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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[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.
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------
(Name of Person[s] Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required
[__] Fee computed on table below per Exchange Act Rules 14a-(6)(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[__] Fee paid previously with preliminary materials.
[__] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
HEMAGEN DIAGNOSTICS, INC.
40 Bear Hill Road
Waltham, Massachusetts 02451
Revocation of Consent Statement of the
Board of Directors of Hemagen Diagnostics, Inc.
This Revocation of Consent Statement is furnished by the Board of
Directors of Hemagen Diagnostics, Inc., a Delaware corporation ("Hemagen" or the
"Corporation"), to the holders of outstanding shares of its common stock, par
value $0.01 per share (the "Common Stock"), in opposition to the solicitation by
Jerry L. Ruyan, William P. Hales, Thomas A. Donelan and Christopher P. Hendy
(collectively, the "Redwood Group") of written consents from stockholders of
Hemagen. This Revocation of Consent Statement and the accompanying Revocation of
Consent card are being mailed to stockholders commencing on or about July ,
1999.
The Redwood Group is conducting a consent solicitation with respect to
the following proposals (the "Redwood Group Proposals"):
- - oust our duly elected Board of Directors, replacing them with Messrs. Ruyan,
Hales, Donelan and Hendy, the four members of the Redwood Group, and two of our
current directors, which will give the Redwood Group control of the Board and,
effectively, of Hemagen;
- - approve a grant to the Redwood Group members, or an entity that they control,
of options to purchase a total of 15% of Hemagen's common stock, on a fully
diluted basis; and
- - amend Hemagen's by-laws to eliminate our staggered board and make certain
other changes that would enable the Redwood Group to remove all of our directors
without cause.
THE BOARD OF DIRECTORS OF THE CORPORATION VIGOROUSLY OPPOSES THE
REDWOOD GROUP'S SOLICITATION OF CONSENTS AND URGES YOU NOT TO SIGN OR RETURN ANY
WHITE CONSENT CARD SENT TO YOU BY THE REDWOOD GROUP. IF YOU HAVE PREVIOUSLY
SIGNED AND RETURNED A WHITE CONSENT CARD TO THE REDWOOD GROUP, YOU HAVE EVERY
RIGHT TO CHANGE YOUR MIND.
THE BOARD IS ASKING FOR YOUR SUPPORT. THE BOARD URGES YOU TO SIGN, DATE
AND MAIL THE ENCLOSED BLUE REVOCATION OF CONSENT CARD IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE AS SOON AS POSSIBLE TO REVOKE ANY AND ALL PRIOR
CONSENTS.
Questions concerning the voting of your shares of common stock should
be directed to our proxy solicitor:
MacKenzie
Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or Call Toll-Free: (800) 322-2885
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WHY THE BOARD OPPOSES THE REDWOOD GROUP'S PROPOSALS
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE
SOLICITATION BEING MADE BY THE REDWOOD GROUP IS
NOT IN THE BEST INTEREST OF SHAREHOLDERS. YOUR BOARD
URGES YOU TO DISREGARD THE REDWOOD GROUP'S SOLICITATION
MATERIAL AND NOT TO SIGN THE WHITE CONSENT CARD.
REMOVAL OF BOARD MEMBERS
The Redwood Group is seeking your written consent to remove the entire
Board of Directors and elect themselves along with two of our existing directors
as a new Board of Directors. The Redwood Group is seeking to remove Carl
Franzblau, Ph.D., Lawrence Gilbert, Charles W. Smith and Paul N. Fruitt and
replace them with the four Redwood Group members, Jerry L. Ruyan, William P.
Hales, Thomas A. Donelan and Christopher P. Hendy. Although the Redwood Group
intends to seek the reelection of Ricardo M. de Oliveira, M.D. and Alan S.
Cohen, M.D. to the Board after their removal, neither Dr. de Oliveira nor Dr.
Cohen has approved of the Redwood Group's solicitation, nor have they authorized
or consented to their inclusion as nominees to be elected to the Redwood Group's
slate of directors.
Our Board unanimously OPPOSES the Redwood Group's proposal to remove
all of the current directors and replace several existing board members with
Redwood Group members. In fact, our Board believes that if such proposal were
to succeed, there would be a substantial disruption to the business
operations of Hemagen. Moreover, we believe that certain of the Redwood Group
members have conflicts of interest that would place their commitment and
dedication to Hemagen in question. We also believe that three of the four
members of the Redwood Group do not have business experience that is relevant
to our business. With the exception of one of our six directors, all members
of our Board have served as directors of Hemagen since its inception, and
each brings vast experience and a knowledge of Hemagen that has grown as
Hemagen has grown.
