UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THERMOGENESIS CORP.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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THERMOGENESIS CORP.
2711 Citrus Road
Rancho Cordova, CA 95742
Telephone (916) 858-5100
To the Stockholders of ThermoGenesis Corp.:
You are cordially invited to attend the Annual Meeting of Stockholders of
ThermoGenesis Corp. (the "Company") to be held at 9:00 a.m. (PDT), on October
28, 2005, at Sacramento Marriott, Rancho Cordova, located at 11211 Point East
Dr., Rancho Cordova, Ca. 95742.
At the meeting, you will be asked (i) to elect five (5) directors of the
Company, (ii) approve an amendment to and restatement of the Certificate of
Incorporation to increase the number of authorized shares of common stock from
50,000,000 to 60,000,000 and (iii) to consider any other matters that properly
come before the meeting.
The accompanying Notice of the Annual Meeting of Stockholders and Proxy
Statement contain information about the matters to be considered and acted upon,
and you should read the material carefully.
We hope you will be able to attend the meeting. However, whether or not you
plan to attend the meeting in person, to help assure us of a quorum, please
complete, date and sign the enclosed proxy card and mail it in the postage-paid
envelope provided as promptly as possible. Your proxy may be revoked at any time
prior to the time it is voted.
/s/ Philip H. Coelho
Philip H. Coelho,
Chairman of the Board and
Chief Executive Officer
September 9, 2005
Rancho Cordova, California
THERMOGENESIS CORP.
2711 Citrus Road
Rancho Cordova, CA 95742
Telephone (916) 858-5100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 28, 2005
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
ThermoGenesis Corp. (the "Company"), a Delaware corporation, will be held at
Sacramento Marriott, Rancho Cordova, located at 11211 Point East Dr., Rancho
Cordova, Ca. 95742, on Friday, October 28, 2005, at 9:00 a.m. (PDT) for the
following purposes:
1. To elect five (5) directors to hold office until the next
Annual Meeting of Stockholders or until their successors are
elected and qualified;
2. To approve an amendment to our Certificate of Incorporation to
increase the number of authorized shares of common stock by
10,000,000 shares; and
3. To transact such other business as may properly come before
the meeting.
The Board of Directors of the Company has fixed the close of business on
September 9, 2005, as the record date for determining those stockholders who
will be entitled to vote at the meeting or any postponement or adjournment
thereof. Stockholders are invited to attend the meeting in person.
Please sign and date the accompanying proxy card and return it promptly in
the enclosed postage-paid envelope whether or not you plan to attend the meeting
in person. If you attend the meeting, you may vote in person if you wish, even
if you previously have returned your proxy card. The proxy may be revoked at any
time prior to the time it is voted.
By Order of the Board of Directors
/s/ David C. Adams
David C. Adams
Corporate Secretary
September 9, 2005
Rancho Cordova, California
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. ANY PROXY
GIVEN BY YOU MAY BE REVOKED BY WRITTEN NOTIFICATION TO THE COMPANY'S CORPORATE
SECRETARY, BY FILING A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY ATTENDING
THE ANNUAL MEETING IN PERSON AND VOTING BY BALLOT.
THERMOGENESIS CORP.
2711 Citrus Road
Rancho Cordova, CA 95742
Telephone (916) 858-5100
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
We are furnishing this proxy statement to you in connection with the
fiscal year 2005 Annual Meeting of Stockholders of ThermoGenesis Corp. (the
"Company") to be held on Friday, October 28, 2005, at 9:00 a.m. (PDT) at
Sacramento Marriott, Rancho Cordova, located at 11211 Point East Dr., Rancho
Cordova, CA 95742, and at any postponement or adjournment thereof (the
"Meeting").
Only stockholders of record on September 9, 2005, are entitled to
notice of and to vote at the Meeting. As used in this Proxy Statement, the terms
"we," "us" and "our" also refer to the Company.
The proxy solicited hereby, if properly signed and returned to us and
not revoked prior to its use, will be voted at the Meeting in accordance with
the instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" the nominees for the Board of Directors,
"FOR" amendment to the certificate of incorporation to increase the authorized
shares of common stock, and at the proxy holder's discretion, on such other
matters, if any, which may properly come before the Meeting (including any
proposal to adjourn the Meeting). Any stockholder giving a proxy has the power
to revoke it at any time before it is exercised by: (i) filing with the Company
written notice of its revocation addressed to: Corporate Secretary,
ThermoGenesis Corp., 2711 Citrus Road, Rancho Cordova, California 95742, (ii)
submitting a duly executed proxy bearing a later date, or (iii) appearing at the
Meeting and giving the Corporate Secretary notice of his or her intention to
vote in person.
This proxy is solicited on behalf of the Board of Directors of the
Company. The Company will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
stockholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to beneficial owners of the Company's
stock entitled to vote. In addition to the solicitation of proxies by use of the
mail, some of our officers, directors and employees may, without additional
compensation, solicit proxies by telephone or personal interview.
Our Annual Report on Form 10-K for the fiscal year ended June 30, 2005,
including financial statements, is included in this mailing. Such report and
financial statements are not a part of this proxy statement except as
specifically incorporated herein.
This Proxy Statement and form of proxy were first mailed on September
15, 2005 to stockholders of record as of September 9, 2005.
RECORD DATE AND VOTING RIGHTS
The Company is currently authorized to issue up to 50,000,000 shares of
Common Stock, $0.001 par value and 2,000,000 shares of Preferred Stock, $0.001
par value. As of September 9, 2005, 45,919,125 shares of Common Stock were
issued and outstanding and no shares of Preferred Stock were outstanding. Each
1
share of Common Stock shall be entitled to one (1) vote on all matters submitted
for stockholder approval. The record date for determination of stockholders
entitled to notice of and to vote at the Meeting is September 9, 2005.
A majority of the outstanding shares of Common Stock of the Company,
entitled to vote must be represented in person or by proxy at the Meeting to
constitute a quorum for the transaction of business.
Under Delaware law, abstentions and broker non-votes are counted as
present for determining quorum. For the election of directors, the nominees for
director who receive the most votes will become our directors. There are no
cumulative voting rights. A majority of quorum is required to approve all other
proposals. Abstentions are treated as a vote against the proposal and broker
non-votes will not be counted either for or against any proposal to determine if
a proposal is approved.
PROPOSAL 1--ELECTION OF DIRECTORS
General Information
Our bylaws presently provide that the authorized number of directors
may be fixed by resolution of the Board from time to time, with a minimum of not
less than three (3) directors and a maximum of seven (7) directors. The Board
has fixed the authorized number of directors at five (5) and is currently
searching for additional suitable independent director candidates for future
appointment to the Board.
At the Meeting, stockholders will be asked to elect the nominees for
director listed below, each of whom is a current member of the Company's Board
of Directors.
Nominees for Director
The nominees for director have consented to being named as nominees in
this Proxy Statement and have agreed to serve as directors, if elected. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five (5) nominees named below. If any nominee of the Company is unable
or declines to serve as a director at the time of the Meeting, the proxies will
be voted for any nominee designated by the present Board of Directors to fill
the vacancy. The Board of Directors has no reason to believe that any of the
nominees will be unavailable for election. The Directors who are elected shall
hold office until the next Annual Meeting of Stockholders or until their earlier
death, resignation or removal, or until their successors are elected and
qualified.
The following sets forth the persons nominated by the Board of
Directors for election and certain information with respect to those
individuals:
Nominee Age
------------ -----
Philip H. Coelho 61
Patrick McEnany 58
Hubert E. Huckel, M.D. 74
George J. Barry 52
Kevin Simpson 47
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Biographies
Philip H. Coelho Director since 1986
Philip H. Coelho is the Company's Chief Executive Officer and Chairman of
the Board. From September 1989 to November 1997, Mr. Coelho served as the
Company's President. From October 1986 to September 1989, Mr. Coelho was Vice
President and Director of Research, Development and Manufacturing. Mr. Coelho
was President of Castleton, Inc. from October 1983 until October 1986. Castleton
developed and previously licensed the Insta Cool technology to the Company. Mr.
Coelho serves on the Board of Directors for Mediware Information Systems, Inc.
and Catalyst Pharmaceutical Partners and previously served on the Board of
Directors of Kourion Therapeutics. Mr. Coelho has a Bachelor of Science degree
in Mechanical Engineering from the University of California, Davis and is the
inventor or co-inventor on the majority of the Company's patents.
