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Cytomedix, Inc.
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CYTOMEDIX, INC.
- --------------------------------------------------------------------------------
Notice of Special Meeting
and
Proxy Statement
- --------------------------------------------------------------------------------
Special Meeting to be held
on
October 19, 2004
10:00 a.m. est
Cytomedix, Inc.
416 Hungerford Dr., Suite 330
Rockville, Maryland 20850
Cytomedix, Inc.
416 Hungerford Dr., Suite 330
Rockville, Maryland 20850
Dear Shareholder:
It is my pleasure to invite you to attend the Special Meeting of
Shareholders of Cytomedix, Inc. to be held on October 19, 2004, at the offices
of Cytomedix, Inc., located at 416 Hungerford Dr., Suite 330, Rockville,
Maryland 20850 at 10:00 a.m. local time.
Please mark, date, sign, and return your proxy card in the enclosed
envelope at your earliest convenience, or you may also vote your shares by
telephone voting which is explained in further detail on your proxy card. This
will assure that your shares will be represented and voted at the meeting, even
if you do not attend.
I appreciate your continued confidence in the Company and look forward to
seeing you on October 19.
Sincerely,
/s/ Kshitij Mohan
Kshitij Mohan, Chief Executive Officer
PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS
Date: October 19, 2004
Time: 10:00 a.m., Eastern Standard Time
Place: Cytomedix, Inc.
416 Hungerford Dr., Suite 330
Rockville, Maryland 20850
Cytomedix, Inc. (the "Company"), on behalf of its Board of Directors, is
soliciting your proxy to vote your shares at the special meeting of shareholders
to be held October 19, 2004. The special meeting is being held in lieu of the
Company's 2004 annual meeting. The Company plans to hold its next annual meeting
during the second quarter of 2005 and at approximately the same time every year
thereafter.
On September 7, 2004, the Company opened an office at the following location:
Cytomedix, Inc.
416 Hungerford Dr., Suite 330
Rockville, Maryland 20850
The Company maintains an office in Little Rock at the following address:
Cytomedix, Inc.
11809 Hinson Rd., Suite 300
Little Rock, Arkansas 72212
We are soliciting proxies to give all shareholders an opportunity to vote
on matters that will be presented at the meeting. In the following pages of this
proxy statement, you will find information on these matters. We have provided
this information to assist you in voting your shares.
This proxy statement, the accompanying proxy card, the Company's 10-KSB
for fiscal year ended December 31, 2003, and the Company's 10-QSB for the
quarter ended June 30, 2004 are being mailed to Cytomedix shareholders beginning
September 20, 2004. Copies of exhibits filed with these reports will be
furnished to shareholders upon written request and payment of a nominal fee in
connection with the furnishing of such documents. If you share an address with
another security holder, only one proxy statement, 10-KSB, and 10-QSB will be
delivered to your household unless we have received contrary instructions from
you. Upon your request, we will promptly deliver a separate copy of the proxy
statement and reports to each individual shareholder at the address.
To request exhibits to the periodic reports or to obtain additional copies
of the proxy statement and periodic reports, please contact the Secretary of the
Company by mail, phone or fax at the following office location:
Cytomedix, Inc.
416 Hungerford Dr., Suite 330
Rockville, Maryland 20850
(301) 251-2815 (phone) (301)
251-2817 (fax)
MEETING INFORMATION
What are the purposes of this meeting?
The Board of Directors is seeking your affirmative vote for the following:
1. To elect five directors to serve until the next annual meeting of
shareholders;
2. To amend the Amended and Restated Certificate of Incorporation to
increase the authorized shares of common stock from 40,000,000 to
65,000,000;
3. To amend the Long-Term Incentive Plan to reserve and allocate
additional shares to be issued under the Plan from 2,336,523 to
4,000,000;
4. To transact any other business that may properly come before the
meeting, or any adjournments thereof.
Who can vote?
You can vote if, as of the close of business on September 15, 2004, you were a
shareholder of record of the Company's Common Stock, Series A Convertible
Preferred Stock, or Series B Convertible Preferred Stock.
