<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CRYOMEDICAL SCIENCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
CRYOMEDICAL SCIENCES, INC.
1300 PICCARD DRIVE
SUITE 102
ROCKVILLE, MARYLAND 20850
-------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - JANUARY 8, 1996
-------------------------------
TO THE STOCKHOLDERS OF CRYOMEDICAL SCIENCES, INC.
Notice is hereby given that the Annual Meeting of Stockholders of
Cryomedical Sciences, Inc. (the "Company") will be held at The Watergate Hotel,
2650 Virginia Avenue, N.W., Washington, D. C., on Monday, January 8, 1996, at
1:00 p.m., Eastern Standard Time, for the following purposes:
1. To elect a Board of Directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualified.
2. To ratify an amendment to the Company's 1988 Stock Option Plan
to increase the number of shares issuable thereunder by 500,000 to 2,700,000.
3. To ratify the selection by the Board of Directors of Deloitte
& Touche LLP to serve as independent auditors for the fiscal year ending June
30, 1996.
4. To transact such other business as may properly be presented
for action at the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 24,
1995 as the record date for the determination of Stockholders entitled to
notice of, and to vote at, this meeting or any adjournment thereof. Holders of
a majority of the outstanding shares must be present in person or by proxy in
order for the meeting to be held. WHETHER OR NOT YOU EXPECT TO ATTEND THE
ANNUAL MEETING, YOUR PROXY VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE REQUESTED
TO MARK, SIGN AND DATE THE ENCLOSED PROXY FORM AND RETURN IT IN THE
ACCOMPANYING STAMPED ENVELOPE. The giving of such proxy will not affect your
right to revoke such proxy before it is exercised or to vote in person should
you later decide to attend the meeting.
All stockholders are cordially invited to attend this meeting.
By Order of the Board of Directors
J. J. FINKELSTEIN
President and CEO
December 1, 1995
IT IS IMPORTANT THAT THE ENCLOSED PROXY FORM BE COMPLETED
AND RETURNED PROMPTLY
<PAGE> 3
THIS PAGE LEFT INTENTIONALLY BLANK
<PAGE> 4
CRYOMEDICAL SCIENCES, INC.
1300 PICCARD DRIVE
SUITE 102
ROCKVILLE, MARYLAND 20850
-----------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 8, 1996
-----------------------------
SOLICITATION AND REVOCATION OF PROXIES
This statement is furnished in connection with the solicitation by the
Board of Directors of Cryomedical Sciences, Inc., a Delaware corporation (the
"Company"), of proxies to be voted at the Annual Meeting of the Stockholders of
the Company to be held on Monday, January 8, 1996, at 1:00 p.m., Eastern
Standard Time, at The Watergate Hotel, 2650 Virginia Avenue, N.W., Washington,
D. C., and any adjournments thereof.
A form of proxy is enclosed for use at the meeting. The proxy may be
revoked by a stockholder at any time before it is voted by execution of a proxy
bearing a later date or by written notice to the Secretary before the meeting,
and any stockholder present at the meeting may revoke his proxy thereat and
vote in person if he desires. When such proxy is properly executed and
returned, the shares it represents will be voted at the meeting in accordance
with any instructions noted thereon. If no direction is indicated, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked prior to exercise) will be voted FOR the election of the nominees for
directors named herein, FOR the ratification of the amendment to the Company's
Stock Option Plan, and FOR the ratification of the appointment of Deloitte &
Touche LLP as independent auditors.
The cost for soliciting proxies on behalf of the Board of Directors
will be borne by the Company. In addition to solicitation by mail, proxies may
be solicited by directors, officers or regular employees of the Company (who
will receive no extra compensation for these services) in person or by
telephone or telefax. The Company will also request brokerage houses,
custodians, nominees and fiduciaries to forward these proxy materials to the
beneficial owners of the common stock, par value $.001 per share, of the
Company ("Common Stock") and will reimburse such holders for the reasonable
expenses in connection therewith. The approximate date of mailing of the proxy
statement is December 8, 1995.
Only stockholders of record at the close of business on November 24,
1995 will be entitled to notice of, and to vote at, the Annual Meeting. At the
close of business on such record date the Company had issued and outstanding
24,854,383 shares of Common Stock. Each share entitles the holder thereof to
one vote and a vote of the majority of the shares present, or represented, and
entitled to vote at the meeting is required to approve each proposal to be
acted upon at the meeting. An automated system administered by the Company's
transfer agent tabulates the votes. Abstentions and broker non-votes are each
included as shares present and voting for purposes of determining whether a
quorum is present at the Meeting. Each is tabulated separately. Abstentions
are counted as votes cast on proposals presented to stockholders, whereas
broker non-votes are not counted as votes cast for purposes of determining
whether a proposal has been approved.
