SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Hemagen Diagnostics, Inc.
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(Name of Registrant as Specified In Its Charter)
Jerry L. Ruyan, William P. Hales, Thomas A. Donelan, Christopher P. Hendy
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(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)(14) 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 identity 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:
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ATTENTION HEMAGEN STOCKHOLDERS
If after reading the attached materials you want to support our proposals you
must do the following:
1. Sign and return the WHITE consent card enclosed.
2. Act before the cut-off date of August 28, 1999.
3. Not return the BLUE or any other proxy card sent to you by management
If you do nothing, the effect will be a vote against our proposal since we need
the affirmation of a majority of all outstanding shares.
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REVISED PRELIMINARY MATERIAL
Hemagen Diagnostics, Inc.
40 Bear Hill Road
Waltham, Massachusetts 02451
Dear Hemagen Stockholder:
Through the attached Consent Statement, we are providing you with an
opportunity to replace four of Hemagen's Board of Directors with our nominees
and to approve certain other proposals which are described in the attached
Consent Statement. All Hemagen stockholders are being asked to express their
consent to the proposals by marking, signing and dating the enclosed WHITE
consent card and returning it in the enclosed, postage-paid envelope, to our
solicitor, Beacon Hill Partners as set forth in the Consent Statement.
If elected, we will analyze all aspects of the Company and, where
appropriate, make structural and management changes designed to make Hemagen
more responsive to stockholders. We also believe that the changes we make will
increase Hemagen's profitability and stockholder value. Of course, there can be
no assurance that we will be successful in our efforts. Please read the
following material.
Our Company and its Stock Price Can Be Substantially Improved
Hemagen went public on February 4, 1993 at a price of $5 per share and
closed at $6 on that date. Hemagen stockholders have suffered a significant
decline in their investment since then. The following chart shows the change in
a $100 investment in Hemagen at $6 and the other indices shown at the close on
February 4, 1993 through February 4, 1999:
Willshire
Peer Russel Small
Hemagen Group(1) 2000 Cap Index S&P 500
------- --------- ------- --------- -------
2/4/93 $100.00 $100.00 $100.00 $100.00 $100.00
2/4/94 43.75 90.69 112.61 111.79 104.50
2/6/95 31.25 115.79 108.64 106.75 107.03
2/5/96 52.08 230.28 137.05 132.06 142.68
2/4/97 37.50 172.96 159.00 160.58 175.56
2/4/98 28.13 126.91 228.59 200.00 223.98
2/4/99 23.96 148.29 179.80 195.75 277.71
(1) The Peer Group consists of Diagnostic Products Corp., Meridian Diagnostics,
Immucor, Inc. and Idexx Laboratories. All calculations exclude cash
dividends paid.
We think Hemagen's current Board of Directors has failed to provide the
full-time professional management that is necessary in order to realize the
potential of Hemagen.
For example, as you may be aware, since Hemagen went public, it has been
managed by the same family group. The Chairman, President and CEO, Carl
Franzblau, is a full-time Professor and Chairman of the Biochemistry Department
and Associate Dean for Graduate Affairs at the Boston University School of
Medicine, which means he is not able to devote One Hundred Percent of his time,
effort and attention to the company's affairs. The Treasurer, Myrna Franzblau,
is the wife of Carl Franzblau. The Chief Financial Officer & General Counsel,
William Franzblau, is the son of Carl and Myrna Franzblau. The Vice President of
Sales & Marketing, Scott Weiss, is the son-in-law of Carl and Myrna Franzblau.
We believe that the stockholders of Hemagen deserve full-time, professional
management.
We own 8.7% of Hemagen's stock. Our nominees intend to restructure
Hemagen's management with the goal of improving its performance. If elected, the
new directors intend to focus on more profitable sales and a reduction in
expenses. If these goals are successfully implemented, we believe the company
and the stock price will benefit accordingly.
We Can Only Implement Our Plan with Your Help
We believe we can bring about progress in the company and to provide better
management of its business. We want to replace current directors Carl Franzblau,
Lawrence Gilbert, Charles W. Smith and Paul N. Fruitt with Jerry L. Ruyan,
William P. Hales, Christopher P. Hendy and Thomas A. Donelan. Information about
these new nominees is contained in the accompanying Consent Solicitation.
Although, in effect, we intend to replace only four of the six members of the
Hemagen Board of Directors, we are seeking to remove all six directors and then
re-elect a slate of six in order to clarify that, in the future, all directors
will serve for one-year terms. When we refer to the "nominees" in this consent
statement, we are referring to all six of the nominees we have presented for
election.
We Believe We Can Deliver Stockholder Value
Our four new director nominees have strong backgrounds, both in the
diagnostics industry and in a wide variety of businesses. We believe that we
will be able to bring about an increase in the value of your investment in
Hemagen. Members of our group include Jerry L. Ruyan, a founder and formerly a
Director and CEO of Meridian Diagnostics, Inc., a publicly-traded company, who
has spent almost twenty-five years in the diagnostics industry. Mr. Ruyan and
his associates started with five hundred dollars in a basement in 1976 and grew
Meridian Diagnostics, Inc. into a business with revenues of $30,000,000 and a
market capitalization in 1996, when Mr. Ruyan resigned to pursue other
investment/business opportunities, of over $140,000,000. William P. Hales, an
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investment banker and CPA, has substantial experience in the capital and equity
markets. Mr. Hales has spent six years in public accounting with Ernst & Young
and Coopers & Lybrand advising clients on both audit and management consulting
issues. Mr. Hales has spent the last seven years in the investment banking field
and is well able to make decisions to improve profitability and create value for
all shareholders. Christopher P. Hendy and Thomas A. Donelan both have
impressive credentials in the commercial banking industry with Marine Midland
Bank and Fifth Third Bank working with troubled companies. A biographical sketch
of each of our nominees is included in the Consent Solicitation for your review.