Each share of the Company's stock represents one vote. On September 15, 2004,
there were issued and outstanding:
19,110,269 shares of Common Stock
1,596,673 shares of Series A Convertible Preferred Stock
1,513,907 shares of Series B Convertible Preferred Stock
How do I vote by proxy?
By mail - You may vote by completing and mailing the enclosed proxy card. If you
vote by proxy, your shares will be voted in the manner you indicate at the
special meeting. If you sign your proxy card but do not specify how you want
your shares to be voted, they will be voted as the Board of Directors
recommends.
By telephone - You may vote by telephone by using the toll-free number
1-866-626-4508 and following the instructions on your proxy card.
What vote is required to take action?
In order for any business to be conducted, the holders of a majority of the
shares entitled to vote at the meeting must be present, either in person or
represented by proxy. For purposes of determining the presence of a quorum,
abstentions and broker non-votes will be counted as present. A broker non-vote
occurs when a broker or nominee holding shares for a beneficial owner signs and
returns a proxy but does not vote on a particular proposal because the broker or
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. If a quorum is not present, the meeting
may be adjourned or postponed by those shareholders who are represented. The
meeting may be rescheduled at the time of the adjournment with no further notice
of the rescheduled time. An adjournment will have no effect on the business to
be conducted.
For the election of directors, the five candidates receiving the most votes will
be elected as members of the Board of Directors.
The Board has recommended proposals to amend the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock and to amend the Company's Long-Term Incentive Plan to increase the
number of allocated shares of common stock. The passage of these proposals
requires the affirmative vote of a majority of the shares present, either by
proxy or in person, and entitled to vote.
Who is making this solicitation?
The Company is soliciting your vote through the use of the mail and will bear
the cost of this solicitation. The Company will not employ third party
solicitors, but its directors, officers, employees, and consultants may solicit
proxies by mail, telephone, personal contact, or through online methods. We will
reimburse their expenses for doing this. We will also reimburse brokers,
fiduciaries, and custodians for their costs in forwarding proxy materials to
beneficial owners of the Company's stock. Other proxy solicitation expenses
include those for preparation, mailing, returning, and tabulating the proxies.
May I revoke my proxy after I return my proxy card?
Yes, you can change or revoke your proxy by mail by giving written notice of
revocation to our Secretary at 416 Hungerford Dr., Suite 330, Rockville,
Maryland 20850, as long as such notice is received prior to the meeting, or you
may change or revoke your proxy by voting in person at the meeting.
Who may attend the meeting?
Only shareholders, their proxy holders, and our invited guests may attend the
meeting. If you plan to attend, please bring identification, and, if you hold
shares in street name, you should bring your bank or broker statement showing
your beneficial ownership of Cytomedix stock in order to be admitted to the
meeting.
YOUR VOTE IS IMPORTANT. Even if you plan to attend the annual meeting, we
encourage you to complete and return the enclosed proxy card to ensure that your
shares are represented and voted. This benefits the Company by reducing the
expenses of additional proxy solicitation.
3
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors currently consists of five directors. Robert Burkett,
Chairman of the Board, and David P. Crews were elected in connection with the
Company's bankruptcy reorganization in 2002. David F. Drohan, Mark T.
McLaughlin, and Kshitij Mohan were appointed to the Board in 2004 to fill
vacancies.
The Nominating and Governance Committee reviewed all five director nominees and
considered each of these directors and their qualifications. Upon the
recommendation of the committee, the Board of Directors has nominated the five
director nominees. Up to two seats on the Board remain vacant and may be filled
by the Board prior to the next annual meeting if the Board so determines. Each
Director will serve until the next annual meeting and until his successor is
duly elected.
The Board of Directors recommends a vote FOR Robert Burkett, David P. Crews,
David F. Drohan, Mark T. McLouglin, and Kshitij Mohan as Directors to hold
office until the next annual meeting of shareholders and until their successors
are duly elected.
We do not know of any reason why any of these nominees would not accept the
nomination. However, if any of the nominees do not accept the nomination, the
persons named in the proxy will vote for the substitute nominee that the Board
recommends.