NOMINATION AND ELECTION OF DIRECTORS
Six directors, all of whom are members of the present Board of
Directors, are nominees for election to hold office until the next annual
meeting and until their respective successors are elected and qualified.
Unless authority to vote for the election of directors shall have been
withheld, it is intended that proxies in the accompanying form will be voted at
the meeting for the election of the six nominees named below. If any nominee,
for any reason presently unknown to the Company, should refuse or be unable to
serve, the shares represented
1
<PAGE> 5
by the proxies will be voted for such person as shall be designated by the
Board of Directors to replace any such nominee.
The following information is submitted concerning the nominees named
for election as directors based upon information received by the Company from
such person:
<TABLE>
<CAPTION>
Position and Offices Director
Name Age With the Company Since
---- --- -------------------- --------
<S> <C> <C> <C>
J. J. Finkelstein 43 President, 1989
Chief Executive Officer,
and Director
Howard S. Breslow 56 Director 1988
Sam Carl 64 Director 1990
Robert A. Schoellhorn 67 Director 1992
Henry T. Pietraszek 48 Director 1995
J. Donald Hill 63 Director 1995
</TABLE>
J. J. Finkelstein has been President and Chief Executive Officer of
the Company since November 1989, and a director of the Company since August
1989. From 1982 to November 1989, Mr. Finkelstein was employed by Alpha 1
Biomedicals, Inc. ("Alpha 1"), a publicly-held corporation engaged in the
research and development of pharmaceutical products for immune system
deficiencies, including as President (1984 to November 1989), Chief Executive
Officer and Treasurer (1986 to November 1989), and as Vice President for
Administration (1982 to 1984). He also served as the President and as a
director of Viral Technologies, Inc., a company 50% owned by Alpha 1 and
engaged in the development of AIDS related technology. From 1982 to May 1991,
Mr. Finkelstein also served as a director of Alpha 1.
Howard S. Breslow has served as a director of the Company since July
1988. He has been a practicing attorney in New York City for more than 28
years and is a member of the law firm of Breslow & Walker, New York, New York,
which firm serves as general counsel to the Company. Mr. Breslow currently
serves as a director of FIND/SVP, Inc., a publicly-held company engaged in the
development and marketing of information services and products; Vikonics, Inc.,
a publicly-held company engaged in the design and sale of computer-based
security systems; and Lucille Farms, Inc., a publicly-held company engaged in
the manufacture and marketing of dairy products.
Sam Carl has been a director of the Company since January 1990. For
more than the past five years, Mr. Carl has been a private investor and the
owner of a seat on the Chicago Mercantile Exchange.
Robert A. Schoellhorn has been a director of the Company since
September 1992. Since August 1990, Mr. Schoellhorn has been retired from
Abbott Laboratories, a publicly-held corporation engaged in the discovery,
development, manufacture and sale of a broad and diversified line of human
health care products and services. From 1973 to August 1990, Mr. Schoellhorn
was employed by Abbott Laboratories, including as Chairman of the Board (1981
to March 1990), Chief Executive Officer (1979 to January 1990) and President
(1976 to 1981). Mr. Schoellhorn currently serves as a director of SunPharm
Corporation, a publicly held company engaged in the development of small
molecule pharmaceutical products.
Henry T. Pietraszek has served as a director of the Company since
April 1995. Mr. Pietraszek was President and Chief Executive Officer of
BioStar, Inc., a privately held medical diagnostic company in Boulder,
Colorado, from March 1994 to August 1995. From 1986 to 1994, Mr. Pietraszek
served as the President and Chief
2
<PAGE> 6
Executive Officer of TAP Pharmaceuticals, a joint venture between Abbott
Laboratories and Takeda Chemical Industries of Japan.
J. Donald Hill has been a director of the Company since November 1995.
Mr. Hill was a consultant to the Company from 1992 to 1995. He serves as
President of Excel Technology, Inc., a manufacturer of laser products and
systems, since 1994; from 1992 to present Mr. Hill has also served as President
of Excel/Quantronix, a wholly owned subsidiary of Excel Technology, Inc. From
January 1991 to October 1991, Mr. Hill was the Chief Executive Officer of
Medstone International, and Corporate Secretary and Director of CytoCare, Inc.,
companies engaged in the development of medical therapy devices. From 1988 to
1990, he was Director of Corporate Finance at Weeden & Company a securities
firm. Mr. Hill also served as Vice Chairman of First Affiliated Securities,
Inc. and as a General Partner of Loeb, Rhoades & Company, also securities
firms.
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the
Board of Directors. The Board meets periodically during its fiscal year to
review significant developments affecting the Company and to act on matters
requiring Board approval. It also holds special meetings when an important
matter requires Board action before the next scheduled meeting. The Board of
Directors met nine times during the 1995 fiscal year. Each director attended
at least 75% of the meetings.
The Board of Directors has an Audit Committee consisting of Howard S.
Breslow and Sam Carl, and a Compensation Committee consisting of Robert A.
