SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
THERMOGENESIS CORP.
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and how it was determined):
_______________________________________________________
4) Proposed maximum aggregate value of transaction: _______________
5) Total Fee Paid: ____________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ___________________
2) Form, Schedule, or Registration No. _________
3) Filing Party: _____________________________
4) Date Filed: ______________________________
<PAGE>
THERMOGENESIS CORP.
3146 Gold Camp Drive
Rancho Cordova, California 95670
(916) 858-5100
To the Stockholders of THERMOGENESIS CORP.:
You are invited to attend the Annual Meeting of Stockholders of
THERMOGENESIS CORP. to be held on December 11, 1998 at 10:00 a.m., PST, at the
Lake Natoma Inn, located at, 702 Gold Lake Drive, Folsom, CA, 95630.
The Notice of the Annual Meeting of Stockholders and Proxy Statement
contain the matters to be considered and acted upon, and you should read that
material carefully.
The Proxy Statement contains important information concerning (i) the
election of the Board of Directors, (ii) a proposed consolidation of stock,
(iii) a proposal that will allow the Company to sell an amount of stock in
excess of 20%, and (iv) other matters that properly come before the meeting,
including adjournment of the meeting. I urge you to give these matters your
close attention since they are of great importance to the company and its
stockholders.
We hope you will be able to attend the meeting, but, if you cannot do so,
it is important that your shares are voted at the meeting. Accordingly, we
urge you to mark, sign, date and return the enclosed proxy promptly. You may,
of course, withdraw your proxy if you attend the meeting and choose to vote in
person, or by notifying us.
Sincerely,
Philip H. Coelho
Chief Executive Officer
November 9, 1998
<PAGE>
THERMOGENESIS CORP.
3146 Gold Camp Drive
Rancho Cordova, CA 95670
(916) 858-5100
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 11, 1998
NOTICE IS GIVEN that the Annual Meeting of Stockholders of THERMOGENESIS CORP.,
a Delaware corporation ("Company"), will be held on December 11, 1998 at 10:00
a.m. (PST), at The Lake Natoma Inn, located at 702 Gold Lake Drive, Folsom,
California, 95630, for the following purposes, all of which are discussed in
the Proxy Statement:
1. To elect four (4) directors to serve one year terms or until their
successors have been elected and qualified; and
2. To approve an amendment to the Certificate of Incorporation to
effect a one-for-four consolidation of the Company's common stock.
3. To approve and authorize the Board of Directors to enter into an
equity transaction that may result in the sale of more than 20% of
the Company's outstanding stock in a private transaction, which
authority will be exercised in the Board of Directors judgment.
4. To transact such other business that may properly come before the
meeting, or any adjournments of the meeting.
Only Stockholders of record at the close of business on November 6, 1998 are
entitled to notice of, and to vote at, the Annual Meeting of Stockholders.
BY ORDER OF THE BOARD OF DIRECTORS
David C. Adams
Secretary
November 9, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THERMOGENESIS CORP.'S ANNUAL MEETING OF
STOCKHOLDERS. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING YOU ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN PERSON
OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT
ANY TIME PRIOR TO THE MEETING.
<PAGE>
PROXY STATEMENT
OF
THERMOGENESIS CORP.
3146 GOLD CAMP DRIVE
RANCHO CORDOVA, CA 95670
(916) 858-5100
INFORMATION CONCERNING THE SOLICITATION OF PROXIES
This Proxy Statement is furnished to the Stockholders of THERMOGENESIS CORP.
("Company") in connection with the solicitation of proxies on behalf of the
Company's Board of Directors for use at the Company's Annual Meeting of
Stockholders (the "Meeting"). The Meeting will be held on December 11, 1998 at
10:00 a.m. (PST), at The Lake Natoma Inn, located at 702 Gold Lake Drive,
Folsom, California, 95630. A copy of the Company's Annual Report for the year
ended June 30, 1998 has been sent with this Proxy Statement. Only Stockholders
of record on November 6, 1998 are entitled to vote at the Meeting.
The proxy solicited, if signed by you and returned to the Company, will be
voted at the Meeting per your instructions. If no contrary instructions are
given, each proxy received will be voted "FOR" the nominees for the Board of
Directors, and "FOR" Proposals two and three. Any other matter that may come
before the Meeting (including any proposal to adjourn the Meeting) will be
acted on by the Board of Directors in their discretion. Any Stockholder giving
a proxy has the power to revoke it at any time before it is exercised by (i)
filing with the Company written notice of its revocation addressed to
Secretary, THERMOGENESIS CORP., 3146 Gold Camp Drive, Ranch Cordova, California
95670, or (ii) submitting a properly signed proxy bearing a later date, or
(iii) appearing at the Meeting and giving the Secretary notice of his or her
intention to vote in person prior to submission of any matter to vote.
The Company will bear the entire cost of preparing and mailing these proxy
materials. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to beneficial owners of the
Company's common stock. In addition to the solicitation of proxies through
this proxy statement, some of the officers, directors, employees and agents of
the Company may, without additional compensation, solicit proxies by telephone
or personal interview, the cost of which the Company will also pay.
This Proxy Statement and form of proxy were first mailed to Stockholders on or
about November 9, 1998.
RECORD DATE AND VOTING RIGHTS
The Company is authorized to issue up to 50,000,000 shares of common stock, par
value $0.001, and 2,000,000 shares of preferred stock, par value $0.001. As of
October 8, 1998, there were 18,955,765 shares of common stock issued and
outstanding. No shares of preferred stock are outstanding. Each share of
common stock shall be entitled to one vote on all matters submitted for
Stockholder approval, including the election of directors. The record date for
determination of Stockholders who are entitled to notice of and to vote at the
Meeting is November 6, 1998. The Company's Certificate of Incorporation does
not provide for cumulative voting. Under Delaware law, abstentions and broker
non-votes will be counted for purposes of determining quorum to open the
meeting, but will not be counted either for or against any proposal submitted.
<PAGE> 1
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Amended and Restated By-laws ("By-laws") currently provide for
the annual election of all directors. The authorized number of directors of the
Company is not less than three (3) nor more than seven (7). The Board of
Directors has fixed the number of directors to be elected at the annual meeting
at four (4), as provided in the Bylaws.
In the event that any of the nominees should unexpectedly decline or be
unavailable to act as a director, the enclosed proxy may be voted for a
substitute nominee to be designated by the Board of Directors. The Board of
Directors has no reason to believe that any nominee will become unavailable and
has no present intention to nominate any person in lieu of those named below.
NOMINEES FOR DIRECTOR
The following table lists the persons nominated by the Board of Directors for
election as directors and also lists certain information with respect to those
persons.
NOMINEE AGE DIRECTOR COMMON STOCK PERCENT
SINCE OWNERSHIP{(1)} OWNERSHIP
Philip H. Coelho 54 1986 590,500(2) 3%
Chief Executive
Officer
James Godsey 47 1997 200,500{(3)} 1%
President & Chief
Operating Officer
Patrick McEnany 51 1997 110,829{(4)} *%
Hubert Huckel, M.D. 67 1997 65,000{(5)} *%
Officers and Directors 1,228,829{(6)} 6%
as a group (7)
Footnotes to Table
* Less than 1%.
{(1) }The ownership includes only options exercisable, as adjusted for the
June 14, 1996 one-for-two stock consolidation, on or before September 25,
1998. The total outstanding includes shares assumed exercised for
percentage ownership computation.