Mr. Ruyan would become the Company's new Chairman and CEO, and Mr. Hales
would become the new President. The remaining members of Hemagen's management
would consist of persons, not currently identified, with experience in the
diagnostics industry. We anticipate that total executive compensation after
these changes would be about the same as last reported by Hemagen.
We are asking each stockholder to vote to support us in this endeavor.
Further, in consideration or our efforts, we are asking for a commitment from
Hemagen stockholders by agreeing to grant us an option for 15% of the
fully-diluted outstanding shares of Hemagen common stock. The number of
"fully-diluted" shares includes outstanding options and warrants to purchase
Hemagen common stock. We would not be paying Hemagen any monetary consideration
in exchange for the grant of the options. These options will be exercisable for
$1.36 per share which is a 33-1/3% premium over the average of the closing price
of Hemagen common stock during the 30 day trading period ending June 25, 1999,
the date of the public announcement of our consent solicitation. They will serve
to align our objectives with those of all stockholders, namely to create as much
stock price appreciation as possible which will benefit all stockholders. We
will not profit from these stock options unless and until Hemagen's common stock
price exceeds $1.36 per share. Additionally, we will not exercise these options
for a period of eighteen months or until the stock trades above $5 per share for
20 consecutive business days, unless there is a further change in control.
We urge you to take advantage of this opportunity to make these changes
in the Board of Directors for the betterment of Hemagen. If we fail in this
effort, there may not be another opportunity.
Please sign and return your consent cards today. Call us if you have
questions or suggestions.
Sincerely,
WILLIAM P. HALES
(212) 757-9682
JERRY L. RUYAN
THOMAS A. DONELAN
CHRISTOPHER P. HENDY
(800) 205-0407
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Our Consent Solicitation
We are furnishing this Consent Solicitation Statement and form of written
consent in connection with our solicitation of written consents from the holders
of common stock of Hemagen Diagnostics, Inc. to take the following actions, in
the order set forth below, in place of a meeting of Hemagen's stockholders, as
authorized by Delaware law:
1. Repeal the Bylaw amendments adopted July 2, 1999 and any other
amendments adopted by the Board of Directors since February 4, 1993
and prior to the effective date of this stockholder action other than
the Bylaws adopted by this Consent; and
2. Amend Article III, Section 1 of the Bylaws to eliminate the classified
Board of Directors;
3. Remove Hemagen's Board of Directors and any other person or persons
(other than the persons elected pursuant to this consent) elected or
appointed to the Board of Directors prior to the effective date of
this stockholder action in addition to or in lieu of any of such
current members to fill any newly created directorship or vacancy on
the Board of Directors, or otherwise;
4. Amend Article III, Section 2 of the Bylaws to permit Hemagen's
stockholders to fill vacancies on the Board of Directors;
5. Elect our nominees, Jerry L. Ruyan, William P. Hales, Thomas A.
Donelan, Christopher P. Hendy, Dr. Ricardo M. de Oliveira and Dr. Alan
S. Cohen as directors of Hemagen to fill the newly created vacancies
on the Board of Directors and to serve until their respective
successors are duly elected and qualified;
6. Approve the grant of options to purchase 7.5% of the outstanding
fully-diluted shares of Hemagen common stock at $1.36 per share to
William P. Hales and 7.5% of the outstanding fully-diluted shares of
Hemagen common stock at $1.36 per share to Redwood Holdings Inc.
The sole shareholder of Redwood Holdings Inc. is an employee stock
ownership plan whose principal participants are Jerry L. Ruyan, Thomas A.
Donelan and Christopher P. Hendy, each of whom is a nominee for director under
this consent solicitation.
Stockholders of Hemagen are being asked to express their consent to the
proposals by marking, signing and dating the enclosed WHITE consent card and
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returning it in the enclosed, postage-paid envelope to our solicitor, Beacon
Hill Partners, in accordance with the instructions set forth below.
We recommend that you consent to each of the proposals. Our delivery of
consents on Proposals 2 through 6 is conditioned upon the receipt of approval
for each of those proposals. Consequently, if each of Proposals 2 through 6 are
not approved, none of them will be enacted even though sufficient consents may
have been received to approve a particular proposal.
This Consent Statement and the enclosed WHITE consent card are first being
furnished to Hemagen's stockholders on or about July __, 1999.
Consent Procedure
What Provisions of Law Govern Hemagen in Connection with the Consent
Solicitation?
Section 228 of the Delaware General Corporation Law (the "DGCL") provides
that, unless otherwise provided in the certificate of incorporation, the actions
proposed in this Consent Statement may be taken at any annual or special meeting
of stockholders and may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing, setting forth the actions so
taken, are signed by the holders of a majority of the outstanding shares of
Hemagen common stock entitled to vote as of the record date, and such consents
are delivered to Hemagen's headquarters. Acceptable methods of delivery are
outlined in Delaware law.
Hemagen's Certificate of Incorporation is silent on this matter. The
written, unrevoked consents of the holders of a majority of the outstanding
shares of common stock entitled to vote approving all of the proposals contained
in this Consent Statement as of the record date must be delivered to Hemagen to
effect the actions described in this Consent Solicitation. Section 228 further
provides that no written consent shall be effective to take the corporate action
referred to therein unless, within 60 days of the earliest dated consent
delivered in the manner required by Section 228, written consents signed by a
sufficient number of holders to take such action are delivered to the
corporation.
As soon as we have received valid and unrevoked consents representing a
majority of the outstanding common stock as of the record date evidencing
approval of Proposal number 1, we will deliver those consents to Hemagen. When
we receive valid unrevoked consents representing a majority of the outstanding
common stock as of the record date evidencing approval of proposals 2 through 6,
we will also deliver those consents to Hemagen. After deliveries are made,
stockholders will be unable to revoke a consents with respect to those
delivered.
