<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 [ ]
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 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 state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[CRYOMEDICAL SCIENCES, INC. LETTERHEAD]
PRESIDENTS LETTER
To Our Shareholders:
The response to the challenges and opportunities that your company faces
today are now, more than ever, going to determine the future not only of CMSI,
but of the industry as well. Make no mistake about it -- the climb is uphill
and the incline, in just about every regard, necessitates an entrepreneurial
approach, good business judgment and stamina. The good news is that we have
started on that climb.
Since my arrival at CMSI last year a great number of changes have taken
place in regard to policies, procedures and organizational structure. Perhaps
the most important change has been in the attitude and direction of the
employees. The company is now focused on objectives that utilize its strengths
- -- a strong customer base, unparalleled understanding of cryotechnology, and a
plethora of field experience.
During the 1997 fiscal year (January through December), the company
will not plan or depend, upon generating significant revenues through the sale
of capital equipment. In today's cost containment healthcare environment,
capital equipment budgets, for all practical purposes, do not exist. Therefore,
revenues must be derived through AccuProbe(R) placement fees and the sale of
one-time use probes and catheters. Additional revenues will come from
services rendered by our clinical application specialists as well as our
service organization.
We are seeking, and will continue to seek, strategic alliances that will
provide the necessary assets to bolster the sales and marketing efforts
necessary to get the company's products to market. The former premier product
application in the medical specialty of Urology is now severely limited by the
decision of HCFA to institute a national non-reimbursement policy for
cryosurgery of the prostate. It is, therefore, not only necessary to address
other medical applications outside of the reimbursement restraints present in
Urology, but to develop products that are both cost effective and meet the
clinical needs of each of these applications.
The development of the new CryoLite(R) product line of cryosurgical
instruments is one step in that direction. Development costs associated with
this new product line have been, and will continue to be, kept at a minimum.
Contingent upon receipt of 510k clearance from the FDA, we will have the unique
ability to address the non-hospital market -- more specifically, clinics and
physicians' offices.
The trends in cryoscience going into the new millennium in many
respects represent a "brave new world" for the company, our customers and you
the shareholder. This new "age" in cryoscience does not obliterate previous
ages, but rather builds upon those predecessor periods and transforms them.
Cryomedical Sciences, Inc. has started to open new vistas in the future of
cryomedicine.
My primary objective as the CEO is very simple -- make the company
profitable. When that objective is realized on a consistent basis, we can all
look forward to stock performance more closely paralleling your expectations.
Your understanding and support is appreciated.
/s/ RICHARD J. REINHART
- -----------------------------
Richard J. Reinhart, Ph.D.
President and CEO
May 7, 1997
<PAGE> 3
CRYOMEDICAL SCIENCES, INC.
1300 PICCARD DRIVE
ROCKVILLE, MARYLAND 20850
--------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - JUNE 26, 1997
--------------------------------
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 Holiday Inn, 2
Montgomery Village Avenue, Gaithersburg, Maryland on Thursday, June 26, 1997,
at 10:00 a.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 the selection by the Board of Directors of Deloitte
& Touche LLP to serve as independent auditors for the fiscal year ending
December 28, 1997.
3. 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 May 5, 1997
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
/s/ RICHARD J. REINHART
RICHARD J. REINHART, Ph.D.
President and CEO
May 7, 1997
IT IS IMPORTANT THAT THE ENCLOSED PROXY FORM BE COMPLETED
AND RETURNED PROMPTLY
<PAGE> 4
THIS PAGE LEFT INTENTIONALLY BLANK
<PAGE> 5
CRYOMEDICAL SCIENCES, INC.
1300 PICCARD DRIVE
ROCKVILLE, MARYLAND 20850
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 26, 1997
-----------------------------
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 Thursday, June 26, 1997, at 10:00 a.m., Eastern
Standard Time, at the Holiday Inn, 2 Montgomery Village Avenue, Gaithersburg,
Maryland, 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 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 May 12, 1997.
Only stockholders of record at the close of business on May 5, 1997
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
33,395,087 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
Three 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 three nominees named below. If any
nominee, for any reason presently unknown to the Company, should refuse or be
unable to serve, the shares
1
<PAGE> 6
represented 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>
Richard J. Reinhart, Ph.D. 55 President, 1996
Chief Executive Officer,
and Director
Howard S. Breslow 57 Director, Secretary 1988
J. Donald Hill 64 Director 1995
</TABLE>
Richard J. Reinhart, Ph.D., has been President, Chief Executive
Officer and a director of the Company since May 1996. From 1994 to 1996, Dr.
