* Less than 1.0%.
(1) Includes 46,475 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options.
(2) Includes 58,500 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options.
(3) Includes 16,640 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options. Also
includes 2,400 shares owned of record by Mrs. Hardee, beneficial
ownership of which is disclaimed by Mr. Hardee.
2
<PAGE>
(4) Includes 15,040 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options.
(5) Includes 10,000 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options and
2,226 shares owned of record by Mrs. Brieden, beneficial
ownership of which is disclaimed by Mr. Brieden.
(6) Includes 20,000 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options.
(7) Includes 19,500 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options and
1,950 shares owned of record by Mrs. Turner, beneficial ownership
of which is disclaimed by Mr. Turner.
(8) Includes 12,500 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options and
799 shares owned of record by Mrs. Case, beneficial owner of
which is disclaimed by Mr. Case.
(9) Includes 4,875 shares which can be acquired during the next 60
days pursuant to the exercise of outstanding stock options.
(10) Includes 258,155 shares which can be acquired during the next
60 days pursuant to the exercise of outstanding stock options.
(11) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of
277,400 shares of the Company in stock as of December 31, 1997,
all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee benefit
plans, for all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership
of all such shares.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
INFORMATION CONCERNING DIRECTORS
It is proposed that six directors will be elected at the Meeting, each to
hold office until the annual meeting of shareholders in 1999 and until his or
her successor is duly elected and qualified. The Company has no reason to
believe that any nominee will be unavailable to serve at the time of election.
All of the nominees are presently members of the Board of Directors of the
Company. There are no family relationships among any of the directors of the
Company. The names of the nominees, together with information as to their
principal occupations, age, and experience, are as follows:
3
<PAGE>
<TABLE>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE
- -------------------------------- ------------------------------------------ --- --------
<S> <C> <C> <C>
Dr. Richard H. Aster . . . . . . Senior Investigator at the Blood Center of 67 1997
Southeastern Wisconsin and professor
of medicine at Medical College of
Wisconsin(1)
Bryan J. Brieden . . . . . . . Consultant(2) 70 1970
H. H. "Will" Hardee . . . . . . Senior Vice President of Dain Rauscher 43 1997
Wessels(3)
Betty F. Hatcher . . . . . . . Executive Vice President and Assistant 65 1988
Secretary of the Company(4)
David E. Hatcher . . . . . . . Chairman of the Board, President and Chief
Executive Officer of the Company(5) 75 1970
Hayle B. Randolph . . . . . . . Blood services consultant(6) 67 1991
</TABLE>
- --------------------
(1) Dr. Aster retired in 1996 as President and Chief Executive Officer of
the Blood Center of Southeastern Wisconsin after 26 years. Dr. Aster
is Chairman of Genetic Testing Institute, Inc. and is a director of
Principle Preservation Portfolios, a mutual fund company and
subsidiary of the BC Ziegler Company.
(2) In 1994, Mr. Brieden retired as President of Bryan Biologicals, Inc.,
a distributor of laboratory supplies, a position he held for more than
five years. Mr. Brieden now serves as a consultant to Bryan
Biologicals, Inc.
(3) Mr. Hardee served as Senior Vice President of Kidder Peabody Co. for
three years from 1991 until October 1994. Mr. Hardee has served as
Senior Vice President of Dain Rauscher since October 1994.
(4) Ms. Hatcher served as the Senior Vice President and Secretary of the
Company prior to becoming a consultant to the Company in 1988. Ms.
Hatcher was appointed Assistant Secretary of the Company in February
1989 and was appointed Director of Product Development of the Company
in February 1990. She was appointed Executive Vice President of the
Company in August 1992.
(5) Mr. Hatcher served as President of the Company until June 1992 and
became President of the Company again in October 1996.
(6) Mr. Randolph served as President and Chief Executive Officer of Blood
Systems, Inc. until his retirement in March 1991. Mr. Randolph served
as a consultant on various projects for Blood Systems, Inc. and as the
Executive Director of Blood Systems Research Foundation until January
15, 1993 and is currently an independent consultant to the blood
services industry.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met four times during fiscal 1998.