Schoellhorn and Sam Carl. The Audit Committee held one meeting during the
fiscal year ended June 30, 1995. The Company has no Nominating Committee.
All of the directors hold office until the next annual meeting of
stockholders of the Company or until their successors are elected and
qualified. No family relationship exists between any director or executive
officer and any other director or executive officer of the Company.
COMPENSATION OF DIRECTORS
The Company currently compensates outside directors for their service
in such capacity at an annual fee of $5,000 plus $1,000 for each Board meeting
attended and $500 for each committee meeting attended. In addition to such
cash compensation, in October 1991 two of the Company's outside directors
(Messrs. Breslow and Carl) were each granted five-year non-incentive options to
purchase 25,000 shares of Common Stock at an exercise price of $9.25 per share
and in September 1992 Mr. Schoellhorn was granted a five-year non-incentive
option to purchase 25,000 shares of Common Stock at $7.75 per share. In June
1994 three of the outside directors of the Company (Messrs. Breslow, Carl, and
Schoellhorn) were each granted ten-year non-incentive options to purchase
50,000 shares of Common Stock at an exercise price of $2.125 per share. In
April 1995 Mr. Pietraszek was granted a ten-year non-incentive option to
purchase 25,000 shares of Common Stock at $3.00 per share. In November 1995
Mr. Hill was granted a ten-year non-incentive option to purchase 25,000 shares
of Common Stock at $2.9375 per share.
3
<PAGE> 7
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth, as of November 20, 1995, certain
information concerning stock ownership of all persons known by the Company to
own beneficially 5% or more of the outstanding shares of the Company's Common
Stock, each director, and all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name (and Address of 5% Holder) Beneficial Ownership (1) of Class
------------------------------- ------------------------ --------
<S> <C> <C>
J. J. Finkelstein . . . . . . . . . . . . . 709,343 (2) 2.8%
Howard S. Breslow . . . . . . . . . . . . . 243,000 (3) 1.0%
Sam Carl . . . . . . . . . . . . . . . . . 345,600 (3) 1.4%
Robert A. Schoellhorn . . . . . . . . . . . 103,000 (4) 0.4%
Henry T. Pietraszek . . . . . . . . . . . . 25,000 (5) 0.1%
J. Donald Hill . . . . . . . . . . . . . . . 50,000 (5) 0.2%
D. H. Blair Investment Banking Corp . . . . 1,840,950 7.4%
44 Wall Street, NY, NY 10005
All officers and directors
as a group (10 persons) . . . . . . . . . . 2,098,743 (6) 8.0%
</TABLE>
---------------------------------------
(1) Unless otherwise indicated below, all shares are owned
beneficially and of record.
(2) Includes 13,000 shares owned of record by the children of Mr.
Finkelstein and an aggregate of 573,334 shares underlying stock
options. See "Employment Agreements."
(3) Includes an aggregate of 75,000 shares underlying stock options.
(4) Includes an aggregate of 100,000 shares underlying stock options
and warrants.
(5) Includes an aggregate of 50,000 shares underlying stock options
and warrants.
(6) Includes an aggregate 1,167,434 shares underlying options which
the Company has granted to the five executive officers of the
Company and an aggregate of 325,000 shares underlying options and
warrants granted to the five non-employee directors of the
Company.
Henry T. Pietraszek failed to file a Form 3 Initial Statement of
Beneficial Ownership during the fiscal year ended June 30, 1995, as required by
Section 16(a) of the Securities Exchange Act of 1934. Except as noted, the
Company is not aware of any other late filings of, or failures to file, of the
reports required by Section 16(a) of the Exchange Act.
4
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company during each of the Company's last three fiscal
years to the Company's Chief Executive Officer and to each of the Company's
executive officers who received salary, commission and bonus payments in excess
of $100,000 during the fiscal year ended June 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
----------------------------------- --------------------------- -------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Positions Year ($) (1) ($) ($) ($) (#) (2) ($) ($)
- --------------------- ------ ------- ----- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. J. Finkelstein 1995 166,893 - - - - - -
President, Chief 1994 162,036 - - - 200,000 - -
Executive Officer 1993 157,276 - - - 373,334 (3) - -
and Director
John G. Baust, Ph.D. 1995 104,429 - - - - - 9,243 (4)
Senior Vice Pres- 1994 108,927 - - - 50,000 - 8,234 (4)
ident and Chief 1993 105,750 - - - - - 12,324 (4)
Scientific Officer
Yuchi Huang, Ph.D.(5) 1995 106,979 - - - - - -
Vice President, 1994 101,062 - - - 30,000 (6) - -
Operations 1993 97,577 - - - - - -
Alan F. Rich 1995 94,417 - 132,596 (7) - - -
Vice President, 1994 76,667 - 158,818 (8) - 100,000 - -
Sales and Marketing 1993 70,000 - 77,248 (9) - - - -
</TABLE>
- -------------------
(1) Salaries for fiscal 1995 reflect 10% salary reductions for executive
officers of the Company commencing April 1, 1995. Such salary reductions
continue in effect.