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On July 2, 1999, after announcement of our solicitation for your consents,
Hemagen's Board of Directors purported to amend the Bylaws to increase the vote
necessary for amendment of the Bylaws from 50% of all outstanding shares
entitled to vote to 66-2/3% of all outstanding shares entitled to vote. We
believe this action is invalid and was made purely as a device to prevent
stockholders from adopting our proposals. We further believe this action
represents a breach of fiduciary duty by the directors of Hemagen to their
stockholders and demonstrates the attitude of Board members to the stockholders.
We intend to contest this matter in Delaware courts. We believe that one of the
motives for this action is to discourage shareholders from affirming their
consents to our proposals. WE URGE SHAREHOLDERS NOT TO BE DISCOURAGED OR
CONFUSED BY THIS TACTIC BUT TO EXPRESS YOUR SUPPORT FOR OUR PROPOSALS BY
SUBMITTING THE WHITE PROXY CARD.
Assuming our Consent Solicitation is successful, we will notify all
stockholders as soon as practicable after the effectiveness of consents by press
release and by mail.
What is the Record Date for the Consent Solicitation?
June 29, 1999. Therefore, a sufficient number of consents must be returned
to us by August 28, 1999 so that we can deliver the consents to Hemagen within
the 60-day period required under Section 228 of the DGCL.
How Many Shares Must be Voted in Favor of the Proposals to Effect Them?
Consents may only be executed by stockholders of record at the close of
business on the Record Date. As of March 31, 1999, Hemagen had outstanding
7,651,890 shares of Common Stock excluding shares held in the Company's treasury
and which are not entitled to vote on the proposals. Based on its review of
publicly available information, we are not aware of any change since March 31,
1999 in the number of outstanding shares of Common Stock. Each share of Common
Stock entitles the record holder thereof to cast one vote. Hemagen's Certificate
of Incorporation and Bylaws do not provide for cumulative voting in the election
of directors.
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Based on available records, the affirmative vote of 3,825,945 shares is
necessary to effect the proposals. We intend to execute consents for the 684,854
shares of Common Stock we own in favor of all of the proposals. Accordingly,
written consents by owners of an additional 3,141,091 shares of Common Stock, or
41% of the shares not owned by us, will be required to adopt and approve each of
the proposals. Under the Bylaw amendment purportedly approved by the Board of
Directors on July 2, 1999, the affirmative vote of 5,101,260 shares (consisting
of 4,416,406, or 58% of the shares not used by us) would be necessary to effect
the proposals.
Under Section 228 of the DGCL, consents taken without a meeting are not
adopted by a percentage of those voting at the meeting but rather a percentage
of all outstanding shares. Therefore, since we must receive consents from a
majority of all Hemagen's outstanding shares in order for the proposals to be
adopted, abstentions, failures to vote and broker non-votes will have the same
effect as a "no" vote with respect to our solicitation.
Our delivery of consents on Proposals 2 through 6 is conditioned upon the
receipt of approval for each of those proposals. Consequently, if each of
Proposals 2 through 6 are not approved, none of them will be enacted even though
sufficient consents may have been received to approve a particular proposal.
If you are in favor of the actions we are proposing, you must send us a
written consent. If we do not receive a consent from you, it will be the same as
a "no" vote. We, therefore, urge you to mark, sign, date and return the enclosed
consent as soon as possible.
What Must I do to Consent?
1. If your shares of Hemagen Common Stock are held in your own name,
please sign, date and return the enclosed WHITE consent card today in
the postage-paid envelope provided.
2. If your shares of Hemagen Common Stock are held in the name of a
brokerage firm, bank nominee or other institution, only that entity
can execute a consent with respect to your shares. They will do so
only upon receipt of your specific instructions. Accordingly, you
should contact the person responsible for your account and instruct
him or her to vote a WHITE consent card on your behalf today.
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How Do I Complete the Consent Card?
You may elect to consent to, withhold consent or abstain with respect to
each Proposal by marking the "Consent," "Consent Withheld" or "Abstain" box, as
applicable, underneath each such Proposal on the accompanying WHITE consent card
and signing, dating and returning it promptly in the enclosed postage-paid
envelope.
If the stockholder who has executed and returned the consent card has
failed to check a box marked "Consent," "Consent Withheld" or "Abstain" for any
or all of the proposals, such stockholder consent card will be treated as a
consent to such proposal or proposals.
Your consent is important. Please mark, sign and date the enclosed WHITE
consent card and return it in the enclosed postage-paid envelope promptly.
Failure to return your consent will have the same effect as voting against the
proposals.
If you have any questions or require any assistance in executing or
delivering your consent, please call our solicitors:
Beacon Hill Partners, Inc.
90 Broad Street, 20th Floor
New York, New York 10004
(XXX) XXX-XXXX
Can I Revoke My Consent?
You can revoke your consent at any time before its exercise by submitting a
written, later dated revocation of such consent covering the same shares. You
can also make any revocation of consent that you previously submitted null and
void by submitting a written, dated consent covering the same shares. Any
consent or revocation may be delivered to Beacon Hill Partners at the address
set forth above before August 28, 1999. Only your latest-dated consent or
revocation of consent will count.
The Proposals
This solicitation statement and the accompanying form of written consent
are first being furnished on or about July __, 1999, in connection with our
solicitation from the holders of shares of Common Stock of written consents to
take the following actions without a stockholders meeting, as permitted by
Section 228 of the DGCL:
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1. The Bylaw Repeal Proposal. Repeal the Bylaw amendments adopted July 2,
1999 and any other amendments adopted by the Board of Directors since
February 4, 1993.
"RESOLVED, that all amendments to the Bylaws adopted by the Board of
Directors of Hemagen on July 2, 1999 and all other amendments to the
Bylaws adopted by the Board of Directors on or after February 4, 1993
and prior to the effective date of this resolution (other than the
Bylaws adopted pursuant to this consent), are hereby rescinded and
shall have no further force or effect."
We seek the repeal of all Bylaws adopted by the Board of Directors since
February 4, 1993 through the date that the proposals are adopted so that the
Board of Directors cannot use new Bylaws or Bylaws which have not been disclosed
to Hemagen's stockholders to prevent the stockholders from accomplishing the
objectives described in this Consent Statement.