Reinhart was a consultant to Medical Resources, Inc., a diagnostic imaging
company, while also working with several other health care companies. From
1988 to 1994, Dr. Reinhart was Managing Director for Medical Resources, Inc.
From 1981 through 1988, Dr. Reinhart was Chief Executive Officer of several
small entrepreneurial medical device and instrumentation companies. From 1969
to 1981, Dr. Reinhart was employed by Roche Medical Electronics (a subsidiary
of Hoffman La Roche) where, after serving in several senior management
positions, he became President and Chief Executive Officer in 1978.
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 30
years and is a member of the law firm of Breslow & Walker, LLP, New York, New
York, which firm serves as general counsel to the Company. Mr. Breslow
currently serves as a director of Excel Technology, Inc., a publicly-held
company engaged in the development and sale of laser products; 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.
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 currently
serves as Chairman and Chief Executive Officer of Excel Technology, Inc., where
he has been employed since 1992. 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, Mr. Hill 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 General Partner of
Loeb, Rhoades and Company, also securities firms.
The Company is not aware of any late filings of, or failures to file,
during either the fiscal year ended June 30, 1996 or the six-month transition
period ended December 29, 1996, the reports required by Section 16(a) of the
Exchange Act.
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 the 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 1996 fiscal year and three times during the
six-month transition period ended December 29, 1996. Each director attended at
least 75% of the meetings.
2
<PAGE> 7
The Board of Directors has an Audit Committee currently consisting of
Howard S. Breslow and Sam Carl, and a Compensation Committee currently
consisting of Robert A. Schoellhorn and Sam Carl. These committees did not
meet during the 1996 fiscal year or the six-month transition period ended
December 29, 1996.
In January 1997, the Board of Directors elected an Executive Committee
within the Board of Directors consisting of Dr. Reinhart, Howard Breslow, and
J. Donald Hill. The Executive Committee was empowered to act on all matters
which an Executive Committee can legally act under Delaware Law. The Company
has no other committees within the Board of Directors.
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
Through June 1996, the Company compensated outside directors for their
service in such capacity at an annual fee of $5,000 plus $1,000 for each Board
meeting attended. As of January 15, 1997, it was determined that the Company
would compensate Messrs. Breslow and Hill for board meetings held during the
transition period and Board meetings held during 1997 with a grant of warrants
to purchase 25,000 shares of Common Stock at an exercise price of $0.50. These
options vest immediately and expire in ten years. In June 1994, three of the
Company's current outside directors (Messrs. Breslow, Sam Carl and Robert
Schoellhorn) were each granted non-incentive options to purchase 50,000 shares
of Common Stock at an exercise price of $2.125 per share. In November 1995,
Mr. Hill was granted non-incentive options to purchase 25,000 shares of Common
Stock at an exercise price of $2.938 per share.
3
<PAGE> 8
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth, as of April 22, 1997, 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>
Richard J. Reinhart, Ph.D. . . . . . . . . . 1,000,000 (2) 2.9%
Howard S. Breslow . . . . . . . . . . . . . 318,000 (3) *
Sam Carl . . . . . . . . . . . . . . . . . . 345,600 (4) 1.0%
J. Donald Hill . . . . . . . . . . . . . . . 75,000 (5) *
Robert Schoellhorn . . . . . . . . . . . . . 243,000 (6) *
John G. Baust . . . . . . . . . . . . . . . 380,000 (7) 1.1%
Alan F. Rich . . . . . . . . . . . . . . . . 185,500 (8) *
D. H. Blair Investment Banking Corp . . . . 1,840,950 5.5%
44 Wall Street, NY, NY 10005
All officers and directors
as a group (10 persons) . . . . . . . . . . 2,647,452 (9) 7.4%
</TABLE>
---------------------------------------
*Less than 1%
(1) Unless otherwise indicated below, all shares are owned
beneficially and of record.
(2) Includes an aggregate of 1,000,000 shares underlying stock
options.
(3) Includes an aggregate of 100,000 shares underlying stock options
and warrants.
(4) Includes an aggregate of 75,000 shares underlying stock options.
(5) Includes an aggregate of 75,000 shares underlying stock options
and warrants.
(6) Includes an aggregate of 100,000 shares underlying stock options
and warrants.
(7) Includes an aggregate of 380,000 shares underlying stock options.
(8) Includes an aggregate of 180,000 shares underlying stock options.
(9) Includes an aggregate of 1,659,100 shares underlying stock
options which the Company has granted to the four executive
officers of the Company and an aggregate of 350,000 shares
underlying stock options and warrants granted to the current four
non-employee directors of the Company.