{(2) }Includes rights to purchase 175,000 common shares at $2.32 per share and
200,000 common shares at $2.125 per share pursuant to stock options
granted December 31, 1993, and October 23, 1995, respectively, and
50,000 common shares granted on May 29, 1996 and repriced on April 2,
1997 at $2.3125 per share.
{(3) }Includes rights to purchase 200,000 common shares at $2.969 per share
pursuant to stock options granted on November 24, 1997 of which only
66,667 are vested and immediately exercisable.
{(4) }Includes rights to purchase 40,000 shares at $3.3125 per share pursuant
to stock options granted on May 29, 1997. Also includes 25,829 shares
owned by Equisource Capital of which Mr. McEnany is the sole shareholder
and 2,500 shares owned by Mr. McEnany's wife, however, Mr. McEnany
disclaims beneficial ownership of the shares owned by his wife.
{(5) }Includes rights to purchase 40,000 shares at $3.3125 per share pursuant
to stock options granted on May 29, 1997.
{(6) }Includes rights to purchase 120,000 shares at $2.3125 per share pursuant
to stock options granted to David Adams, V.P. Business Development, on
April 2, 1997; rights to purchase 50,000 shares at $2.3125 per share
pursuant to stock options granted to Michael Zmuda, V.P. Regulatory
Affairs, on April 2, 1997, of which 20,000 shares are immediately
exercisable; rights to purchase 132,000 shares at $3.1888 granted to Sam
Acosta on November 20, 1998, of which 44,000 shares are immediately
exercisable; and rights to purchase 10,000 shares at $2.9063 granted to
Renee Ruecker on August 13, 1997, of which 4,000 shares are immediately
exercisable.
<PAGE> 2
BACKGROUND OF NOMINEES.
PHILIP H. COELHO was named President of the Company on September 1989, and
currently serves as Chief Executive Officer and Chairman of the Board. From
October 1986 to September 1989, Mr. Coelho was Vice President and Director of
Research, Development and Manufacturing. Mr. Coelho was President of
Castleton, Inc. from October 1983 until October 1986. Castleton developed and
previously licensed the Insta Cool Technology to the Company. Mr. Coelho has a
Bachelor of Science degree in Mechanical Engineering from the University of
California, Davis, and is the inventor or co-inventor on all of the Company's
patents.
JAMES H. GODSEY, PH.D. joined the Company as its new President and Chief
Operating Officer in November 1997. Previously, Dr. Godsey was with Dade
MicroScan, a division of DADE BEHRING INC., where he was Vice President of
Planning and Technology Integration, responsible for technology assessment
activities, including the evaluation and acquisition of other medical device
companies and medical device products. Dr. Godsey also served as Product Line
General Manager of Dade MicroScan Inc. and Bartels Diagnostics Inc. from August
1993 to June 1995, overseeing annual product sales of $150 million and served
as Vice President of Research & Development from February 1987 to August 1993.
Dr. Godsey received his Doctorate in Bacterial Physiology from St. John's
University in New York, a Masters of Science in Bacterial Physiology from the
University of Missouri, a Bachelor of Science from Southeast Missouri State
University and is a candidate for a Masters of Business Administration from the
University of Phoenix.
PATRICK MCENANY has been the President and Chief Executive Officer of AMDG,
Inc. since February 1998. From 1991 to April of 1997 Mr. McEnany was the
President of Royce Laboratories and was the Chairman of the Board. In April
1997, Royce Laboratories merged with and became a subsidiary of Watson
Pharmaceuticals, Inc. From 1973 to 1985, Mr. McEnany was the President, Chief
Executive Officer and Chief Financial Officer of Zenex Synthetic Lubricants,
Inc. ("Zenex"), a company engaged in the distribution of synthetic lubricants.
In February 1985, Zenex merged with Home Intensive Care, Inc. ("HIC"), a
provider of home infusion therapy services and Mr. McEnany continued to serve
as a director and chairman of the audit committee until HIC was acquired by WR
Grace & Co. in 1993. From December 1984 through 1991, Mr. McEnany also served
as the President of Equisource Capital, Inc., a consulting company in the areas
of corporate finances as Vice Chairman and director of the National
Association of Pharmaceutical Manufacturers. Mr. McEnany was a director of the
Company in 1991.
HUBERT E. HUCKEL, M.D. currently serves as a member of the Board of Directors
of Titan Pharmaceuticals, Inc., Gynetics Inc. & AMDG, Inc. (Chairman). In 1964,
Dr. Huckel joined Hoechst A.G., a Frankfurt, Germany based chemical-
pharmaceutical company ranking in the top 5 of such companies world wide. Dr.
Huckel later moved to Hoechst U.S. subsidiaries in 1966 where he held various
operations and executive management positions, advancing to Chairman of Hoechst
Roussel Pharmaceutical, Inc., president of the Life Sciences Group, and member
of the Executive Committee at Hoechst Celanese Corp., a Fortune 100 company.
Dr. Huckel earned his medical degree from the University of Vienna, Austria, in
1956.
VOTE REQUIRED
A majority of votes by the shares of common stock present or represented and
voting at the meeting is required to elect the nominees.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR ALL NOMINEES FOR THE
BOARD OF DIRECTORS.
<PAGE> 3
PROPOSAL TWO
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO EFFECT A ONE-FOR-FOUR CONSOLIDATION OF COMMON STOCK
GENERAL
The Board of Directors is concerned about the low trading price and the low
trading volume for the Company's common stock over the past few months. In
light of those trends, the Board of Directors has concluded that it would be
advisable, in the immediate near future, to amend the Company's certificate of
incorporation to effect a one-for-four consolidation ("reverse stock split") of
the Company's issued and outstanding common stock. The effect of the amendment
to the Company's certificate of incorporation will be to add a new paragraph
in place of the existing Article FOURTH, which will read as follows:
"Each four (4) issued and outstanding shares of common stock of this
Corporation shall be combined into one (1) share of validly issued, fully
paid and non-assessable common stock, par value $.001. Each person as of
[the date this amendment is filed] holding of record any issued and
outstanding shares of common stock shall receive upon surrender to the
Company's transfer agent a stock certificate or certificates to evidence
and represent the number of shares of post-consolidation common stock to
which such shareholder is entitled after giving effect to the
consolidation; provided, however, that all fractional shares resulting
therefrom shall be paid in cash."
The proposed amendment to the certificate of incorporation of the Company was
unanimously approved by the Board of Directors who directed that it be
submitted for stockholder approval at the Meeting. The amendment, if approved,
will result in the consolidation of outstanding stock. Therefore, following
approval and filing of the amendment, each share of post-consolidation common
stock ("New Common Stock") will be exchanged for every four (4 ) shares of
presently issued and outstanding common stock ("Old Common Stock") owned by a
stockholder.
Other than adjusting the total number of shares issued (by consolidation),
there will be no other changes to ownership of the stock. The voting rights
and other privileges that each share of common stock enjoys before the proposed
consolidation will be the same following the consolidation, and the
consolidation will not affect any stockholder's proportionate equity interest
in the Company. The consolidation may, however, result in an immaterial
adjustment due to the purchase of any fractional shares of common stock that
result from the consolidation. Shares of common stock issuable upon the
exercise of outstanding stock options or upon the exercise of outstanding
warrants will also be consolidated in the same ratio of one-for-four.
This table gives an example of the effect of consolidation:
PRE-APPROVAL POST-APPROVAL SHARE
STOCKHOLDER SHARES OWNED SHARES OWNED FRACTIONS PAID
Stockholder A 30,000 shares 7,500 shares -0-
Stockholder B 500 shares 125 shares -0-
Stockholder C 66 shares 16 shares 1/2 share
Fractional shares will be paid for upon exchange of the outstanding
certificates based upon the average of the high and low bid price for the
common stock as quoted on the Nasdaq Market on the date of the consolidation.