Patrick McEnany Director rejoined in 1997
Patrick J. McEnany is a founder and Chief Executive Officer of Catalyst
Pharmaceutical Partners, a drug development company since its formation in
January 2002. From 1991 to April of 1997, Mr. McEnany was Chairman and President
of Royce Laboratories, Inc., a Miami, Florida based manufacturer of generic
prescription drugs. From 1997 to 1998, after the merger of Royce Laboratories,
Inc., into Watson Pharmaceuticals, Inc., Mr. McEnany served as President of the
wholly-owned Royce Laboratories subsidiary and Vice President of Corporate
Development for Watson Pharmaceuticals, Inc. From 1993 through 1997, he also
served as Vice Chairman and director of the National Association of
Pharmaceutical Manufacturers. He currently serves on the Board of Directors for
Renal CarePartners, Inc., an operator of kidney dialysis centers, and the
Jackson Memorial Hospital Foundation and Excalibur Health Systems. Mr. McEnany
also served on the Board of Directors of Med/Waste, Inc. from March 2000 until
February 13, 2002, when that company filed for voluntary bankruptcy protection
under federal bankruptcy laws.
Hubert E. Huckel, M.D. Director since 1997
Dr. Huckel joined the Board of Directors in 1997. He is a founder of
Catalyst Pharmaceutical Partners, formed in January 2002, and serves as its
Chairman of the Board. In addition, he is on the Board of Directors of Titan
Pharmaceuticals, Inc., Amarin Pharmaceuticals, plc and Valera Pharmaceuticals,
Inc. He spent 29 years with the Hoechst Group ("Hoechst" now "Aventis"), and was
at the time of his retirement, Executive Chairman of the Board of
Hoechst-Roussel Pharmaceuticals, Inc. Dr. Huckel received his M.D. degree from
the University of Vienna, Austria, and is a member of the Rockefeller University
Council.
George J. Barry Director since 2002
Mr. Barry rejoined Mediware Information Systems, Inc. in January 2001 as
President and Chief Executive Officer and serves on its Board of Directors. He
previously served as Mediware Information Systems' Chief Financial Officer from
1997 through 1998 and acted as an advisor to the Board of Directors thereafter.
Mr. Barry has been a senior manager of software technology companies for over 16
years. He was employed as Vice President and Chief Financial Officer of Silvon
Software, Inc. from 1999 through 2000; Chief Financial Officer at Microware
Systems from 1994 to 1996; Executive Vice President and Chief Financial Officer
at Comptech Research from 1992 to 1994 and as Group Chief Financial Officer for
Dynatech Corporation from 1986 to 1992. Mr. Barry serves on the Board of
Directors of Silvon Software, Inc. Mr. Barry is a Certified Public Accountant
and holds a Masters in Business Administration from the University of Wisconsin,
Madison.
3
Kevin Simpson Director since 2003
In January 2003, Mr. Simpson joined the Company as President and Chief
Operating Officer and was also appointed to the Company's Board of Directors.
Mr. Simpson has over 20 years experience in key management positions within life
sciences based companies. In 2001 and 2002, Mr. Simpson was General Manager of
the Pathogen Reduction Technology Business Unit at Gambro Healthcare, Inc. Prior
to that, he was a Managing Consultant in the Strategy Group of Breakaway
Solutions Inc., a provider of hosted business to business e-commerce
applications and packaged applications from 2000 - 2001 and was President and
Chief Executive Officer of Thermo Technology Ventures, Inc., consultants to
emerging growth companies from 1998 - 2000. Prior to that, Mr. Simpson spent
eight years at Haemonetics Corporation, most recently as Vice President of the
Commercial Plasma Business Unit and Vice President, Sales and Sales Operations
for plasma sales. Mr. Simpson holds a Bachelor of Science in Mechanical
Engineering from Purdue University and a Masters of Business Administration from
Harvard Business School.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED ABOVE.
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
General
The Board of Directors approved and recommends that the stockholders
approve an amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of common stock from
50,000,000 to 60,000,000 shares. The number of authorized shares of the
Company's preferred stock will not be affected by the proposed increase. The
amendment will not result in any changes to the issued and outstanding shares of
common stock of the Company and will only affect the number of shares that may
be issued by the Company in the future.
Reasons for the Proposal
The primary purpose of this amendment to our Certificate of Incorporation
is to make available for future issuance by us additional shares of common stock
and to have a sufficient number of authorized and unissued shares of common
stock to maintain flexibility in our corporate strategy and planning. Such
corporate purposes might include acquiring other businesses in exchange for
shares of the Company's common stock; facilitating broader ownership of the
Company's stock by effecting stock splits or issuing a stock dividend;
flexibility for possible future financings; and attracting and retaining
valuable employees and directors through the issuance of additional stock
options or awards. The Board of Directors believes that these additional shares
will provide the Company with needed flexibility to issue shares in the future
without potential expense and delay incident to obtaining stockholder approval
for a particular issuance in the future. The Company currently has no plans,
understandings or agreement for the issuance or use of additional shares of
common stock to be authorized under Proposal 2.
As of September 9, 2005, there were 45,919,125 shares of common stock
outstanding, 2,280,499 shares reserved for previously granted options, and
600,749 shares reserved for previously issued warrants. Additionally, a total of
4
700,578 shares have been set aside for future issuance under the Company's
equity incentive plans. Therefore, the Company currently has 499,049 authorized,
unissued and unreserved shares of common stock available for future issuance. If
Proposal 2 is not adopted, the Company will have relatively few additional
shares of common stock available for employee retention, financings, acquisition
or other corporate purposes.
In the past, the Company has utilized authorized but unissued shares for
acquiring additional working capital and for incentives for employees, directors
and consultants. At the present time there are no specific plans, arrangements
or understandings in existence or in process for any public or private financing
or issuance of shares in an acquisition. The Company's current shares
outstanding and shares reserved for issuance as of September 9, 2005 constitute
in the aggregate 99% of its current authorized shares. Therefore, the Board of
Directors has determined that it is desirable for the Company to increase the
number of shares of authorized common stock in order to meet needs that may
arise from time to time in the future.
Amendment
If this proposal 2 is adopted by the stockholders, Article 4 of the Fourth
Amended and Restated Certificate of Incorporation will be amended to read as
follows:
"The Corporation is authorized to issue two classes of stock,
designated Common Stock, $0.001 par value ("Common Stock") and
Preferred Stock, $0.001 par value ("Preferred Stock"). The total number
of shares which the Corporation is authorized to issue is Sixty Two
Million (62,000,000). The total number of shares of Common Stock is
Sixty Million (60,000,000) and the total number of shares of Preferred
Stock is Two Million (2,000,000).
Shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors shall determine the
designation of each series and the authorized number of shares of each
series. The Board of Directors is authorized to determine and alter the
rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of shares of Preferred Stock and to
increase or decrease (but not below the number of shares of such series
then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series. If the number of shares of any
series of Preferred Stock shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of
shares of such series. "
A copy of the Fourth Amended and Restated Certificate of Incorporation
is attached as Exhibit A.
Delaware Franchise Tax
If Proposal Two is adopted, the Company's authorized capital will increase
and the Company will be subject to an increase in the Delaware Franchise Tax.
However, the Company believes the increase in the number of authorized shares
will not materially increase the Delaware Franchise Tax of the Company.
Potential Anti-Takeover Aspects
Shares of authorized and unissued common stock could be issued in one or
more transactions that could make it more difficult, and therefore less likely,
for a takeover of the Company. Although the Board of Directors does not have the
present intention to use the additional authorized shares as an anti-takeover
device, the issuance of additional common stock could have the effect of
diluting the stock ownership of persons seeking control of the Company and the
5
possibility of such dilution could have a deterrent effect on persons seeking to
acquire control. For example, shares of common stock can be privately placed
with purchasers who support a board of directors in opposing a tender offer or
other hostile takeover bid, or can be issued to dilute the stock ownership and
voting power of a third party seeking a merger or other extraordinary corporate
transaction. Accordingly, the power to issue additional shares of common stock
could enable the Board of Directors to make it more difficult to replace
incumbent directors and to accomplish business combinations opposed by the
incumbent Board of Directors.
Principal Effects on Outstanding Common Stock
The proposal to increase the authorized capital stock will affect the
rights of existing holders of common stock to the extent that future issuances
of common stock will reduce each existing stockholder's proportionate ownership
and may dilute earnings per share of the shares outstanding at the time of any
such issuance. If approved, the amendment to the certificate of incorporation
will be effective upon filing with the Secretary of State for Delaware.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK UNDER PROPOSAL 2 ON THE PROXY CARD.
Executive Officers of the Company
Set forth below is information about the executive officers and key employees of
the Company:
---------------------------------- ----------------------------------- --------
Name Position Age
---------------------------------- ----------------------------------- --------
Philip H. Coelho Chief Executive Officer 61
---------------------------------- ----------------------------------- --------
Kevin Simpson President and Chief Operating 47
Officer
---------------------------------- ----------------------------------- --------
Matthew T. Plavan Chief Financial Officer 41
---------------------------------- ----------------------------------- --------
Renee M. Ruecker [Former] Chief 41
Financial Officer
---------------------------------- ----------------------------------- --------
Christopher Gemma [Former] V.P. of Worldwide Sales 49
---------------------------------- ----------------------------------- --------
Dennis F. Marr, Ph.D. V.P. Research & Development 41
---------------------------------- ----------------------------------- --------
Key Employee Position Age
---------------------------------- ----------------------------------- --------
Kimberly Ellner Sr. Director of Operations 38
---------------------------------- ----------------------------------- --------
On May 31, 2005, Matthew T. Plavan was appointed Chief Financial Officer,
and Renee M. Ruecker resigned from that position and continues with the Company
as our Director of Securities and Exchange Commission ("SEC") Reporting. The
Board of Directors appoints the executive officers. Executive officers serve at
the pleasure of the Board. There are no family relationships between any of the
directors, executive officers or key employees.