4
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for the Company's six-month transition period ended December 29,
1996 and its last three completed fiscal years ended June 30, 1994, 1995 and
1996 with respect to the Company's Chief Executive Officer, each of the
Company's named executive officers and the Company's former Chief Executive
Officer. Other than as is set forth in the table below, no executive officer
of the Company received salary, commission and bonus payments in excess of
$100,000 during the six- month transition period ended December 29, 1996
(computed on an annualized basis) or for the fiscal year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------------------
Annual Compensation Awards Payouts
-------------------------------- ----------------------- ------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Positions Year(1) ($) (2) ($) ($) ($) (#) (3) ($) ($)
- -------------------------- ------- -------- --------- ------------- --------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard J. Reinhart, Ph.D. 1996.5 75,481 - - - - - -
Current President, Chief 1996 9,712 - (5) - - 750,000 - -
Executive Officer and - - - - - - - -
Director (4) - - - - - - - -
John G. Baust, Ph.D. 1996.5 57,668 - - - - - 6,162 (6)
Senior Vice 1996 108,646 - - - - - -
President, Research 1995 104,429 - - - - - 9,243 (6)
and Development 1994 108,927 - - - 50,000 - 8,234 (6)
Alan F. Rich 1996.5 50,012 - 23,073 - - - -
Vice President, 1996 87,600 - 66,015 - - - -
Sales and Marketing 1995 94,417 - 132,596 - - - -
1994 76,667 - 158,818 - 100,000 - -
J. J. Finkelstein 1996.5 - - - - - - -
Former President, 1996 149,464 - - - - - 216,000 (8)
Chief Executive 1995 166,893 - - - - - -
Officer and Director(7) 1994 162,036 - - - 200,000 - -
</TABLE>
- -----------------------------
(1) The transition period is identified as Fiscal 1996.5 for purposes of this
table.
(2) Salaries for fiscal years ended June 30, 1995 and 1996 reflect 10% salary
reductions for executive officers of the Company commencing April 1,
1995. Such salary reductions were reinstated in July 1996.
(3) Options to acquire shares of Common Stock.
(4) Dr. Reinhart's employment with the Company commenced in May 1996.
(5) Dr. Reinhart's contract contains a potential bonus provision based upon a
"percentage of pretax profits of the Company."
(6) Consists of Company contributions made in Dr. Baust's name to the State
University of New York at Binghamton.
(7) Mr. Finkelstein's employment with the Company ceased in May 1996.
(8) Consists of a twelve month severance agreement between Mr. Finkelstein
and the Company which commenced June 1, 1996.
5
<PAGE> 10
OPTION/SAR GRANTS IN FISCAL YEAR 1996 AND SIX-MONTH TRANSITION PERIOD
The following table provides information related to stock options granted
to the Company's Chief Executive Officer, each of the named executive officers
and the Company's former Chief Executive Officer during the fiscal year ended
June 30, 1996 and the six-month transition period ended December 29, 1996.
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
of Stock Price Appreciation
Individual Grants For Option Term (1)
- ------------------------------------------------------------------------------------------- ----------------------------
% of Total
Options/ Options/SARs
SARs Granted to Exercise or
Granted Employees in Base Price
Name ( #) (2) Fiscal Year ($/Share) Expiration Date 5% ($) 10% ($)
------------------- ------------- ------------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Reinhart,
Ph.D. (3) 750,000 (4) 84.8% 2.1875 May 23, 2006 557,969 1,265,842
John G. Baust, Ph.D. - - - - - -
Alan F. Rich - - - - - -
J.J. Finkelstein(5) - - - - - -
</TABLE>
- -----------------------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be received upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the option following termination of
employment.
(2) Options to acquire shares of Common Stock.
(3) Dr. Reinhart's employment with the Company commenced in May 1996.
(4) Options are exercisable in their entirety in May 2002, six years after the
date of grant.
(5) Mr. Finkelstein's employment with the Company ceased in May 1996.