(2) Options to acquire shares of Common Stock.
(3) Pursuant to his employment agreement, in November 1989, Mr. Finkelstein
received 560,000 shares of Common Stock of the Company, a portion of which
was subject to forfeiture under certain circumstances if he was not
employed by the Company for the remaining term of the agreement. In
January 1993 the Company entered into a new employment agreement with Mr.
Finkelstein to continue his employment as President and Chief Executive
Officer. Of the 560,000 shares of Common Stock of the Company that Mr.
Finkelstein had received in 1989 pursuant to his original employment
agreement, 373,334 shares remained subject to forfeiture. Under the new
Employment Agreement these 373,334 shares were exchanged for a
non-incentive stock option granted to Mr. Finkelstein to purchase a like
amount of shares at a price of $0.05 per share. See "Employment
Agreements."
(4) Consists of Company contributions to Dr. Baust's retirement account at
State University of New York at Binghamton in accordance with the
employment agreement between Dr. Baust and the Company.
(5) Dr. Huang's employment with the Company ceased in October 1995.
(6) In June 1994, unvested options for 60,000 shares granted in 1992 were
cancelled in connection with the grant of options for 30,000 additional
shares.
(7) Consists of $126,846 of commissions and a $5,750 automobile allowance.
(8) Consists of $153,618 of commissions and a $5,200 automobile allowance.
(9) Consists of $72,448 of commissions and a $4,800 automobile allowance.
5
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options were granted to any of the named executive officers
during fiscal 1995.
AGGREGATED OPTION/SAR EXERCISES DURING FISCAL YEAR 1995
AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information related to options exercised by
each of the named executive officers during the 1995 fiscal year and the number
and value of options held at fiscal year end. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs Options/SARS
at Fiscal Year End (#) at Fiscal Year End ($) (1)
----------------------------- ---------------------------
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.J. Finkelstein 25,000 $83,556 473,334 100,000 $834,877(2) $25,000
John G. Baust, Ph.D. - - 230,000 100,000 110,250 32,750
Yuchi Huang, Ph.D. - - 50,000 20,000 2,500 5,000
Alan F. Rich - - 40,000 90,000 - -
</TABLE>
- ----------------------------------
(1) The closing price for the Company's Common Stock as reported on the NASDAQ
National Market System on June 30, 1995 was $2.375. Value is calculated
on the basis of the difference between the option exercise price and
$2.375 multiplied by the number of shares of Common Stock underlying the
option.
(2) In January 1993, Mr. Finkelstein, pursuant to an employment agreement
entered into at that time, exchanged 373,334 shares of Common Stock of the
Company owned by him for options to purchase 373,334 shares of Common
Stock at $.05 per share.
EMPLOYMENT AGREEMENTS
In June 1989, the Company and Mr. Finkelstein entered into a three year
employment agreement (as amended in November 1991 and November 1992) pursuant
to which Mr. Finkelstein commenced employment as President and Chief Executive
Officer of the Company in November 1989. Pursuant to his employment agreement,
in November 1989, Mr. Finkelstein received 560,000 shares of Common Stock of
the Company, a portion of which was subject to forfeiture under certain
circumstances if he was not employed by the Company.
In January 1993, the Company entered into a new employment agreement with
Mr. Finkelstein to continue his employment as President and Chief Executive
Officer. The new employment agreement commenced upon the expiration of the
original employment agreement in November 1992 and is for a period of one year,
which term is to be automatically renewed each year for an additional one year
period, unless terminated sooner pursuant to the terms of the employment
agreement. At June 30, 1995, Mr. Finkelstein's annual salary was $169,161,
which salary is to increase each year in November to the extent of any cost of
living increases based upon the Consumer Price Index increase for the immediate
preceding year, or 8%, whichever is greater. In the event the term of the
employment agreement is terminated due to Mr. Finkelstein's resignation from
the Company with the written consent of the Board, or for a reason other than
death, disability, discharge for cause or resignation without the written
consent of the Board, or if at the end of any one-year period the employment
agreement is not renewed for any reason other than death, disability, discharge
for cause or resignation without the written consent of the Board, the Company
is required to pay Mr. Finkelstein an amount equal to 12 months salary. Of the
560,000 shares of Common Stock of the Company that Mr. Finkelstein had received
in November 1989 pursuant to the original employment agreement, 373,334 shares
remained subject to forfeiture. Under the new employment agreement, these
373,334 shares were exchanged for a non-incentive stock option, granted to Mr.
Finkelstein, to purchase
6
<PAGE> 10
373,334 shares of Common Stock at a price of $.05 per share, which option may
be exercised in whole or in part commencing July 14, 1993 until its expiration
date in January 1998, unless terminated sooner as provided in the non-incentive
stock option agreement.