Creating value for our shareholders has always been our objective. When
we took the Corporation public in 1993, our goal was to build a profitable
multi-product diagnostic enterprise that could serve as the cornerstone of a
sizable medical device company. It has been our experience in this industry that
success is achieved by steadily growing sales of core product lines, developing
new products that complement existing products and acquiring enterprises with
complementary technologies. Following that strategy has poised Hemagen to emerge
as a prominent competitor in the medical and veterinary diagnostic communities.
During the past few years, Hemagen has developed many new diagnostic
products while simultaneously pursuing strategic acquisitions that we believe
have added value to the Corporation. Hemagen recently acquired the Analyst
automated clinical chemistry system, a proprietary diagnostic system that
complements Hemagen's existing technologies.
Our Board of Directors has overseen a string of successful acquisitions
and structural changes from 1993, when they took the Corporation public, to the
present, including:
- - the expansion of our distribution center for Latin America in Brazil in
1993;
- - the addition of the immunofluoresence product line in 1995;
- - the acquisition and integration of the RAICHEM clinical chemistry business
in 1996;
- - the acquisition of Cellular Products, Inc. research products in 1996;
- - the addition of several VIRGO and RAICHEM products for which we have succeeded
in receiving FDA clearance;
- - the execution of contracts with several multi-national corporations
including Carter-Wallace, Inc., AVL Scientific Corporation and Boehringer
Mannheim Gmbh; and
- - the acquisition of the Analyst benchtop clinical chemistry system from Dade
Behring in 1998.
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Our Board is optimistic about the ability of Hemagen to leverage these
recent developments to position the Corporation for expansion into new markets.
We are also seeking to increase profit margins by concentrating our efforts in
three core areas within the field of diagnostics that complement each other and
provide an opportunity for cross-marketing our products. Hemagen's three key
platforms are:
- - our immunodiagnostic division;
- - our clinical chemistry division; and
- - our point-of-care instrumentation business, which includes the Analyst and
companion products.
Historically, Hemagen has placed the greatest emphasis on its
immunodiagnostic business. We believe that our expansion into additional product
lines has allowed us to increase our presence in international markets. Recently
we have been negotiating with a potential strategic partner to further increase
our market presence by supplying reagents to a prominent instrument distributor.
If successful, we believe that Hemagen will be able to expand its market
presence and reputation outside its areas of historical competence of
diagnostics and into systems, including instrument and disposable reagent
systems.
Consistent with our recent emphasis on our three core technologies, we
have been examining which segments of the Corporation are incompatible with our
strategic focus. For example, although Cellular Products, Inc. has generally
been a positive addition to the Corporation, we believe that our resources are
more profitably used to reinforce our core businesses and are therefore
negotiating a divestiture of Cellular Products, Inc.
Our Board has also led Hemagen to develop several new products, for
which we are pursuing regulatory approval by the FDA, in the fields of
infectious diseases and autoimmune diseases. The Board's strategy of supporting
continuous research and development is beginning to reap rewards for the
Corporation, and the Board believes that continued emphasis on research and
development will maximize long-term value for our shareholders.
Our efforts have recently contributed a positive trend in revenues
from our RAICHEM division, which has begun marketing a test for
HDL-Cholesterol based on a state of the art, fully automated technology. We
recently entered into an agreement with AVL Scientific Corporation to be
their exclusive supplier of reagents for a new instrument that AVL Scientific
Corporation is launching in South America. We are in negotiations with
Italian, French and Israeli diagnostic manufacturers that we believe offer
Hemagen tremendous opportunity to expand its international business. The
recent success of our negotiations is based in part on the established
quality of our product lines, and also in part on the industrial and
strategic relationships that our key officers and our Board of Directors have
nurtured within Hemagen's targeted field over the last several years. We
believe that current as well as future negotiations could be compromised or
upset by a sudden shift in the management of the Corporation.
Our current Board of Directors brings loyalty, significant experience
and a demonstrated level of commitment to Hemagen, and the relationships
established by our Board members in the industry are amongst the Corporation's
valuable assets. Our directors have persevered through market fluctuations and
the learning process that defines the character of a company. One defining
attribute of our Board is that they have been dedicated to finding opportunities
for Hemagen's growth in both traditional and less-traditional avenues, and have
maintained a vision toward the long-term success of the Corporation. Members of
our Board of Directors, who have an unblemished record of utmost loyalty to our
shareholders, unanimously contend that the actions solicited by the Redwood
Group, for which the
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Redwood Group seeks immediate compensation through equity
potential, and which will place the Redwood Group in the position of determining
their own compensation going forward, would harm our shareholders as a class.
Our Board questions the Redwood Group's anticipated level of commitment to
vigorously represent the interests of all shareholders as a class, and grow
the Corporation as an enterprise.