We are not aware of any Bylaws that would be repealed by the approval of
this proposal other than Bylaws adopted on July 2, 1999 after announcement of
our solicitation of consents purporting to increase the vote necessary to amend
the Bylaws and purporting to require Hemagen to pay all expenses, including
attorneys' fees, incurred by any Hemagen director, officer, employee or agent in
defending any proceeding brought against them in advance of the final
disposition of any such action. Rules of the Securities and Exchange Commission
require that Bylaws and any amendments be filed as exhibits to the reports filed
with the SEC. Except for filings related to the July 2 actions purporting to
adopt Bylaw changes, no such filings have been made with respect to Hemagen's
Bylaws since their initial filing on February 4, 1993. Approval of this proposal
could result in the repeal of Bylaws which may be in the best interest of
Hemagen's stockholders, although we believe such a possibility to be unlikely in
view of the failure of the Board of Directors to disclose any such Bylaws. If
Hemagen has amended the Bylaws and discloses such amendment, we may forward
additional solicitation materials to Hemagen's stockholders regarding such
actions and seek appropriate remedies.
Section 109 of the DGCL provides that stockholders of Hemagen have the
power to repeal Bylaws as provided by this proposal, whether or not the Bylaws
so amended or repealed are known to the stockholders. Hemagen's certificate of
incorporation confers the power to adopt, amend or repeal the Bylaws on the
Board of Directors, and the Bylaws provide for such amendment or repeal by the
Board of Directors without a vote of Hemagen's stockholders.
2. The Classified Board Proposal. Amend the Bylaws to eliminate the
classified Board of Directors:
"RESOLVED, that the stockholders hereby amend Article III, Section 1
of the Bylaws by deleting the fourth and fifth sentences
thereof."
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Hemagen's Board of Directors is currently divided into three classes of two
each. Directors constituting one-third of the Board of Directors are elected
annually for a period of three years at Hemagen's Annual Meetings of
Stockholders to serve until their successors are duly elected by the
stockholders. Removing the classified Board would enable Hemagen stockholders to
elect annually all members of the Board to serve one-year terms while, under
Hemagen's current system, three annual meetings would be required to remove all
of Hemagen's existing directors.
A classified Board of Directors could discourage, delay or prevent a
takeover or change of control of Hemagen. A classified board structure could
prevent sudden shifts in corporate policy and could contribute to the stability
of Hemagen's corporate governance. This proposal would result in the elimination
of the classified Board of Directors of Hemagen and would permit the
stockholders of Hemagen to remove the existing directors. The elimination of the
classified Board would also neutralize one of Hemagen's anti-takeover measures.
Hemagen has a number of additional anti-takeover measures, and we have no
current plans to remove or modify any such existing measures. Hemagen's
Certificate of Incorporation authorizes the Board of Directors to issue up to
1,000,000 shares of preferred stock, none of which is currently outstanding.
Hemagen can issue such preferred stock in one or more series, the terms of which
may be determined at the time of issuance by the Board of Directors, without
further action by stockholders. The ability of the Board of Directors to issue
preferred stock could discourage, delay or prevent a takeover of the Company.
Section 203 of the DGCL generally restricts the ability of a public
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder. As a result of
the application of Section 203 and certain provisions in Hemagen's Certificate
of Incorporation and Bylaws, potential acquirors of Hemagen may find it more
difficult or be discouraged from attempting to effect an acquisition transaction
with Hemagen, thereby possibly depriving holders of Hemagen's securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions.
On February 10, 1999, the Board of Directors of Hemagen adopted a "poison
pill" by paying a dividend of one common share purchase right (a "Right") for
each outstanding share of Hemagen Common Stock. In general, the Right, when
exercisable, entitles the registered holder to purchase from the Company one
share of Hemagen Common Stock at $4.00 per share, subject to adjustment. The
Rights have certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group that attempts to acquire Hemagen on terms not
approved by the Board of Directors. The Rights should not interfere with any
merger or other business combination approved by the Board of Directors since
the Rights may be redeemed by Hemagen at $.001 per Right prior to the time that
a person or group has acquired beneficial ownership of 15% or more of the
Hemagen Common Stock.
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3. The Director Removal Proposal. Remove existing directors from the
Board of Directors immediately following the effectiveness of Proposal
2:
"RESOLVED, that each current member of the Board of Directors of
Hemagen, and any other person or persons (other than the persons
elected pursuant to this consent) elected or appointed to the Board of
Directors of Hemagen prior to the effective date of this resolution in
addition to or in lieu of any of such current members to fill any
newly created directorship or vacancy on the Board of Directors of
Hemagen, or otherwise, is hereby removed and the office of each member
of the Board of Directors is hereby declared vacant."
Section 141 of the DGCL provides that, if a board of directors is not
classified, the directors may be removed without cause by the holders of a
majority of the corporation's outstanding shares entitled to vote for the
election of directors. Accordingly, upon the de-classification of Hemagen's
Board of Directors pursuant to Proposal 2, all of Hemagen's current directors
will be removable by the stockholders without cause and will be so removed if
this Proposal 3 is approved by the stockholders. In the absence of a classified
board structure, all directors serve until the next annual meeting of
stockholders or until their successors are elected and qualified, unless they
resign or are removed from office before that time by a majority stockholder
vote described above. Hemagen's governing documents require that Hemagen have at
least one director and do not prescribe a maximum number of directors.
Hemagen's Board of Directors currently consists of Mr. Paul N. Fruitt and
Mr. Charles W. Smith, whose terms expire in 1999; Dr. Alan S. Cohen and Mr.
Lawrence Gilbert, whose terms expire in 2000; and Dr. Carl Franzblau and Dr.
Ricardo M. de Oliveira, whose terms expire in 2001.
If our proposals are adopted, Mr. Ruyan would become Hemagen's new Chairman
and CEO, and Mr. Hales would become Hemagen's new President. The remaining
members of Hemagen's management would consist of persons with experience in the
diagnostics industry.