OVERVIEW OF CYTOMEDIX DIRECTORS AND OFFICERS
Date of Election
Name Age or Appointment Position(s) with the Company
- ---------------------------------------------------------------------------------------------------
Robert Burkett 58 September 28, 2001 Chairman of the Board
David P. Crews 41 September 28, 2001 Director
Kshitij Mohan 59 April 20, 2004 Chief Executive Officer
May 7, 2004 Director
Mark T. McLoughlin 48 June 7, 2004 Director
David F. Drohan 65 July 12,2004 Director
BIOGRAPHIES OF CURRENT DIRECTORS AND OFFICERS
MR. ROBERT BURKETT, age 58, has served as Chairman of the Board of Directors
since his election through the consent solicitation that became effective on
September 28, 2001. Through February 2003, Mr. Burkett served as the president
of the Non-Profit Sector Division of The Carmen Group, Inc. In this capacity, he
was responsible for the client development and strategy for a division of The
Carmen Group providing strategic development, government affairs, and public
affairs consulting for various non-profit entities. Mr. Burkett currently
provides consulting services for The Carmen Group, Inc. In addition to his
consulting role, Mr. Burkett's positions include Chairman of the Democratic
National Committee Trustees (1991-92), Library Commissioner for the City of Los
Angeles (1993-97), Los Angeles City Environment Commissioner (1989-92), Finance
Chair for Kerry for President, president of the David Geffen Foundation,
executive vice president of public affairs for the Geffen Company, president of
strategic development of the Gilman Investment Company, senior vice president of
Corporate Affairs for The Interscope Group, executive with the California State
Bar Association, and partner in Yucipa Companies. Mr. Burkett also serves on the
boards of many philanthropic organizations, including the Elizabeth Glaser
Pediatric AIDS Foundation, AMFAR, People For The American Way, National Public
Radio, the Crossroads in Santa Monica, the Rape Treatment Center, and the
Children's Health Fund. Mr. Burkett is a graduate of New York University and has
a law degree from Boston University School of Law.
MR. DAVID P. CREWS, age 41, has served as a Director since his election through
the consent solicitation that became effective on September 28, 2001. Mr. Crews
is executive vice president of Crews and Associates, Inc., a brokerage house
located in Little Rock, Arkansas, founded by his father. Mr. Crews has worked at
Crews & Associates for more than 19 years, specializing in the fixed income
markets. He is a former partner of All American Leasing, a municipal finance
firm, and also serves as vice president, secretary, and treasurer of CHASC,
Inc., an entity that acquired Smith Capital Management (an investment advisory
firm). Mr. Crews is also a Board Member of Pure Energy Group, Inc. (an oil and
gas company).
4
DR. KSHITIJ MOHAN, age 59, became our Chief Executive Officer on April 20, 2004.
He was appointed as a Director by resolution of the Board on May 7, 2004. Dr.
Mohan most recently served as chief executive officer of International Remote
Imaging Systems Inc., the predecessor company to Iris International. Previously,
Dr. Mohan was the chief regulatory and technology strategist at King & Spalding,
based in the law firm's Washington, D.C. office, where he provided a variety of
support to medical device, biologics and pharmaceutical companies, including
product development, FDA approval strategies and clinical trials. His prior
experience also includes positions as senior vice president and chief technology
officer of Boston Scientific Corporation, and corporate vice president for
research and technical service of Baxter International. He has served in various
capacities within the U.S. Food and Drug Administration, including heading up
science and technology programs and the Office of Device Evaluation which is
responsible for the review and approval of medical devices. Between 1979 and
1983, Dr. Mohan served in the White House Office of Management and Budget, with
responsibilities for national research and development policies, programs of the
National Science Foundation and NASA's Aeronautical and Space Research and
Technology programs. Before 1979, Dr. Mohan was a researcher at the FDA and the
National Bureau of Standards which was the predecessor agency of the National
Institute for Standards and Technology in the fields of Applied Optics and
Superconductivity. Dr. Mohan has previously served on the boards of AdvaMed,
Keravision, Inc., Regulatory Affairs Professional Society, the National Academy
of Sciences Roundtable on Drugs, Devices and Biologics, the Baxter Japan Board,
the Corporate Advisory Boards of the Schools of Engineering at Dartmouth College
and the University of California at Riverside, an Advisory Committee of the
Battelle Foundation, the Review Board of the President Truman Foundation, the
Regulatory Affairs Professional Society, and various Editorial Boards. Dr. Mohan
earned a Ph.D. degree in Physics from Georgetown University, a M.S. degree in
Physics from the University of Colorado, Boulder and a B.Sc, First Class Honors,
Patna University, Patna, India.