The Company currently has outstanding only one class of common stock and no
shares of preferred stock. In the event that Proposal Two is approved and
adopted by the stockholders, the number of outstanding shares of common stock
would be reduced. The Company is authorized to issue 52,000,000 shares of
common stock, 50,000,000 of which are designated common shares, and 2,000,000
of which are designated preferred shares. Of the 50,000,000 shares of
authorized common stock, there are currently 18,955,765 shares issued and
outstanding. Further, there are approximately 5,233,867 additional shares
underlying warrants and options that have been reserved for future exercise.
The number of shares of common stock issuable upon conversion of warrants or
exercise of stock options would also be reduced (one-for-four) to 1,308,466 in
connection with the proposed consolidation.
<PAGE> 4
The proposed consolidation will not change the authorized number of shares of
common stock or preferred stock, although as a result of the consolidation, the
decrease in the number of issued and outstanding shares will result in an
increase in the number of shares available for future issuance. There would be
no effect on outstanding options and warrants except for the adjustment (one-
for-four).
This table illustrates the principal effects of the proposed consolidation on
all outstanding shares as they would be effected on the date of the
consolidation (the "record date"):
NUMBER OF PRIOR TO AFTER
SHARES OF PROPOSED PROPOSED
COMMON STOCK CONSOLIDATION CONSOLIDATION
Authorized 50,000,000 50,000,000
Issued and
Outstanding 18,955,765 4,738,941**
Available for
Future Issuance 31,047,331 45,261,833*
NOTE TO TABLE
* Does not include further reduction for shares underlying warrants and
options which are reserved.
** Subject to minor adjustment due to the purchase of fractional shares
resulting from the consolidation.
It is not anticipated that any change will be made in the Company's
capital stock as a result of the proposed consolidation.
REASONS FOR THE CONSOLIDATION
The Company's common stock is listed on the Nasdaq SmallCap Market. As part of
continued listing on that market, the Company must satisfy certain quantitative
criteria. One of the requirements for continued listing is that the minimum
bid price for the Company's common stock must be $1 per share. Failure to meet
this requirement for a period of 30 consecutive business days will result in
notification by Nasdaq of possible de-listing from the market if the minimum
bid is not brought within compliance over a 90 day period following the
notification. One method to increase the bid price for the common stock is to
consolidate the outstanding shares, thereby increasing the attached value per
share. The following table illustrates the possible effect of a consolidation
on the stock price, assuming all other market factors remain the same:
BEFORE STOCK CONSOLIDATION AFTER STOCK CONSOLIDATION
NUMBER OF PER SHARE NUMBER OF PER SHARE
SHARES OWNED PRICE SHARES OWNED PRICE
100,000 $1.00 25,000 $4.00
10,000 $1.00 2,500 $4.00
<PAGE> 5
This table demonstrates the mathematical implication of a stock consolidation.
The Company cannot predict the actual result of trading and bid price for the
shares of common stock following the consolidation due to the numerous market
factors that affect trading daily, including impacts to the market as a whole.
The Board of Directors further believes that the current per share price of the
common stock and the large number of shares of common stock outstanding have
had a negative impact on the market for its common stock. Furthermore, the
large number of shares outstanding and the relatively few shares that are
traded on a daily basis in comparison, has hindered the Company's ability to
raise capital by issuing additional shares of common stock. The Board of
Directors is hopeful that after the consolidation the market will react
positively and in such a fashion that the price of the Company's common stock
will rise and cease to be treated as "low-priced" stock by the investment
community.
The Board of Directors recognizes that the proposed consolidation will not, in
itself, result in the Company's common stock being categorized other than as a
low-priced stock, and that the only path to being categorized as other than
low-priced is through sustained growth and profitability, neither of which can
be assured, and the absence of which will result negatively upon the trading
value of the Company's common stock following the proposed consolidation.
The Company believes there are several reasons beyond Nasdaq listing
requirements why the proposed consolidation is prudent and why it may enhance
the market for the common stock. These reasons are summarized as follows.
1. Institutional investors often have internal policies that prevent
the purchase of low-priced stocks and many brokerage houses do not
permit low-priced stocks to be used as collateral for margin
accounts. Similarly, many banks do not permit collateralization of
loans through the pledge of low-priced stocks. If the
consolidation, coupled with Company growth and profitability,
results in an increase in the per share price for the Company's
common stock, the Company may be able to attract additional
institutional investors as well as provide an avenue for its
stockholders to collateralize loans using their common stock
instead of selling that stock for needed money.
2. Further, some brokerage firm's implement internal policies and
practices that tend to discourage dealing with low-priced stock
(stock priced under $5 per share). These practices result in time-
consuming procedures and internal controls that must be complied
with for payment of brokerage commissions (and additional
procedures, including branch manager approval), which function to
make handling low-priced stock unattractive to brokers and
registered representatives of a brokerage firm. Some brokerage
firms also require a non-solicitation letter from the client when
the client desires to purchase a low-priced stock. These policies
and procedures add delay and burden to the process, based on
separate business criteria of the brokerage firm, and are designed
to balance the commission to be paid with the cost of handling the
stock transaction, rather than considering and evaluating such
factors as the underlying nature of the transaction and quality of
the issuer. The Company believes that such policies do not foster
evaluation of its reported results and prospects for future growth
and stockholder return, factors which should be considered in
evaluating stock prices.
3. Since the broker's commissions and transaction costs on low-priced
stock generally represent a higher percentage of the stock sale
price than commissions and costs on higher-priced stocks, the
current share price of the Company's common stock can result in
individual shareholders paying transaction costs (commissions,
mark-ups, mark-downs, etc.) which are a higher percentage of the
total share value than would be the case if the Company's share
price were higher.
Although the Board of Directors is hopeful that the decrease in the number of
shares of common stock that would be outstanding after the proposed
consolidation will result in an increased price level per share of common stock
which will encourage interest in the market for that common stock and promote
greater marketability for the common stock, no assurances can be given that the
market will respond to the consolidation with an increase in the per share
price or with any increase in average daily trading volume.
<PAGE> 6
Finally, the affect of the proposed consolidation, and resulting decrease in
the number of shares of common stock on the market, could adversely affect the
trading value of such common stock if there is not a corresponding increase in
the per share price level for such stock following the consolidation. Many
factors beyond the Company's control will affect the ultimate trading market
and there can be no assurance that the per-share price for the Company's common
stock immediately after the consolidation will reflect the corresponding math
material value based on the consolidation alone, or that any such value will
be sustained for any period of time.
The Company's common stock has been traded on the Nasdaq SmallCap Market under
the symbol "KOOL" since 1987. On October 7, 1998, the closing price for the
Company's common stock, as quoted on the Nasdaq Market, for a share of common
stock was $0.875 per share. The following table sets forth the range of high
and low prices for the Company's common stock for the fiscal years ended June
30, 1997 and 1998 as reported in the Nasdaq Market. Such prices reflect inter-
dealer quotation without adjustment for retail mark ups, mark downs or
commissions and may not represent actual transactions.