6
Biographies
The biographies of Mr. Coelho and Mr. Simpson can be found under Proposal 1
- Election of Directors.
Renee M. Ruecker was appointed Chief Financial Officer in January 2003, and
became our Director of SEC Reporting on May 31, 2005. Ms. Ruecker joined the
Company in August 1997 as Director of Finance and subsequently assumed the
position of V.P. Finance/Accounting in August 1998. Prior to joining the
Company, Ms. Ruecker was a manager in the Audit and Business Advisory Department
at Price Waterhouse LLP. Ms. Ruecker received her Bachelor of Science Degree in
Business Administration from the California Polytechnic State University in San
Luis Obispo and is a certified public accountant.
Dr. Dennis F. Marr, Ph.D., PMP, joined the Company in August 2004 as Vice
President of Research and Development. Prior to joining the Company, Dr. Marr
was employed by Baxter Healthcare Corporation. During his employment he served
as Director, Device Development & Engineering from September 2001 to August
2004, Manager, Programs - R&D from January 2000 to September 2001 and Senior
Engineering Specialist from January 1998 to December of 1999. Dr. Marr earned
his Bachelor of Science Degree in Chemical Engineering from the University of
Illinois Champaign-Urbana, his Doctor of Philosophy Degree in Chemical
Engineering from the University of Wisconsin-Madison, and he is a certified
Project Management Professional with the Project Management Institute.
Christopher M. Gemma was appointed Vice President of Worldwide Sales in
September 2004. Prior to joining the Company, Mr. Gemma was a Director of
Corporate Accounts at Smith + Nephew, Inc. from February 1999 to September 2004.
From 1997 to 1999 he was the International Marketing Manager for Stryker
Endoscopy. Mr. Gemma's experience includes over 23 years of medical sales. Mr.
Gemma received his Bachelor of Arts Degree in Liberal Studies from St. Mary's
College in Moraga, California. In August 2005, Mr. Gemma separated from the
Company.
Matthew T. Plavan joined ThermoGenesis in May of 2005 as Chief Financial
Officer. Mr. Plavan brings 18 years of financial leadership, P&L responsibility
and general management experience to the Company. Before joining the Company,
Mr. Plavan served from 2002 to 2005 as Chief Financial Officer of StrionAir,
Inc., an air purification product development and marketing company. Prior to
that, Mr. Plavan was the Chief Financial Officer for a wireless device
management Company, Reason Inc., from 2000 to 2002. During the preceding seven
years, 1993 through 2000, Mr. Plavan served in a number of key financial and
operating leadership roles within McKesson and McKesson-acquired companies,
including most recently, Vice President of Finance for a $300 million ehealth
division. Prior to that, Mr. Plavan was an audit manager in the Audit and Risk
Advisory Services group of Ernst & Young LLP. Mr. Plavan became a Certified
Public Accountant in 1992. Mr. Plavan earned his bachelor's degree in business
economics from the University of California at Santa Barbara.
KEY EMPLOYEES
Kimberly Ellner joined the Company in September 2003 and currently holds
the position of Sr. Director of Operations. Prior to joining the Company, she
was employed by Smith + Nephew, formerly ORATEC Interventions, Inc. as Manager,
Business Process Improvement from 2001 to 2004, Manufacturing Finance Manager
from 2000 to 2001 and Materials Manager from 1997 to 1999. Ms. Ellner has over
15 years of manufacturing and operations experience. Ms. Ellner received her
Bachelor of Science Degree in Manufacturing Administration from Western Michigan
University.
7
Committees of the Board of Directors
Audit Committee
The Audit Committee of the Board of Directors makes recommendations
regarding the retention of the independent registered public accounting firm,
reviews the scope of the annual audit undertaken by our independent registered
public accounting firm and the progress and results of their work, reviews our
financial statements, and oversees the internal controls over financial
reporting and corporate programs to ensure compliance with applicable laws. The
Audit Committee reviews the services performed by the independent registered
public accounting firm and determines whether they are compatible with
maintaining the registered public accounting firm's independence. The Audit
Committee has a Charter, which is reviewed annually and as may be required due
to changes in industry accounting practices or the promulgation of new rules or
guidance documents. The Audit Committee consists of three independent directors
as determined by NASD listing standards: Mr. McEnany (Audit Committee Chairman),
Mr. Barry and Dr. Huckel. Mr. McEnany and Mr. Barry are qualified as Audit
Committee Financial Experts.
The Audit Committee Charter is attached as Exhibit B.
Compensation Committee
The Compensation Committee of the Board of Directors reviews and approves
executive compensation policies and practices, reviews salaries and bonuses for
our officers, administers the Company's stock option plans and other benefit
plans, and considers other matters as may, from time to time, be referred to
them by the Board of Directors. The members of the Compensation Committee are
Dr. Huckel (Compensation Committee Chairman) and Mr. McEnany.
Compensation Committee Interlocks and Insider Participation
Mr. McEnany and Dr. Huckel serve on the Compensation Committee. There are
no compensation committee interlocks or insider participation on our
compensation committee.
Nominations to the Board of Directors
Our directors take a critical role in guiding our strategic direction and
oversee the management of the Company. Board candidates are considered based
upon various criteria, such as their broad-based business and professional
skills and experiences, a global business and social perspective, concern for
the long-term interests of the shareholders and personal integrity and judgment.
In addition, directors must have time available to devote to Board activities
and to enhance their knowledge of the medical device industry. Accordingly, we
seek to attract and retain highly qualified directors who have sufficient time
to attend to their substantial duties and responsibilities to the Company.
The Board of Directors does not have a nominating committee. The Board
believes given the diverse skills and experience required to grow the Company
that the input of all members is important for considering the qualifications of
individuals to serve as directors. The Board recommends a slate of directors for
election at the annual meeting. In accordance with Nasdaq rules, the slate of
nominees is approved by a majority of the independent directors. Mr. McEnany,
Mr. Barry and Dr. Huckel are independent as defined in the NASD listing
standards.
8
In carrying out its responsibilities, the Board will consider candidates
suggested by shareholders. If a shareholder wishes to formally place a
candidate's name in nomination, however, he or she must do so in accordance with
the provisions of the Company's Bylaws. Suggestions for candidates to be
evaluated by the Board must be sent to Assistant Corporate Secretary, 2711
Citrus Road, Rancho Cordova, California 95742.
In fiscal 2005, the Board of Directors met five (5) times, the Audit
Committee met ten (10) times and the Compensation Committee met five (5) times.
Each director attended all of the meetings of its Board of Directors and of the
committees upon which he served. All Directors attended the 2004 annual meeting
of stockholders. The Board requires all Directors to attend the annual
stockholder meeting unless there is an emergency.
Stockholders may send communications to the Board by mail to the Chairman
of the Board, ThermoGenesis Corp., 2711 Citrus Road, Rancho Cordova, California
95742.
Audit Committee Report
The Audit Committee oversees the financial reporting process for the
Company on behalf of the Board of Directors. In fulfilling its oversight
responsibilities, the Audit Committee (i) reviews the financial statements, (ii)
reviews management's and the independent auditor's results of testing of the
internal controls over the financial reporting process, (iii) reviews and
concurs with managements appointment, termination or replacement of the Chief
Financial Officer, (iv) consults with and reviews the services provided by the
Company's independent auditors and makes recommendations to the Board of
Directors regarding the selection of the independent auditors, and (v) reviews
reports received from regulators and other legal and regulatory matters that may
have a material effect on the financial statements or related company compliance
policies. The Company's management has primary responsibility for preparing the
financial statements and establishing the Company's financial reporting process
and internal control over financial reporting. Company management is also
responsible for its assessment of the effectiveness of internal control over
financial reporting. The Company's independent auditors, Ernst & Young LLP, is
responsible for expressing an opinion on the conformity of the Company's audited
financial statements with U.S. generally accepted accounting principals. The
independent auditors are also responsible for issuing a report on management's
assessment and the effectiveness of the Company's internal control over
financial reporting. The Audit Committee's responsibilities include oversight of
these processes.