MR. MARK T. MCLOUGHLIN, age 48, was appointed a director by resolution of the
Board of Directors on June 7, 2004. Mr. McLoughlin currently serves as vice
president and general manager of the Scientific Products Division of Cardinal
Health, Inc. Prior to joining Cardinal, he was vice president of commercial
operations for Norwood Abbey Ltd., an Australian-based medical technology
company. His prior experience includes serving as president of North American
operations for Ion Beam Application, Inc., a Belgium-based global medical
technology company. His executive career experience also includes Mallinckrodt,
Inc., as well as positions with other healthcare companies. Mr. McLoughlin
earned a B.A. in Psychology from the University of Arizona in 1978.
MR. DAVID F. DROHAN, age 65, was appointed a director by resolution of the Board
of Directors on July 12, 2004. Drohan currently serves as senior vice president
of Baxter Healthcare Corporation and president of Baxter's Medication Delivery
business, a position he has held since May 2001. He joined Baxter in 1965 as a
territory manager in New York. In 1983, he became vice president of sales for
the Parenteral Division, and in 1987, was promoted to president of the Pharmacy
Division. After serving as president of four of the seven business units within
I.V. Systems, in May 1996, he assumed the position of president of I.V. Systems.
In December 1996, he was named corporate vice president of Baxter Healthcare
Corporation and in 1999, became president of I.V. Systems/Medical Products.
Prior to joining Baxter, Drohan worked for Proctor & Gamble. He earned his
bachelor's degree in industrial relations from Manhattan College, New York.
COMMITTEES OF THE BOARD
The Board of Directors recently formed a Nominating and Governance Committee
(the "Committee"). The Committee met once in September 2004 to discuss and
determine the slate of director nominees recommended to the Board. The members
of the Committee are Messrs. Burkett, Crews, Drohan, and McLaughlin. The Board
has determined that each of the members of the Governance Committee is
independent pursuant to section 121A of the American Stock Exchange Listing
Standards.
5
The Committee has the following responsibilities as set forth in its charter: To
review and recommend to the Board with regard to policies for the composition of
the Board; to review any director nominee candidates recommended by any director
or executive officer of the Company, or by any shareholder if submitted
properly; to identify, interview and evaluate director nominee candidates and
have sole authority to retain and terminate any search firm to be used to assist
the Committee in identifying director candidates and approve the search firm's
fees and other retention terms; to recommend to the Board the slate of director
nominees to be presented by the Board; the director nominees to fill vacancies
on the Board, and the members of each Board committee; to lead the annual review
of Board performance and effectiveness and make recommendations to the Board as
appropriate; and to review and recommend corporate governance policies and
principles for the Company, including those relating to the structure and
operations of the Board of Directors and its committees. The Committee's charter
is available to shareholders on the Company's website at www.cytomedix.com.
Pursuant to the charter, the Committee will consider a director nominee's
experience, employment, background, independence and other relevant factors, and
no one factor will be determinative. The Committee will seek to create a Board
that is as a whole strong in its collective knowledge and diversity of skills
and experiences. When the Committee reviews a potential director candidate, the
Committee will look specifically at the candidiate's qualifications in light of
the needs of the Board at that time. The Committee will also as needed perform
reference and background checks and conduct interviews of the potential
candidates. In addition to shareholder recommendations duly submitted in
accordance with the provisions of the Company's Certificate of Incorporation,
Bylaws and other applicable law, the Committee also relies on recommendations
from current directors, officers, employees, and consultants.
As stated in the Committee's charter, the Committee will review any director
nominee candidate recommended by shareholders. Shareholder recommendations for
candidates to the Board should be submitted to the Company at least 120 days
prior to the next meeting of shareholders by written notice to: Cytomedix
Governance Committeee, 416 Hungerford Dr., Suite 330, Rockville, Maryland 20850.
