HEMAGEN DIAGNOSTICS, INC.
34-40 Bear Hill Road
Waltham, Massachusetts 02154
DEAR STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of Stockholders
of Hemagen Diagnostics, Inc. (the "Corporation") to be held on Tuesday,
February 25, 1997 at 10:00 a.m. at the Westin Hotel, 70 Third Avenue,
Waltham, Massachusetts 02154.
At the Annual Meeting, you will be asked to elect two Directors of the
Corporation, to ratify the selection of the Corporation's independent
accountants, and to approve an amendment to the Corporation's 1992 Stock
Option Plan to increase the number of shares of Common Stock for which
options may be granted under said plan.
Details of the matters to be considered at the Annual Meeting are
contained in the Proxy Statement that we urge you to consider carefully.
Whether or not you plan to attend the Annual Meeting, please complete,
date, sign, and return your Proxy promptly in the enclosed envelope, which
requires no postage if mailed in the United States. If you attend the Annual
Meeting, you may vote in person if you wish, even if you have previously
returned your Proxy.
Sincerely,
CARL FRANZBLAU
Chairman of the Board of Directors
Waltham, Massachusetts
January 15, 1997
HEMAGEN DIAGNOSTICS, INC.
34-40 Bear Hill Road
Waltham, Massachusetts 02154
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Hemagen Diagnostics, Inc. (the "Corporation"), a Delaware corporation, will
be held on Tuesday, February 25, 1997 at 10:00 a.m. at the Westin Hotel,
located at 70 Third Avenue, Waltham, Massachusetts 02154 for the following
purposes:
1. To elect two members of the Board of Directors for three-year terms
expiring at the 2001 Annual Meeting of Stockholders, or until their
successors are elected and qualified;
2. To ratify the selection of BDO Seidman, LLP independent
accountants for the Corporation for the fiscal year ending
September 30, 1997;
3. To approve an amendment to the Corporation's 1992 Stock Option Plan
to increase the number of shares of common stock for which options
may be granted pursuant to such plan from 500,000 shares to
1,000,000 shares; and
4. To consider and act upon any matters incidental to the foregoing
and any other matters that may properly come before the meeting or
any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on January 8,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and any adjournment or adjournments
thereof.
We hope that all stockholders will be able to attend the meeting in
person. In order to assure that a quorum is present at the February 25th
meeting, please date, sign and promptly return the enclosed Proxy whether or
not you expect to attend the meeting. A postage-prepaid envelope, addressed
to the Corporation's transfer agent, Continental Stock Transfer and Trust
Company, has been enclosed for your convenience. If you attend
the meeting, your Proxy will, at your request, be returned to you and you
may vote your shares in person.
By Order of the Board of Directors
Carl Franzblau
Secretary
Waltham, Massachusetts
January 15, 1997
HEMAGEN DIAGNOSTICS, INC.
34-40 Bear Hill Road
Waltham, Massachusetts 02154
January 15, 1997
_______________________
PROXY STATEMENT
_______________________
The enclosed Proxy is solicited by the Board of Directors of HEMAGEN
DIAGNOSTICS, INC. (the "Corporation") for use at the Annual Meeting of
Stockholders to be held at the Westin Hotel, 70 Third Avenue, Waltham,
Massachusetts 02154, at 10:00 a.m. on Tuesday, February 25, 1997, and at any
adjournment or adjournments thereof.
Stockholders of record at the close of business on January 8, 1997,
will be entitled to vote at the meeting or any adjournment thereof. On that
date, 7,620,890 shares of Common Stock, $.01 par value per share, ("Common
Stock") of the Corporation were issued and outstanding. There are no other
outstanding voting securities of the Corporation.
Each share of Common Stock entitles the holder to one vote with
respect to all matters submitted to stockholders at the meeting. A quorum
for the meeting is a majority of the shares outstanding. The election of
Directors will be determined by a plurality of the votes cast. The other
proposals to be voted upon by the stockholders of the Corporation require
the votes of a majority of the Common Stock present at the meeting for
passage. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum at the meeting. Abstentions
are counted in tabulation of the votes cast on proposals presented to
stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
The Directors and officers of the Corporation as a group own or may be
deemed to control approximately 20.8% of the outstanding shares of Common
Stock of the Corporation. Each of the Directors and officers has indicated
his/her intent to vote all shares of Common Stock owned or controlled by
him/her in favor of each item set forth herein.
Execution of a Proxy will not in any way affect a stockholder's right
to attend the Annual Meeting and vote in person. The Proxy may be revoked at
any time before it is exercised by written notice to the Corporation's
Secretary prior to the Annual Meeting, or by giving to the Corporation's
Secretary a duly executed Proxy bearing a later date than the Proxy being
revoked at any time before such Proxy is voted, or by appearing at the
Annual Meeting and voting in person. The shares of Common Stock represented
by all properly executed Proxies received in time for the Annual Meeting
will be voted as specified therein. In the absence of a special notice,
shares of Common Stock will be voted in favor of the election of Directors
of those persons named in the Proxy Statement and in favor of all other
items set forth herein.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter should be presented at the Annual
Meeting upon which a vote may be taken, such shares of Common Stock
represented by all Proxies received by the Board of Directors will be voted
with respect thereto in accordance with the judgment of the persons named as
attorneys in the Proxies. The Board of Directors knows of no matter to be
acted upon at the Annual Meeting that would give rise to appraisal rights
for dissenting security-holders.