6
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES DURING FISCAL YEAR 1996 AND SIX-MONTH
TRANSITION PERIOD AND TRANSITION PERIOD END OPTION/SAR VALUES
The following table provides information related to options exercised by
the Company's Chief Executive Officer, each of the named executive officers and
the Company's former Chief Executive Officer during the fiscal year ended June
30, 1996 and the six-month transition period ended December 29, 1996 and the
number and value of options held at the end of the transition period. The
Company does not have any outstanding stock appreciation rights. None of the
options were in the money at period ended December 29, 1996.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs Options/SARS
at Transition Period End (#) at Transition Period End ($) (2)
----------------------------- ---------------------------------
Shares Acquired Value
Name On Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---------- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Reinhart,
Ph.D. (3) - - - 750,000 - -
John G. Baust, Ph.D. - - 330,000 - - -
Alan F. Rich - - 100,000 30,000 - -
J.J. Finkelstein (4) 448,334 (5) $875,779 - - - -
</TABLE>
- ----------------------------------
(1) Value realized is calculated on the basis of the difference between the
option exercise price and the fair market value of the Common Stock on the
date of exercise.
(2) The closing price for the Company's Common Stock as reported on the NASDAQ
National Market System on December 27, 1996 was $0.313. Value is
calculated on the basis of the difference between the option exercise
price and $0.313 multiplied by the number of shares of Common Stock
underlying the option.
(3) Dr. Reinhart's employment with the Company commenced in May 1996.
(4) Mr. Finkelstein's employment with the Company ceased in May 1996.
(5) The exercise price per share with respect to 348,334 of the shares was
$0.05 and with respect to 100,000 of the shares was $2.125; the closing
prices of the Common Stock on the dates of exercise ranged from $2.00 to
$2.4375.
- ----------------------------------
EMPLOYMENT AGREEMENTS
In May 1996, the Company and Richard J. Reinhart, Ph.D. entered into an
employment agreement through December 31, 1999 pursuant to which Dr. Reinhart
was employed as President, Chief Executive Officer and a director of the
Company. In accordance to his employment agreement, Dr. Reinhart was granted
options to purchase 750,000 shares of Common Stock at an exercise price of
$2.1875 per share pursuant to the Company's 1988 Stock Option Plan. The option
vests one-fifth each year, for five years, commencing one year from employment.
In March 1997, the Company extended Dr. Reinhart's employment agreement through
December 31, 2001. In the amended agreement, Dr. Reinhart was granted options
to purchase 250,000 shares of Common Stock at an exercise price of $0.50 per
share. The option vests 20% on December 31, 1997, 1998, 1999, 2000 and 2001.
At December 29, 1996, Dr. Reinhart's salary was $150,000, and in addition to
base salary, Dr. Reinhart is entitled to a bonus based upon a percentage of
"pretax profits of the Company." Such bonus ranges from 10% for the period
ended December 31, 1996 to 2% for 2003. In the event the term of the employment
agreement is terminated for a reason other than death, disability, or discharge
for cause or resignation, the Company is required to pay Dr. Reinhart as
follows: (i) for a period of two and a half years (which period shall be
reduced by one month on the first day of each month commencing August 1, 1997
until such time as such period is reduced to one year), or (ii) until
subsequently employed, whichever is sooner; provided, however, Dr. Reinhart
shall have an affirmative obligation to seek comparable employment and mitigate
the Company's damages.
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
7
<PAGE> 12
to the contrary by either party). 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. During the
transition period ended December 29, 1996, the Company made no payments to
SUNY. In January 1997, the Company determined it would pledge a gift amount of
$39,000, consisting of four quarterly payments of $9,750 in the name of the
Senior Vice President for calendar 1997. In March 1997, Dr. Baust was granted
options to purchase 50,000 shares of Common Stock at an exercise price of $0.50
per share. The option vests 20% per year on the anniversary of the grant. At
December 29, 1996, Dr. Baust's annual salary was $115,140.
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 December 29, 1996,
Mr. Rich's annual salary was $100,450, 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 March 1997, the Company entered into a new two year
employment agreement with Mr. Rich. The employment agreement provides for the
identical compensation package as Mr. Rich's previous employment agreement, but
providing that he shall receive no less than $150,000 in total compensation
each year, including protection until the end of the contract period if fired
without cause, with a duty to mitigate damages to the Company in such an event.
In the renewed employment agreement, Mr. Rich was granted options to purchase
50,000 shares of Common Stock at an exercise price of $0.50 per share. The
option vests 20% per year on the anniversary of the grant.
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 the fiscal year ended June 30, 1996 and the six-month transition
period ended December 29, 1996, the entire Board of Directors held primary
responsibility for determining executive compensation levels. The Board of
Directors as a whole has maintained a philosophy that compensation of executive
officers, specifically that of the Chief Executive Officer, should be directly
linked to operating achievements leading to improved stock performance. Since
the arrival of Dr. Reinhart in May 1996, the Company has expanded from the
original AccuProbe 450 System to a variety of cryosurgical systems and
accessories for applications in numerous medical disciplines. The Company has
received FDA marketing clearance for all of its cryosurgical products with the
exception of the most recent device, Cryo-lite(R). The FDA is currently
reviewing the 510(k) marketing clearance submission by the Company for this
innovative device. To date, the Company has generated sales of $41 million
through placements of over 150 machines and those devices have been utilized in
well over 9,000 procedures in various regions of the body, including urology,
gynecology and general surgery. All executive officers 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.