In accordance with Statements on Auditing Standards (SAS) No. 61
(codification of Statements on Auditing Standards, AUss. 380), as amended by SAS
89 and SAS 90, and Rule 2-07, "Communications with Audit Committees," of
Regulation S-X, discussions were held with management and the independent
auditors regarding the acceptability and the quality of the accounting
principles used in the reports. These discussions included the clarity of the
disclosures made therein, the underlying estimates and assumptions used in the
financial reporting, and the reasonableness of the significant judgments and
management decisions made in developing the financial statements. In addition,
the Audit Committee has discussed with the independent auditors their
independence from the Company and its management and the independent auditors
provided the written disclosures and the letter required by Independence
Standards Board Standard No. 1 and considered the compatibility of non-audit
services with the auditors' independence.
The Audit Committee has also met and discussed with the Company's
management, and its independent auditors, issues related to the overall scope
and objectives of the audits conducted, the internal controls used by the
Company and the selection of the Company's independent auditors. In addition,
the Audit Committee discussed with the independent auditors, with and without
9
management present, the specific results of audit investigations and
examinations and the auditor's judgments regarding any and all of the above
issues.
Pursuant to the reviews and discussions described above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year
ended June 30, 2005, for filing with the Securities and Exchange Commission.
Respectfully submitted,
THERMOGENESIS CORP. AUDIT COMMITTEE
Patrick McEnany, Chairman
George Barry
Dr. Hubert Huckel
Directors of the Company
Compensation Committee Report
The Compensation Committee oversees our compensation plans and policies,
reviews and approves all decisions concerning principal executive officers'
compensation, which are further approved by the Board, and administers our stock
option and equity plans, including reviewing and approving stock option grants
and equity awards under the plans. The Compensation Committee's charter reflects
these various responsibilities, and the Compensation Committee and the Board
periodically review and revise the charter in consultation with outside counsel.
The Compensation Committee's membership is determined by the Board and is
composed entirely of independent directors. The Compensation Committee meets at
scheduled times during the year. The Committee Chairman reports on Compensation
Committee actions and recommendations at Board meetings, where such actions are
further ratified and approved. In addition, the Committee has the authority to
engage the services of outside advisers, experts and others to assist the
Committee.
Compensation Philosophy
The Compensation Committee emphasizes the important link between the
Company's performance, which ultimately increases stockholder value, and the
compensation of its executives. Therefore, the primary goal of the Company's
executive compensation policy is to closely align the interests of the
stockholders with the interests of the executive officers. In order to achieve
this goal, the Company attempts to (i) offer compensation opportunities that
attract and retain executives whose abilities and skills are critical to the
long-term success of the Company and reward them for their efforts in ensuring
the success of the Company, (ii) align the Company's compensation programs with
the Company's long-term business strategies and objectives, and (iii) provide
variable compensation opportunities that are directly linked to the Company's
performance and stockholder value, including an equity stake in the Company. For
several years, the Company has used three integrated components - Base Salary,
Incentive Compensation and Stock Options - to achieve these goals.
Base Salary
The Base Salary component of total compensation is intended to compensate
executives competitively within the industry and the marketplace. Base Salaries
of the executive officers are established by the Compensation Committee based
upon compensation data of comparable companies in the comparable markets, the
executive's job responsibilities, level of experience, individual performance
10
and contribution to the business. In the past, in making Base Salary decisions,
the Committee exercised its discretion and judgment based upon regional and
personal knowledge of industry practice and did not apply any specific formula
to determine the weight of any one factor. In 2004, the Compensation Committee
retained Pearl Meyer & Partners, and adjusted salaries as of July 1, 2004, based
on the report and recommendations prepared by Pearl Meyer & Partners, which were
ratified and approved by the Board.
Incentive Bonuses
The Incentive Bonus component of executive compensation is designed to
reflect the Compensation Committee's belief that a portion of the compensation
of each executive officer should be contingent upon the performance of the
Company, as well as the individual contribution of each executive officer. The
Incentive Bonus is intended to motivate and reward executive officers by
allowing the executive officers to directly benefit from the success of the
Company. The Compensation Committee has directed that a formal written incentive
plan with specified key milestones critical to the Company's success be
developed and implemented, and that the plan be weighted heavily towards
achieving profitability before any bonus compensation would be earned. All
executive employment contracts provide generally for a discretionary bonus of up
to 35% of the executive's base salary, which is to be determined by the
Compensation Committee based on individual performance criteria and Company
achievement of profitability during the year. After further discussion of the
increases in base salary in line with the report and recommendations, and a
proposal made by management, any future bonus payouts were limited to a maximum
of 25% of salary for the Company's principal executive officers, and may be paid
in cash, restricted stock grants, or options, provided that no cash component
will be paid to the Company's principal executive officers unless profitability
is achieved over and above any proposed cash bonus payments.
Long-term Incentives
The Compensation Committee provides the Company's executive officers with
Long-term Incentive compensation in the form of stock option grants under the
Company's Amended 1994 Stock Option Plan and the Amended 1998 Equity Incentive
Plan. The Compensation Committee believes that stock options provide the
Company's executive officers with the opportunity to purchase and maintain an
equity interest in the Company and to share in the appreciation of the value of
the Company's Common Stock. The Compensation Committee believes that stock
options directly motivate an executive to maximize long-term stockholder value.
It is the Company's practice to grant options from time to time to executive
officers at the fair market value of the Company's common stock on the date of
grant. The Committee considers each option subjectively, considering factors
such as the individual performance of the executive officer and the anticipated
contribution of the executive officer to the attainment of the Company's
long-term strategic performance goals. The number of stock options granted to
other executives in prior years and the total number of options granted under
the plans are also taken into consideration.
Independent Analysis of Executive Compensation
In early 2004, the Compensation Committee engaged an outside consultant to
provide an independent analysis of the Company's executive compensation program
and practices. The analysis was helpful because it provided the Compensation
Committee and the Board of Directors with a review of the Company's executive
compensation as compared with compensation packages offered by other peer group
companies identified by the consultant and included other small to mid-sized
publicly traded life sciences companies. The results of this analysis completed
by the independent consultant included the following observations about the
Company's 2003 executive compensation:
11
o Base salaries are below the competitive norm.
o Because of the Company's emphasis on incentive bonuses that are
dependent upon profitability, total cash compensation is below
market due to the lack of incentive payments during years of net
loss.
o Annual stock option grants have not been awarded to executives on a
consistent basis.
Both the Compensation Committee's review and the outside compensation
consultant's review of our executive compensation practices suggest that the
Company should target base salaries closer to the median of peer group companies
and should consider a re-design our annual incentive plan, as well as make new
option grants to executives in 2004.
As a result of the report and recommendations, the Compensation Committee
approved, and the Board further ratified and approved, effective July 1, 2004,
an increase in the Chief Financial Officer's salary to $175,000 per year, and an
increase in the President and Chief Operating Officer's salary to $230,000 per
year, and an increase in the Chief Executive Officer's salary to $300,000 per
year. The bonus and incentive program for the principal executive officers will
be weighted 75% to attainment of corporate objectives, including profitability.
There have been no changes to executive compensation since the July 2004
adjustment.
The outside compensation consultant also reviewed and reported on the
Company's independent director compensation, finding that the Company's total
remuneration consisting of meeting fees and annual stock option grants are below
the median Board remuneration of peer group companies. After further discussion
with the consultants, the Compensation Committee referred the recommendations on
independent director compensation to the Board for review and approval.
As a result, the annual grant of options to independent directors was
increased to 11,000 options per year, and will be granted on July 1st of each
year based on the closing bid price for the Company's common stock on that date
each year, or the next trading day following that date if the market is not open
on that date. The Company retained its existing board retainer of $12,000 per
year, payable quarterly in advance, and added that Committee Chairs shall be
paid an annual retainer of $2,500, payable on July 1 of each year. The meeting
fees remain payable at the rate of $1,000 per meeting for the Board and $500 per
committee meeting when such meetings occur on the same day as Board meetings,
and increased to $1,000 per committee meeting on dates when such committee
meetings are not combined with a board meeting.
In conclusion, the Compensation Committee believes that the Company's
current compensation levels are consistent with Company goals.
Respectfully Submitted,
THERMOGENESIS CORP.
COMPENSATION COMMITTEE
Hubert Huckel, M.D., Chairman
Patrick McEnany
Independent Directors of the Company
12
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS
This table lists the aggregate cash compensation paid in the past three
years for all services of the named Executive Officers of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Restricted Securities
and Annual Stock Underlying LTIP All Other
Principal Compen- Awards(s) Options/ Payouts Compensation
Position Year Salary ($) Bonus ($) sation ($) ($) SARs (#) ($) ($)
-------- ---- ---------- --------- ---------- --- -------- --- ---
Philip H.
Coelho,
Chairman and 2003 $224,000 $0 $12,000(1) $0 -0- $0 $0
Chief Executive
Officer 2004 $225,000 $0 $12,000(2) $0 -0- $0 $0
2005 $298,000 $0 $14,000(3) $0 -0- $0 $0
--------------------------------------------------------------------------------------------------------------------------
Kevin Simpson, 2003 $109,000 $35,000 $17,000(4) $0 300,000(5) $0 $0
President and
Chief Operating 2004 $217,000 $0 $ 3,000(6) $0 -0- $0 $0
Officer
2005 $230,000 $0 $ 8,000(7) $0 227,100(8) $0 $0
--------------------------------------------------------------------------------------------------------------------------
Renee M.