Shareholder recommendations should include the name of the candidate as well as
relevant biographical information. In evaluating candidates, the Committee will
use the criteria described above and will evaluate shareholder candidates in the
same manner as candidates from all other sources. In addition, the Company will
consider the relationship of the submitting shareholder to the Company and the
relationship of the nominee to the shareholder and to the Company.
The Company plans to establish and appoint directors to an audit committee in
the near future. The Board does not currently have a financial expert as defined
by Item 401(e) of Regulation S-B serving on the Board. Once a financial expert
is identified and appointed or elected to the Board, the Board will establish an
audit committee.
The Company also plans to establish a compensation committee. Upon forming a
compensation committee, the Company anticipates that the committee will
establish a director compensation plan which may be comprised of annual option
grants, fees for attending Board or committee meetings, annual retainers and/or
combinations of the foregoing.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 2003. All of the directors
serving at the time of each meeting were present and voting. Since December 31,
2003, the Board has met three times. All Directors serving at the time were
present and voting at both meetings, other than the August and September 2004
meetings which Mr. Drohan was unable to attend.
Shareholders may send communications to the Board or to particular Directors by
sending the communications by first class mail to Cytomedix Board of Directors
(or to any particular director by name), 416 Hungerford Dr., Suite 330,
Rockville, Maryland 20850. All correspondence received is reviewed by the
Secretary or his office and is forwarded to the appropriate Director(s) other
than items unrelated to the functions of the Board or business solicitations and
advertisements.
Although the Company encourages its Directors to attend annual meetings, the
Company has not held an annual meeting in recent years and does not have a
policy in place which requires the Directors' attendance at the annual meetings.
6
DIRECTOR COMPENSATION
Directors who are employed by the Company do not receive compensation for
serving as a Director. Currently, only Kshitij Mohan serves as a director and
employee of the Company. The non-employee Directors have received the following
compensation since their election or appointment to the Board:
Name Date of Election or Appointment Compensation to Date
- ---------------------------------------------------------------------------------------------------------
Robert Burkett July 11, 2002 Options representing
200,000 shares of common
Stock at $1.50 per share
David Crews July 11, 2002 Options representing
200,000 shares of common
Stock at $1.50 per share
Mark T. McLoughlin June 7, 2004 Options representing
30,000 shares of common
stock at $1.50 per share
David F. Drohan July 12, 2004 Options representing
30,000 shares of common
stock at $1.50 per share
The Board of Directors does not pay a retainer, fee, or other type of cash
consideration to its Directors, but it does reimburse its Directors for their
reasonable expenses incurred in connection with their service on the Board. The
Board has not adopted a policy with regard to the timing of its equity awards.
PROPOSAL 2 - TO AMEND THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The following proposal will be presented for action at the meeting by
direction of the Board of Directors:
RESOLVED, that the first sentence in paragraph four of the Amended and
Restated Certificate of Incorporation is hereby amended to read as follows:
The authorized capital stock of the Corporation shall consist of [55,000,000]
80,000,000 shares of capital stock, of which [40,000,000] 65,000,000 shares
shall be Common Stock, with a par value of $.0001 per share, and 15,000,000
shares shall be Preferred Stock, with a par value of $.0001 per share.
(New language is indicated by underlining, and language to be deleted is
bracketed)
The Board of Directors recommends a vote FOR this proposal.
The proposed amendment would change the number of authorized shares of common
stock, par value $.0001, from 40,000,000 shares to 65,000,000 shares. This
change is recommended by the Board in order to issue additional equity
compensation as needed and, although the Company does not anticipate issuing
additional common stock for capital during the next twelve months, to ensure
that shares of common stock are available should the Company need to secure
additional financing.
Unless otherwise required by law or the rules of an exchange, the Company will
not solicit further authorization by security holders for the issuance of these
shares. The additional shares of common stock will have the same rights and
preferences as the existing shares of common stock as more fully described in
the Company's Amended and Restated Certificate of Designation of the relative
rights and preferences of Series A Convertible Preferred, Series B Convertible
Preferred and Common Stock of Cytomedix, Inc. Holders of shares of the Company's
common stock have no preemptive rights.