Richard J. Reinhart, Ph.D. Robert A. Schoellhorn
Howard S. Breslow J. Donald Hill
Sam Carl
8
<PAGE> 13
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, 1996 and a six-month transition period
ended December 29, 1996, 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 30, 1992, 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.
<TABLE>
<CAPTION>
6/30/92 6/30/93 6/30/94 6/30/95 6/28/96 12/27/97
<S> <C> <C> <C> <C> <C> <C>
CRYOMEDICAL SCIENCES INC. 100 68.0 26.6 29.7 27.3 3.9
CRSP Medical Technology Stock Index (1) 100 94.8 83.7 121.5 151.4 142.1
CRSP - NASDAQ Stock Market Index (US & Foreign) (2)(3) 100 126.2 126.8 168.2 214.6 232.7
</TABLE>
(1) The CRSP Medical Technology Stock Index (NASDAQ Stocks in SIC# 3840-3849)
consists of 322 medical technology stocks which trade on NASDAQ, 202 were
active as of December 29, 1996.
(2) Annualized returns for Cryomedical Sciences, Inc., the CRSP Index for
NASDAQ Stock Market (U.S. & foreign companies) 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 (U.S. & 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> 14
CERTAIN TRANSACTIONS
Howard S. Breslow, a director of the Company, is a member of Breslow &
Walker, LLP, general counsel to the Company. Mr. Breslow currently owns
218,000 shares of Common Stock of the Company and holds options and warrants to
purchase an aggregate of 100,000 additional shares of Common Stock of the
Company. During the fiscal year ended June 30, 1996, Breslow and Walker, LLP,
received legal fees of $77,735 and during the six-month transition period ended
December 1996, Breslow & Walker, LLP received legal fees of $52,574.
In September 1992, in connection with a three-year consulting agreement,
the Company granted to J. Donald Hill, 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. Hill 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 1993, in accordance with the terms of the employment agreement
between the Company and John G. Baust, Ph.D., Vice President, Research and
Development 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 was for a term of five years, accrued interest at the rate
of 5% per annum, and was secured by the shares obtained by the option exercise.
During the period ending December 29, 1996, the balance of $44,283 in principal
and interest was forgiven and recorded as compensation expense 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.
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 December 28, 1997 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 DECEMBER 28, 1997.
STOCKHOLDER PROPOSAL
Stockholders who wish to present proposals for action at the 1998 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
January 8, 1998 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 six-month
transition period ended December 29, 1996, 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.
10
<PAGE> 15
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, Rockville, Maryland 20850.
By Order of the Board of Directors
/s/ RICHARD J. REINHART
RICHARD J. REINHART, Ph.D.
President and
Chief Executive Officer
Rockville, Maryland
May 7, 1997
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.
11
<PAGE> 16
PROXY CRYOMEDICAL SCIENCES, INC.
1300 PICCARD DRIVE
ROCKVILLE, MARYLAND 20850
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, acknowledging receipt of the proxy statement dated
May 7, 1997 of Cryomedical Sciences, Inc., hereby constitutes and appoints
Richard J. Reinhart, Ph.D. 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 May 5, 1997, at the Annual Meeting of the
Stockholders of Cryomedical Sciences, Inc., to be held at the Holiday Inn, 2
Montgomery Village Avenue, Gaithersburg, Maryland on June 26, 1997 at 10:00
a.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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 17
PLEASE MARK
/X/ YOUR VOTES AS
IN THIS EXAMPLE
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF FOR
DIRECTORS ALL NOMINEES WITHHOLD
LISTED BELOW AUTHORITY NOMINEES: Richard J. Reinhart, Ph.D.,
------- ------- Howard S. Breslow,
J. Donald Hill
------- -------
</TABLE>
(INSTRUCTION: to withhold authority to vote for any individual nominee, write
in nominee's name on the line below.)
- ----------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection of
Deloitte & Touche LLP as Independent / / / / / /
Auditors for the fiscal year ending
December 28, 1997.
3. For such other matters that may
properly come before the meeting and / / / / / /
any adjournments thereof.
MARK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING / /
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.
Dated:
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Signature
- -------------------------------------------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