Ruecker, 2003 $133,000 $0 $ 1,000(9) $0 100,000(10) $0 $0
Former
Chief Financial 2004 $148,000 $0 $ 2,000(11) $0 -0- $0 $0
Officer
2005 $172,000 $0 $ 1,000(12) $0 40,000(13) $0 $0
--------------------------------------------------------------------------------------------------------------------------
Dennis Marr,
V.P. Research and 2005 $143,000 $30,000 $10,000(14) $0 60,000(15) $0 $0
Development
--------------------------------------------------------------------------------------------------------------------------
Chris Gemma
Former V.P. of 2005 $108,000 $0 $ 2,000(16) $0 60,000(17) $0 $0
Worldwide Sales
--------------------------------------------------------------------------------------------------------------------------
(1) Represents payment of $9,000 in accrued vacation and $3,000 for a term life insurance policy for the
benefit of Ms. Coelho.
(2) Represents payment of $9,000 in accrued vacation and $3,000 for a term life insurance policy for the
benefit of Ms. Coelho.
(3) Represents payment of $11,000 in accrued vacation and $3,000 for a term life insurance policy for the
benefit of Ms. Coelho.
(4) Represents payment for reimbursable expenses related to relocation
activities per Mr. Simpson's employment agreement.
13
(5) Represents 300,000 stock options granted on January 6, 2003 at $1.60.
(6) Represents accrued vacation pay.
(7) Represents accrued vacation pay.
(8) Represents 227,100 stock options granted on August 9, 2004 at $3.58.
(9) Represents payment of accrued vacation.
(10) Represents 100,000 stock options granted on May 1, 2003 at $2.06.
(11) Represents payment of accrued vacation.
(12) Represents payment of accrued vacation.
(13) Represents 20,000 stock options granted on December 9, 2004 at $5.88 and 20,000 stock options granted on
May 12, 2005 at $3.26.
(14) Represents payment of $4,000 in accrued vacation and $6,000 for reimbursable expenses related to
relocation activities.
(15) Represents 60,000 stock options granted on August 25, 2004 at $3.98.
(16) Represents payment of accrued vacation. (17) Represents 60,000
stock options granted on September 30, 2004 at $4.80.
Employment Agreements
In June 2002, the Company and Mr. Philip Coelho entered into an employment
agreement whereby Mr. Coelho agreed to serve as Chief Executive Officer of the
Company and receive compensation equal to $225,000 per year, subject to annual
increases as may be determined by the Board of Directors. Mr. Coelho is eligible
to receive bonuses based on his performance and the attainment of objectives
established by the Company. Bonuses shall not exceed 35% percent of his base
salary in effect for any given year, and shall be subject to Compensation
Committee oversight for meeting stated objectives. The employment agreement may
be terminated by Mr. Coelho or by the Company with or without cause. In the
event Mr. Coelho is terminated by the Company without cause, Mr. Coelho will be
entitled to receive severance pay equal to the greater of six months of his
annual salary or the remaining term of the agreement. In addition, the
employment agreement provides that in the event Mr. Coelho is terminated other
than "for cause" upon a change of control, Mr. Coelho shall be paid an amount
equal to three times his annual salary. The phrase "change of control" is
defined to include (i) the issuance of 33% or more of the outstanding securities
to any individual, firm, partnership, or entity, (ii) the issuance of 33% or
more of the outstanding securities in connection with a merger, or (iii) the
acquisition of the Company in a merger or other business combination. The
employment agreement expires by its terms in June 2007.
In January 2003, the Company and Mr. Kevin Simpson entered into an
employment agreement whereby Mr. Simpson agreed to serve as President and Chief
Operating Officer of the Company and receive compensation equal to $217,200 per
year, subject to annual increases as may be determined by the Board of
Directors. Mr. Simpson is eligible to receive bonuses based on his performance
and the attainment of objectives established by the Company. Bonuses shall not
exceed 35% percent of his base salary in effect for any given year, and shall be
subject to Compensation Committee oversight for meeting stated objectives. The
employment agreement may be terminated by Mr. Simpson or by the Company with or
without cause. In the event Mr. Simpson is terminated by the Company without
cause, Mr. Simpson will be entitled to receive severance pay equal to the
greater of six months of his annual salary, or if terminated within the first
full year of the agreement, an amount equal to two years of his base salary, or
if terminated in the second or third year of the agreement, an amount equal to
one year of his base salary. In addition, the employment agreement provides that
in the event Mr. Simpson is terminated other than "for cause" upon a change of
control, Mr. Simpson shall be paid an amount equal to three times his annual
salary. The phrase "change of control" is defined to include (i) the issuance of
33% or more of the outstanding securities to any individual, firm, partnership,
or entity, (ii) the issuance of 33% or more of the outstanding securities in
connection with a merger, or (iii) the acquisition of the Company in a merger or
other business combination. The employment agreement expires by its terms in
January 2008.
14
In January 2003, the Company entered into an employment agreement with Ms.
Renee Ruecker whereby Ms. Ruecker agreed to serve as Chief Financial Officer and
receive compensation equal to $136,500 subject to annual increases as may be
determined by the Board of Directors. Ms. Ruecker is eligible to receive bonuses
based on her performance and the attainment of objectives established by the
Company. Ms. Ruecker's bonuses shall not exceed 35% of her base salary in effect
for any given year and shall be subject to Compensation Committee oversight for
meeting stated objectives. The employment agreement may be terminated prior to
the expiration of the agreement, upon the mutual agreement of the Company and
Ms. Ruecker. In addition, the employment agreement provides that in the event
Ms. Ruecker is terminated other than "for cause" upon a change of control, Ms.
Ruecker will be paid an amount equal to three times her annual salary. The
phrase "change of control" is defined to include (i) the issuance of 33% or more
of the outstanding securities to any individual, firm, partnership, or entity,
(ii) the issuance of 33% or more of the outstanding securities in connection
with a merger, or (iii) the acquisition of the Company in a merger or other
business combination. The employment agreement was mutually terminated in May
2005.
In August 2004, the Company entered into an employment agreement with Dr.
Dennis Marr whereby Dr. Marr agreed to serve as Vice President of Research and
Development and receive compensation equal to $175,000 subject to annual
increases as may be determined by the Board of Directors. Dr. Marr was paid an
initial signing bonus of $30,000. Dr. Marr is eligible to receive bonuses based
on his performance and the attainment of objectives established by the Company.
Dr. Marr's bonuses shall not exceed 25% of his base salary in effect for any
given year and shall be subject to Compensation Committee oversight for meeting
stated objectives. The employment agreement may be terminated prior to the
expiration of the agreement, upon the mutual agreement of the Company and Dr.
Marr. In addition, the employment agreement provides that in the event Dr. Marr
is terminated other than "for cause" upon a change of control, Dr. Marr will be
paid an amount equal to three times his annual salary. The phrase "change of
control" is defined to include (i) the issuance of 33% or more of the
outstanding securities to any individual, firm, partnership, or entity, (ii) the
issuance of 33% or more of the outstanding securities in connection with a
merger, (iii) the acquisition of the Company in a merger or other business
combination, or (iv) substantially all of the assets of the Company are sold.
The employment agreement expires by its terms in August 2007.
In September 2004, the Company entered into an employment agreement with
Mr. Christopher Gemma whereby Mr. Gemma agreed to serve as Vice President of
Worldwide Sales and receive compensation equal to $150,000 subject to annual
increases as may be determined by the Board of Directors. Mr. Gemma is eligible
to receive bonuses based on his performance and the attainment of objectives
established by the Company. Mr. Gemma's bonuses shall not exceed 50% of his base
salary in effect for any given year and shall be subject to Compensation
Committee oversight for meeting stated objectives. In addition, Mr. Gemma will
be paid a sales commission of 5% of sales beyond the Company's budgeted annual
sales revenue. The employment agreement may be terminated prior to the
expiration of the agreement, upon the mutual agreement of the Company and Mr.
Gemma. If Mr. Gemma is terminated early without cause, he will be paid his
salary for 6 months. In addition, the employment agreement provides that in the
event Mr. Gemma is terminated other than "for cause" upon a change of control,
Mr. Gemma will be paid an amount equal to three times his annual salary. The
phrase "change of control" is defined to include (i) the issuance of 33% or more
of the outstanding securities to any individual, firm, partnership, or entity,
(ii) the issuance of 33% or more of the outstanding securities in connection
with a merger, (iii) the acquisition of the Company in a merger or other
business combination, or (iv) substantially all of the assets of the Company are
sold. The employment agreement was mutually terminated in August 2005.
15
In May 2005, the Company entered into an employment agreement with Mr.