7
PROPOSAL 3 - TO AMEND THE COMPANY'S
LONG-TERM INCENTIVE PLAN
The following proposal will be presented for action at the meeting by direction
of the Board of Directors:
RESOLVED, that Article 4, paragraph 4.1 of the Long-Term Incentive Plan is
amended to read as follows:
The Company shall make Awards available representing up to 4,000,000 shares of
common stock. [fifteen percent (15%) of the fully diluted stock of the Company
as of the Effective Date. The fully diluted stock includes all shares of common
stock, shares of preferred stock and shares of stock underlying all outstanding
warrants and options.]
(New language is indicated by underlining, and language to be deleted is
bracketed.)
The Board of Directors recommends a vote FOR this proposal.
In 2002, the United States Bankruptcy Court of the Northern District of
Illinois, Eastern Division confirmed the Company's First Amended Plan of
Reorganization and in doing so authorized the Company to take certain corporate
actions without the need for any further action by the court or any of the
officers, directors, or shareholders of the Company. Pursuant to this order, the
Company was authorized and did take all actions necessary to execute and adopt
the Long-Term Incentive Plan (the "Plan"). The Plan was approved by a majority
of the persons entitled to vote on the plan of reorganization and had like
effect to shareholder approval.
The Plan permits incentive awards of options, SARs, restricted stock awards,
phantom stock awards, performance unit awards, dividend equivalent awards or
other stock-based awards to employees, officers, consultants, independent
contractors, advisors, and directors of the Company. The Plan provides that the
Company is authorized to make awards of up to 15% of the fully diluted stock of
the Company on the effective date of the bankruptcy reorganization. On October
16, 2002, the Board reserved and allocated 2,336,523 shares of common stock to
the Long-Term Incentive Plan, upon finding that said amount was 15% of the fully
diluted stock of the Company as of the effective date of the plan of
reorganization. The Company has not reserved and allocated additional shares to
the Long-Term Incentive Plan since 2002.
The proposal would increase the total number of shares allocated to the Plan by
1,663,477 additional shares. The Company currently has available 825,253 shares
of common stock for issuance under the Plan. The Company has issued to Kshitij
Mohan options representing the right to purchase 1,000,000 shares of common
stock at $1.50 per share. These options were issued outside of the Plan because
insufficient shares remained authorized under the Plan. If the shareholders
approve this proposal to allocate additional shares of common stock to the Plan,
the Company plans to amend the grant to Dr. Mohan so that the original award of
options falls under the Plan.
The Company believes that the making of awards under the Plan promotes the
success and enhances the value of the Company by providing the employees,
officers, consultants, independent contractors, advisors and directors of the
Company with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of employees, officers, consultants,
independent contractors, advisors and directors upon whose judgment, interest,
and special effort the successful conduct of the Company's operation is largely
dependent. Accordingly, the Board believes it necessary to have sufficient
shares reserved and allocated to the Plan to permit the grant of incentive
awards from time to time to selected employees, officers, consultants,
independent contractors, advisors and directors.
Other than the Company's plan to amend the 1,000,000 option grant to Mohan to be
awarded under the Plan, the Company has not yet determined if, how, or when the
shares of common stock allocated to the Plan will be issued. The Board of
Directors will issue the shares allocated to the Plan as it deems necessary to
induce, compensate, and reward the Company's employees, directors, and
independent consultants and advisors. The Board will neither seek nor be
required to obtain shareholder approval to direct the allocation or grant of
benefits from the Plan.
8
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2003
Number of securities Weighted average exercise price Number of securities
to be issued options, of outstanding options, warrants, remaining available
warrants, and rights and rights for future issuance
------------------------------------------------------------------------------------------
Equity compensation 0 N/A 0
plans approved by
security holders
Equity compensation 1,840,698 $1.49 495,825
plans not approved
by security holders
(but approved in
connection with the
Plan of Reorganization -
Note 1)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL 1,840,698 $1.49 495,825
(Note 2) (Note 3)
Note 1 - The Long-Term Incentive Plan, the Company's only equity compensation
plan, was approved by a majority of the persons entitled to vote on the
Reorganization Plan and had like effect to shareholder approval.