An annual report containing financial statements for the Corporation's
fiscal year ended September 30, 1996 is being mailed herewith to all
stockholders entitled to vote. This Proxy Statement and the accompanying
Proxy were first mailed to stockholders on or about January 15, 1997.
ITEM NO. 1
ELECTION OF DIRECTORS
The Corporation's Board of Directors is divided into three classes.
Directors constituting approximately one-third of the Board of Directors are
elected annually for a period of three years at the Corporation's Annual
Meeting of Stockholders to serve until their successors are duly elected by
the stockholders. The terms of Dr. Sandson and Mr. Smith expire in 1999; and
the terms of Dr. Franzblau and Dr. de Oliveira expire in 1998; and and the
terms of Dr. Cohen and Mr. Gilbert expire in 1997. A classified Board of
Directors could discourage, delay or prevent a takeover or change of control
of the Corporation. Vacancies and newly created directorships resulting from
any increase in the number of authorized Directors may be filled by a
majority vote of Directors then in office. Officers are elected by and serve
at the pleasure of the Board of Directors. Proxies cannot be voted for a
greater number of persons than the number of nominees named.
Shares represented by all Proxies received by the Board of Directors
and not so marked as to withhold authority to vote for Dr. Cohen and Mr.
Gilbert will be voted (unless either Dr. Cohen or Mr. Gilbert is unable or
unwilling to serve) for the election of Dr. Cohen and Mr. Gilbert. The Board
of Directors knows of no reason why Dr. Cohen and Mr. Gilbert should be
unwilling to serve, but if such should be the case, Proxies will be voted
for the election of some other person or for fixing the number of Directors
at a lesser number.
The following table sets forth the ages of and positions and offices
presently held by each Director and nominee with the Corporation.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Carl Franzblau, Ph.D. 62 Chairman of the Board of Directors,
Chief Executive Officer, President
and Secretary
Ricardo M. de Oliveira, M.D. 45 Vice President of Research and
Development, and Director
Alan S. Cohen, M.D. 70 Director
Lawrence Gilbert 64 Director
John I. Sandson, M.D. 69 Director
Charles W. Smith 65 Director
</TABLE>
Each of the Corporation's Directors has served in such capacity since
the Corporation's inception.
The Corporation established an Executive Committee, an Audit Committee
and a Compensation Committee of the Board of Directors on March 16, 1993.
Members of the Executive Committee are Dr. Franzblau, Dr. Sandson and Dr. de
Oliveira. The Executive Committee is authorized to take any action that the
Board of Directors is authorized to act upon with the exception of the
issuance of stock, the sale of all or substantially all of the Corporation's
assets and any other significant corporate transactions.
Members of the Audit Committee are Mr. Smith and Mr. Gilbert. The
Audit Committee is concerned primarily with recommending the selection of
the Corporation's independent accountants and reviewing the effectiveness of
the Corporation's accounting policies and practices, financial reporting and
internal controls. The Audit Committee reviews the scope of audit coverage,
the fees charged by the accountants, and internal control systems.
The Compensation Committee consists of Dr. Franzblau and two
independent outside Directors, Dr. Sandson and Dr. Cohen. The Compensation
Committee was established to set and administer the policies that govern
annual compensation for the Corporation's executives.
The Corporation does not have a standing nominating committee or a
committee performing similar functions.
During the year ended September 30, 1996, members of the Executive
Committee, Audit Committee and Compensation Committee did not meet as
separate committees. Instead, during such time, the Board of Directors, as a
whole, addressed the policies and issues related to the functions of the
Executive, Audit and Compensation Committees.
The Board of Directors met four times during the year ended September
30, 1996. All of the Directors attended 100% of the meetings of the Board of
Directors except for Dr. Ricardo de Oliveira who attended 25% of the
meetings of the Board of Directors during the year ended September 30, 1996.
In fiscal 1996, the Corporation compensated each of its four non-
management Directors 5,000 shares of Common Stock plus actual travel
expenses up to $500 for each Board meeting attended. As of January 1, 1996,
the Corporation has paid its non-management Directors the non cash fee of
Common Stock plus actual travel expenses up to $500 for each Board meeting
attended. Drs. Franzblau and de Oliveira receive no compensation for their
services as Directors.
Carl Franzblau and Myrna Franzblau, the Corporation's Treasurer, are
husband and wife. William Franzblau, Esq., Chief Financial Officer and
General Counsel, is the son of Carl Franzblau and Myrna Franzblau. Except
for Dr. and Mrs. Franzblau and William Franzblau no Director or executive
officer is related by blood, marriage or adoption to any other Director or
executive officer.