Matthew Plavan whereby Mr. Plavan agreed to serve as Chief Financial Officer and
receive compensation equal to $175,000 subject to annual increases as may be
determined by the Board of Directors. Mr. Plavan was paid moving expenses not in
excess of $40,000. Mr. Plavan was granted a seven year option to purchase 90,000
shares of common stock vesting over five years. Mr. Plavan is eligible to
receive bonuses based on his performance and the attainment of objectives
established by the Company. Mr. Plavan's bonuses shall not exceed 35% of his
base salary in effect for any given year and shall by subject to Compensation
Committee oversight for meeting stated objectives. The employment agreement may
be terminated prior to the expiration of the agreement, upon the mutual
agreement of the Company and Mr. Plavan. In addition, the employment agreement
provides that in the event Mr. Plavan is terminated without cause, Mr. Plavan
will be paid an amount equal to 6 months salary. In addition, the employment
agreement provides that in the event Mr. Plavan is terminated other than "for
cause" upon a change of control, Mr. Plavan shall be paid an amount equal to
three times his annual salary. The phrase "change of control" is defined to
include (i) the issuance of 33% or more of the outstanding securities to any
individual, firm, partnership, or entity, (ii) the issuance of 33% or more of
the outstanding securities in connection with a merger, or (iii) the acquisition
of the Company in a merger or other business combination. The employment
agreement expires by its terms in May 2008.
Amended 1998 Equity Incentive Plan
On February 2, 1998, the stockholders of the Company approved the 1998
Equity Incentive Plan (the "1998 Plan"). The 1998 Plan was amended at the Annual
Meeting in January 2003. A total of 3,798,000 shares were approved by the
stockholders for issuance under the 1998 Plan.
The 1998 Plan is administered by the Compensation Committee. The 1998 Plan
permits the grant of stock options to employees, officers and certain directors.
The purpose of the 1998 Plan is to attract the best available personnel to the
Company and to give employees, officers and certain directors of the Company a
greater personal stake in the success of the Company. As of June 30, 2005,
3,132,974 options had been granted under the 1998 Plan and 1,443,462 shares of
common stock have been issued pursuant to the 1998 Plan. Exercise prices for
options under the 1998 Plan range from $1.125 to $5.88.
The Amended 1994 Stock Option Plan
The Company's Amended 1994 Stock Option Plan (the "1994 Plan") was
originally approved by the Company's stockholders in January 1995 and amended at
the Annual Meetings on May 29, 1996 and May 29, 1997. A total of 1,450,000
shares has been approved by the stockholders for issuance under the 1994 Plan.
The 1994 Plan, but not the options granted, expired in October 2004.
The 1994 Plan permits the grant of stock options to employees, officers and
certain directors. The purpose of the 1994 Plan was to attract the best
available personnel to the Company and to give employees, officers and certain
directors of the Company a greater personal stake in the success of the Company.
As of June 30, 2005, 1,331,072 options had been granted under the 1994 Plan
and 942,845 shares of common stock have been issued pursuant to the 1994 Plan.
Exercise prices for options under the 1994 Plan range from $1.60 to $3.58.
16
2002 Independent Directors' Equity Incentive Plan
The 2002 Independent Directors Equity Incentive Plan ("2002 Plan") permits
the grant of stock or options to independent directors. A total of 250,000
shares were approved by the stockholders for issuance under the 2002 Plan. At
the December 13, 2004 annual meeting, stockholders approved an additional
100,000 shares for the 2002 Plan.
As of June 30, 2005, 177,000 options had been granted under the 2002 Plan
and 96,000 shares of common stock have been issued pursuant to the 2002 Plan.
Exercise prices for options under the 2002 Plan range from $1.81 to $4.70.
Equity Compensation Plan Information
The following table provides information for all of the Company's equity
compensation plans and individual compensation arrangements in effect as of June
30, 2005.
-------------------------------------- ------------------------ --------------------- --------------------------------
Plan Category Number of securities Weighted-average Number of securities remaining
to be issued upon exercise price of available for future issuance
exercise of outstanding under equity compensation
outstanding options, options, warrants plans (excluding securities
warrants and rights and rights reflected in column (a))
(a) (b) (c)
-------------------------------------- ------------------------ --------------------- --------------------------------
Equity compensation plans approved
by securities holders 2,344,327 $2.56 652,438
-------------------------------------- ------------------------ --------------------- --------------------------------
Equity compensation plans not - - -
approved by security holders
-------------------------------------- ------------------------ --------------------- --------------------------------
Total 2,344,327 - 652,438
-------------------------------------- ------------------------ --------------------- --------------------------------
Option/SAR Grants in Last Fiscal Year
The following table provides information relating to stock options granted
during the year ended June 30, 2005.
---------------------------- --------------- ---------------- ---------------- ----------------------- -----------------------------
Name Number of Percent of Exercise Base Expiration Date Potential Realized Value at
Securities Total Options Price Assumed Annual Rates of Stock
Underlying Granted to ($/Sh) Price Appreciation for Option
Options Employees in Term
Granted Fiscal Year
5%(1) 10%(1)
---------------------------- --------------- ---------------- ---------------- ------------------------- --------------- ----------
Kevin Simpson 227,100 31% $3.58 August 9, 2011 $330,980 $771,324
Renee Ruecker 20,000 3% $5.88 December 9, 2009 $ 47,875 $111,569
20,000 3% $3.26 May 12, 2008 $ 26,543 $ 61,856
Christopher Gemma 60,000 8% $4.80 September 30, 2011 $117,245 $273,231
Dennis Marr 60,000 8% $3.98 August 25, 2011 $ 97,216 $226,554
Matthew Plavan 90,000 12% $4.01 May 31, 2012 $146,923 $342,392
---------------------------- --------------- ---------------- ---------------- ------------------------- --------------- ----------
17
(1) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of future common stock prices, or actual
performance.
Ten-Year Options/SAR Repricings
There were no repricing of options for the fiscal year ended June 30, 2005.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth executive officer options exercised and
option values for fiscal year ended June 30, 2005 for all executive officers at
the end of the year.
-------------------------- -------------------- ------------ ------------------------------------- ---------------------------------
Number of Securities Underlying Value of Unexercised In -the
Money Options at
Unexercised Options June 30, 2005 June 30, 2005(1)
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Name Shares Acquired on Value Exercisable Unexercisable Exercisable Unexercisable
Exercise Realized
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Phil Coelho - - 750,000 400,000 $1,822,000 $892,000
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Kevin Simpson 50,000 $234,000 250,000 227,100 $688,000 $174,000
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Renee Ruecker - - 106,667 33,333 $174,467 $76,333
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Christopher Gemma - - - 60,000 - -
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Dennis Marr - - - 60,000 - $22,200
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
Matthew Plavan - - - 90,000 - $30,600
-------------------------- -------------------- ------------ --------------- --------------------- --------------- -----------------
(1) Based on June 30, 2005 year-end closing bid price of $4.35. Compensation of
Directors
All directors who are not employees of the Company are paid a quarterly fee
of $3,000, a meeting fee of $1,000 per Board meeting and $500 per committee
meeting when such meetings occur on the same day as Board Meetings and $1,000
per committee meeting on dates when such committee meetings are not combined
with board meetings, and options to purchase 11,000 shares of the Company's
common stock. In addition, committee chairs are paid an annual retainer of
$2,500. Compliance with Section 16 of the Securities Exchange Act of 1934
Based solely upon a review of Forms 3, 4 and 5 delivered to the Company as
filed with the Securities and Exchange Commission, directors and officers of the
Company and persons who own more than 10% of the Company's common stock timely
filed all required reports pursuant to Section 16(a) of the Securities Exchange
Act of 1934, as amended.
18
STOCK PERFORMANCE GRAPH
Five-Year Common Stock Performance Graph
The following graph compares the performance of the Company's common stock
during the period June 30, 2000 to June 30, 2005, with Nasdaq Stock Market Index
and the Company's peer group of Nasdaq stocks:
[OBJECT OMITTED]
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The market price of the Company's common stock in recent years has
fluctuated significantly, and it is likely that the price of the stock will
fluctuate in the future. The Company does not endorse any predictions of future
stock performance. Furthermore, the stock performance chart is not considered by
the Company to be (i) soliciting material, (ii) deemed filed with the Securities
and Exchange Commission, or (iii) to be incorporated by reference in any filings
by the Company under the Securities Act of 1933, or the Securities Exchange Act
of 1934, each, as amended.
Voting Securities and Principal Holders
The following table sets forth certain information as of August 8, 2005,
with respect to the beneficial ownership of our common stock for (i) each
director, (ii) all of our directors and officers as a group, and (iii) each
person known to us to own beneficially five percent (5%) or more of the
outstanding shares of our Common Stock. As of August 8, 2005, there were
45,902,103 shares of Common Stock outstanding.