The Board has established two standing committees, the Audit Committee, which is
comprised of Messrs. Aster, Brieden, Hardee and Randolph, and the
Compensation/Stock Option Committee, which is comprised of Messrs. Aster,
Brieden, Hardee and Randolph. The Audit Committee exercises oversight with
respect to the Company's accounting practices and procedures and its
relationship with its independent auditors, and the Compensation/Stock Option
Committee makes recommendations to the Board of Directors regarding the
compensation of officers and employees of the Company and the granting of
options under the Company's 1991 Employee Stock Option Plan and 1995 Employee
Stock Option Plan. The Audit Committee met one time during fiscal 1998,
4
<PAGE>
and the Compensation/Stock Option Committee met two times during fiscal 1998.
There is no nominating committee. No incumbent director attended fewer than
75% of the total number of meetings of the Board of Directors and of all
committees of the board on which he or she served in fiscal 1998.
DIRECTOR COMPENSATION
Directors of the Company who are also employees of the Company do not
receive fees for attending meetings of the Board of Directors. Non-employee
directors of the Company receive a retainer of $3,000 per year, payable in
quarterly installments, and a fee of $600 for each meeting of the Board of
Directors and for each meeting of each committee of the Board of Directors
attended by such director. Pursuant to the 1997 Outside Director Stock Option
Plan, upon initial election to the Board of Directors, non-employee directors
receive an option to purchase 10,000 shares of the Company's Common Stock and,
the Board of Directors may grant additional options to the non-employee
directors in lieu of cash compensation.
EXECUTIVE OFFICERS
The following table sets forth the names, ages, length of service as an
officer, and the positions of the persons who are not nominees for director and
who are executive officers of the Company:
<TABLE>
OFFICER
NAME AGE SINCE POSITION
- --------------------- --- ------- -----------------------------------------------------------
<S> <C> <C> <C>
Jimmie L. Turner. . . 59 1989 Executive Vice President and Chief Operating Officer
Raul F. Alvarez . . . 49 1996 Senior Vice President - International Business
John Case . . . . . . 71 1980 Senior Vice President - Regulatory Affairs
Thomas H. Frame . . . 43 1996 Senior Vice President - Research and Development
Margaret O'Bannion. . 43 1989 Senior Vice President - Finance and Chief Financial Officer
Gary L. Parrish . . . 61 1994 Senior Vice President - National Sales
Susan A. Batcha . . . 44 1996 Vice President - Assistant to Regulatory Affairs
Marilyn K. Moulds . . 54 1996 Vice President - Consultation and Education
</TABLE>
Mr. Turner joined the Company in 1976 as a sales representative and became
Vice President-Customer Services in August 1989. Mr. Turner became Executive
Vice President and Chief Operating Officer in October 1996.
Mr. Alvarez joined the Company in 1994 as International Sales and Marketing
Manager. Previously, Mr. Alvarez had been division general manager of Menarini
Diagnostics in Barcelona, Spain and Florence, Italy. Mr. Alvarez became Vice
President-International Business in August 1996 and Senior Vice President -
International Business in August 1997.
Mr. Case joined the Company in 1976 and became Vice President-Regulatory
Affairs in 1980. He was appointed Senior Vice President - Regulatory Affairs in
August 1997.
Mr. Frame joined the Company in 1993 as Director of Monoclonal Production
and Product Development. Previously, Mr. Frame had been a senior scientist
specializing in monoclonal research at the Central Laboratory of the Netherlands
Red Cross Transfusion Service. Mr. Frame became Vice President-
5
<PAGE>
Research and Development in August 1996, and was appointed Senior Vice
President - Research and Development in August 1997.
Ms. O'Bannion joined the Company in 1978 and was named Controller of the
Company in 1987. Ms. O'Bannion became Vice President-Finance and Chief
Financial Officer in August 1989, and was appointed Senior Vice President -
Finance and Chief Financial Officer in August 1997.
Mr. Parrish joined the Company in 1977 as a sales representative and was
named National Sales Manager in 1989. He became Vice President-National Sales
in August 1994 and was appointed Vice President-National Sales and Customer
Services in October 1996, and Senior Vice President - National Sales in August
1997.
Ms. Batcha joined the Company in 1981 in Coombs manufacturing. Ms. Batcha
became department supervisor in 1984, and was named director of manufacturing in
1989. She became Vice President-Manufacturing in August 1996, and was appointed
Vice President - Assistant to Regulatory Affairs in August 1997.
Ms. Moulds joined the Company in 1975 as supervisor of consultation and
education. Ms. Moulds became director, consultation and education, in 1989, and
Vice President-Consultation and Education in August 1996.