In July 1990, the Company and John G. Baust, Ph.D., entered into a three
year employment agreement (as amended in December 1991 and July 1993),
automatically renewable for additional one year periods (absent notice to the
contrary by either party), pursuant to which Dr. Baust is employed as Senior
Vice President and Chief Scientific Officer of the Company. At June 30, 1995,
Dr. Baust's annual salary was $108,646. The agreement provides that Dr. Baust
shall retain his affiliation with the State University of New York at
Binghamton, where he is the Director of the Center for Cryobiological Research.
In October 1993, the Company entered into an agreement with the Department of
Biological Sciences of the State University of New York at Binghamton ("SUNY")
under which agreement SUNY released Dr. Baust from undergraduate teaching
responsibilities for the year ended June 30, 1994 in return for reimbursement
totaling $39,000 for the fiscal year. The Company entered into a similar
agreement with SUNY for the year ending June 30, 1995 in return for
reimbursements totaling $39,000. In accordance with the employment agreement,
in July 1990, Dr. Baust was granted an option to purchase an aggregate of
200,000 shares of Common Stock at $1.875 per share pursuant to the Company's
1988 Stock Option Plan. The option vested one-third each year for three years,
commencing one year from the date of the agreement. Among other things, the
employment agreement also provided for the Company to loan to Dr. Baust the
funds required for the exercise of the options at the time of exercise. Such
loans would be for terms of five years, accrue interest at a rate of 5% per
annum and be secured by shares obtained from the option exercise. In
accordance with the terms of the agreement, in May 1993 the Company lent
$37,500 to Dr. Baust to exercise options to purchase 20,000 shares of Common
Stock.
Alan F. Rich joined the Company in May 1992 as a regional sales manager.
On March 1, 1994, the Company and Mr. Rich entered into a one year employment
agreement, automatically renewable for additional one year periods (absent
notice to the contrary by either party), pursuant to which Mr. Rich is employed
as Vice President, Sales and Marketing, of the Company. At June 30, 1995, Mr.
Rich's annual salary was $87,600, which salary is to increase each year to the
extent of any cost of living increases based upon the Consumer Price Index
increase for the immediate preceding year. In addition, Mr. Rich is entitled
to commissions of up to 1% of the sales revenue of the Company. In accordance
with the employment agreement, in March 1994, Mr. Rich was granted options to
purchase 100,000 shares of Common Stock at $3.125 per share pursuant to the
Company's 1988 Stock Option Plan. The options vest with respect to 20,000
shares after one year, an additional 25,000 shares after two years, an
additional 25,000 shares after three years, and an additional 30,000 shares
after four years.
In connection with the execution of the employment agreements between the
Company and each of its executive officers, each officer executed a Proprietary
Information and Inventions Agreement, pursuant to which each agreed, among
other things, to keep the Company's information confidential and assigned all
inventions to the Company, except for certain personal inventions not related
to the Company's work, whether existing or later developed.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company is engaged in a highly competitive industry and must attain
high levels of quality and safety in the design, production and servicing of
its products. In order to succeed, the Board believes that it must be able to
attract and retain qualified experienced executives. To achieve this goal, the
Company has offered competitive executive compensation to attract and retain
key executives with relevant experience in the medical device industry or in
growth companies in related industries. Executive compensation has also been
structured to align management's interests with the success of the Company by
making a portion of compensation dependant on long term success of the Company.
During fiscal 1995, the entire Board of Directors held primary
responsibility for determining executive compensation levels. The Compensation
Committee and the Board as a whole have maintained a philosophy that
compensation of executive officers, specifically including that of the Chief
Executive Officer, should be directly linked to operating achievements and, to
a lesser extent, stock performance. Since the initial public offering of the
Company's stock in November 1989, the Company has taken a design concept for
its AccuProbe System and
7
<PAGE> 11
successfully developed a prototype device, obtained Food and Drug
Administration (FDA) marketing clearance for the device, initiated the clinical
use of the device for the management of several major diseases, and
manufactured and sold commercial products. Sales in the three years after the
market introduction of the AccuProbe System totaled over $32 million and
through October 31, 1995, the device has been used for nearly 6,000 procedures.
These achievements have been reflected in executive compensation and,
specifically, in the compensation of the Company's Chief Executive Officer. In
addition, the Company has utilized stock options to link executive compensation
to stock price performance. All executive officers, including the Chief
Executive Officer, have been granted stock options so that they will benefit
financially from long term success of the Company and increases in the price of
the Company's Common Stock.