Jerry L. Ruyan is a co-founder of Meridian Diagnostics, Inc., which
is one of our major competitors. He has previously served as president and
chief executive officer of Meridian, and based on the Redwood Group's Consent
Solicitation Statement, continues to serve as a director. It is our
understanding that Mr. Ruyan also currently holds a significant equity
interest in Meridian Diagnostics. We view Mr. Ruyan's position and status at
Meridian as a clear conflict of interest which could only serve to damage our
competitive position.
In January, 1998, our Chairman of the Board met with Mr. Ruyan, in his
capacity as a shareholder of Hemagen, to discuss Hemagen and its prospects. When
our Chairman requested that Mr. Ruyan inform him of possible acquisition
opportunities, Mr. Ruyan responded that to do so would be in conflict with his
duties to Meridian as he was required to bring any possible acquisition of the
sort that would benefit Hemagen first to Meridian. At a later date when Mr.
Ruyan requested a seat on our Board of Directors, he was rejected due to his
clear conflict of interest relative to his association with Meridian
Diagnostics. The Redwood Group has proposed that Mr. Ruyan serve as Hemagen's
Chairman of the Board and Co-Chief Executive Officer. As Mr. Ruyan's
relationship with Meridian appears to be at least as strong now as at the date
of this conversation, our Chairman and the other Board members can only conclude
that Mr. Ruyan would favor Meridian, our principal competitor, at the expense of
Hemagen.
We are not the first company to be targeted by Mr. Ruyan. Mr. Ruyan has
experience instigating proxy fights and was successful with respect to a contest
waged against Frisch's Restaurants. Messrs. Ruyan and Donelan formed a company
called Redwood Venture Group in 1995, an investment fund, and were later joined
by Mr. Hendy. Redwood Venture Group and certain of its members have attracted
media attention in connection with their aggressive business tactics.
We also have previous experience with Mr. Hales, who assisted us in
obtaining financing in 1995. Our experience with Mr. Hales led us to conclude
that his manner of conducting business was not compatible with the
Corporation's. Moreover, Mr. Hales' experience is in money management. He has no
documented experience operating a company of which we are aware. He is also of
the tendency to rapidly change positions; the longest period he has been
associated with a single company is for about 2 years at his present position.
Prior to that his average tenure with any brokerage firm was 14 months. As a
money manager, his experience extends primarily to managing money for individual
investor clients.
Thomas Donelan is a banker with experience in the area of commercial
lending. In 1995, Mr. Donelan co-founded Redwood Venture Group. Christopher
Hendy is also a commercial banker by trade who joined Redwood Venture Group in
1996. We are not aware that Mr. Donelan or Mr. Hendy has any experience relevant
to operating a business like ours.
In light of the complete lack of germane experience that most of the
members of the Redwood Group offer to our Board of Directors and the dilution
that shareholders will experience as a result of the stock options that the
Redwood Group is seeking to acquire, our Board must assume that the Redwood
Group does not have any real understanding of, or interest in, our business,
but, instead, is seeking to maximize the short-term investment return of its
members in large part at the expense of the other stockholders of Hemagen.
Moreover, while we have articulated and implemented strategies that we
believe will make Hemagen a successful company, the Redwood Group has not
proffered any plans at all. Our Board has always shown a willingness to listen
to ideas that will strengthen the Corporation or lead it in directions that will
enhance shareholder returns. However, Redwood Group, composed principally of
individuals
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with expertise that does not overlap with Hemagen's niche
technologies, has provided no strategy for improving the Corporation. Their
confident statement made in a proxy statement they filed with the Securities and
Exchange Commission that "We Believe We Can Deliver Stockholder Value" is
without substantiation or strategy as to how this may be achieved.
AWARD OF OPTIONS FOR 15% OF HEMAGEN
The Redwood Group's proposal calls for Mr. Hales and a company called
Redwood Holdings Inc. with only one shareholder - an employee stock ownership
plan whose principal participants are Messrs. Ruyan, Donelan and Hendy - each to
receive an option to purchase 7.5% of our common stock, on a fully-diluted
basis, for a total of 15%. Although the options will be priced at a value
exceeding the current trading value of our common stock, even very small
increases in our stock price, which may be caused by fluctuations in the market
or otherwise, will reap the Redwood Group a very handsome reward at the expense
of the rest of the shareholders. Moreover, we believe that if the Redwood Group
were to gain control of the Board, they may use their authority to further
enrich themselves.
Accordingly, our Board unanimously OPPOSES the Redwood Group's proposal
to grant to the Redwood Group stock options to purchase 15%, on a fully-diluted
basis, of the Common Stock.