Note 2 - As of August 31, 2004, the Company has outstanding options representing
the right to purchase an aggregate of 1,511,270 shares of common stock under the
Long-Term Incentive Plan. This number is less than the total amount outstanding
under the Plan as of December 31, 2003, because of option expirations and
forfeitures.
Note 3 - As of August 31, 2004, the Company has 825,253 shares of common stock
remaining available for issuance under the Lon-Term Incentive Plan.
The table below provides information regarding the grant of options from the
Long-Term Incentive Plan since its adoption in 2002. All issuances were made
pursuant to exemptions afforded by Section 4(2) of the Securities Act.
- ------------------------------------------------------------------------------------------------------------------------------------
RECIPIENT DATE NUMBER OF DATE VESTED/ EXPIRATION
SHARES OF EXERCISABLE
COMMON STOCK
UNDERLYING
OPTIONS/
EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Burkett August 7, 2002 100,000/$1.50 August 7, 2002 August 7, 2012
March 23, 2004 100,000/$1.50 March 23, 2004 March 23, 2014
- ------------------------------------------------------------------------------------------------------------------------------------
David Crews August 7, 2002 100,000/$1.50 August 7, 2002 August 7, 2012
March 23, 2004 100,000/$1.50 March 23, 2004 March 23, 2014
- ------------------------------------------------------------------------------------------------------------------------------------
Kent T. Smith August 7, 2002 521,928/$1.50 (1)
November 30, 2003 47,693/$1.25
- ------------------------------------------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------------------------------------------
RECIPIENT DATE NUMBER OF DATE VESTED/ EXPIRATION
SHARES OF EXERCISABLE
COMMON STOCK
UNDERLYING
OPTIONS/
EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
Carelyn P. Fylling August 7, 2002 250,000/$1.50 100,000 - August August 7, 2012
7, 2002. 100,000 -
August 7, 2003.
100,000 - August 7,
2004.
November 30, 2003 19,077/$1.25 Vesting November 30, 2013
commencement date
is September 4,
2002. 1/24th of
the options vest on
each monthly
anniversary of the
vesting
commencement date
- ------------------------------------------------------------------------------------------------------------------------------------
BDR Consulting, Inc. August 7, 2002 300,000/$1.50 100,000 - August August 7, 2012
(2) 7, 2002. 100,000 -
August 7, 2003.
100,000 - August 7,
2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Lance Jones February 4, 2003 40,000/$1.50 February 4, 2003 February 4, 2013
- ------------------------------------------------------------------------------------------------------------------------------------
Marilyn Mathews February 4, 2003 10,000/$1.50 February 4, 2003 February 4, 2013
- ------------------------------------------------------------------------------------------------------------------------------------
Dennis Dees November 26, 2002 50,000/$1.50 November 26, 2002 November 26, 2012
- ------------------------------------------------------------------------------------------------------------------------------------
Judy Beriou November 26, 2002 20,000/$1.50 November 26, 2002 November 26, 2012
- ------------------------------------------------------------------------------------------------------------------------------------
Mike Chunn November 26, 2002 15,000/$1.50 November 26, 2002 November 26, 2012
- ------------------------------------------------------------------------------------------------------------------------------------
Pat Justice November 26, 2002 12,000/$1.50 November 26, 2002 November 26, 2012
- ------------------------------------------------------------------------------------------------------------------------------------
Ladey Schanley November 26, 2002 20,000/$1.50 November 26, 2002 November 26, 2012
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine Rinne November 17, 2003 12,000/$1.50 November 17, 2003 November 17, 2013
- ------------------------------------------------------------------------------------------------------------------------------------
Dennis E. Dees, Jr. August 1, 2003 500/$1.90 August 1, 2003 August 1, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
JSC II LLC April 1, 2003 2,500/$1.50 April 1, 2003 April 1, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Brad Wicklas June 1, 2003 1,000/$1.50 June 1, 2003 June 1, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Dave Champion June 1, 2003 1,000/$1.50 June 1, 2003 June 1, 2006
- ------------------------------------------------------------------------------------------------------------------------------------
Mark Cline November 15, 2003 150,000/$1.50 Note 3
- ------------------------------------------------------------------------------------------------------------------------------------
Bill Allender November 15, 2003 175,000/$1.50 Option vests on November 15, 2013
November 15, 2004,
unless Cytomedix
terminates the
employee without
cause prior to that
date in which event
1/12th of the
option will be
deemed to have
vested on each
monthly anniversary
of the date of grant.