Background
The principal occupations during the past five years of each of the
Corporation's Directors and nominees for Directors are as follows:
Carl Franzblau, Ph.D. has served as Chairman of the Board of
Directors, Chief Executive Officer and President of the Corporation since
its inception. For more than the past five years, Dr. Franzblau has served
as a Professor and Chairman of the Biochemistry Department and Associate
Dean for Graduate Affairs at the Boston University School of Medicine. Dr.
Franzblau received his Bachelor of Science degree in Chemistry from the
University of Michigan and his Ph.D. in Biochemistry from the Albert
Einstein College of Medicine.
Ricardo M. de Oliveira, M.D. has been the Vice President of Research
and Development and a Director of the Corporation since its inception. From
1980 through 1990, Dr. de Oliveira was a Professor at the University of Sao
Paulo in Brazil. Dr. de Oliveira is also the Director of Clinical Pathology
at the Cancer Hospital of Sao Paulo, Brazil. Dr. de Oliveira received his
M.D. degree from the Faculdade de Ciencias Medicas da Santa Casa de Sao
Paulo in Brazil.
Alan S. Cohen, M.D. has served as a Director of the Corporation since
its inception. Dr. Cohen has been employed by the Boston University School
of Medicine as a Professor of Medicine since 1968 and a Professor of
Pharmacology since 1974. Dr. Cohen is Editor-in-Chief of the International
Journal of Amyloid. Dr. Cohen served as the Director of the Arthritis
Center of Boston University from 1976 to 1994. From 1972 to 1992, Dr. Cohen
served as Chief of Medicine of Boston City Hospital. Dr. Cohen is a past
president of the American College of Rheumatology. Dr. Cohen received his
Bachelor of Arts degree from Harvard College and his M.D. degree from the
Boston University School of Medicine.
Lawrence Gilbert has served as a Director of the Corporation since its
inception and served as Clerk of the Corporation from its inception until
1988. From 1987 until 1995, Mr. Gilbert served as the Director of Patent and
Technology Administration for Boston University. Since 1995, Mr. Gilbert has
been the Director of Technology Transfer for the California Institute of
Technology in Pasadena, California. Mr. Gilbert received his Bachelor of
Arts degree from Brandeis University, his Bachelor of Foreign Trade from the
American Institute of Foreign Trade and a J.D. degree from Suffolk
University Law School.
John I. Sandson, M.D. has served as a Director of the Corporation
since its inception. Since 1988, Dr. Sandson has been Dean Emeritus of the
Boston University School of Medicine. He was Dean of the Boston University
School of Medicine from 1974 to 1988. Dr. Sandson received his Bachelor's
degree from St. Vincent College and received his M.D. from Washington
University School of Medicine.
Charles W. Smith has served as a Director of the Corporation since its
inception. From 1984 through 1989, Mr. Smith served as a Senior Vice
President of Boston University. From 1983 through June 1992, Mr. Smith also
served as the Treasurer and on the Board of Trustees of Boston University.
Mr. Smith attended Metropolitan College in England and is a fellow of the
Institute of Chartered Accountants in England and Wales.
Executive Officers
The executive officers of the Corporation, their ages and positions
held in the Corporation are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Carl Franzblau, Ph.D 62 Chairman of the Board of Directors,
Chief Executive Officer,
President and Secretary
Peter von Stein 62 Vice President and Chief Operating
Officer
Ricardo M. de Oliveira, M.D. 45 Vice President of Research and
Development, and Director
Myrna Franzblau 58 Treasurer
William Franzblau 34 Chief Financial Officer and General
Counsel
</TABLE>
The following is a brief summary of the background of each executive
officer of the Corporation, other than Drs. Franzblau and de Oliveira, whose
backgrounds are summarized above.
Peter von Stein joined the Corporation in August 1992 as its Vice
President and Chief Operating Officer after having served as a consultant to
the Corporation since February 1992. From August 1991 to June 1992, Mr. von
Stein served as Chief Executive Officer of Health Protection Products, a
privately-held distributor of hip-protection devices. From October 1990
through June 1991, Mr. von Stein served as President and Chief Executive
Officer of Adams Scientific, Inc., a privately-held microbiology company.
From 1983 to 1991, Mr. von Stein served as Chief Executive Officer of Access
Medical Systems, Inc., a privately-held manufacturer of medical-diagnostics
products. Access Medical Systems filed a petition in bankruptcy court for
protection from creditors five months after Mr. von Stein's departure and
completed its reorganization in late 1991. Mr. von Stein received his
Bachelor of Arts degree from Brown University.
Myrna Franzblau has been the Corporation's Treasurer since its
inception. Mrs. Franzblau received her Bachelor of Arts from Brooklyn
College and her Master's degree from Boston University.
William Franzblau has served as the Corporation's Chief Financial
Officer since March 1996. Since 1993, Mr. Franzblau has been general counsel
for the Corporation. Mr. Franzblau received his Bachelor of Arts degree,
J.D. and L.L.M. degree in taxation from Boston University.