4. The Director Vacancy Proposal. Amend the Bylaws to permit stockholders
to fill vacancies on the Board of Directors:
"RESOLVED, that the stockholders hereby amend Article III of the
Bylaws by deleting the first sentence of Section 2 and by replacing it
with a new first sentence, which shall read as follows:
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'If vacancies occur in the Board of Directors, or if new
directorships are created, they may be filled by a majority of
directors then in office, although less than a quorum, by a sole
remaining director, or by a vote of the stockholders at an annual or
special meeting of the stockholders or by written consent in lieu of a
meeting of stockholders.'";
This proposal would amend Section 2 of Article III of the Bylaws to clarify
that vacancies on the Board of Directors created as a result of the removal of
the current directors may be filled by stockholders of Hemagen as well as by the
directors. Section 223 of the DGCL permits stockholders to fill such vacancies
unless such power has been specifically taken away. The Bylaws currently provide
that vacancies on the Board of Directors may be filled by the directors then in
office. No provision is made for the filling of vacancies by stockholders. The
proposed Bylaw amendment would grant to stockholders the right to elect the
Nominees to fill the vacancies on the Board of Directors created by adoption of
the Director Removal Proposal.
5. The Director Election proposals. Elect the six persons listed below to
fill the newly vacant directorships:
"RESOLVED, that the following persons are hereby elected as directors
of the Company to fill the newly created vacancies on the Board of
Directors, and to serve until their successors are elected and
qualified: Jerry L. Ruyan, William P. Hales, Thomas A. Donelan,
Christopher P. Hendy, Dr. Ricardo M.. de Oliveira and Dr. Alan S.
Cohen."
We seek to replace four of the current Directors with our Nominees. Our
primary purpose in seeking to elect the Nominees to the Board of Directors is to
analyze all aspects of the Company and where appropriate make structural and
management changes designed to make Hemagen more responsive to shareholders and
increase stockholder value. If elected, the Nominees would be responsible for
managing the business and affairs of Hemagen. Dr. de Oliveira and Dr. Cohen are
currently directors of Hemagen. However, in order that all directors of Hemagen
will serve one-year terms instead of, in the case of Dr. de Oliveira and Dr.
Cohen, completing their existing term as directors of Hemagen , we must remove
all of the Directors and reelect Dr. de Oliveira and Dr. Cohen.
Our Nominees understand that, as directors of Hemagen, each of them has an
obligation under Delaware law to the most scrupulous observance of his duty of
care and duty of loyalty, which requires an undivided and unselfish loyalty to
Hemagen and demands that there be no conflict between duty and self interest.
Each of our Nominees has undertaken personally, if elected, to be bound by and
discharge his duty of care and duty of loyalty to Hemagen and has agreed to
perform his duties in good faith, in a manner that he reasonably believes to be
in the best interests of Hemagen and all of its stockholders.
The following sets forth information about the Nominees:
<PAGE>
Jerry L. Ruyan, age 53, 9468 Montgomery Road, Cincinnati, Ohio 45242. Prior
to becoming a founder of Redwood in 1995, Mr. Ruyan was president and chief
executive officer of Meridian Diagnostics, Inc., a publicly traded company that
develops diagnostic test products for the global medical industry. He served as
a director of Meridian from its inception until July 7, 1999 when he severed
relations with Meridian in order to be in a position to operate Hemagen without
suggestion of any conflict of interest. As a founder of Meridian, he is
intimately familiar with developing growth for a company from start-up to
identifying market potential, nurturing product development, operating
successful organizations and accessing public markets. He guided Meridian
through each stage to create a thriving, and still growing, public company. Mr.
Ruyan has been an active, successful investor in other companies in need of
private equity infusions and management support. He serves on the boards of
Meritage Hospitality Group Inc. and Cafe Odyssey Inc., both public restaurant
companies, and is also on the boards of several private companies such as The
Last Best Place Catalog Company and Schonstedt Instrument Company. Mr. Ruyan is
a trustee for Ashland University. Mr. Ruyan received a B.S. degree in Biology
from Ashland University and a Master's degree in Microbiology from The Ohio
State University.
William P. Hales, age 37, 408 West 57th Street, 4A, New York, New York
10019, is a certified public accountant and has been a Senior Investment Advisor
with Jesup & Lamont Securities corporation, an investment banking and brokerage
firm, since May, 1997. Mr. Hales has substantial experience in the capital and
equity markets, in financing public and private companies and managing
investments in public companies. Mr. Hales received his B.A. in Accounting from
Pace University. From 1992 to present, Mr. Hales has been a full time money
manager with several investment banking firms including D. Blech & Co., from
March 1994 to September 1994, Josephthal, Lyon & Ross, from September 1994 to
July 1996, and The Thornwater Company, L.P., from July 1996 to May 1997. From
1988 to 1992, Mr. Hales was a practicing CPA with Coopers & Lybrand in New York
City. From 1985 to 1988, Mr. Hales was a practicing CPA with Ernst & Young in
New York City. While in public accounting, Mr. Hales served numerous clients in
varied industries including banking, manufacturing and financial institutions
both in an auditing and consulting capacities.
Thomas A. Donelan, age 43, 9468 Montgomery Road, Cincinnati, Ohio 45242,
has extensive experience consulting with corporate clients. A twenty-year
veteran of the banking industry, he has expertise in business analysis, loan
organization, equity portfolio management and structuring financing packages for
merger and acquisition transactions. These skills are valuable in determining
investment opportunities, supporting corporate management in achieving their
business objectives and managing a portfolio of fund investments. Prior to
becoming a founder of Redwood Venture Group in 1995, Mr. Donelan spent twenty
years in the Fifth Third organization and was vice president, commercial
lending. He has also served as a board member for Blue Chip Venture Fund in
Cincinnati and Alpha Capital Venture Fund in Chicago. He serves on the boards of
Schonstedt Instrument Company and The Avon Workshop Inc, two private companies;
and St. Joseph Orphanage, a charitable organization. Mr. Donelan earned a B.S.
degree in Political Science from Northern Kentucky University and a J.D. from
Chase College of Law.