AMENDMENTS TO OUR BY-LAWS
The Redwood Group's proposal includes amendments to our by-laws that
will facilitate their rapidly and efficiently securing themselves as the
majority of the Board of Directors. The proposed by-law amendments do not
necessarily represent specific areas in which the Redwood Group seeks change
or improvement for shareholders generally - rather, they serve the Redwood
Group's end of wresting control of the Corporation in a blitzkrieg fashion.
One of the proposed changes is a by-law amendment that eliminates all other
by-law amendments made since we took Hemagen public in 1993. As they have
made a blanket request without any discussion of any provisions they find
unacceptable, it seems apparent that the Redwood Group is merely ensuring
that the stage is set for a quick and efficient overturn of our Board.
Moreover, the two specific by-law provisions for which they request repeal
would, if left unchanged, stymie their intention to take over the Corporation
in the backdoor fashion they have proposed. We believe that the amendments
that they request benefit only the Redwood Group and not our shareholders
generally.
Accordingly, our Board unanimously OPPOSES the Redwood Group's proposal
to amend Hemagen's by-laws.
As you consider your decision, the Board asks that you recognize
that the Redwood Group is not offering to purchase your shares or pay you
anything for their rise to control of the Corporation. Rather, they are
seeking your vote to install them as the majority of Hemagen's Board of
Directors and asking you, as a member of the stockholder class, to suffer
dilution of your shares -potentially up to 15% on a fully diluted basis. Our
Board does not find this to be in anybody's best interests except those of
the Redwood Group.
For the foregoing reasons, our Board unanimously OPPOSES all of the
Redwood Group Proposals.
PLEASE SIGN, DATE AND MAIL ONLY THE ENCLOSED BLUE REVOCATION OF CONSENT
CARD.
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THE CONSENT PROCEDURE
VOTING SECURITIES AND RECORD DATE
As of June 1, 1999, the Corporation had 7,751,890 shares of Common
Stock outstanding. The Board of Directors has set June 29, 1999 as the record
date for the determination of stockholders entitled to express or withhold their
consent to the Redwood Group Proposals. Each share of Common Stock represents
one vote and only such holders of record are entitled to express or withhold
consent to the Redwood Group Proposals.
EFFECTIVENESS OF CONSENTS
Under Delaware law, unless otherwise provided in a corporation's
certificate of incorporation, stockholders may act without a meeting without
prior notice and without a vote, if consents in writing setting forth the
action to be taken are signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The Corporation's Restated Certificate of
Incorporation does not prohibit stockholder action by written consent. At a
meeting of the Company's Board of Directors held on July 2, 1999, the Board
determined to amend the by-laws to provide that, in order for the
Corporation's shareholders to amend, alter or repeal any by-law, holders of
at least two-thirds of the outstanding shares of Common Stock must approve
such action.
The Board took such action for several reasons, including that the
change aligns the vote necessary to change the by-laws with that required to
change the Corporation's certificate of incorporation, which had been 2/3;
that it adds an additional level of protection to the Corporation's
classified board governance structure, which the Board believes contributes
to consistency and stability in corporate policy, while at the same time not
precluding a successful solicitation by the Redwood Group; and that it also
tends to neutralize any timing advantage which would otherwise inhere in the
Redwood Group by virtue of its having filed its solicitation materials with
the Securities and Exchange Commission several days earlier than the
Corporation's filing of its materials, thus increasing the chances that all
stockholders of the Corporation will have the opportunity to read and
consider both sides' positions on the Redwood Group's proposals before any
action by written consent becomes final. In addition, as noted above, the
Board noted in making its decision in this regard that the Redwood Group's
efforts appear to be led by an individual who, based on the Redwood Group's
preliminary proxy materials filed with the Securities and Exchange
Commission, is currently a director of a principal competitor of the Company.
EFFECT OF BLUE CARD
The Corporation's Board of Directors is soliciting AGAINST the Redwood
Group Proposals. By executing the blue card stockholders will revoke any earlier
dated consent card solicited by the Redwood Group which stockholders may have
signed. Shares represented by the blue card will be voted as indicated thereon
as a revocation of consent as to all shares held by the shareholder in all
capacities.
Any stockholder executing and delivering the enclosed blue card may
revoke such action by signing and returning a later dated consent card solicited
by the Redwood Group.