CERTAIN TRANSACTIONS
During 1993, the Corporation acquired a 51% interest in Hemagen
Diagnosticos, Comercio, Importacao e Exportacao, Ltda., a Brazilian limited
liability company ("HDC"), that had been 100% beneficially-owned by Dr.
Ricardo M. de Oliveira, the Corporation's Vice President of Research and
Development and a Director of the Corporation. The Corporation purchased its
interest in HDC in exchange for the forgiveness of a $25,000 advance to HDC
that was outstanding as of September 30, 1992. The Corporation loaned HDC
$185,500, $100,000 and $50,000 in August 1994, November 1993 and August
1993, respectively, to renovate, equip and operate a new manufacturing
facility in Sao Paulo, Brazil. This indebtedness is evidenced by three five-
year promissory notes, each with interest payable quarterly at the rate of
approximately 12% per annum. The Corporation and HDC have signed an
agreement in principal for the Corporation to acquire substantially all of
the remaining interest in HDC by issuing stock options to the minority
stockholders of HDC with an exercise price at or above the fair market value
of the Corporation's Common Stock.
The Corporation has entered into two license agreements and one
product development agreement with Boston University. In the fiscal year
ended September 30, 1993, the Corporation repaid a $50,000 demand note plus
accrued interest to Boston University. Several of the Corporation's
Directors, including Dr. Franzblau, the Chairman, Chief Executive Officer
and President of the Corporation, have affiliations with Boston University.
Pursuant to a prior arrangement, the Corporation paid to Dr. Antonio
Lazzari, a principal stockholder and former Director of the Corporation,
royalties of 1.5% on all revenues arising from sales of certain
hemagglutination test kits through June 1993. In the fiscal years ended
September 30, 1992 and 1993, Dr. Lazzari received approximately $12,000 and
$5,000, respectively, pursuant to this arrangement. According to the terms
of the arrangement, this royalty could have increased to 5% if Dr. Lazzari's
ownership interest in the Corporation fell below 9%. The Corporation
believes that it is no longer required to make such payments to Dr. Lazzari,
and has not paid Dr. Lazzari royalties since June 1993. Dr. Lazzari has
indicated to the Corporation that he believes the royalty payments should
continue. The Corporation has accrued these royalties on the Corporation's
financial statements through September 30, 1995, and does not believe that
payment of theses royalties, if they were to be re-established, would have a
material adverse effect on the Company's results from operations.
In connection with a private placement offered in July 1995, the
following directors and officers of the Corporation subscribed for
convertible promissory notes (the "Notes") in the following amounts:
<TABLE>
<CAPTION>
Individual Amount of Note
- ---------- --------------
<S> <C>
* Carl Franzblau, PhD., and Myrna Franzblau $ 62,500
Peter von Stein 50,000
** Alan S. Cohen, M.D. 50,000
Lawrence Gilbert 50,000
John I. Sandson, M.D. 25,000
Charles W. Smith 50,000
--------
Total $287,500
<F*> Includes $12,500 invested by Dr. and Mrs. Franzblau's children.
<F**> Includes $25,000 invested by one of Dr. Cohen's sons.
</TABLE>
The Notes subscribed for by the officers and Directors listed above
were converted into an aggregate of 287,500 shares of Common Stock of the
Corporation at the conversion price of $1.00 per share during Fiscal 1996.
The Corporation believes the terms of these agreements were on terms
at least as favorable as those which it would otherwise have obtained.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth, as of January 8, 1997, certain
information concerning stock ownership of the Corporation by (i) each person
who is known by the Corporation to own beneficially 5% or more of the
Corporation's Common Stock, (ii) each of the Corporation's Directors, and
(iii) all Directors and officers as a group. Except as otherwise indicated,
the stockholders listed in the table have sole voting and investment powers
with respect to the shares indicated.
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Common Stock Percentage
of Beneficial Owner(1) Beneficially Owned(2) of Class(2)(3)
- ---------------------- --------------------- --------------
<S> <C> <C>
Carl Franzblau, Ph.D. and Myrna Franzblau(4) 669,021 8.2%
Ricardo M. de Oliveira, M.D.(5) 385,684 4.9%
Alan S. Cohen, M.D.(7) 138,705 1.7%
Lawrence Gilbert(6) 160,887 2.1%
Charles W. Smith(8) 144,159 1.8%
John I. Sandson, M.D.(9) 82,691 1.0%
All Directors & Officers as a Group (9 persons)(10)) 1,783,537 21.7%
<F1> The addresses for all of the named individuals is c/o Hemagen
Diagnostics, Inc., 34-40 Bear Hill Road, Waltham, Massachusetts 02154.
<F2> Pursuant to the rules of the Securities and Exchange Commission,
shares of Common Stock which an individual or group has a right to
acquire within 60 days pursuant to the exercise of options or warrants
are deemed to be outstanding for the purpose of computing the
percentage ownership of such individual or group, but are not deemed
to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.
<F3> Except to the extent stated in Note 10 below, the percentage ownership
of such individual or group does not include up to 500,000 shares of
Common Stock reserved for issuance pursuant to stock options that have
been or may be granted under the Corporation's 1992 Stock Option Plan.