J. J. Finkelstein
Howard S. Breslow
Sam Carl
Robert A. Schoellhorn
Henry T. Pietraszek
J. Donald Hill
8
<PAGE> 12
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock for a period
of five fiscal years ended June 30, 1995, with the cumulative total return of
the NASDAQ Stock Market Index (U.S. & Foreign Companies), a broad market
index, prepared for NASDAQ by the Center for Research in Securities Prices
("CRSP") at the University of Chicago, and the CRSP Medical Technology Index,
an index prepared by CRSP made up of all NASDAQ traded surgical, medical, and
dental instrument and supplies companies, under the Standard Industrial
Classification (SIC) Code for Medical Technology companies (SIC 3840-3849).
The comparison for each of the periods assumes that $100 was invested on June
29, 1990, in each of the Common Stock of the Company, the stocks included in
the NASDAQ Stock Market Index (U.S. & Foreign Companies) and the stocks
included in the CRSP Medical Technology Index. These indices which reflect the
assumption of reinvestment of dividends, do not necessarily reflect returns
that could be achieved by individual investors.
[CHART]
<TABLE>
<CAPTION>
6/29/90 6/28/91 6/30/92 6/30/93 6/30/94 6/30/95
<S> <C> <C> <C> <C> <C> <C>
CRYOMEDICAL SCIENCES INC. 100 202.9 476.6 323.9 126.6 141.5
CRSP Medical Technology Stock Index (1) 100 105.9 127.2 160 161.6 215.4
CRSP - NASDAQ Stock Market Index (US & Foreign) (2)(3) 100 130.5 137.8 130.6 115.4 168.2
</TABLE>
(1) The CRSP Medical Technology Stock Index (NASDAQ Stocks in SIC# 3840-3849)
consists of 272 medical technology stocks which trade on NASDAQ.
(2) Annualized returns for Cryomedical Sciences, Inc., the CRSP Index for
NASDAQ Stock Market (US & Foreign) and the CRSP Medical Technology Stock
Index are comprised of total market return for all stocks in the index.
(3) The CRSP Index for the NASDAQ Stock Market (US & Foreign Companies)
includes total returns on all domestic and foreign common shares and ADR's
traded on the NASDAQ National Market and NASDAQ Small-Cap Market and is
comprised of their annualized total market return.
9
<PAGE> 13
STOCK OPTION PLAN
On July 7, 1988 the Company adopted its 1988 Stock Option Plan (the
"Plan"), which was amended in July 1989, March 1990, February 1992 and August
1995. The Plan, as amended in August 1995, covers 2,700,000 shares of Common
Stock (subject to adjustment to cover stock splits, stock dividends,
recapitalizations and other capital adjustments) for employees, including
officers, and directors of the Company (aggregating 63 persons at November 20,
1995). The August 1995 amendment, which increased the number of shares under
the Plan from 2,200,000 to 2,700,000, is subject to shareholder approval
hereby. The Plan provides that options to be granted under the Plan will be
designated as incentive stock options or non-incentive stock options by the
Board of Directors or a committee thereof, which also will have discretion as
to the persons to be granted options, the number of shares subject to the
options and terms of the option agreements. The options to be granted under
the Plan and designated as incentive stock options are intended to receive
incentive stock option tax treatment pursuant to Section 422 of the Internal
Revenue Code of 1986, as amended.
The Plan provides that all options granted thereunder shall be exercisable
during a period of no more than ten years from the date of grant (five years
for options granted to holders of 10% or more of the outstanding shares of
Common Stock), depending upon the specific stock option agreement and that the
option exercise price of incentive stock options shall be at least equal to
100% of the fair market value of the Common Stock on the date of grant (110%
for options granted to holders of 10% or more of the outstanding shares of
Common Stock). Pursuant to the provisions of the Plan, the aggregate fair
market value (determined on the date of grant) of the shares of Common Stock
for which incentive stock options are first exercisable under the terms of the
Plan by an option holder during any one calendar year cannot exceed $100,000.
If the employment of an optionee is terminated other than by reason of
death, disability or retirement at age 65 any options granted to the optionee
will terminate within 30 days from the date of termination of employment. If
employment is terminated by reason of disability or retirement at age 65, the
optionee may, within one year from the date of termination, in the event of
termination by reason of disability, or three months from the date of
termination, in the event of termination by reason of retirement at age 65 (but
not after ten years from the date of grant), exercise the option. If
employment is terminated by death, the person or persons to whom the optionee's
rights under the option are transferred by will or the laws of descent and
distribution have similar rights of exercise within three months after such
death (but not after ten years from the date of the grant). Options are not
transferable otherwise than by will or the laws of descent and distribution and
during the optionee's lifetime are exercisable only by the optionee. Shares
subject to options which expire or terminate may be the subject of future
options. The Plan terminates on July 6, 1998.