The Corporation's Board of Directors urges you NOT to sign any consent
card sent to you by the Redwood Group. Whether or not you have previously
executed a consent card, the Board urges you to show your support for the Board
by executing and dating the enclosed blue card solicited by the Board, and to
mail it in the enclosed postage prepaid envelope as soon as possible.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth, as of June 1, 1999, 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 Common Stock, (ii) each of
the Corporation's Directors, (iii) each of the Corporation's executive officers
named in the Summary Compensation Table ("Named Executive Officers"), and (iv)
all Directors
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and Named Executive 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.(4) 759,021 9.7%
Myrna Franzblau(5) 759,021 9.7%
William Franzblau(6) 67,890 *
Ricardo M. de Oliveira, M.D.(7) 345,684 4.5%
Alan S. Cohen, M.D. 148,705 1.9%
Lawrence Gilbert(8) 118,687 1.5%
Charles W. Smith 146,659 1.9%
Paul N. Fruitt 8,000 *
All Directors & Executive Officers as a Group (8 persons)(9) 1,594,646 20.4%
Jerry L. Ruyan(10) 641,354 8.3%
9468 Montgomery Road
Cincinnati, Ohio 45242
William P. Hales(10) 641,354 8.3%
408 West 57th Street, 4A
New York, New York 10019
Thomas A. Donelan(10) 641,354 8.3%
9468 Montgomery Road
Cincinnati, Ohio 45242
Christopher P. Hendy(10) 641,354 8.3%
9468 Montgomery Road
Cincinnati, Ohio 45242
- ----------------------------------------
(*) represents less than 1%
</TABLE>
(1) The addresses for all of the named individuals is c/o Hemagen Diagnostics,
Inc., 40 Bear Hill Road, Waltham, Massachusetts 02451.
(2) 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.
(3) As of June 1, 1999 there were 7,751,890 shares of Common Stock issued and
outstanding.
(4) Includes 344,510 shares owned by Dr. Franzblau and 354,511 shares owned by
Myrna Franzblau, Dr. Franzblau's spouse. Also includes 20,000 shares subject to
stock options granted to Dr. Franzblau and 40,000 shares subject to stock
options granted to Myrna Franzblau under the Corporation's 1992 Stock Option
Plan. Dr. Franzblau disclaims beneficial ownership over all shares held by his
spouse.
(5) Includes 354,511 shares owned by Mrs. Franzblau and 334,510 shares owned by
Dr. Franzblau. Also includes 40,000 shares subject to stock options granted to
Myrna Franzblau and 20,000 shares subject to
(6) Includes options to purchase 3,500 shares.
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stock options granted to Dr. Franzblau under the Corporation's 1992 Stock Option
Plan. Mrs. Franzblau disclaims beneficial ownership over all shares held by her
spouse.
(7) Includes 40,014 shares owned by Dr. de Oliveira's spouse and 10,000 shares
subject to stock options granted under the Corporation's 1992 Stock Option Plan.
(8) Includes 44,000 shares owned by Mr. Gilbert's spouse. Mr. Gilbert disclaims
beneficial ownership over all shares held by his spouse.
(9) Includes the shares referenced in notes (4) through (8) above.
(10) Information has been obtained from a Schedule 13D, dated June 21, 1999,
filed by the Redwood Group.
INFORMATION REGARDING THE DIRECTORS AND OFFICERS OF THE CORPORATION
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. Mr. Paul N. Fruitt was duly elected to take the seat on the
Board of Directors vacated by virtue of Dr. John Sandson's death. Mr Fruitt
became a director on December 9, 1998. The terms of Mr. Fruitt and Mr. Smith
expire in 1999, the terms of Dr. Cohen and Mr. Gilbert expire in 2000 and the
terms of Dr. Franzblau and Dr. de Oliveira expire in 2001. A classified Board
of Directors could discourage, delay or prevent a takeover or change of
control of the Corporation. Our Board believes, however, that Corporation's
classified board structure prevents sudden shifts in corporate policy and
adds to the stability of the Corporation's governance. 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.
BUSINESS EXPERIENCE OF DIRECTORS AND OFFICERS
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. Dr. Franzblau is the
husband of Myrna Franzblau, the Corporation's Treasurer.
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 former 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.
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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 his J.D. degree from Suffolk University Law
School.
PAUL N. FRUITT has served as a Director of the Corporation since
December 1998. Mr. Fruitt had been employed by the Gillette Company until his
retirement in 1996. He has many years experience in market research as well as
in strategic business planning. Mr. Fruitt served as Vice President of corporate
planning for 27 years at the Gillette Company. He is currently a member of the
Board of Overseers of Brandeis University's Graduate School of International
Economics and Finance, and also serves on the Board of Overseers of the
Newton-Wellesley Hospital.
Mr. Fruitt is a graduate of Harvard College.
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.
MYRNA FRANZBLAU has been the Corporation's Treasurer and Director of
Human Resources since its inception. Mrs. Franzblau received her Bachelor of
Arts from Brooklyn College and her Master's degree from Boston University. Mrs.
Franzblau is the wife of Carl Franzblau, the Corporation's President.