To date, options to purchase 451,300 shares have been granted pursuant
to this plan with an average exercise price of $2.35 per share.
<F4> Includes 317,010 shares owned by Dr. Franzblau, 307,011 shares owned
by Mrs. Franzblau. Also includes 15,000 shares of Common Stock
issuable upon exercise of outstanding warrants, and 30,000 shares
granted under the Corporation's 1992 Stock Option Plan. Excludes a
total of 141,280 shares of Common Stock owned by the children of Dr.
and Mrs. Franzblau to which Dr. and Mrs. Franzblau disclaim any
beneficial interest.
<F5> Includes 40,014 shares owned by Dr. de Oliveira's spouse and 10,000
shares granted under the Corporation's 1992 Stock Option Plan, but
excludes 40,014 shares owned by each of his brother and sister to
which Dr. de Oliveira disclaims any beneficial interest.
<F6> Includes 7500 shares of Common Stock issued upon exercise of warrants
during fiscal 1996 and 44,000 shares owned by Mr. Gilbert's spouse.
Excludes a total of 31,572 shares of Common Stock owned by children of
Mr. Gilbert and 6,000 shares owned by Mr. Gilbert's spouse's nieces to
which Mr. Gilbert disclaims any beneficial interest.
<F7> Includes 7,500 shares of Common Stock issuable upon exercise of
outstanding warrants. Excludes a total of 63,754 shares of Common
Stock owned by sons of Dr. Cohen to which Dr. Cohen disclaims any
beneficial interest which includes 7,500 shares of Common Stock
issuable upon conversion of warrants to one of Dr. Cohen's sons.
<F8> Includes 7,500 shares of Common Stock issuable upon exercise of
outstanding warrants. Excludes a total of 51,300 shares of Common
Stock owned by children of Mr. Smith to which Mr. Smith disclaims any
beneficial interest.
<F9> Includes 7,500 shares of Common Stock issuable upon exercise of
outstanding warrants. Excludes a total of 22,708 shares of Common
Stock owned by children of Dr. Sandson to which Dr. Sandson disclaims
any beneficial interest.
<F10> Includes the shares referenced in notes (4) through (9) above, plus
67,500 shares issuable pursuant to currently exercisable options and
warrants and 50,000 shares of Common Stock issued upon conversion of
Notes held by Mr. Peter von Stein, the Corporation's Chief Operating
Officer.
</TABLE>
COMPENSATION OF OFFICERS
The following table sets forth the compensation paid to the
Corporation's Chief Executive Officer and to its highest paid executive
officers during the fiscal years ended September 30, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
- ----------------------------------------------------------------------------- Compensation
Awards
------------
(a) (b) (c) (d) (e) (f)
Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options(#)(4)
- --------------------------- ---- ------ ----- ------------ -------------
<S> <C> <C> <C> <C> <C>
Carl Franzblau 1996 $122,312 0 $5,073(1) 0
Chief Executive Officer 1995 $103,000 0 $5,073 0
1994 $ 97,950 0 $5,073 0
Ricardo de Oliveira 1996 $112,270 0 $3,496(2) 0
Senior Vice President 1995 $103,000 0 $3,496 0
1994 $100,350 0 $3,496 0
Peter von Stein 1996 $109,002 0 $3,450(3) 0
Chief Operating Officer 1995 $100,000 0 $3,000 0
1994 $ 97,500 0 $2,925 0
<F1> The Corporation had provided Dr. Franzblau with the use of a Company-
owned or leased car during the fiscal years ended September 30, 1996,
1995 and 1994, and has recorded an annual expense for Dr. Franzblau's
automobile of approximately $5,073, $5,073 and $5,073, respectively.
<F2> The Corporation had provided Dr. de Oliveira with the use of a Company-
owned or leased car during the fiscal years ended September 30, 1996,
1995 and 1994, and has recorded an annual expense for Dr. de Oliveira's
automobile of approximately $3,496, $3,496 and $3,496, respectively.
<F3> Mr. von Stein received an average monthly reimbursement of
approximately $1,200 for housing, automobile and travel expenses
associated with his weekly commute to the Boston area from out of
state during the fiscal years presented. At the election of each
employee who has been employed by the Company for more than twelve (12)
months, the Company matches contributions made by that employee into
his or her individual retirement account, up to a maximum of three
percent (3%) of the employee's annual salary. Mr. von Stein
participates in the Company's retirement assistance program and the
Company paid $3,450 for the fiscal year ended September 30, 1996, and
$3,000 for the fiscal year ended September 30, 1995 and $2,925 for the
fiscal year ended September 30, 1994 into Mr. von Stein's retirement
account.
<F4> No options have been granted to Dr. Franzblau or Dr. de Oliveira in the
fiscal years ended September 30, 1996, 1995 and 1994. On August 17,
1992, 50,000 options were granted to Mr. von Stein at an exercise price
of $5.00 per share to vest annually over a three-year period. The
exercise price of these options was reduced to $1.75 per share in July
1995. As of September 30, 1996, all of Mr. von Stein's 50,000 options
had vested, none of which have been exercised.