<PAGE>
Christopher P. Hendy, age 41, 9468 Montgomery Road, Cincinnati, Ohio 45242,
has over 18 years of experience providing capital to help privately held
companies attain their financial goals. Prior to joining Redwood Venture Group,
Inc. in August of 1996, Mr. Hendy spent the preceding five years in the Asset
Based Lending department of Fifth Third Bank. As vice president and manager of
the department, Mr. Hendy increased portfolio outstandings by 47% to over
$330,000,000. Prior to that, Mr. Hendy was with Marine Midland Bank where he
rose through positions of increasing responsibility to regional manager-vice
president. Mr. Hendy serves on the Board of Meritage Hospitality Inc. and two
private companies--Schonstedt Instrument Company and The Avon Workshop Inc. His
experience in assessing the prospects and management abilities of small cap
companies is a great asset to Redwood. Mr. Hendy received his B.S. degree in
Business Administration from Xavier University.
Alan S. Cohen, M.D., age 72, 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.
Ricardo M. de Oliveira, M.D., age 47, 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.
Neither Dr. Cohen nor Dr. de Oliveira have informed us as to whether they
will continue to serve as directors of Hemagen if stockholders approve the
proposals contained in this Consent Statement, and there can be no assurance
that either or both of them would continue to serve as directors. They have, to
date, not consented to being named by us as nominees for director. We desire to
have a degree of continuity on the Board of Directors. Dr. Cohen and Dr. de
Oliveira were previously elected directors by Hemagen stockholders. We have
assumed that they took their position under the obligation to serve Hemagen
stockholders rather than Hemagen management. We believe that Dr. Cohen and Dr.
de Oliveira would desire to continue to serve Hemagen stockholders by virtue of
their prior election as directors by Hemagen stockholders and their current
election pursuant to this Consent Statement. In order to complete their current
terms as Hemagen directors under the staggered Board, Dr. Cohen would remain a
director through the 1999 Annual Meeting of Stockholders and Dr. de Oliveira
would remain a director through the 2001 Annual Meeting of Stockholders.
<PAGE>
Should, however, any of our nominees be unable to serve, we will not name
substitute nominees. Any resulting vacancies on the Board will be filled only by
vote of the stockholders.
Exhibit A sets forth information regarding shares of Hemagen common stock
owned of record and beneficially by us and, to our best knowledge, by those
participating in this solicitation on our behalf, the Nominees, or any associate
or immediate family member of the foregoing persons.
Except as otherwise set forth in this Consent Statement, no one
participating in this solicitation on our behalf, the Nominees, or any associate
or immediate family member of any of the foregoing persons is or has within the
past year been a party to any contract, arrangement or understanding with
respect to any securities of Hemagen. To the best of our knowledge, no one
participating in this solicitation on our behalf, the Nominees, or any associate
or immediate family member of any of the foregoing persons has been convicted in
a criminal proceeding.
We have agreed to indemnify each of our Nominees against all liabilities,
including liabilities under the federal securities laws, in connection with this
consent solicitation and such person's involvement in the operation of Hemagen
and to reimburse such Nominee for his out-of-pocket expenses.
If our proposals are accepted, we will request reimbursement from Hemagen
for the expenses that we incur in connection with this consent solicitation as
more fully described below under "Costs of the Consent Solicitation" on page __.
6. The Stock Option Proposal. Approve the grant of stock options to
William P. Hales and Redwood Holdings Inc.
"RESOLVED, that the Company grant options to purchase 7.5% of the
outstanding fully-diluted shares of Hemagen common stock at $1.36 per
share to William P. Hales and 7.5% of the outstanding fully-diluted
shares of Hemagen common stock at $1.36 per share to Redwood Holdings
Inc., in each case as of the effective date of this resolution, with
such further terms and conditions as determined by the Board of
Directors."
<PAGE>
Approval of this resolution by the stockholders of Hemagen will not result
in the issuance of the option by Hemagen. Under Section 157 of the DGCL, options
to purchase shares of common stock must be approved by the Board of Directors.
If the proposals set forth in this Consent Statement are approved by Hemagen
stockholders, we intend that the Board of Directors of Hemagen will approve the
option. We are seeking stockholder approval of the option in advance in order to
satisfy requirements of the Nasdaq SmallCap Market. We will not be advancing any
monetary consideration to Hemagen in exchange for the grant of the options. If
our proposals are adopted, we do not intend to make any changes in the current
general compensation level structure of Hemagen.
The exercise price for the stock option that we have described is $1.36
which is a 33-1/3% premium over the average of the closing prices for the
Hemagen common stock during the 30 trading day period ending June 25, 1999, the
date of the public announcement of this consent solicitation. Furthermore, the
options will not be exercisable for a period of eighteen months from issuance
unless the stock trades above $5 per share for 20 consecutive trading days
unless there is a change in control in which case the option will be exercisable
at that time. In any event, we will not profit from these stock options unless
and until Hemagen's stock price exceeds the exercise price of $1.36 per share.
Thereafter, increases in the value of stock underlying our stock options will be
shared by all stockholders of Hemagen.
<PAGE>
As of March 31, 1999 and according to publicly-available information,
Hemagen had 7,651,890 shares of common stock outstanding, excluding treasury
shares, and had 3,894,873 shares underlying outstanding options and warrants to
purchase Hemagen common stock. Therefore, if this option were granted effective
March 31, 1999, each of Mr. Hales and Redwood Holdings Inc. would receive an
option to purchase 866,007 shares of Hemagen common stock at $1.36 per share.
While we are unaware of any change in the number of outstanding shares, options
and warrants of Hemagen since March 31, 1999, the actual number of shares that
Mr. Hales and Redwood Holdings Inc. would be able to purchase under their
options would be determined as of the effective date of the adoption of the
proposals. The exercise of these options could dilute existing equity interests
of stockholders.