FISCAL 1998: HIGH LOW
First Quarter $3.5626 $3.3750
Second Quarter $3.1250 $2.9688
Third Quarter $2.7500 $2.6250
Fourth Quarter $2.2500 $2.0940
FISCAL 1997:
First Quarter $4.2500 $4.0625
Second Quarter $3.8750 $3.6875
Third Quarter $3.0625 $2.8750
Fourth Quarter $2.7813 $2.7813
EXCHANGE OF STOCK CERTIFICATES
If the proposed amendment to the Company's certificate of incorporation to
provide for a one-for-four consolidation is approved, the Company will file an
amended and restated certificate of incorporation within the next three months
following the Meeting, consistent with the Company's judgment on timing and
timing requirements that may be imposed by the Nasdaq Market. The proposed
consolidation will become effective upon the filing of that amended and
restated certificate of incorporation (the "Effective Date"). American
Securities Transfer & Trust, Inc. has been appointed as the Company's exchange
agent ("Exchange Agent") to act for stockholders in effecting the exchange of
their certificates.
If the proposed amendment is approved, Stockholders will be notified and
requested to surrender their certificates representing shares of the Old Common
Stock to the Exchange Agent who will issue new certificates representing shares
of New Common Stock after giving effect to the consolidation. Commencing with
the effective date, however, each certificate representing shares of Old Common
Stock will be automatically deemed, without any action, for all purposes to
evidence ownership of New Common Stock taking into account the consolidation.
No scrip or fractional share certificates of New Common Stock will be issued in
connection with the proposed consolidation. Stockholders who would otherwise
receive fractional shares will receive, instead, the cash value for such
fractional shares determined by multiplying the fractional share by the average
of the high and low bid price for the Company's common stock on the date of the
consolidation ("Effective Date").
<PAGE> 7
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of the proposed consolidation are set forth
below. The following information is based upon existing law which is subject
to change by legislation, administrative action and judicial decision, and is
necessarily general in nature. Furthermore, individual circumstances may alter
the effect or require different tax treatment depending upon those specific
circumstances. Accordingly, stockholders are advised to consult with their own
tax advisor(s) for more detailed information relating to their individual
circumstances and the individual tax treatment that may result due to the
consolidation of stock.
1. The proposed consolidation will be a tax-free recapitalization for
the Company and its stockholders.
2. The shares of New Common Stock registered in the name of a
stockholder (or beneficially owned by such stockholder) will have
an aggregate basis for computing gain or loss equal to the
aggregate basis of the Old Common Stock held by that stockholder
immediately prior to the Effective Date for the proposed
consolidation.
3. A stockholder's holding period for shares of New Common Stock will
include the holding period of shares of Old Common Stock tendered
in exchange, provided that the shares of Old Common Stock were
capital assets in the hands of the stockholder on the Effective
Date of the proposed consolidation.
4. Depending on the individual facts and circumstances, to the extent
a stockholder receives cash in lieu of a fractional share, the
stockholder may be required to treat such cash as income from a
dividend or as a sale or exchange of the fractional share and will
recognize gain or loss based on the difference between the cash
price paid and the stockholder's basis in the fractional share.
While it appears that dividend treatment will not apply,
stockholders are advised to consult with their own tax advisor with
respect to individual treatment.
REGISTRATION AND TRADING
The New Common Stock will continue to be registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company will
continue to file periodic and current reports with the Securities and Exchange
Commission (the "Commission") pursuant to the Exchange Act. In addition, the
Company's New Common Stock will continue to be traded on the Nasdaq SmallCap
Market. The Company intends to file all required notifications with the Nasdaq
Market to provide for continued trading (on a post-consolidated basis) in
coordination with the Effective Date. Certificates representing the New Common
Stock will, however, contain a new CUSIP number.
The Company has no intention of entering into any future transaction or
business combination which would result in deregistration of the New Common
Stock under the Exchange Act, or which might result in loss of eligibility for
the New Common Stock to be listed and traded on the Nasdaq Market.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding common
stock is required to approve Proposal two.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE PROPOSAL TO AMEND
THE CERTIFICATE OF INCORPORATION TO PROVIDE FOR A ONE-FOR-FOUR CONSOLIDATION OF
THE COMPANY'S COMMON STOCK.
<PAGE> 8
PROPOSAL THREE
APPROVAL FOR THE BOARD OF DIRECTORS TO AUTHORIZE THE COMPANY
TO ENTER INTO A PRIVATE EQUITY TRANSACTION THAT MAY RESULT IN
ISSUANCE OF MORE THAN 20% OF THE OUTSTANDING COMMON STOCK
The Company has expended considerable capital resources in completing
development of its new technology platforms, the additions to management and
facilities required for market launch of new products, and the actual market
launch of the Company's BioArchive<trademark> Stem Cell System. Nevertheless,
to fully effect the Company's accelerated business plan and to begin clinical
trials directed towards collection of data for submission to the U.S. Food and
Drug Administration ("FDA") for additional products and product claims, the
Company will require additional sums of working capital. Although the Company
is currently working to establish working capital lines of revolving debt, it
is anticipated that some future equity transaction might also be necessary,
depending ultimately on a number of factors, including future sales volume for
the Company's products, expenses associated with the clinical trials, and other
operationally related expenses.
The Company is not required under the Nasdaq Market voting rights policy to
obtain stockholder approval for the issuance of stock at market prices or in a
public transaction. However, stockholder approval is required in the event a
private transaction results in the issuance of more than 20% of the currently
issued and outstanding shares of common at prices below market. If market
conditions become more favorable in the immediate future, it may be in the best
interest of the Company to obtain all required capital to conclude its
marketing efforts, including funding for all scheduled FDA trials and
completion of all required FDA submissions, in order to bring the Company and
its operations into profitability.
The Company seeks approval from its stockholders authorizing the Board of
Directors to enter into a transaction that could result, at the closing of the
transaction, in the Company issuing or being obligated to issue in the future a
number of shares of common stock that would, in the aggregate, exceed 20% of
the currently issued and outpany is limiting such approval and authority to the
Board of Directors so that the shares issued in any transaction would not be
greater than 30% of the issued and outstanding shares without first obtaining
additional stockholder approval. As of October 8, 1998, there were 18,955,765
shares issued and outstanding, and approval of this proposal would authorize
the Board of Directors, in the exercise of their best judgment as to timing,
price and terms, to enter into a transaction that could result at the closing
of the transaction in the Company issuing or being obligated to issue in the
future up to 5,685,800 shares of common stock, or in the event that
proposal number two is approved, up to 30% of the issued and outstanding
shares at the time of the transaction taking into consideration the
one-for-four stock consolidation.
As of October 8, 1998, the Board of Directors is not actively pursuing or
negotiating any private transaction that would result in the issuance of common
stock.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding common
stock is required to approve Proposal Three.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE PROPOSAL TO
AUTHORIZE THE COMPANY TO ENTER INTO A PRIVATE TRANSACTION, AT THE DISCRETION OF
THE BOARD OF DIRECTORS, THAT WOULD RESULT IN ISSUANCE OF MORE THAN 20% OF THE
ISSUED AND OUTSTANDING SHARES OF COMMON STOCK.
<PAGE> 9
EXECUTIVE COMPENSATION OF MANAGEMENT,
OWNERSHIP OF CERTAIN
STOCKHOLDERS, AND CERTAIN RELATED TRANSACTIONS
The following table sets forth certain information with respect to executive
officers of the Company at fiscal year end.
NAME POSITIONS WITH THE COMPANY AGE OFFICE
HELD SINCE
Philip H. Coelho Chief Executive Officer 54 1989{(1)}
James H. Godsey President & Chief Operating Officer 47 1997
David C. Adams V.P. Business Development
and General Counsel 40 1996
Sam Acosta V.P. Manufacturing Operations 55 1997
Michael Zmuda, PhD, RAC{(2)} V.P. Regulatory Affairs
and Quality Systems 61 1997
Renee Ruecker{(3) }Director of Finance 34 1997
Charles de B. Griffiths V.P. Foreign Marketing 49 1990
NOTES TO TABLE
{(1) }Prior to becoming President, Mr. Coelho served as Vice President and
Director of Research, Development and Manufacturing from October 1986 to
September 1989.