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, in 1984,
his J.D. degree in 1987 and his LLM degree in taxation in 1990 from Boston
University. William Franzblau is the son of Dr. and Mrs. Franzblau.
BOARD MEETINGS; COMMITTEES
The Board of Directors met four times during the fiscal year ending on
September 30, 1998. All of the Directors attended 100% of the meetings of the
Board of Directors except for Dr. Ricardo de Oliveira who attended none of the
meetings of the Board of Directors and Dr. John Sandson who attended three of
the meetings of the Board of Directors during the year ended September 30, 1998.
During the year ended September 30, 1998, 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.
COMMITTEES OF THE BOARD
The Corporation established an Executive Committee, an Audit Committee
and a Compensation Committee of the Board of Directors on March 16, 1993.
Executive Committee - Members of the Executive Committee are Dr. Cohen,
Dr. Franzblau 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.
Audit Committee - 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
11
<PAGE>
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.
Compensation Committee - The Compensation Committee consists of Dr.
Franzblau and two independent outside Directors, Mr. Fruitt and Mr. Gilbert. The
Compensation Committee was established to set and administer the policies that
govern annual compensation for the Corporation's executives.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
In fiscal 1998, the Corporation compensated each of its four
non-management Directors by paying them six thousand dollars ($6,000.00) 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.
CERTAIN RELATIONSHIPS
Carl Franzblau and Myrna Franzblau, the Corporation's Treasurer, are
husband and wife and William Franzblau, Esq. Chief Financial Officer and
General Counsel, is the son of Carl Franzblau and Myrna Franzblau. Scott
Weiss, VP, Marketing and Sales, is the son-in-law of Carl Franzblau and Myrna
Franzblau. Except for Dr. and Mrs. Franzblau and William Franzblau and Scott
Weiss, no Director or officer is related by blood, marriage or adoption to
any other Director or executive officer.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal years ended September
30, 1998, 1997 and 1996, the compensation paid to the Corporation's Chief
Executive Officer and to its highest paid executive officers who received from
the Corporation more than $100,000 in cash compensation.
12
<PAGE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(3))
- --------------------------- ---- ------ ----- ------------ -----------
<S> <C> <C> <C> <C> <C>
Carl Franzblau 1998 $140,000 0 $7,324 (1) 10,000
Chief Executive Officer 1997 $137,187 0 $7,961 10,000
1996 $128,750 0 $5,073 0
William Franzblau 1998 $110,000 0 $3,300 (4) 10,000
Chief Financial Officer 1997 $105,000 0 $3,150 20,500
Ricardo de Oliveira 1998 $120,000 0 0 (2) 10,000
Senior Vice President 1997 $118,840 0 $ 610 0
1996 $118,840 0 $5,073 0
</TABLE>
- ---------------------------------------
(1) The Corporation had provided Dr. Franzblau with the use of a leased car
during the fiscal years ended September 30, 1998, 1997 and 1996, and has
recorded an annual expense for Dr. Franzblau's automobile of approximately
$7,324, $7,961 and $5,073, respectively.
(2) The Corporation had provided Dr. de Oliveira with the use of a leased car
during the fiscal years ended September 30, 1997, and 1996, respectively, and
has recorded an annual expense for Dr. de Oliveira's automobile of approximately
$610 for the beginning of 1997 and $3,496 for 1996.
(3) In fiscal year 1998, the Corporation granted options to purchase 10,000
shares of Common Stock under the Corporation's 1992 Stock Option Plan to Dr.
Franzblau and Dr. de Oliveira, and options to purchase 10,000 shares of Common
Stock under the Corporation's 1992 Stock Option Plan to Dr. Franzblau in the
fiscal year ended September 30, 1997. No options were granted to Dr. de Oliveira
in the fiscal year ended September 30, 1997. No options were granted to Dr.
Franzblau or Dr. de Oliveira in the fiscal year ended September 30, 1996.
(4) William Franzblau participated in the Corporation's 401k plan and
received Corporation match of 3%.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of
stock options to the named executive officers during the year ended on September
30, 1998.
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable
Securities Options Value at Assumed Rates of
Underlying Granted to Exercise or Stock Price Appreciation
Options Employees in Base Price Expiration for Option Term
Name(1) Granted Fiscal Year ($/Sh) Date 5%($) / 10%($)
<S> <C>
Carl Franzblau 10,000
Ricardo de Oliveira 10,000
William Franzblau
- ----------------------------------------
The following table sets forth the value of outstanding options held
as of September 30, 1998.