If our proposals are approved by the stockholders, we and the other
Nominees will work diligently to improve the value of your investment in
Hemagen. By requesting stockholder approval of the grant of the options, we are
asking that we have the opportunity to profit from our labor in consideration of
past expenses and services, and future services, to Hemagen. The current Hemagen
stockholders' interest in Hemagen Common Stock will be diluted as a result of
the grant and exercise of the options.
Also, please remember that if each of Proposals 2 through 6 are not
approved, none of them will be enacted even though sufficient consents may have
been received to approve a particular proposal. Therefore, unless stockholders
advocate change for Hemagen and indicate their desire for change by adopting
each of Proposals 2 through 6, we will not receive the option outlined in this
proposal even if this particular proposal is approved.
Certain Other Information Regarding Hemagen
Stockholder proposals
Stockholders are referred to Hemagen's 1998 Annual Report and the Proxy
Statement for Hemagen's 1999 Annual Meeting of Stockholders for information
regarding the compensation and remuneration paid and payable and other
information related to Hemagen's officers and directors and for information to
the beneficial ownership of Hemagen's securities by officers, directors and
beneficial owners of 5% or more of the Common Stock. Hemagen's 1999 Proxy
Statement states that the deadline for stockholders to submit proposals to be
considered for inclusion in Hemagen's Proxy Statement for the next year's Annual
Meeting of Stockholders is expected to be November 25, 1999.
<PAGE>
Costs of Consent Solicitation
Written consents may be solicited by mail, advertisement, telephone,
facsimile or in person. We have retained Beacon Hill Partners to act as our
solicitor in this consent solicitation. Approximately 25 employees of Beacon
Hill Partners will engage in the solicitation. We have agreed to pay Beacon Hill
Partners a fee of $20,000 plus reasonable out-of-pocket expenses. Beacon Hill
Partners has also agreed to provide consulting and analytic services and act as
proxy solicitor with respect to banks, brokers, institutional investors and
individual stockholders.
Costs related to the solicitation of consents to the proposals include
expenditures for attorneys, accountants, investment bankers, consent solicitors,
printing, postage, litigation and related expenses and filing fees and are
expected to aggregate approximately $_____, of which approximately $30,000 has
been spent to date. The portion of such costs allocable solely to the
solicitation of consents to the proposals is not readily determinable. Actual
expenditures may vary materially from the estimate, however, as many
expenditures cannot be readily predicted. The entire expense of preparing,
assembling, printing and mailing this Consent Statement and any other consent
soliciting materials and the cost of soliciting consents will be borne by us. If
the proposals are elected, we will request reimbursement from Hemagen for these
expenses.
Banks, brokerage houses and other custodians, nominees and fiduciaries may
be requested to forward our solicitation materials to the beneficial owners of
the shares they hold of record, and we will reimburse them for their reasonable
out-of-pocket expenses. If your shares are registered in your own name, you may
mail or fax both sides of your consent card to us at the address or fax number
listed below.
Your consent is important. No matter how many or how few shares you own,
please submit your consent to the proposals contained in this Consent Statement.
Our delivery of consents on Proposals 2 through 6 is conditioned on the receipt
of approval for each of those proposals. Consequently, if all of those proposals
are not approved, none of them will be enacted even though sufficient consents
may have been received to approve a particular proposal. Only your latest dated
consent counts.
If you have any questions or require any assistance in executing or
delivering your consent, please call our solicitors:
Beacon Hill Partners, Inc.
90 Broad Street, 20th Floor
New York, New York 10004
(XXX) XXX-XXXX
<PAGE>
EXHIBIT A
SHARES HELD BY US AND
OTHER PERSONS NOMINATED AS DIRECTORS BY THIS PROXY STATEMENT
The following persons are the beneficial owners of Shares purchased and
sold in open market transactions executed on the Nasdaq SmallCap Market since
June 30, 1997 in the amount and on the dates set forth below:
William P. Hales
Number Price Number Price
Purchase of Per Purchase of Per
Date or Sale Shares Unit Date or Sale Shares Unit
------ ------- ------ ---- ---- -------- ------ -----
6/5/98 Purchase 2,500 $1.22 6/14/99 Purchase 40,000 1.06
6/10/98 Purchase 6,400 1.28 6/15/99 Purchase 35,000 1.03
8/21/98 Purchase 5,000 1.06 6/17/99 Purchase 25,100 1.17
2/4/99 Purchase 2,000 1.50 6/18/99 Purchase 25,000 1.06
3/25/99 Purchase 2,500 1.13 6/21/99 Purchase 10,000 1.25
5/28/99 Purchase 5,000 .88 6/24/99 Purchase 5,000 1.19
6/4/99 Purchase 2,600 1.30 6/24/99 Purchase 2,000 1.25
6/11/99 Purchase 25,000 1.13 6/24/99 Purchase 3,000 1.09
6/14/99 Purchase 2,000 1.19 6/25/99 Purchase 1,000 1.19
6/25/99 Purchase 49,500 0.19
warrants
Jerry L. Ruyan
Number Price Number Price
Purchase of Per Purchase of Per
Date or Sale Shares Unit Date or Sale Shares Unit
------ ------- ------ ------- ---- -------- ------ -----
7/29/97 Purchase 5,000 2.00 12/8/98 Purchase 5,000 0.88
7/29/97 Purchase 5,000 2.00 12/18/98 Purchase 15,000 0.77
8/8/97 Sale 1,500 1.88 12/18/98 Purchase 15,000 0.77
9/30/97 Purchase 7,000 2.00 1/29/98 Sale 2,000 1.69