</TABLE>
The following table sets forth the value of Mr. von Stein's
outstanding options held as of September 30, 1996.
Aggregated Option Exercises in Fiscal Year 1996 and FY-End Option Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of
Underlying Unexercised Unexercised
Options/SARs In-the-Money
at FY-End(#) Options/SARs at FY-End(#)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($) Unexercisable Unexercisable(1)
- ---- --------------- ----------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
Peter von Stein 0 0 50,000/0 $37,500/n.a.
<F1> Options listed carry an exercise price of $1.75 per share. The fair
market value of the Corporation's Common Stock underlying the options,
as of September 30, 1996, was $2.50 per share (NASDAQ closing price on
September 30, 1996).
</TABLE>
Compensation of Directors
In 1996, the Corporation awarded its non-management Directors 5,000
shares of Common Stock each as compensation for their services. Drs.
Franzblau and de Oliveira receive no compensation for their services as
Directors.
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements
The Corporation has entered into employment and non-competition
agreements with Dr. Franzblau and Dr. de Oliveira, that expire on June 30,
1997. For the year ending December 31, 1996, Dr. Franzblau and Dr. de
Oliveira each received base annual salaries of $125,000 and $115,00,
respectively, and the use of an automobile owned or leased by the
Corporation. The employment agreements of Dr. Franzblau and Dr. de Oliveira
provide that they each devote a minimum of 30 hours and 40 hours per week,
respectively, to the business of the Corporation. For the year ending
December 31, 1996, Mr. von Stein received a base annual salary of $115,000
and reimbursements for his housing, automobile and travel expenses.
Pursuant to Dr. Franzblau's agreement with Boston University, Dr.
Franzblau must disclose certain inventions made by him to the University.
Dr. Franzblau is also responsible for ensuring that his employment with the
Corporation does not conflict with the patent policy of the University. As
Dr. Franzblau is not primarily responsible for conducting laboratory
research for the Corporation and the Corporation's research is generally
unrelated to Dr. Franzblau's research for the University, the Corporation
does not believe that these provisions will have any material effect on, or
restrict the Corporation's ownership or use of, future technological
advances, if any, developed by the Corporation.
Compensation Committee Interlocks and Insider Participation
On March 16, 1993, the Board of Directors established a Compensation
Committee. Members of the Compensation Committee are Dr. Franzblau, Dr.
Sandson and Dr. Cohen. During the fiscal year ended September 30, 1996, no
executive officer served as a member of the compensation committee of the
board of directors of another entity.
ITEM NO. 2
ACCOUNTING MATTERS AND RATIFICATION OF ACCOUNTANTS
The persons named in the enclosed Proxy will vote to ratify the
selection of BDO Seidman, LLP as independent accountants for the fiscal year
ending September 30, 1997 unless otherwise directed by the stockholders. The
Corporation's independent accountants for the fiscal year ended September
30, 1996 were BDO Seidman, LLP. A representative of BDO Seidman, LLP is
expected to be present at the Annual Meeting of Stockholders and will have
the opportunity to make a statement and answer questions from stockholders.
Effective January 29, 1996, Price Waterhouse LLP declined to serve as
the Corporation's certifying accountants and on May 20, 1996, the
Corporation retained BDO Seidman, LLP as its new certifying accountants.
Price Waterhouse LLP's report on the financial statements for the three
fiscal years ending September 30, 1995, contained no adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope, or accounting principles. The appointment of BDO Seidman, LLP as the
certifying accountants for the Corporation was approved by the Board of
Directors of the Corporation.
During the three fiscal years ending September 30, 1995 and the
subsequent period to the date hereof, there were no disagreements between
the Corporation and Price Waterhouse LLP on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope
or procedure, which disagreement, if not resolved to the satisfaction of
Price Waterhouse LLP, would have caused it to make a reference to subject
matter of the disagreements in connection with its reports.
During the three fiscal years ending September 30, 1995 and the
subsequent period:
(a) Price Waterhouse LLP has not advised the Corporation that
the internal controls necessary for the Corporation to
develop reliable statements do not exist.
(b) Price Waterhouse LLP has not advised the Corporation that
information has come to Price Waterhouse LLP's attention
that has led it to no longer be able to rely on management's
representations, or that has made it unwilling to be
associated with the financial statements prepared by
management.
(c) Price Waterhouse LLP has not advised the Corporation that
Price Waterhouse LLP has needed to expand significantly the
scope of its audit, or that information has come to Price
Waterhouse LLP's attention during such time period that if
further investigated may (i) materially impact the fairness
or reliability of either a previously issued audit report or
the underlying financial statements or the financial
statements issued or to be issued covering the fiscal
period(s) subsequent to the date of the most recent
financial statements covered by an audit report (including
information that may prevent it from rendering an
unqualified audit report on those financial statements), or
(ii) cause it to be unwilling to rely on management's
representations or be associated with the registrant's
financial statements, and Price Waterhouse LLP did not, due
to its declination to serve or for any other reason, not so
expand the scope of its audit or conduct such further
investigation.
d) Price Waterhouse LLP has not advised the Corporation that
information has come to Price Waterhouse LLP's attention of
the type described in paragraph (c) above, the issue not
being resolved to Price Waterhouse LLP's satisfaction prior
to its declination to serve.