If shares are issued to the holder of a non-incentive option under the
1988 Plan (1) no income will be recognized by the holder at the time of grant
of the option; (2) except as stated below, upon exercise of the option the
holder will recognize taxable ordinary income in an amount equal to the excess
of the fair market value of the shares over the option price; (3) if the holder
exercising the option is restricted from selling the shares so acquired because
the holder is an officer or director of the Company and would be subject to
liability under Section 16(b) of the Securities Exchange Act of 1934, then,
unless the holder makes an election to be taxed under the rule of clause (2)
above, the holder will recognize the taxable ordinary income, at the time such
Section 16(b) restriction terminates, equal to the excess of the fair market
value of the shares at that time over the option price, and any dividends he or
she receives on the shares before that time will be taxable to him or her as
compensation income; (4) the Company will be entitled to a deduction at the
same time and in the same amount as the holder has income under clause (2) or
(3); and (5) upon a sale of shares so acquired, the holder may have additional
short-term or long-term capital gain or loss.
If the shares are issued to the holder of an incentive stock option under
the 1988 Plan (1) no income will be recognized by such holder at the time of
the grant of the option or the transfer of shares to the holder pursuant to his
or her exercise of the option; (2) the difference between the option price and
the fair market value of the shares at the time of exercise will be treated as
an item of tax preference to the holder; (3) no deduction will be allowed to
the Company for Federal income tax purposes in connection with the grant or
exercise of the option; and (4) upon a sale or exchange of the shares after the
later of (a) one year from the date of transfer of the shares to the original
holder, or (b) two years from the date of grant of the option, any amount
realized by the holder in excess of the option price will be taxed to the
holder as a long-term capital gain, and any loss sustained by the holder will
be a long-term capital loss. If the shares are disposed of before the holding
period requirements described in the
10
<PAGE> 14
preceding sentence are satisfied, then (1) the holder will recognize taxable
ordinary income in the year of disposition in an amount determined under the
rules of the Code; (2) the Company will be entitled to a deduction for such
year in the amount of the ordinary income so recognized; (3) the holder may
have additional long-term or short-term capital gain or loss; and (4) the tax
preference provision might not be applicable.
During the fiscal year ended June 30, 1995, options to purchase an
aggregate of 49,900 shares of Common Stock were granted at an average exercise
price of $3.32.
PROPOSAL TO RATIFY AN AMENDMENT TO THE 1988 STOCK OPTION PLAN
Submitted for ratification by stockholders is an amendment to the 1988
Stock Option Plan which was approved by the Board of Directors on August 21,
1995, allowing for the maximum number of shares issuable under the 1988 Plan to
be increased to 2,700,000 shares. Presently a total of 2,200,000 shares of
Common Stock is authorized for the purposes of the 1988 Plan and options to
purchase 1,968,484 shares have been issued as of November 20, 1995.
Accordingly, only 231,516 shares remain available for issuance upon the
exercise of options that may be granted under the 1988 Plan. The Board believes
that the additional shares are necessary to encourage and enable key employees
and directors to obtain a proprietary interest in the Company through the
ownership of stock, thereby providing such persons with an added incentive to
continue in the employ or service of the Company and to stimulate their effort
in promoting the growth, efficiency and profitability of the Company, and
affording the Company a means of attracting to its services persons of
outstanding quality.
The proposed Amendment to the 1988 Plan changes only the number of shares
available for issuance under the 1988 Plan and does not affect any other
provision thereunder.
The Board of Directors believes that the 1988 Plan provides an appropriate
means to reward contributions to the Company and to stimulate employee interest
in the Company's success through equity ownership. The Directors believe the
1988 Plan has been successful in achieving these objectives and can continue to
make a significant contribution to the morale and motivation of the Company's
employees. Accordingly, the Board wishes to assure that a sufficient number of
shares of Common Stock remain available for options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE AMENDMENT
TO THE COMPANY'S 1988 STOCK OPTION PLAN.
CERTAIN TRANSACTIONS
Howard S. Breslow, a director of the Company, is a member of Breslow &
Walker, general counsel to the Company. Mr. Breslow currently owns 168,000
shares of Common Stock of the Company and holds options to purchase an
aggregate of 75,000 additional shares pursuant to stock options issued to him
in October 1991 and June 1994. During the fiscal year ended June 30, 1995,
Breslow & Walker received legal fees of $104,046.
In May 1993, in accordance with the terms of the employment agreement
between the Company and John G. Baust, Ph.D., Senior Vice President and Chief
Scientific Officer of the Company, the Company loaned $37,500 to Dr. Baust
which Dr. Baust utilized to exercise stock options to purchase 20,000 shares of
Common Stock of the Company for $1.875 per share, or a total purchase price of
$37,500. The loan is for a term of five years, accrues interest at the rate of
5% per annum, and is secured by the shares obtained by the option exercise. At
June 30, 1995 Dr. Baust owed, inclusive of interest, $41,471 to the Company.