9/26/97 Purchase 26,500 1.96 12/31/98 Purchase 5,000 0.78
9/22/97 Purchase 2,000 1.94 3/25/99 Purchase 500 1.13
9/18/97 Purchase 22,000 1.89 3/25/99 Purchase 500 1.13
10/3/97 Purchase 5,400 2.00 3/26/99 Purchase 4,000 1.13
10/8/97 Purchase 2,500 2.00 3/26/99 Purchase 5,000 1.13
10/8/97 Purchase 4,500 2.00 6/17/99 Purchase 400 1.06
11/3/97 Sale 500 1.88 6/17/99 Purchase 500 1.06
11/3/97 Purchase 72,727 2.81(1) 6/17/99 Purchase 2,000 1.06
11/30/98 Purchase 5,000 0.94 6/29/99 Purchase 3,000 1.38
12/1/98 Purchase 3,000 0.94
<PAGE>
Thomas A. Donelan
Purchase
Date or Sale Number of Shares Price Per Share
- ------- -------- ---------------- ---------------
6/14/99 Purchase 100 $ 1.03
6/28/99 Purchase 25,000 1.38
6/29/99 Purchase 25,000 1.38
Christopher P. Hendy
Purchase
Date or Sale Number of Shares Price Per Share
- ------- -------- ---------------- ---------------
6/8/99 Purchase 5,000 $1.00
6/11/99 Purchase 4,900 1.06
6/11/99 Purchase 100 1.03
6/14/99 Purchase 8,500 1.06
6/15/99 Purchase 1,000 1.06
6/16/99 Purchase 2,000 1.06
6/18/99 Purchase 3,500 1.06
6/25/99 Purchase 6,500 0.94
6/29/99 Purchase 3,500 1.31
7/1/99 Purchase 5,000 1.25
Dr. Alan S. Cohen(2)
Purchase
Date or Sale Number of Shares Price Per Share
- ------- -------- ---------------- ---------------
11/97 Purchase 7,500 (2)
10/9/98 Purchase 10,000 $0.84
(1) Each unit purchased consisted of one share of Hemagen Common Stock and one
warrant to purchase Hemagen Common Stock. The purchase price was $2.19 for
each share of Common Stock and $0.62 for each warrant to purchase Hemagen
Common Stock.
(2) According to publicly-available information, these are the only
transactions of Dr. Cohen's. The price of Dr. Cohen's November, 1997
transaction is not publicly available. In addition, according to
publicly-available information, Dr. de Oliveira has not engaged in any
transactions in Hemagen common stock.
<PAGE>
Consent Card
Hemagen Diagnostics, Inc.
Consent of stockholders to action without a meeting
This Consent is being solicited by Jerry L. Ruyan and William P. Hales
The undersigned, a stockholder of record of Hemagen Diagnostics, Inc. (the
"Company"), hereby consents pursuant to Section 228 of the Delaware General
Corporation Law, with respect to the number of shares of Common Stock, par value
$0.01 per share, of Hemagen held by the undersigned, to each of the following
actions, which will occur in the order set forth in this Consent Card, without
prior notice and without a vote, as more fully described in the consent
statement, receipt of which is hereby acknowledged.
If a box for any proposal is not marked, this Consent, if signed, will
be voted in favor of that proposal.
1. Bylaw Proposal: Repeal the Bylaws adopted by the Board of
Directors of Hemagen on July 2, 1999 and any other Bylaws adopted
since February 4, 1993 (other than the Bylaws adopted by this
consent), pursuant to the resolution set forth in the consent
statement.
CONSENT CONSENT WITHHELD ABSTAIN
2. Classified Board Proposal: Amend the Bylaws to eliminate the
classified Board of Directors of Hemagen, pursuant to the
resolution set forth in the consent statement.
CONSENT CONSENT WITHHELD ABSTAIN
3. Director Removal Proposal: Remove the current members of the
Board of Directors of Hemagen other than the directors elected by
this consent, pursuant to the resolution set forth in the consent
statement.
CONSENT CONSENT WITHHELD ABSTAIN
4. Director Vacancy Proposal: Amend the Bylaws to provide that
Hemagen's stockholders may fill vacancies on the Board of
Directors of Hemagen, pursuant to the resolution set forth in the
consent statement.
CONSENT CONSENT WITHHELD ABSTAIN
<PAGE>
5. Director Election Proposal: Elect the following six persons
listed below (the "Nominees") to fill the newly vacant
directorships, pursuant to the resolution set forth in the
consent statement:
Jerry L. Ruyan, William P. Hales, Thomas A. Donelan, Christopher
P. Hendy, Dr. Ricardo M.. de Oliveira and Dr. Alan S. Cohen
If no box is marked, this Consent will be voted in favor of the
election of all six Nominees.
CONSENT CONSENT WITHHELD ABSTAIN
To withhold consent to a proposed Nominee, specify the Nominee in
the following space:
-------------------------------------------------------------------
6. Stock Option Proposal. Approve the grant of options to purchase
7.5% of the outstanding fully-diluted shares of Hemagen common
stock at $1.36 per share to William P. Hales and 7.5% of the
outstanding fully-diluted of Hemagen common stock at $1.36 per
share to Redwood Holdings Inc., pursuant to the resolution set
forth in the consent statement.
CONSENT CONSENT WITHHELD ABSTAIN
If no box is marked with respect to the Stock Option Proposal,
this consent will be voted in favor of the approval of the stock
option to Messrs. Hales and Ruyan.
PLEASE ACT PROMPTLY.
<PAGE>
IMPORTANT: THIS CONSENT MUST BE SIGNED AND DATED TO BE VALID.
Dated: ______________ , 1999
Signature: _______________________________
Signature
(if held jointly): __________________________
Title or authority
(if applicable): _________________________
Please sign exactly as name appears hereon. If shares are registered in
more than one name, the signature of all such persons should be provided. A
corporation should sign in its full corporate name by a duly authorized officer,
stating his or her title. Trustees, guardians, executors and administrators
should sign in their official capacity, giving their full title as such. If a
partnership, please sign in the partnership name by authorized persons. The
consent card votes all shares in all capacities.
PLEASE MARK, SIGN AND DATE THIS CONSENT
BEFORE MAILING THE CONSENT IN THE ENCLOSED ENVELOPE.