</TABLE>
13
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FY AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT FY-END(#) OPTIONS AT FY-END(#)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- ----------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Carl Franzblau 0 0 10,000 0
0 0 10,000 0
Ricardo de Oliveira 0 0 10,000 0
William Franzblau 0 0 500 0
0 0 10,000 0
0 0 10,000 0
0 0 10,000 0
</TABLE>
- ----------------------------------------
(1) Options listed carry an exercise price of $2.19 and $1.20 per share,
respectively for Carl Franzblau, $2.19 per share for Ricardo de Oliveira, and
$2.00, $1.75, $2.19 and $1.20 per share, respectively for William Franzblau.
The fair market value of the Common Stock underlying the options, as of June 1,
1999 was $0.88 per share (NASDAQ closing price on June 1, 1999).
SUMMARY OF EMPLOYMENT AGREEMENTS
Hemagen has entered into employment agreements with Messrs. Carl
Franzblau, Ricardo de Oliveira, and William Franzblau. Under the terms of
such agreements, Messrs. Carl Franzblau, Ricardo de Oliveira and William
Franzblau are guaranteed salaries of not less than $145,000, $130,000 and
$130,000, respectively, in each case subject to annual increases. The agreements
also provide for severance benefits in the event that the officer is terminated
without cause, as defined, of continued base salary for a period of three years,
in the case of Carl Franzblau, and one year, in the case of each of Ricardo
de Oliveira and William Franzblau.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1998, no executive officer
served as a member of the compensation committee of the board of directors of
another entity.
STOCKHOLDER PROPOSALS
In order to be included in Proxy material for the 2000 Annual Meeting,
tentatively scheduled to be held on Tuesday, March 4, 2000, stockholders'
proposed resolutions must have been received by the Corporation on or before
November 25, 1999. It is suggested that proponents submit their proposals by
certified mail, return receipt requested, addressed to the Secretary of the
Corporation.
PARTICIPANTS
14
<PAGE>
In addition to the Board of Directors, Myrna Franzblau, Hemagen's
Treasurer and Director of Human Resources, and William Franzblau, Hemagen's
Chief Financial Officer and General Counsel, may be deemed to be 'participants'
(the "Participants") in the solicitation of revocations of consents in response
to the proposed consent solicitation by the Redwood Group.
All of the Participants have a place of business, care of Hemagen
Diagnostic, Inc., at 40 Bear Hill Road, Waltham, Massachusetts 02451.
Mr. William Franzblau beneficially owns 94,890 shares of Common Stock,
including options to purchase 30,500 shares. Ms. Myrna Franzblau's beneficial
ownership of Common Stock is as set forth under the heading "Beneficial
Ownership of Voting Securities". None of the Participants owns of record any
shares of Common Stock other than shares over which they respectively have
beneficial ownership.
Over the past two years, the following Participants purchased or sold
securities of Hemagen in the following quantities:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME PURCHASE (P) OR SALE (S) DATE OF COMMON STOCK
---- ------------------------ ---- ----------------
<S> <C> <C> <C>
Carl Franzblau P Dec. 1997 7,500
P Sep. 1998 4,000
P Sep. 1998 8,000
P Sep. 1998 4,000
P Sep. 1998 4,000
Paul Fruitt P Jan. 1999 5,000
Alan S. Cohen P Dec. 1997 7,500
P Oct. 1998 10,000
Charles W. Smith P Nov. 1997 2,500
P Dec. 1997 7,500
Lawrence Gilbert P
P Jan. 1998 3,500
Myrna Franzblau P Dec. 1997 7,500
</TABLE>
On July 2, 1999, the Board of Directors adopted an amendment to the
Corporation's by-laws to provide for mandatory advancement of expenses
incurred by Indemnitees, which is defined in the Corporation's by-laws to
include, among other persons, the Corporation's directors and officers. One
of the Redwood Group Proposals contemplates the repeal of all amendments to
our by-laws that were adopted since February 4, 1993. If such proposal were
adopted, the Participants, all of whom are directors or officers, would not
receive the benefit of this July 2, 1999 by-law amendment.
SOLICITATION OF REVOCATIONS
The expense of preparing, printing and mailing of this Revocation of
Consent Statement, and the total expenditure relating to the solicitation of
revocations of consent (including , without limitation, costs, if any, relating
to fees of attorneys, accountants, public relations or financial advisers,
solicitors, advertising, printing, transportation and litigation) will be borne
by Hemagen. In addition to use of the mails, revocations of consent may be
solicited by officers, directors and regular employees of Hemagen, without
additional remuneration, by personal interviews, telephone, facsimile or
otherwise. Hemagen will also request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to beneficial owners of shares held of
record and will provide reimbursement for the cost of forwarding such materials
in accordance with customary charges. Hemagen has retained MacKenzie Partners,
Inc. to aid in the solicitation of revocations of consent, including soliciting
revocations of consent from brokerage firms, banks, nominees, custodians and
fiduciaries. Approximately persons will be utilized by such firm in its
solicitation efforts. The fees of such firm are estimated at $ plus
out-of-pocket costs and expenses.