In August 1993, in connection with a three-year consulting agreement, the
Company granted to Robert A. Schoellhorn, a director of the Company, warrants
to purchase 25,000 shares of Common Stock of the Company. The warrants lapse
after five years, and in the event that Mr. Schoellhorn continues to provide
consulting services to the Company, one-third may be exercised after one year,
an additional one-third may be exercised at the end of the second year, and an
additional one-third may be exercised at the end of the third year.
In May 1994, the Company loaned $25,000 to J. J. Finkelstein, President
and Chief Executive Officer of the Company and in August 1994 the Company
loaned an additional $10,000 to Mr. Finkelstein. The loans are evidenced by
promissory notes and secured by 20,000 shares of Common Stock of the Company.
The loans were for periods of
11
<PAGE> 15
one year with interest at the rate of 7.5% per annum. In April 1995, the terms
of the loans were extended for one additional year. At June 30, 1995 Mr.
Finkelstein owed, inclusive of interest, $37,735 to the Company.
In September 1992, in connection with a three-year consulting agreement,
the Company granted to J. Donald Hill, a director of the Company since November
1995, warrants to purchase 25,000 shares of Common Stock of the Company. The
warrants lapse after five years, one-third may be exercised after one year, an
additional one-third may be exercised at the end of the second year, and an
additional one-third may be exercised at the end of the third year. Mr. Hill
also holds options to purchase an aggregate of 25,000 shares pursuant to stock
options issued to him in November 1995. During the fiscal year ended June 30,
1995, Mr. Hill received consultant fees of $10,000.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected the accounting firm of Deloitte &
Touche LLP to serve as independent auditors of the Company for the fiscal year
ending June 30, 1996 and proposes the ratification of such decision. Deloitte
& Touche LLP was appointed as the Company's principal accountants in 1989 and
is familiar with the business and operations of the Company and its subsidiary
and has offices convenient to the executive offices of the Company. A
representative of Deloitte & Touche LLP is expected to be present at the
meeting to make a statement if he wishes to do so and to respond to appropriate
stockholder questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT AUDITORS FOR THE COMPANY FOR THE
FISCAL YEAR ENDING JUNE 30, 1996.
STOCKHOLDER PROPOSAL
Stockholders who wish to present proposals for action at the 1996 Annual
Meeting should submit their proposals in writing to the Secretary of the
Company at the address of the Company as set forth on the first page of this
Proxy Statement. Proposals must be received by the Secretary no later than
August 3, 1996 for inclusion in next year's proxy statement and proxy card.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders of the Company for the year ended June
30, 1995, including audited consolidated financial statements, has been mailed
to the stockholders concurrently herewith, but such report is not incorporated
in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
12
<PAGE> 16
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
that are to be presented for action at the Annual Meeting. Should any other
matters come before the meeting or any adjournments thereof, the persons named
in the enclosed proxy will have the discretionary authority to vote all proxies
with respect to such matters in accordance with their judgments.
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of exhibits), will be furnished
without charge to any stockholder upon written request to Investor Relations,
Cryomedical Sciences, Inc., 1300 Piccard Drive, Suite 102, Rockville, Maryland
20850.
By Order of the Board of Directors
J. J. FINKELSTEIN
President and
Chief Executive Officer
Rockville, Maryland
December 1, 1995
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, AND DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. A PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
13
<PAGE> 17
PROXY CRYOMEDICAL SCIENCES, INC.
1300 PICCARD DRIVE
SUITE 102
ROCKVILLE, MARYLAND 20850
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, acknowledging receipt of the proxy statement dated
December 8, 1995 of Cryomedical Sciences, Inc., hereby constitutes and appoints
J. J. Finkelstein and Richard R. Fisher and each or any of them attorney, agent
and proxy of the undersigned, with full power of substitution to each of them,
for and in the name, place and stead of the undersigned on the books of said
corporation on November 24, 1994, at the Annual Meeting of the Stockholders of
Cryomedical Sciences, Inc., to be held at The Watergate Hotel, 2650 Virginia
Avenue, N.W., Washington, D. C. on January 8, 1995 at 1:00 p.m., Eastern
Standard Time, and any adjournments thereof.
When properly executed, this proxy will be voted as designated by the
undersigned. If no choice is specified, the proxy will be voted FOR the
election of directors and FOR the following proposals, which are set forth in
the Proxy Statement.
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
J. J. Finkelstein, Howard S. Breslow, Sam Carl, Robert A.
Schoellhorn, Henry T. Pietraszek, J. Donald Hill
(INSTRUCTION: to withhold authority to vote for any individual nominee, write
in nominee's name on the line below.)
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY AN AMENDMENT TO THE COMPANY'S 1988 STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE THEREUNDER TO
2,700,000.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS FOR THE YEAR ENDING JUNE 30, 1996.
/ / FOR / / AGAINST / / ABSTAIN
4. FOR SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING AND
ANY ADJOURNMENTS THEREOF.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, 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.
/ / MARK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING
Dated:
-------------------------------
-------------------------------
Signature
-------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE.