{(2) }Dr. Michael Zmuda agreed to resign as V.P. Regulatory Affairs & Quality
Systems in October 1998.
{(3) }Ms. Renee Ruecker assumed the position of V.P. Finance in August 1998.
Executive officers are elected annually by the Board of Directors and serve at
the pleasure of the Board. Messrs. Coelho, Griffiths, Acosta, Adams, and Dr.
Godsey have entered into employment agreements with the Company. There is no
family relationship between any of the officers and directors. Mr. McEnany is
currently a member of the AMDG, Inc.Board of Directors and Dr. Huckel is a
member of the Board of Directors for Titan Pharmaceuticals, Inc., Gynetics Inc.
and AMDG, Inc. Board of Directors.
The biographies of Messr. Coelho, and Dr. Godsey can be found on page 3.
Mr. Adams joined the Company at the end of November 1996 as General Counsel,
and filled the newly created position of V.P. of Business Development. Prior
to joining the Company, Mr. Adams was in private practice representing public
and private corporations in the areas of intellectual property, corporate
finance, mergers and acquisitions, and regulatory matters. Mr. Adams received
his Bachelor of Arts Degree in Psychology, with High Distinction, from the
University of Colorado, Colorado Springs in 1984, and his Juris Doctorate, with
Distinction, from the University of the Pacific, McGeorge School of Law in
1988.
Dr. Zmuda joined the Company in February 1997 as V.P. of Regulatory Affairs and
Quality Systems. After serving as Assistant Professor of Pharmacology at
Southern Illinois University School of Medicine for five years, Dr. Zmuda
worked at Baxter-Travenol Laboratories, CD Medical, Inc., and American
Sterilizer Company ("AMSCO"). Prior to joining the Company, Dr. Zmuda held the
position of Director of Regulatory Affairs at AMSCO from 1989 through 1996 when
AMSCO merged with Steris Corporation. Dr. Zmuda received his Bachelor of Arts
Degree in Psychology in 1969, and his Physical Doctorate in Pharmacology in
1975, both from the University of Minnesota.
Mr. Sam Acosta joined the Company in December 1997 as V.P. Manufacturing
Operations. Prior to joining the Company, Mr. Acosta was V.P. of Manufacturing
at Dade International, MicroScan, formerly Baxter Diagnostics. Mr. Acosta was
responsible for manufacturing engineering, materials management and
distributions and quality control. Mr. Acosta received his Bachelor of Arts
Degree in Business Administration from California State University Sacramento.
Ms. Ruecker joined the Company in August 1997 as Director of Finance. Prior to
joining the Company, Ms. Ruecker was a manager in the Audit and Business
Advisory Department at Price Waterhouse LLP. Her clients included a number in
the science and health industries. A Certified Public Accountant, Ms. Ruecker
received her Bachelor of Arts Degree in Business Administration from the
California Polytechnic State University in San Luis Obispo.
<PAGE> 10
CERTAIN LEGAL PROCEEDINGS
Except for Mr. McEnany, none of the executive officers or directors has been
involved in any material legal proceeding within the past five years. While
Chairman and President of Royce Laboratories (1991 - 1997), Mr. McEnany
responded to a formal investigation by the Securities and Exchange Commission
against Royce Laboratories and its officers and directors related to certain of
Royce Laboratories' disclosure in February 1993. The matter was resolved in
May 1996 when Royce Laboratories and Mr. McEnany entered into a settlement with
the SEC, without admitting or denying that a violation of the securities laws
had occurred. As part of the settlement, Royce Laboratories and Mr. McEnany
consented to a civil injunction requiring that they comply with the federal
securities laws in the future. The Company does not believe that the substance
of the consent decree or the injunction will affect Mr. McEnany's ability as a
director of the Company.
BOARD MEETINGS
During the fiscal year ended June 30, 1998, the Board took formal action 25
times, by meeting or consent. All directors were either present at the meeting
or consented in writing to each action taken. The Compensation Committee also
took action on 12 occasions, by meeting or consent, during the fiscal year
ended June 30, 1998. All members of the Compensation Committee were present or
consented to the actions in writing. The Audit Committee met once, and all
members of that committee were present at the meeting. There were no Executive
Committee meetings during the year.
BOARD COMMITTEES
The Company currently has a Compensation Committee, an Executive Committee and
an Audit Committee.
At fiscal year end, the Executive Committee consisted of Philip Coelho, Patrick
McEnany, and James Godsey. The Executive Committee assists the Company's
officers in establishing or implementing strategic plans, and determining
questions of general policy with regard to the Company's business and day-to-
day operations.
At fiscal year end, the Audit Committee consisted of two non-employee
directors, Patrick McEnany and Dr. Hubert Huckel. The Audit Committee
coordinates and oversees the Company audit performed by outside auditors.
The Compensation Committee consisted of two non-employee directors, Patrick
McEnany and Dr. Hubert Huckel. The Compensation Committee reviews and approves
the executive compensation policies and determines employee option grants. The
following report submitted by the Compensation Committee describes the
compensation policies and rationales applicable to the Company's executive
officers with respect to the compensation paid to such executive officers for
the fiscal year ended June 30, 1998.
<PAGE> 11
COMPENSATION OF THERMOGENESIS CORP. MANAGEMENT
The Compensation Committee ("Committee") of the Board of Directors is
responsible for the Company's compensation, benefits, and stock option grants
for executive officers. The Committee is composed entirely of independent
outside directors. The following is the Committee's report on executive
compensation.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
No new compensation issues were decided since last annual meeting. Dr. Godsey
and Mr. Acosta were hired during the fiscal year, prior to the last annual
meeting.
Compensation Philosophy
The Committee continues to emphasize the important link between the Company's
performance, which ultimately benefits all shareholders, and the compensation
of its executives. Therefore, the primary goal of the Company's executive
compensation policy is to closely align the interests of the shareholders with
the interests of the executive officers. In order to achieve this goal, the
Company attempts to (i) offer compensation opportunities that attract and
retain executives whose abilities and skills are critical to the long-term
success of the Company and reward them for their efforts in ensuring the
success of the Company and (ii) encourage executives to manage from the
perspective of owners with an equity stake in the Company. The Company
currently uses three integrated components - Base Salary, Incentive
Compensation and Stock Options - to achieve these goals. More recently, the
Committee has begun to focus more on principles of pay for performance and
stock ownership, through option grants, to provide adequate incentive for
completing tasks and operational hurdles the Company is facing. The following
outlines the overall compensation components.
Base Salary
The Base Salary component of total compensation is designed to compensate
executives competitively within the industry and the marketplace. The Committee
reviewed and approved an employment agreement for Mr. Adams in December 1996,
Dr. Godsey in November 1997, and Mr. Acosta in December 1997. Base Salaries of
the executive officers are established by the Committee based upon Committee
compensation data, the executive's job responsibilities, level of experience,
individual performance and contribution to the business. Executive officer
salaries have been targeted at slightly below average rates paid by competitors
and other public companies in the area. In making base salary decisions, the
Committee exercised its discretion and judgment based upon regional and
personal knowledge of industry practice and did not apply any specific formula
to determine the weight of any one factor.