On May 20, 1996, Management of the Corporation engaged the firm of BDO
Seidman, LLP as accountants to examine the books and accounts of the
Corporation for the fiscal year ended September 30, 1996.
The Corporation has not, during its fiscal years ended September 30,
1995 , 1994 and 1993 and the subsequent interim period, consulted with BDO
Seidman, LLP regarding (1) the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Corporation's financial statements,
and either a written report was provided to the Corporation or oral advice
was provided that BDO Seidman, LLP concluded was an important factor
considered by the Corporation in reaching a decision as to the accounting,
auditing or financial reporting issue, or (2) any matter that was either the
subject of a disagreement between the Corporation and Price Waterhouse LLP
or a reportable event (as described in paragraphs (a) through (d) above).
ITEM NO. 3
AMENDMENT TO 1992 STOCK OPTION PLAN
The Board of Directors proposes that the Corporation's 1992 Stock
Option Plan (the "Plan") be amended to increase the aggregate number of
shares of Common Stock subject to issuance under the Plan by 500,000 shares
from 500,000 to 1,000,000 shares. As of January 8, 1997, 451,300 shares of
the 500,000 shares of Common Stock issuable under the Plan were subject to
outstanding options.
The Plan
The purpose of the Plan is to strengthen the ability of the
Corporation to attract and retain well-qualified executive and managerial
personnel and to provide additional incentive to the Corporation's employees
and officers to contribute to the success of the Corporation, and thereby to
enhance stockholder value.
The Plan was originally adopted by the Board of Directors and the
Corporation's stockholders on May 6, 1992 and was amended on March 8, 1994,
to increase the aggregate number of shares of Common Stock subject to
issuance by 300,000 shares to a total of 500,000 shares.
The Board of Directors has retained the right to amend or terminate
the Plan as it deems advisable. However, no amendment shall be made to
increase the number of shares of stock which may be optioned under the Plan,
change the class of employees eligible under the Plan or materially increase
the benefits which may accrue to participants under the Plan without
submitting such amendments to stockholders for approval. In addition, no
amendments to, or termination of, the Plan shall impair the rights of any
individual under options previously granted without such individual's
consent. In any event, the Plan shall terminate in 2002. Any option
outstanding under the Plan at the time of the Plan's termination shall
remain outstanding until the option expires by its terms.
Federal Income Tax Consequences
No tax obligation will arise for the optionee or the Corporation upon
the granting of either incentive stock options or non-qualified stock
options under the Plan. Upon exercise of a non-qualified stock option, an
optionee will recognize ordinary income in an amount equal to the excess, if
any, of the fair market value, on the date of exercise, of the stock
acquired over the exercise price of the option. Thereupon, the Corporation
will be entitled to a tax deduction (as a compensation expense) in an amount
equal to the ordinary income recognized by the optionee. Any additional
gain or loss realized by an optionee on disposition of the stock generally
will be capital gain or ioss to the optionee and will not result in any
additional tax deduction to the Corporation. The taxable event arising from
the exercise of non-qualified stock options by officers of the Corporation
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended,
occurs on the later of the date on which the option is exercised or the date
six months after the date the option was granted unless the optionee elects,
within 30 days of the date of exercise, to recognize ordinary income as of
the date of exercise. The income recognized at the end of any deferred
period will include any appreciation in the value of the stock during that
period and the capital gain holding period will not begin to run until the
completion of such period.
Upon the exercise of an incentive stock option, an optionee recognizes
no immediate taxable income. The tax cost is deferred until the optionee
ultimately sells the shares of stock. If the optionee does not dispose of
the option shares within two years from the date the option was granted and
within one year after the exercise of the option, and the option is
exercised no later than three months after the termination of the optionee's
employment, the gain on the sale will be treated as long term capital gain.
Subject to the limitations in the Plan, certain of these holding periods and
employment requirements are liberalized in the event of the optionee's death
or disability while employed by the Corporation. The Corporation is not
entitled to any tax deduction, except that if the stock is not held for the
full term of the holding period outlined above, the gain on the sale of such
stock, being the lesser of (i) the fair market value of the stock on the
date of exercise minus the option price, or (ii) the amount realized on
disposition of the option shares minus the option exercise price, will be
taxed to the optionee as ordinary income and the Corporation will be
entitled to a deduction in the same amount. Any additional gain or loss
realized by an optionee upon disposition of the stock prior to the
expiration of the full term of the holding period outlined above, generally
will be capital gain or loss to the optionee and will not result in any
additional tax deduction to the Corporation. The "spread" upon exercise of
an incentive stock option constitutes a tax preference item within the
computation of the "alternative minimum tax" under the Internal Revenue
Code. The tax benefits which might otherwise accrue to an optionee may be
affected by the imposition of such tax if applicable to the optionee's
individual circumstances.