COMPENSATION/STOCK OPTION COMMITTEE REPORT (1)
The Compensation/Stock Option Committee of the Board of Directors (the
"Committee") is composed entirely of outside directors and is responsible for
developing and making recommendations to the Board with respect to the Company's
executive compensation policies. This Committee Report sets forth the
components of the Company's executive officer compensation and describes the
basis on which the fiscal 1998 compensation determinations were made by the
Committee with respect to the executive officers of the Company.
In designing its executive compensation programs, the Company follows its
belief that executive compensation should reflect the value created for
shareholders while supporting the Company's strategic goals. The following
objectives have been adopted by the Committee:
1. Executive compensation should be meaningfully related to the value
created for shareholders;
2. Executive compensation programs should reflect and promote the
Company's value and reward individuals for outstanding contributions
to the Company's success; and
- --------------------
(1) Notwithstanding filings by the Company with the Securities and
Exchange Commission ("SEC") that have incorporated or may incorporate
by reference other SEC filings (including this proxy statement) in
their entirety, this Compensation Committee Report shall not be
incorporated by reference into such filings and shall not be deemed
to be "filed" with the SEC except as specifically provided otherwise
or to the extent required by Item 402 of the Regulation S-K.
6
<PAGE>
3. Short and long term executive compensation play a critical role in
attracting and retaining well qualified executives.
The Committee currently implements a compensation program based on three
components: a base salary, a bonus program related to Company and individual
performance during the relevant year, and a stock option program. The Committee
regularly reviews the various components of the Company's executive compensation
to ensure that they are consistent with the Company's objectives.
BASE SALARY. The Committee, in recommending the appropriate base salaries
of the Company's executive officers, generally considers the level of executive
compensation in similar companies in the industry. In addition, the Committee
takes into account (i) the performance of the Company and the roles of the
individual executive officers with respect to such performance and (ii) the
particular executive officer's specific responsibilities, and the long-term
performance of such executive officer in those areas of responsibility.
ANNUAL INCENTIVES. The bonus program provides direct financial incentives,
in the form of an annual cash bonus, to executive officers to achieve and exceed
the Company's annual goals. The Committee recommends cash bonuses based upon
the Committee's evaluation of the contributions of each individual officer
during the applicable fiscal year in achieving the goals of the Company for that
year.
LONG-TERM INCENTIVES. The stock option program is currently the Company's
primary long-term incentive plan for executive officers and key employees. The
objectives of the stock option program are to align executive officer
compensation and shareholder return, and to enable executive officers to develop
and maintain a significant, long-term stock ownership position in the Company's
Common Stock. In addition, grants of stock options to the named executive
officers and others are intended to retain and motivate executives to improve
long-term corporate and stock market performance. Stock options are granted at
the prevailing market value and will only have value if the Company's stock
price increases. Generally, grants of stock options vest in equal amounts over
four years, and executives must be employed by the Company at the time of
vesting in order to exercise a stock option.
Consistent with the Company's compensation program outlined above,
compensation for each of the named executive officers, as well as other senior
executives, consists of a base salary, bonus and stock options. The base
salaries for the named executive officers for fiscal 1998 were at levels below
competitive amounts paid to executives with comparable qualifications,
experience and responsibilities of other companies engaged in the same or
similar business as the Company. The Committee has not yet determined the
amount of cash bonuses, if any, to be paid to the named executive officers for
fiscal 1998.
The Committee believes that the compensation of the chief executive officer
("CEO") should be impacted by Company performance. Mr. Hatcher founded the
Company in 1970 and has served as its CEO since that time. During fiscal 1998,
Mr. Hatcher received a base salary of $230,000, which the Committee believes to
be average for the base salary for chief executive officers with comparable
qualifications, experience and responsibilities of other companies engaged in
the same or similar business as the Company. At this time, this Committee has
not made a determination as to the bonus, if any, to be paid to Mr. Hatcher, for
fiscal 1998.
Compensation Committee: Dr. Richard H. Aster, H.H. "Will" Hardee, Bryan J.
Brieden, and Hayle B. Randolph.
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except as set forth below, no member of the Compensation/Stock Option
Committee of the Board of Directors of the Company was, during fiscal 1998, an
officer or employee of the Company or any of its subsidiaries, was formerly an
officer of the Company or any of its subsidiaries, or had any relationships
requiring disclosure.