Incentive Bonuses
The Incentive Bonus component of executive compensation is designed to reflect
the Committee's belief that a portion of the compensation of each executive
officer should be contingent upon the performance of the Company, as well as
the individual contribution of each executive officer. The Incentive Bonus is
intended to motivate and reward executive officers by allowing the executive
officers to directly benefit from the success of the Company. Mr. Coelho is
entitled to receive up to one-half of one percent of the Company's net profits,
but such incentive compensation cannot exceed ten percent of his annual Base
Salary, i.e., no more than $16,000. Dr. Godsey was provided with an initial
bonus of $50,000 to entice him to join the Company immediately, and Mr. Acosta
was similarly provided with a $10,000 bonus. Executive Employment contracts
provide generally for a discretionary bonus of up to 35% of the executive's
base salary which will be determined by the Committee based on performance
criteria and Company performance during the year.
Long Term Incentives
The Committee provides the Company's executive officers with long-term
incentive compensation in the form of stock option grants under the Company's
Amended 1994 Stock Option Plan and the 1998 Employee Equity Incentive Plan.
The Committee believes that stock options provide the Company's executive
officers with the opportunity to purchase and maintain an equity interest in
the Company and to share in the appreciation of the value of the Company's
Common Stock. The Committee believes that stock options directly motivate an
executive to maximize long-term shareholder value. All options granted to
executive officers to date have been granted at the fair market value of the
Company's Common Stock on the date of grant, except for the repricing of
options granted to Mr. Coelho on May 29, 1996 which were repriced on April 2,
1997. The Committee considers each option subjectively, considering factors
such as the individual performance of the executive officer and the anticipated
contribution of the executive officer to the attainment of the Company's long-
term strategic performance goals. The number of Stock Options granted in prior
years are also taken into consideration.
<PAGE> 12
In conclusion, the Committee believes that the Company's current compensation
levels are consistent with Company goals.
Respectfully Submitted,
THERMOGENESIS CORP. COMPENSATION COMMITTEE
Hubert Huckel, M.D., Chairman
Patrick McEnanay
EXECUTIVE COMPENSATION
This table lists the aggregate cash compensation paid in the past three years
for all services of the named Executive Officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
OTHER ANNUAL
NAME AND PRINCIPAL COMP. RESTRICTED STOCK OPTIONS GRANTED
POSITION YEAR SALARY BONUS AWARD(S)
Philip H. Coelho, 1996 $ 110,000 $ 0 $ 27,296{(1)} $ 0 250,000{(2)}
Chief Executive Officer 1997 $ 160,000 $ 0 $ 52,764{(3)} $ 0 -0-
1998 $160,000 $0 $15,228{(4)} $0 -0-
James Godsey, President 1996 $0 $0 $0 $0 -0-
and Chief Operating 1997 $0 $0 $0 $0 -0-
Officer 1998 $93,000 $50,000 $3,269{(5)} $0 200,000{(6)}
Charles de B. 1996 $ 110,000 $ 0 $ 21,512{(7)} $ 0 100,000{(8)}
Griffiths 1997 $ 120,000 $ 0 $ 31,781{(9)} $ 0 -0-
VP Foreign Markets 1998 $120,000 $0 $9,352{(10)} $0 -0-
David Adams, VP 1996 $0 $0 $0 $0 -0-
Business Development 1997 $64,167 $0 $4,550{(11)} $0 120,000{(12)}
and General Counsel 1998 $110,000 $0 $11,731{(13)} $0 -0-
Michael Zmuda, VP 1996 $0 $0 $0 $0 -0-
VP Regulatory Affairs 1997 $37,500 $0 $9,023{(14)} $0 50,000{(15)}
and Quality Systems 1998 $90,404 $0 $22,218{(16)} $0 -0-
</TABLE>
{(1)} Represents payments of $7,200 annual automobile allowance and $20,096 in
accrued vacation pay.
{(2) }Includes 200,000 stock options granted on October 23, 1995, and 50,000
stock options granted on May 29, 1996 which were repriced on April 2,
1997 to $2.3125 per share.
{(3) }Represents payments of $12,000 annual automobile allowance and $40,764
in accrued vacation pay.
{(4) }Represents payment of $9,231 annual automobile allowance and $5,997 in
accrued vacation.
{(5) }Represents payments of $3,269 annual automobile allowance.
{(6) }Includes 200,000 stock options granted on November 14, 1997 at $2.969
per share.
{(7) }Represents payments of $9,000 annual automobile allowance and $12,512 in
accrued vacation pay.
{(8) }Includes replacement option of 100,000.
{(9)} Represents payments of $9,600 annual automobile allowance and $22,781 in
accrued vacation pay.
{(10)} Represents payments of $6,231 annual automobile allowance and $3,121 in
accrued vacation pay.
{(11) }Represents payments of $4,550 annual automobile allowance.
{(12) }Includes 120,000 stock options granted on April 2, 1997 at $2.313 per
share.
{(13) }Represents payments of 7,500 annual automobile allowance and $4,231 in
accrued vacation pay.
{(14) }Represents payments of $4,165 annual automobile allowance plus $4,858 in
relocation moving expense reimbursement..
{(15) }Includes 50,000 stock options granted on April 2, 1997 at $2.313 per
share.
{(16) }Represents payments of 9,612 annual automobile allowance plus $12,606 in
relocation moving expense reimbursement..
______________________
<PAGE> 13
EMPLOYMENT AGREEMENTS
In June 1996, the Company and Mr. Coelho entered into an employment agreement
whereby Mr. Coelho agreed to serve as President and Chief Executive Officer of
the Company and receive compensation equal to $160,000 per year and a $800 per
month automobile allowance, subject to annual increases as may be determined by
the Board of Directors. The employment agreement may be terminated by Mr.
Coelho or by the Company with or without cause. In the event Mr. Coelho is
terminated by the Company without cause, Mr. Coelho will be entitled to receive
severance pay equal to the greater of six months of his annual salary or the
remaining term of the agreement. In addition, the employment agreement
provides that in the event Mr. Coelho is terminated other than "for cause" upon
a change of control, Mr. Coelho shall be paid an amount equal to three times
his annual salary. The phrase "change of control" is defined to include (i) the
issuance of 33% or more of the outstanding securities to any individual, firm,
partnership, or entity, (ii) the issuance of 33% or more of the outstanding
securities in connection with a merger, or (iii) the acquisition of the Company
in a merger or other business combination. The employment agreement expires by
its terms in June 1999. In November 1997, Mr. Coelho resigned his position as
President.
In June 1996, the Company and Charles de B. Griffiths entered into an
employment agreement whereby Mr. Griffiths agreed to serve as Vice-President of
Marketing and Sales of the Company and receive compensation equal to $120,000
per year and a $750 per month car allowance, subject to annual increases as may
be determined by the Board of Directors. The employment agreement may be
terminated by Mr. Griffiths or by the Company with or without cause. In the
event Mr. Griffiths is terminated by the Company without cause, Mr. Griffiths
will be entitled to receive severance pay equal to the greater of six months of
his annual salary, or the remaining term of the agreement. In addition, the
employment agreement provides that in the event Mr. Griffiths is terminated
following a change of control, Mr. Griffiths shall be paid an amount equal to
three times his annual salary. The phrase "change of control" is defined to
include (i) the issuance of 33% or more of the outstanding securities to any
individual, firm, partnership, or entity, (ii) the issuance of 33% or more of
the outstanding securities in connection with a merger, or (iii) the
acquisition of the Company in a merger or other business combination. The
employment agreement expires by its terms in June 1999.