Unless otherwise indicated, the address for each listed stockholder is:
ThermoGenesis Corp., 2711 Citrus Road, Rancho Cordova, California 95742. To our
knowledge, except as indicated in the footnotes to this table or pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to the shares of common stock
indicated.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Percent of Class
Ownership(1)
Philip H. Coelho 817,503(2) 1.8%
George J. Barry 55,000(3) *%
Hubert E. Huckel, M.D. 33,000(4) *%
Patrick McEnany 77,158(5) *%
Kevin Simpson 325,700(6) *%
Officers & Directors as a group (7) 1,461,502 3.1%
---------------------------
* Less than 1%.
(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person has
the right to acquire beneficial ownership of the security within 60 days,
including, but not limited to, any right to acquire the security through
the exercise of any option or warrant or through the conversion of a
security. Any securities not outstanding that are subject to options or
warrants shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by that person, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
(2) Includes 67,503 shares, of which 6,000 shares are held in an IRA, 750,000
shares issuable upon the exercise of options.
20
(3) Includes 55,000 shares issuable upon the exercise of options.
(4) Includes 33,000 shares issuable upon the exercise of options.
(5) Includes 43,329 shares, 33,000 shares issuable upon the exercise of
options. Also includes 829 shares owned by McEnany Holding, Inc. Mr.
McEnany is the sole shareholder of McEnany Holding, Inc.
(6) Includes 325,700 shares issuable upon the exercise of options.
(7) Includes 34,474 shares and 106,667 shares issuable upon the exercise of
options owned by Renee Ruecker. Includes 12,000 shares issuable upon the
exercise of options owned by Dennis Marr.
Certain Relationships and Related Transactions
During the second quarter of fiscal 2004, the Company entered into an
agreement with Mediware Information Systems, Inc. ("Mediware") to explore
technical and market requirements and terms and conditions for the joint
development and marketing of the industry's first fully integrated system to
make personalized cell therapy safer and more accessible. The Company had no
expenses or revenues associated with this agreement during fiscal 2005. The
Company's Chief Executive Officer is on the Board of Directors of Mediware and
Mediware's Chief Executive Officer is on the Board of Directors of the Company.
Legal Proceedings
The Company and its property are not a party to any pending legal
proceedings. In the normal course of operations, the Company may have
disagreements or disputes with employees, vendors or customers. These disputes
are seen by the Company's management as a normal part of business, and there are
no pending actions currently or no threatened actions that management believes
would have a significant material impact on the Company's financial position,
results of operations or cash flows.
Relationship with Independent Registered Public Accounting Firm
The Company retained the firm of Ernst & Young LLP as the Independent
Registered Public Accounting Firm of the Company for the fiscal year ending June
30, 2005. The Company expects a representative of Ernst & Young LLP to be
present at the Annual Meeting of Stockholders, and the representative will have
an opportunity to make a statement if he or she desires to do so. Such
representative is expected to be available to respond to appropriate questions.
Audit Fees
Fees for audit services by Ernst and Young LLP totaled $363,000 and
$183,000 for the fiscal years ended June 30, 2005 and 2004, respectively,
including fees associated with the annual audits of our financial statements,
review of the financial statements included in our quarterly reports on Form
10-Q, consents, assistance with the review of documents filed with the SEC, and
accounting consultations..
Audit-Related Fees
Fees for audit-related services by Ernst & Young LLP totaled $30,000 and
$25,000 for the fiscal years ended June 30, 2005 and 2004, respectively.
Audit-related fees consist of professional services performed in conjunction
with the Company's efforts to comply with Sarbanes-Oxley Act of 2002.
21
Tax Fees
Fees for tax preparation by Ernst and Young LLP totaled $10,000 and $9,100
for the fiscal years ended June 30, 2005 and 2004, respectively.
All Other Fees
Ernst & Young LLP did not bill us for other services for the fiscal years
ended June 30, 2005 and 2004.
The Audit Committee pre-approves all audit and non-audit services to be
performed by the independent registered public accounting firm in accordance
with the Audit Committee Charter. The Audit Committee pre-approved 100% of the
audit, audit-related and tax services performed by the independent registered
public accounting firm in fiscal 2005. The percentage of hours expended on the
principal accountant's engagement to audit the Company's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees was
0%.
Code of Ethics
We have adopted a code of ethics that applies to all employees. A copy of
our code of ethics can be found on our website at www.thermogenesis.com. The
Company will report any amendment or wavier to the code of ethics on our website
within five (5) days.
Stockholder Proposals
Proposals by stockholders intended to be presented at the 2006 Annual
Meeting of Stockholders must be received by us not later than July 12, 2006, for
consideration for possible inclusion in the proxy statement relating to that
meeting. All proposals must meet the requirements of Rule 14a-8 of the Exchange
Act.
For any proposal that is not submitted for inclusion in next year's proxy
statement (as described in the preceding paragraph), but is instead intended to
be presented directly at next year's annual meeting, SEC rules permit management
to vote proxies in its discretion if the Company (a) receives notice of the
proposal before the close of business on September 24, 2006, and advises
stockholders in the next year's proxy statement about the nature of the matter
and how management intends to vote on such matter, or (b) does not receive
notice of the proposal prior to the close of business on September 24, 2006.
Notices of intention to present proposals at the 2006 Annual Meeting should
be addressed to the Assistant Corporate Secretary, ThermoGenesis Corp., 2711
Citrus Road, Rancho Cordova, California 95742. The Company reserves the right to
reject, rule out of order or take other appropriate action with respect to any
proposal that does not comply with these and other applicable requirements.
Additional Information
The Annual Report on Form 10-K for the fiscal year ended June 30, 2005,
including audited financial statements, has been mailed to stockholders
concurrently with this proxy statement, but such report is not incorporated in
this Proxy Statement and is not deemed to be a part of the proxy solicitation
material. The Company is required to file annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and other information with the
SEC. The public can obtain copies of these materials by visiting the SEC's
Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549, by
calling the SEC at 1-800-SEC-0330, or by accessing the SEC's website at
www.sec.gov.
22
Additional copies of the Company's Annual Report on Form 10-K filed with
the SEC for the fiscal year ended June 30, 2005, will be provided to
stockholders without charge upon request. Stockholders should direct any such
requests to ThermoGenesis Corp., 2711 Citrus Road, Rancho Cordova, California
95742, Attention: Matthew T. Plavan, Chief Financial Officer.
OTHER BUSINESS
We do not know of any business to be presented for action at the meeting
other than those items listed in the notice of the meeting and referred to
herein. If any other matters properly come before the meeting or any adjournment
thereof, it is intended that the proxies will be voted in respect thereof in
accordance with their best judgment pursuant to discretionary authority granted
in the proxy.
ALL STOCKHOLDERS ARE URGED TO EXECUTE THE ACCOMPANYING PROXY AND TO RETURN
IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS MAY REVOKE ANY PROXY IF
SO DESIRED AT ANY TIME BEFORE IT IS VOTED.
By Order of the Board of Directors
/s/ David C. Adams
------------------
David C. Adams,
Corporate Secretary
September 9, 2005
Rancho Cordova, California
23
PROXY PROXY
THERMOGENESIS CORP.
2711 Citrus Road
Rancho Cordova, CA 95742
Telephone (916) 858-5100
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Philip H. Coelho and Kevin Simpson as proxies,
each with full power to appoint substitutes, and hereby authorizes them or
either of them to represent and to vote as designated below, all the shares of
common stock of ThermoGenesis Corp. held of record by the undersigned as of
September 9, 2005, at the Annual Meeting of Stockholders to be held at
Sacramento Marriott Rancho Cordova, located at 11211 Point East Dr., Rancho
Cordova, Ca. 95742, at 9:00 a.m., (PDT), on October 28, 2005, and any
adjournments or postponements thereof, and hereby ratifies all that said
attorneys and proxies may do by virtue hereof.
PLEASE MARK VOTE IN BRACKET IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Directors to serve until the Annual Meeting of Stockholders for
the fiscal year 2005.
Nominees
Philip H. Coelho [ ] FOR [ ] WITHHOLD AUTHORITY
Patrick McEnany [ ] FOR [ ] WITHHOLD AUTHORITY
Hubert E. Huckel, M.D. [ ] FOR [ ] WITHHOLD AUTHORITY
George J. Barry [ ] FOR [ ] WITHHOLD AUTHORITY
Kevin Simpson [ ] FOR [ ] WITHHOLD AUTHORITY
2. Approve an amendment to the Certificate of Incorporation to increase
the number of authorized shares of common stock from 50,000,000 to
60,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL ONE.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO OTHER
BUSINESS WHICH PROPERLY MAY COME BEFORE THE MEETING, OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE READ, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
24
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
Dated: ____________________, 200__
-------------------------------
Signature
-------------------------------
Signature
Common Stock
Please sign exactly as name appears. When shares are held by joint tenants or
more than one person, all owners should sign. When signing as attorney, as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
25
Exhibit A
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF THERMOGENESIS CORP.
ThermoGenesis Corp., a corporation organized and existing under the
laws of the State of Delaware, (the "Corporation") hereby certifies as follows:
1. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on July 3, 1986,
under the corporate name Refrigeration Systems International.