Grant of Options
Pursuant to the terms of the Plan, on January 8, 1997, options to
purchase 416,400 shares of Common Stock had been granted to executive
officers and other employees of the Corporation and an additional 40,000
shares had been granted to consultants of the Corporation. Of the 416,400
shares granted to employees, 10,100 have been exercised as of January 8, 1997.
If this proposed amendment is approved by the stockholders, 538,600 shares
of Common Stock would be issuable upon exercise of options available for
future grant by the Corporation.
Required Affirmative Vote
Approval of the Amendment to the Corporation's 1992 Stock Option Plan
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present in person or by proxy at the February 25th Annual
Meeting.
VOTING AT MEETING
The Board of Directors has fixed January 8, 1997, as the record date
for the determination of stockholders entitled to vote at this meeting. At
the close of business on that date, there were outstanding and entitled to
vote 7,620,890 shares of Common Stock.
SOLICITATION OF PROXIES
The cost of solicitation of Proxies will be borne by the Corporation.
In addition to the solicitation of Proxies by mail, officers and employees
of the Corporation may solicit in person or by telephone. The Corporation
may reimburse brokers or persons holding stock in their names, or in the
names of their nominees, for their expenses in sending Proxies and Proxy
material to beneficial owners.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all Proxies
received by the Corporation will be effective, notwithstanding any transfer
of the shares of Common Stock to which such Proxies relate, unless prior to
the Annual Meeting the Corporation receives a written notice of revocation
signed by the person who, as of the record date, was the registered holder
of such shares. The Notice of Revocation must indicate the certificate
number or numbers of the shares to which such revocation relates and the
aggregate number of shares represented by such certificate(s).
STOCKHOLDER PROPOSALS
In order to be included in Proxy material for the 1998 Annual Meeting,
tentatively scheduled to be held on Tuesday, February 24, 1998,
stockholders' proposed resolutions must have been received by the
Corporation on or before November 26, 1997. It is suggested that proponents
submit their proposals by certified mail, return receipt requested,
addressed to the Secretary of the Corporation.
ANNUAL REPORT ON FORM 10-KSB
The Corporation will provide to any stockholder, without charge, upon
the written request of such stockholder, a copy of the Corporation's Annual
Report on Form 10-KSB, including the financial statements for the
Corporations's most recent fiscal year ended September 30, 1996. Requests
for such report should be addressed to Shareholder Relations, Hemagen
Diagnostics, Inc., 34-40 Bear Hill Road, Waltham, Massachusetts 02154.
MISCELLANEOUS
The Management does not know of any other matters which may come
before this meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying
Proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
By Order of the Board of Directors
Carl Franzblau
Secretary
Waltham, Massachusetts
January 15, 1997
HEMAGEN DIAGNOSTICS, INC.
Proxy for Annual Meeting
to be held on February 25, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED hereby appoints Carl Franzblau as Proxy with full
power of substitution to vote for and on behalf of the undersigned at the
Annual Meeting of Stockholders of HEMAGEN DIAGNOSTICS, INC., to be held at
the Westin Hotel, 70 Third Avenue, Waltham, Massachusetts 02154, on Tuesday,
February 25, 1997 at 10:00 a.m., and at any adjournment or adjournments
thereof, upon and with respect to all shares of the Common Stock of the
Corporation to which the undersigned would be entitled to vote and act if
personally present. The undersigned hereby directs Carl Franzblau to vote in
accordance with his judgment on any matters that may properly come before the
meeting, all as indicated in the notice of the meeting, receipt of which is
hereby acknowledged, and to act on the following matters set forth in such
notice as specified by the undersigned:
If no direction is made, this Proxy will be voted FOR election of
Directors and FOR Proposals 2 and 3.
(1) Proposal to elect two (2) members of the Board of Directors of the
Corporation.
INSTRUCTION: To withhold authority for any individual nominee STRIKE
such nominee's name from the list below.
[ ] FOR ALL nominees listed [ ] WITHHOLD AUTHORITY to vote
below (except as marked for all nominees listed
to the contrary below). below.
Alan S. Cohen, M.D. and Lawrence Gilbert
(2) Proposal to ratify and approve the selection of BDO Seidman, LLP as the
independent accountants of the Corporation for the fiscal year ending
September 30, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Proposal to approve an amendment to the Corporation's 1992 Stock Option
Plan to increase the number of shares of Common Stock for which options
may be granted pursuant to such plan from 500,000 to 1,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1, 2 and 3.
(4) In his discretion to transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR AND IN FAVOR OF
THE ITEMS SET FORTH ABOVE UNLESS A CONTRARY SPECIFICATION IS MADE.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
Dated: , 1997
----------------------------------
Signature
----------------------------------
Signature if held jointly
----------------------------------
Printed Name
----------------------------------
Address
NOTE: 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
the person named on the stock
certificate has died, please submit
evidence of your authority. If a
corporation, please sign in full
corporate name by an authorized
officer and indicate the signer's
office. If a partnership, sign in the
partnership name by authorized
person.