In December 1996, the Company and Mr. Adams entered into an employment
agreement whereby Mr. Adams agreed to serve as Vice President of Business
Development and General Counsel of the Company and receive compensation equal
to $110,000 per year and a $650 per month automobile allowance, subject to
annual increases as may be determined by the Board of Directors. The
employment agreement may be terminated by mutual consent of the Company and Mr.
Adams or by the Company with or without cause. In the event Mr. Adams is
terminated by the Company without cause, Mr. Adams will be entitled to receive
severance pay equal to the greater of six months of his annual salary,
excluding any amounts for benefits or automobile allowance or an amount equal
to the then current per month Base Salary multiplied by the number of calendar
months remaining in the Agreement. In addition, the employment agreement
provides that in the event Mr. Adams is terminated other than "for cause" upon
a change of control, Mr. Adams will be paid an amount equal to three times his
annual salary. The phrase "change of control" is defined to include (i) the
issuance of 33% or more of the outstanding securities to any individual, firm,
partnership, or entity, (ii) the issuance of 33% or more of the outstanding
securities in connection with a merger, or (iii) the acquisition of the Company
in a merger or other business combination. The employment agreement expires by
its terms in November 1999.
<PAGE> 14
In February 1998, the Company and Michael Zmuda entered into an employment
agreement whereby Dr. Zmuda agreed to serve as Vice President of Regulatory
Affairs and Quality Systems of the Company and receive compensation equal to
$105,000 per year and a $833 per month automobile allowance, subject to annual
increases as may be determined by the Board of Directors. The employment
agreement may be terminated by the Company with or without cause. By agreement
with the Company, Dr. Zmuda resigned as V.P., and ceased employment as of
October 5, 1998. Dr. Zmuda entered into a severance agreement effective that
date that would obligate the Company to pay continuation of his salary for a
period of seven months, with three additional months paid conditioned on his
inability to find gainful employment at the end of the seven month period. The
Company will also pay health benefits during that period.
In November 1997, the Company entered into an employment agreement with Dr.
Godsey whereby Dr. Godsey agreed to serve as President and Chief Operating
Officer and receive compensation equal to $160,000 and a $500 per month
automobile allowance, subject to annual increases as may be determined by the
Board of Directors. Dr. Godsey is eligible to receive bonuses based on his
performance and the attainment of objectives established by the Company. Dr.
Godsey shall receive an initial bonus of $60,000 at the end of the first
anniversary of the employment agreement and thereafter, bonuses shall not
exceed thirty-five percent of his base salary in effect for that given year.
The employment agreement may be terminated prior to the expiration of the
agreement, upon the mutual agreement of the Company and Dr. Godsey. In
addition, the employment agreement provides that in the event Dr. Godsey is
terminated other than "for cause" upon a change of control, Dr. Godsey will be
paid an amount equal to three times his annual salary. The phrase "change of
control" is defined to include (i) the issuance of 33% or more of the
outstanding securities to any individual, firm, partnership, or entity, (ii)
the issuance of 33% or more of the outstanding securities in connection with a
merger, or (iii) the acquisition of the Company in a merger or other business
combination. The employment agreement expires by its terms in November 2000.
In December 1997, the Company entered into an employment agreement with Mr.
Acosta whereby Mr. Acosta agreed to serve as V.P. of Manufacturing Operations
and receive compensation equal to $135,000 subject to annual increases as may
be determined by the Board of Directors. Mr. Acosta is eligible to receive
bonuses based on his performance and the attainment of objectives established
by the Company. Mr. Acosta shall receive an initial bonus of $10,000 at the
commencement of employment and thereafter, bonuses shall not exceed thirty-five
percent of his base salary in effect for that given year. The employment
agreement may be terminated prior to the expiration of the agreement, upon the
mutual agreement of the Company and Mr. Acosta. In addition, the employment
agreement provides that in the event Mr. Acosta is terminated other than "for
cause" upon a change of control, Mr. Acosta will be paid an amount equal to
three times his annual salary. The phrase "change of control" is defined to
include (i) the issuance of 33% or more of the outstanding securities to any
individual, firm, partnership, or entity, (ii) the issuance of 33% or more of
the outstanding securities in connection with a merger, or (iii) the
acquisition of the Company in a merger or other business combination. The
employment agreement expires by its terms in December 2000.
<PAGE> 15
OPTIONS GRANTED IN LAST FISCAL YEAR
All option grants and values have been adjusted to reflect the one-for-two
stock consolidation effected by the Company on June 14, 1996.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Percent of Total
Options Granted
Number of to Employees in Potential Realized Value at
Securities Fiscal Year Assumed Annual Rates of Stock
Underlying Exercise Base Price Appreciation for Option
Options Granted Price ($/sh) Expiration Term
Director Date 5%($){(1)}
10%($){(1)}
<S> <C> <C> <C> <C> <C> <C>
Sam Acosta 132,000 28.76% $ 3.188 11/20/00 $ 66,331,12 $ 139,290.10
James Godsey 200,000 43.57% $ 2.969 11/14/00 $ 93,597,73 $ 196,547.80
</TABLE>
FOOTNOTES TO TABLE
{
(1)}The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of future common stock prices, or actual performance.
TEN-YEAR OPTIONS/SAR REPRICINGS
There were no repricing of options for the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth executive officer options exercised and option
values for fiscal year 1998 for all executive officers at the end of the year.
Number of options Value of Unexercised
at FY end Options at FY End
Shares Acquired Value (Exercisable/ (Exercisable/
NAME OR EXERCISED REALIZED UNEXERCISABLE) UNEXERCISABLE){(1)}
Philip Coelho 0 0 425,000/ $12,600/
0 $0
James Godsey 0 0 66,667/ $0/
133,333 $0
Sam Acosta 0 0 44,000/ $0/
88,000 $0
David Adams 0 0 120,000/ $0/
0 $0
Michael Zmuda 0 0 20,000/ $0/
30,000 $0
Charles De B. 0 0 225,000/ $6,3000/
Griffiths 0 $0
FOOTNOTES TO TABLE
{(1)} Based on June 30, 1998 year end closing bid price of $ 2.188 per
share.
<PAGE> 16
DIRECTORS COMPENSATION
All directors who are not employees of the Company are paid a meeting fee of
$1,000 per Board meeting attended in person ($500 for attendance by telephonic
conference). In addition, members of the Board's Compensation Committee receive
$500 per meeting attended in person ($250 for attendance by telephonic
conference) and options to purchase 4,000 shares of common stock upon
completion of each full year of service on such Committee pursuant to the
Amended 1994 Stock Option Plan. Members of the Audit and Executive Committees
receive $500 per meeting in person ($250 for attendance by telephonic
conference).
THE AMENDED 1994 STOCK OPTION PLAN
The Company's Amended 1994 Stock Option Plan (the "Plan") was originally
approved by the Company's stockholders in January 1995 and amended at the
Annual Meetings on May 29, 1996 and May 29, 1997. A total of 1,450,000 (post-
consolidation) shares were approved by the stockholders for issuance under
option agreements, subject to the Plan.
The Plan permits the grant of stock options to employees, officers and certain
directors. The purpose of the Plan is to attract the best available personnel
to the Company and to give employees, officers and certain directors of the
Company a greater personal stake in the success of the Company.
As of June 30, 1998, 509,000 options had been granted under the Plan during the
fiscal year. In addition, after June 30, 1998, options to purchase 56,500
shares of common stock were issued under the Plan to certain employees in
connection with normal employment practice, with exercise prices ranging from
$1.64 to $3.75 per share.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
The Company's 1998 Employee Equity Incentive Plan (EEIP) was approved by the
Company's stockholders in February 1998. A total of 798,000 shares were
approved by the stockholders for issuance under option agreements, subject to
the EEIP.