2. A Certificate of Merger was filed with the Secretary of State of the
State of Delaware on September 26, 1986, whereupon the Corporation's name
changed to Insta Cool Inc. of North America.
3. A Restated Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on March 24, 1994.
4. An Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
January 12, 1995, changing the Corporation's name to THERMOGENESIS CORP.
5. An Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
June 5, 1996.
6. An Amended and Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
August 2, 1999.
7. This Fifth Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors and stockholders of the Corporation in
accordance with Sections 242 and 245 of the Delaware General Corporation Law and
restates and integrates and further amends the provisions of the previous filed
Amended and Restated Certificate of Incorporation of this Corporation.
8. The current Amended and Restated Certificate of Incorporation is
hereby amended and restated in its entirety to read as follows:
FIRST: The name of the corporation is: THERMOGENESIS CORP.
SECOND: The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 2711
Centerville Road, Suite 400, Wilmington, County of Newcastle, Delaware 19808;
and the name of the registered agent of the Corporation in the State of Delaware
at such address is The Company Corporation.
THIRD: The nature of the business or purposes to be conducted or
promoted of this Corporation shall be to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
26
FOURTH: The Corporation is authorized to issue two classes of stock,
designated Common Stock, $0.001 par value ("Common Stock") and Preferred Stock,
$0.001 par value. The total number of shares of Common Stock that the
Corporation shall have authority to issue is Sixty Million (60,000,000) and the
total number of Shares of Preferred Stock that the Corporation shall have
authority to issue is Two Million (2,000,000).
The Corporation has no issued or outstanding shares of its previously
authorized Series A Convertible Preferred Stock. Accordingly, all rights,
preferences, privileges and restrictions granted to or imposed upon such series
of shares have been omitted from this Fifth Amended and Restated Certificate of
Incorporation.
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors shall determine the designation of each
series and the authorized number of shares of each series. The Board of
Directors is authorized to determine and alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of shares of Preferred Stock and to increase or decrease (but not below
the number of shares of such series then outstanding) the number of shares of
any such series subsequent to the issue of shares of that series. If the number
of shares of any series of Preferred Stock shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
FIFTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court or equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SIXTH: The business and affairs of the Corporation shall be managed by
or under the direction of its Board of Directors. The number of directors which
shall constitute the entire Board of Directors shall be fixed by, or in the
manner provided in, the bylaws of this Corporation. The election of directors of
the Corporation need not be by written ballot, unless the bylaws so provide.
SEVENTH: The Board of Directors is authorized to adopt, amend or repeal
the bylaws of the Corporation. The stockholders shall also have the power to
adopt, amend or repeal the bylaws of the Corporation. Notwithstanding, any
provision for the classification of directors for staggered terms pursuant to
Section 141(d) of the Delaware General Corporation Law shall be set forth in the
bylaws adopted by the stockholders unless provisions for such classification
shall be set forth in the Corporation's certificate of incorporation.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as the same exists or may hereafter be amended.
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Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
NINTH: To the fullest extent permitted by Section 145 of the General
Corporation Law of Delaware as the same exists or may hereafter be amended, the
Corporation shall indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for hereby shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to any
action such person may have performed in current official capacity or in another
capacity while holding such office, and shall continue as to any person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of heirs, executors and administrators of such person. No repeal or
modification of this Section by the stockholders of the Corporation shall
adversely affect any right of protection existing by virtue of this Section at
the time of such repeal or modification.
IN WITNESS WHEREOF, the Corporation has caused this Fifth Amended and
Restated Certificate of Incorporation to be signed by its duly authorized
officer this ___ day of December, 2005.
THERMOGENESIS CORP.
---------------------------------
Philip H. Coehlo, President & CEO
28
EXHIBIT B
THERMOGENESIS CORP.
Audit Committee Charter
(Amended and Restated January 27, 2003)
Preamble
THERMOGENESIS CORP. ("Company"), as part of its continuous improvement efforts,
and consistent with its requirements for continued listing on the Nasdaq
SmallCap Market, desires to strengthen its board oversight of accounting and
reporting functions through this Charter setting forth the duties and authority
of the Company's Audit Committee.
Composition
The Audit Committee shall be comprised of at least three directors who are
independent of management and the Company, and each of whom shall have no
employment or other relationship with the Company that might interfere with the
exercise of their independence from the Company or management, and shall
otherwise meet the requirements under Nasdaq and SEC rules. All Audit Committee
members will be financially literate, by experience or otherwise, and at least
one member will have accounting or related financial management expertise.
Statement of Policy
Annually, the Board of Directors shall appoint at least three outside directors
to serve as members of the Audit Committee. The Audit Committee shall assist the
Board of Directors in monitoring (a) the effectiveness of the Company's system
of internal controls, (b) the integrity of the financial statements, and (c) the
compliance by the Company with legal and regulatory requirements. In so doing,
the Audit Committee shall maintain free and open communication between the
members of the Board of Directors, the independent auditors, and the Company's
principal financial and accounting officer.
Duties and Responsibilities
In carrying out its responsibilities, the Audit Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the Board of Directors and stockholders that the
corporate accounting and reporting practices are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
o Obtain the full Board of Directors' approval of this Charter and review and
reassess this Charter as conditions dictate, but no less frequently than
annually in conjunction with the Company's annual audit.
o Review and recommend to the Board of Directors the selection of independent
auditors to audit the financial statements of the Company.
29
o Have a clear understanding with the independent auditors that the
independent auditors are ultimately accountable to the Board of Directors
and the Audit Committee, as the stockholders' representatives, who have the
ultimate authority in deciding to engage, evaluate, and if appropriate,
terminate those services.
o Review and concur with management's appointment, termination, or
replacement of the Vice President of Finance.
o Meet with the independent auditors and financial management of the Company
to review the scope of the proposed audit and timely quarterly reviews for
the current year and the procedures to be utilized, the adequacy of the
independent auditor's compensation, and at the conclusion thereof review
such audit or review, including any comments or recommendations of the
independent auditors, if any.
o Review with the independent auditors, the Company's principal financial
officer, and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the company, and elicit any
recommendations for the improvement of such internal controls.
o Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related company compliance policies.
o Inquire of management and the independent auditors about significant risks
or exposures and assess the steps management has taken to minimize such
risks to the Company.
o Direct the independent auditors to communicate directly to each member of
the audit committee with respect to any disagreement with the Company on
any financial treatment or accounting practice that is reflected in the
quarterly reports on Form 10-Q upon review. For purposes of such
communication, contacting the Chairman of the Audit Committee may represent
the entire Audit Committee for purposes of the initial communication, and
shall take required action to schedule any meetings to discuss the
communication, as may be required.
o Hold meetings with the independent auditors to determine that the
independent auditors do not take exception to the disclosure and content of
the financial statements, and discuss any other matters required to be
communicated to the committee by the independent auditors.
o Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the shareholders. Review with
financial management and the independent auditors the results of their
timely analysis of significant financial reporting issues and practices,
including changes in, or adoptions of, accounting principles and disclosure
practices, and discuss any other matters required to be communicated to the
committee by the auditors. Such review shall include the independent
auditors judgments about the quality, and not just acceptability, of
accounting principles and the clarity of the financial disclosure practices
used, and other significant decisions made in preparing the financial
statements.
30
o Provide sufficient opportunity for the Company's principal financial and
accounting officer and the independent auditors to meet with the members of
the audit committee without members of management present. Among the items
to be discussed in these meetings are the independent auditors' evaluation
of the company's financial, accounting, and auditing personnel, and the
cooperation that the independent auditors received during the course of
audits.
o Review accounting and financial human resources and succession planning, as
applicable, within the Company.
o Report the results of the annual audit to the Board of Directors. If
requested by the board, invite the independent auditors to attend the full
Board of Directors meeting to assist in reporting the results of the annual
audit or to answer other directors' questions (alternatively, the other
directors, particularly the other independent directors, may be invited to
attend the audit committee meeting during which the results of the annual
audit are reviewed).
o On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional services
as required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. In addition, review with the independent
auditors the nature and scope of any disclosed relationships or
professional services and take, or recommend that the Board of Directors
take, appropriate action to ensure the continuing independence of the
auditors.
o Submit the minutes of all meetings of the Audit Committee to, or discuss
significant matters addressed at Audit Committee meetings with, the Board
of Directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
o Review the Company's disclosure in the proxy statement for its annual
meeting of shareholders that describes that the Audit Committee has
satisfied its responsibilities under this Charter for the prior year. In
addition, include a copy of this Charter in the annual report to
shareholders or the proxy statement at least triennially or the year after
any significant amendment to the Charter.
31
The Audit Charter, dated July 27, 2001, as confirmed upon full approval by the
Board of Directors, is attached hereto for the Corporate records.
/s/ Patrick McEnany
------------------------------------------ Date: January 30, 2003
Patrick McEnany, Audit Committee Chairman