During fiscal 1998, no executive officer of the Company served as (i) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
on the compensation committee of the Board of Directors, (ii) a director of
another entity, one of whose executive officers served on the Compensation
Committee of the Board of Directors, or (iii) a member of the Compensation
Committee (or other board committee performing equivalent functions) of another
entity, one of whose executive officers served as a director of the Company.
The Company distributes its products in the State of Michigan through Bryan
Biologicals, Inc. In fiscal 1998, the Company's sales to Bryan Biologicals,
Inc. amounted to approximately $203,000, or 1.1%, of the Company's net sales.
Mr. Bryan J. Brieden, a director of the Company, is a consultant to, and former
president and principal owner of, Bryan Biologicals, Inc. As of May 1, 1998
Bryan Biologicals, Inc. owed the Company approximately $91,000 on open account
for product purchases made from November 1996 to April 1998. No interest is
charged by the Company on such obligation. The largest amount owed to the
Company by Bryan Biologicals, Inc. at any time during fiscal 1998 was
approximately $126,000.
8
<PAGE>
COMPENSATION TABLES
The cash and other compensation paid by the Company and its subsidiaries
during fiscal 1998 to the chief executive officer and the four most highly
compensated executive officers of the Company were as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
- ----------------------------------- ------ ------- ------ --------------- ----------- ------------
($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
David E. Hatcher . . . . . . . . . 1998 224,735 0 11,542 0 29,678(2)
Chairman of the Board, 1997 215,100 25,000 11,284 0 29,014
President and Chief Executive 1996 209,949 0 10,992 7,000 28,265
Officer
Betty F. Hatcher . . . . . . . . . 1998 116,523 0 7,033 0 19,568(3)
Executive Vice President, 1997 110,100 7,500 6,526 0 18,105
Assistant Secretary and 1996 106,680 0 6,214 5,000 17,328
Director
John Case . . . . . . . . . . . . 1998 116,523 0 0 0 0
Senior Vice President- 1997 110,100 6,500 0 0 0
Regulatory Affairs 1996 106,680 0 0 3,000 0
Jimmie L. Turner . . . . . . . . . 1998 118,311 0 3,130 10,000 9,274(4)
Executive Vice President 1997 103,657 7,500 2,960 0 8,463
and Chief Operating Officer 1996 95,046 0 2,796 3,000 8,011
Raul F. Alvarez(6) . . . . . . . . 1998 87,060 40,087 1,534 5,000 5,048(5)
Senior Vice President - 1997 81,600 21,940 1,423 0 4,019
International Business
</TABLE>
- ----------------
(1) For each named executive officer in fiscal 1998, represents payments
by the Company for the named executive's taxes on split dollar premium
payment.
(2) Represents the dollar value of premiums paid by the Company with
respect to a split dollar life insurance policy for the benefit of the
named executive.
(3) Includes $18,086 which represents the dollar value of premiums paid by
the Company with respect to a split dollar life insurance policy for
the benefit of the named executive, and $1,482 which represents
Company matching contributions pursuant to the Company's 401(k)
Retirement Savings Plan.
(4) Includes $8,050 which represents the dollar value of premiums paid by
the Company with respect to a split dollar life insurance policy for
the benefit of the named executive, and $1,224 which represents
Company matching contributions pursuant to the Company's 401(k)
Retirement Savings Plan.
9
<PAGE>
(5) Includes $3,945 which represents the dollar value of premiums paid by
the Company with respect to a split dollar life insurance policy for
the benefit of the named executive, and $1,103 which represents
Company matching contributions pursuant to the Company's 401(k)
Retirement Savings Plan.
(6) Not an executive officer in fiscal 1996.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
PERCENTAGE OF
TOTAL OPTIONS POTENTIAL REALIZABLE
NUMBER OF GRANTED TO EXERCISE VALUE AT ASSUMED STOCK
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED FISCAL YEAR (PER SHARE) DATE OPTION TERMS
- -------------------------- --------- ------------- ----------- ---------- ----------------------
5% 10%
----------------------
<S> <C> <C> <C> <C> <C>
David E. Hatcher . . . . 0 $0 $0
John Case . . . . . . . . 0 -- $0 $0
Betty F. Hatcher . . . . 0 -- $0 $0
Jimmie L. Turner . . . . 10,000 20% $4.50 8/7/2007 $28,300 $71,718
Raul F. Alvarez . . . . . 5,000 10% 4.50 8/7/2007 $14,150 $35,859
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT AT
ON VALUE FISCAL YEAR END FISCAL YEAR END
NAME EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
- --------------------- -------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
David E. Hatcher. . . 0 0 58,500/3,500 $24,600/$1,750
John Case . . . . . . 0 0 12,500/1,500 $3,630/$750
Betty F. Hatcher. . . 0 0 46,475/2,500 $29,006/$1,250
Jimmie L. Turner. . . 0 0 19,500/11,500 $4,070/$3,250
Raul F. Alvarez . . . 0 0 4,875/7,375 --/$875
</TABLE>
10
<PAGE>
PERFORMANCE GRAPH
The following performance graph provided by Research Data Group, Inc.