The Plan permits the grant of stock options to employees, officers and certain
directors. The purpose of the Plan is to attract the best available personnel
to the Company and to give employees, officers and certain directors of the
Company a greater personal stake in the success of the Company. As of June 30,
1998, no options have been granted under the EEIP.
PRINCIPAL STOCKHOLDERS
The Company is not aware of any stockholder of record who owns five percent
(5%) or more of the outstanding common stock, and the Company has not received
any Form 13d filings which would indicate that any stockholder owns
beneficially more than five percent (5%) or more of the Company's common stock.
The table on page 2 of this proxy statement sets forth, as of September 25,
1998, certain information with respect to the beneficial ownership of shares of
the Company's common stock by all directors and executive officers of the
Company individually, and all directors and all executive offic As of October
8, 1998, there were 18,955,765 shares of common stock outstanding.
<PAGE> 17
FIVE YEAR COMMON STOCK PERFORMANCE GRAPH
The following graph compares the performance of the Company's common stock
during the period June 30, 1993 to June 30, 1998 with Nasdaq Stock Market Index
and the Company's peer group of Nasdaq stocks.
The graph depicts the results of investing $100 in the Company's common stock,
and the identified index at closing prices on June 30, 1993.
[GRAPH NOT ELECTRONICALLY FILED]
Graph Legend
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 06/30/93 06/30/94 06/30/95 06/30/96 06/30/97 06/30/98
- ----- THERMOGENESIS CORP. 100.0 48.5 75.8 104.5 67.4 53.0
. _ . Nasdaq Stock Market
(US Companies) 100.0 101.0 134.8 173.0 210.4 277.6
_ _ _ Nasdaq Stocks SIC
3580-3589 US
Companies -
Refrigeration
and Service
Industry Machinery 100.0 122.4 135.6 164.7 184.0 183.3
</TABLE>
NOTES TO PERFORMANCE GRAPH:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 06/03/93.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above.
The market price of the Company's common stock in recent years has fluctuated
significantly and it is likely that the price of the stock will fluctuate in
the future. The Company does not endorse any predictions of future stock
performance. Furthermore, the stock performance chart is not considered by the
Company to be (i) soliciting material, (ii) deemed filed with the Securities
and Exchange Commission, and (iii) to be incorporated by reference in any
filings by the Company under the Securities Act of 1933, or the Securities
Exchange Act of 1934.
<PAGE> 18
CERTAIN RELATED TRANSACTIONS
In May, 1997, the Company loaned the principal sum of $88,281,25 to Charles de
B. Griffiths, the Company's Vice President of Marketing and Sales and a
director of the Company, to assist with the purchase and renovation of a
residence in connection with Mr. Griffiths relocation to the Company's Rancho
Cordova office from France, where he previously resided. The loan bears simple
interest at the annual rate of eight percent (8%), and was due and payable in
February 1998. The loan was fully secured by 25,000 shares of common stock held
by Mr. Griffiths at the time of the loan. In February 1998, the Company
extended the repayment terms under the promissory note until June 30, 1999 and
received a right of full offset against Mr. Griffiths' employment agreement in
the event of any missed payment. As of June 30, 1998, Mr. Griffiths had made
required payments and the balance of principal and interest at that date was
$94,100.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of Forms 3, 4 and 5 delivered to the Company as
filed with the Securities and Exchange Commission ("Commission"), directors and
officers of the Company timely filed all required reports pursuant to Section
16(a) of the Securities Exchange Act of 1934.
OTHER MATTERS
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Company has retained the firm of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending June 30, 1999. The Company expects a
representative of Ernst & Young LLP to be present at the Annual Meeting of
Stockholders and the representative will have an opportunity to make a
statement if he desires to do so. Such representative will be available to
respond to appropriate questions.
TRANSFER AGENT
The American Securities Transfer and Trust, Inc. located at 1825 Lawrence
Street, Suite 444, Denver, CO 80202-1817, phone (303) 234-5300, fax (303) 234-
5340 is the transfer agent for the Company's common stock.
ACTION ON OTHER MATTERS
The Board of Directors of the Company knows of no other matters that may, or
are likely, to be presented at the Meeting. However, in such event, the
persons named in the enclosed form of proxy will vote such proxy in accordance
with their best judgement in such matters pursuant to discretionary authority
granted in the proxy.
STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the Company's Proxy Statement and Proxy
for its 1998 Annual Meeting must meet the requirements of Rule 14a-8
promulgated by the Securities and Exchange Commission ("SEC") and must be
received by the Company no later than July 13, 1999.
<PAGE> 19
ADDITIONAL INFORMATION
EACH STOCKHOLDER HAS RECEIVED THE COMPANY'S 1998 ANNUAL REPORT CONTAINING THE
COMPANY'S 1998 AUDITED FINANCIAL STATEMENTS, INCLUDING THE REPORT OF ITS
INDEPENDENT PUBLIC ACCOUNTANTS. UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY
WILL FURNISH TO ANY STOCKHOLDER, WITHOUT CHARGE, A COPY OF THE COMPANY'S 1998
FORM 10-K AS FILED WITH THE SEC UNDER THE SECURITIES EXCHANGE ACT OF 1934
(INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO AND A LIST
BRIEFLY DESCRIBING THE EXHIBITS THERETO). STOCKHOLDERS SHOULD DIRECT ANY
REQUEST TO THE COMPANY, 3146 GOLD CAMP DRIVE, RANCHO CORDOVA, CALIFORNIA 95670,
ATTENTION: DAVID C. ADAMS, SECRETARY.
THERMOGENESIS CORP.
By Order of the Board of Directors
David C. Adams, Secretary
Rancho Cordova, California
<PAGE> 20
THERMOGENESIS CORP.
3146 Gold Camp Drive, Rancho Cordova, CA 95670
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Philip H. Coelho and James H. Godsey, and each
of them, as proxies with the power to appoint his or her or their successor,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of common stock of THERMOGENESIS CORP. ("the Company"), held of
record by the undersigned on November 6, 1998 , at the Annual
Meeting of Stockholders to be held on Decemebr 11, 1998, at 10:00 a.m.
(PT), at the Lake Natoma Inn, located at 702 Gold Lake Drive, Folsom,
California 95630, and at any and all adjournments thereof.
1. Election of Directors.
FOR all nominees listed below _____ WITHOUT AUTHORITY ____
(except as marked to the contrary below) (to vote for all Nominees below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Philip H. Coelho Hubert Huckel Patrick McEnany James Godsey
2. Approval of the amendment to the Certificate of Incorporation to provide a
one-for-four consolidation of the Company's Common Stock .
FOR _______ AGAINST _________ ABSTAIN _____
3. Approval to authorize the Board of Directors to enter into an equity
transaction that may result in the sale of more than 20% of the Company's
outstanding stock in a private transaction, which authority will be
exercised in the Board of Director's judgment.
FOR _______ AGAINST _________ ABSTAIN _____
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting, including adjournment.
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 PROPOSALS 1, 2, 3, AND 4 AND IN THE DISCRETION OF THE
PROXIES FOR ANY OTHER MATTER THAT IS PRESENTED.
Please sign exactly as your name appears on the share certificates. When
shares are held by joint tenants, both should sign. 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.
__________________________________ __________________________________
Name (Print) Name (Print) (if held jointly)
Dated: __________________________ __________________________________
Signature Signature (if held jointly)
__________________________________ _________________________________
__________________________________ _________________________________
(Address) (Address)
I will ___ will not ___
attend the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
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