Hemagen estimates that its total expenditures relating to the
solicitation of revocations of consent
15
<PAGE>
(exluding costs represented by salaries and wages of regular employees and
officers) will be approximately $ .
To date, Hemagen has incurred approximately $ .
16
<PAGE>
[FORM OF CONSENT REVOCATION CARD]
PRELIMINARY COPY
THIS REVOCATION OF CONSENT IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF HEMAGEN DIAGNOSTICS, INC. ("HEMAGEN")
IN OPPOSITION TO THE CONSENT SOLICITATION BY
JERRY L. RUYEN, WILLIAM P. HALES, THOMAS A. DONELAN AND
CHRISTOPHER P. HENDY (COLLECTIVELY, THE "REDWOOD GROUP")
Revocation of any and all consents heretofore executed with respect to the
matters set forth herein, as described in the statement enclosed herewith.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "REVOKE CONSENT" ON EACH
PROPOSAL SET FORTH BELOW
YOUR REVOCATION OF CONSENT IS IMPORTANT. PLEASE INDICATE YOUR OPPOSITION TO THE
REDWOOD GROUP'S PROPOSALS BY MAKING, SIGNING, DATING AND MAILING THIS CARD TODAY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF NOT OTHERWISE MARKED, THIS REVOCATION
OF CONSENT REVOKES ALL PREVIOUS CONSENTS.
1. 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 of the Redwood Group.
/ / REVOKE CONSENT / / DO NOT REVOKE / / ABSTAIN
If no box is marked with respect to the Classified Board Proposal, this
Revocation of Consent will be used to revoke any consent previously given to
any amendment of the Bylaws as set forth above.
2. Director Removal Proposal: Remove the current members of the Board of
Directors of Hemagen, pursuant to the resolution set forth in the
consent statement of the Redwood Group.
/ / REVOKE CONSENT / / DO NOT REVOKE / / ABSTAIN
If no box is marked with respect to the Director Removal Proposal,
this Revocation of Consent will be used to revoke any consent previously
given in support of the removal of the directors of Hemagen as set forth
above.
3. 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 of the
Redwood Group.
/ / REVOKE CONSENT / / DO NOT REVOKE / / ABSTAIN
If no box is marked with respect to the Director Vacancy Proposal,
this Revocation of Consent will be used to revoke any consent previously
given in support of the amendment of the Bylaws as set forth above.
4. 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 of the Redwood
Group: Jerry L. Ruyan, William P. Hales, Thomas A. Donelan, Christopher
P. Hendy, Dr. Ricardo M. de Oliveira and Dr. Alan S. Cohen.
<PAGE>
/ / REVOKE CONSENT / / DO NOT REVOKE / / ABSTAIN
If no box is marked above with respect to the Director Election
Proposal, this Revocation of Consent will be used to revoke any consent
previously given in support of the election of the foregoing Nominees.
To revoke consent only to a proposed Nominee or proposed Nominees,
specify the Nominee(s) in the following space:
5. Bylaw Proposal: Repeal any Bylaws adopted by the Board of Directors of
Hemagen since January 1, 1998, pursuant to the resolution set forth in
the consent statement of the Redwood Group.
/ / REVOKE CONSENT / / DO NOT REVOKE / / ABSTAIN
If no box is marked with respect to the Bylaw Proposal, this
Revocation of Consent will be used to revoke any consent previously given in
support of the repeal of any Bylaws adopted since January 1, 1998 as set
forth above.
6. Stock Option Proposal. Approve the grant of options to purchase 7.5% of
the outstanding fully-diluted shares of Hemagen common stock at $____
per share to William P. Hales and 7.5% of the outstanding fully-diluted
of Hemagen common stock at $____ per share to Redwood Holdings Inc.,
pursuant to the resolution set forth in the consent statement of the
Redwood Group.
/ / REVOKE CONSENT / / DO NOT REVOKE / / ABSTAIN
If no box is marked with respect to the Stock Option Proposal, this
Revocation of Consent will be used to revoke any consent previously given in
support of the approval of the stock option to Mr. Hales and Redwood
Holdings, Inc.
PLEASE ACT PROMPTLY.
IMPORTANT: THIS CONSENT REVOCATION 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 revocation of
consent card revokes consent for all shares in all capacities. PLEASE
MARK, SIGN AND DATE THIS CONSENT BEFORE MAILING THE CONSENT REVOCATION
IN THE ENCLOSED ENVELOPE.