compares the performance of the Company's Common Stock to the Russell 2000
Index and a Peer Group Index (as defined below) for the Company's last five
fiscal years. Many of the Company's peers are privately-held companies, or
subsidiaries or divisions of larger publicly-held companies. As a result,
there is only one public company to which the Company may realistically
compare itself. Accordingly, the Peer Group Index consists of Immucor, Inc.
The graph below assumes $100 invested on March 31, 1993 in Company Common
Stock or Index and that any dividends are reinvested.
<TABLE>
3/93 3/94 3/95 3/96 3/97 3/98
------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Gamma Biologicals, Inc. . . $100.0 193.5 142.0 137.2 120.3 161.3
Russell 2000 . . . . . . . $100.0 110.8 117.0 151.0 158.8 225.5
Peer Group . . . . . . . . $100.0 79.31 96.55 182.7 131.0 132.7
</TABLE>
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with Mr. Hatcher, Ms.
Hatcher, Ms. O'Bannion, Mr. Turner, Mr. Parrish, Mr. Alvarez, Mr. Frame, Ms.
Batcha and Ms. Moulds, which provide severance benefits upon a change of
control of the Company. Under these agreements, if one of the named
employee's employment is terminated without cause following a change of
control, he or she will be compensated by the Company as described below.
Each of Mr. Hatcher, Ms. Hatcher, Ms. O'Bannion, Mr. Turner, Mr. Parrish, Mr.
Alvarez and Mr. Frame will receive a lump sum payment equal to a specified
percentage of his or her average annual compensation for the five years
preceding the change of control. The percentage for Mr. Hatcher is 299% and
the percentage for Ms. Hatcher, Ms. O'Bannion, Mr. Turner, Mr. Parrish, Mr.
Alvarez and Mr. Frame is 200%. Each of Ms. Batcha and Ms. Moulds will
receive a lump sum payment equal to 200% of her average annual compensation
for the two years preceding the change of control. Stock options granted to
the named employees by the Company and not then exercisable will become
immediately exercisable in full. The Company is required to pay the named
employees all amounts owed to the named employees by the Company under any
deferred compensation arrangements. The Company is also required to
reimburse the named employees for all legal fees incurred as a result of
termination of employment following a change of control.
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SPLIT-DOLLAR AGREEMENTS
The Company has purchased life insurance policies insuring the lives of
Mr. Brieden, Ms. Hatcher, Mr. Hatcher, Ms. O'Bannion, Mr. Turner, Mr.
Parrish, Mr. Letwin, Mr. Alvarez, Mr. Frame, Ms. Batcha and Ms. Moulds and
has entered into split-dollar agreements with these persons. The Company is
the owner of the policies and by the terms of the split-dollar agreements is
obligated to pay all premiums and to take all necessary steps, upon the death
of the insured, to obtain the death benefits provided under the policies.
The insured is obligated to reimburse the Company on an annual basis for the
value of the economic benefit of the policy to the insured for that year (as
determined for federal income tax purposes). Upon the death of the insured,
the Company is entitled to receive a portion of the death benefits provided
under the policy equal to the amounts of net premiums and interest on policy
loans, if any, to the insured paid by the Company, plus 3% interest. This
amount is payable from the death benefits. With respect to all policy
proceeds in excess of the amounts required to be paid to the Company, the
insured has the right to designate the beneficiaries of the policy and the
right to elect the settlement option with respect to such proceeds. The
Company has the right to obtain loans secured by the policy. The insured may
also obtain loans secured by the policy, with the Company's consent. With
the consent of the Company, interest on policy loans to the insured may be
paid by the Company. All dividends declared by the issuer of the policy will
be first applied to purchase one-year term insurance on the insured's life in
an amount not to exceed the guaranteed cash value of the policy at the next
policy anniversary, with any remaining dividends being used to purchase
additional paid-up insurance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10%
of the Company's common stock (collectively, "Filing Persons") to file with
the Securities and Exchange Commission (the "SEC") initial reports of
ownership (Form 3), reports in changes of ownership (Form 4), or annual
reports of ownership (Form 5). All Filing Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based on its review of the copies of such
reports furnished to the Company and upon certain representations made by the
Filing Persons, during fiscal 1998, all of the Filing Persons filed the
required reports on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company distributes its products in the State of Michigan through
Bryan Biologicals, Inc. In fiscal 1998, the Company's sales to Bryan
Biologicals, Inc. amounted to approximately $203,000, or 1.1%, of the
Company's net sales. Mr. Bryan J. Brieden, a director of the Company, is a
consultant to, and former president and principal owner of, Bryan
Biologicals, Inc. As of May 1, 1998, Bryan Biologicals, Inc. owed the
Company approximately $91,000 on open account for product purchases made from
November 1996 through April 1998. No interest is charged by the Company on
such obligation. The largest amount owed to the Company by Bryan
Biologicals, Inc. at any time during fiscal 1998 was approximately $126,000.
12
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RELATIONSHIP WITH INDEPENDENT AUDITORS
The independent auditors of the Company are Deloitte & Touche LLP who
have acted in that capacity for many years. The Company has requested that
Deloitte & Touche LLP act as the independent auditors for the Company for
fiscal 1999. Representatives of Deloitte & Touche LLP will be present at the
Meeting, having the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions addressed to them.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1999 annual
meeting of shareholders must be received by the Company at its principal
executive offices (3700 Mangum Road, Houston, Texas 77092) by March 2, 1999,
for inclusion in the Company's proxy materials relating to the annual meeting.
GENERAL
The management does not intend to present any matter for action at the
Meeting other than the matters described above, and does not know of any
other matters to be brought before the Meeting. However, if any such other
matter should properly come before the Meeting, or if any vacancy in the
proposed slate of directors should be caused by an unexpected occurrence
before the holding of the election, the proxies will vote thereon in
accordance with the recommendations of management or for such other nominee
as management may select.
The information set forth above as to the present principal occupations
of the nominees for directors, as to their beneficial ownership of securities
of the Company, and as to other information not of record with the Company is
based upon information furnished to the Company by those nominees.
By order of the Board of Directors,
Lawrence E. Letwin
SECRETARY
June 30, 1998
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
ANNUAL REPORT OF THE COMPANY ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31,
1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO. REQUESTS FOR COPIES OF THE
ANNUAL REPORT SHOULD BE DIRECTED TO MS. MARGARET J. O'BANNION, GAMMA
BIOLOGICALS, INC., 3700 MANGUM ROAD, HOUSTON, TEXAS 77092.
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PROXY PROXY
GAMMA BIOLOGICALS, INC.
PROXY FOR ANNUAL MEETING TO BE HELD AUGUST 11, 1998
The undersigned hereby appoints DAVID E. HATCHER and JIMMIE L. TURNER, or
either of them, each with power of substitution, the proxies of the
undersigned, to vote the stock of the undersigned at the annual meeting of
shareholders of Gamma Biologicals, Inc., to be held at the offices of the
company at 3700 Mangum Road, Houston, Texas on August 11, 1998, at 3:00 P.M.,
Central time, or at any adjournments thereof, as follows:
1. To elect as directors the following persons: Dr. Richard H. Aster,
Bryan J. Brieden, H.H. "Will" Hardee, Betty F. Hatcher, David E.
Hatcher and Hayle B. Randolph.
2. To vote in accordance with the recommendations of management upon
whatever other business may properly come before the meeting
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS and will be voted as
indicated by the shareholder. Unless a contrary direction is indicated, the
proxies shall vote the shares FOR the election as directors of the Board's
nominees, and in accordance with the recommendations of management on any
other business coming before the meeting.
(CONTINUED ON REVERSE SIDE)
<PAGE>
GAMMA BIOLOGICALS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY / /
<TABLE>
<S> <C>
Withheld For All
1. ELECTION OF DIRECTORS (SEE REVERSE) For Authority Except 2. OTHER BUSINESS. To For Against Abstain
vote in accordance with
the recommendations
of management upon
/ / / / / / ____________ whatever other business / / / / / /
Nominee may properly come before
Exception(s) the meeting.
Check if Change of Address. / /
Date _______________________________________________
Signature __________________________________________
Please sign exactly as name appears above.
</TABLE>