10
- ------------------------------------------------------------------------------------------------------------------------------------
RECIPIENT DATE NUMBER OF DATE VESTED/ EXPIRATION
SHARES OF EXERCISABLE
COMMON STOCK
UNDERLYING
OPTIONS/
EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Charles Baxter January 10, 2004 10,000/$1.50 January 10, 2004 January 10, 2014
- ------------------------------------------------------------------------------------------------------------------------------------
Mark T. McLouglin August 18, 2004 30,000/$1.50 August 18, 2004 August 18, 2014
- ------------------------------------------------------------------------------------------------------------------------------------
David F. Drohan August 18, 2004 30,000/$1.50 August 18, 2004 August 18, 2014
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Kshitij Mohan April 20, 2004 1,000,000/$1.50 500,000 - April 20, April 20, 2014
(Note 4) 2004, 250,000 -
April 20, 2005,
250,000 - April 20,
2006
- ------------------------------------------------------------------------------------------------------------------------------------
This table does not include information regarding expired options, but instead
only includes the grant of options under the Plan. Therefore, the total amount
shown by this table as granted exceeds the total amount of options representing
the right to purchase 1,511,270 shares currently outstanding under the Plan.
Note 1 - Effective January 2, 2004, we entered into a Confidential Release and
Settlement Agreement with Mr. Kent Smith, former president of the Company. Mr.
Smith consented to the expiration of all vested and unvested options or other
stock-based incentives that had been awarded to him. In return, we granted Mr.
Smith warrants to purchase 175,000 shares of common stock at an exercise price
of $1.50. The warrants expire on January 2, 2007. The common stock underlying
the warrants is expected to be issued pursuant to exemptions afforded by Section
4(2) of the Securities Act.
Note 2 - Effective February 24, 2004, we issued to BDR Consulting, Inc., a
related party, warrants to purchase 200,000 shares of our common stock outside
of the Long-Term Incentive Plan. The warrants have a ten-year term and an
exercise price of $1.50 per share of common stock. These warrants were issued as
partial consideration for the services provided by BDR Consulting under its
consulting agreement dated July 16, 2002. The common stock underlying the
warrants is expected to be issued pursuant to exemptions afforded by Section
4(2) of the Securities Act.
Note 3 - Pursuant to the employment agreement between Cytomedix and Mr. Cline,
Mr. Cline received options to purchase 175,000 shares of the Company's common
stock at a price of $1.50 per share. These options were to vest on November 15,
2004, unless the Company terminated Mr. Cline without cause prior to such date,
in which case 1/12th of the options vested on the 15th day of each month
beginning on November 15, 2003, and continuing until the date of termination.
Pursuant to the Confidential Separation and Release Agreement executed in
connection with Mr. Cline's resignation, 25,000 options of the 175,000
originally awarded to Mr. Cline expired upon the execution of the agreement. The
remaining 150,000 shall continue to vest as per the original vesting schedule.
As of June 15, 2003, 87,500 options have vested. The options shall remain
exercisable for a period of five years from the date of original grant, so that
the options awarded to Mr. Cline shall expire on November 15, 2008.
Note 4 - On April 20, 2004, we entered into an employment agreement with Dr.
Kshitij Mohan under which Dr. Mohan will serve as our Chief Executive Officer.
In conjunction with the employment agreement, we granted Dr. Mohan an inducement
award consisting of stock options for 1,000,000 shares of our common stock at an
exercise price of $1.50 per share. Options for 500,000 shares vested
immediately. These shares were issued outside of the Company's Long-Term
Incentive Plan because insufficient shares remained authorized under the Plan.
The Company plans to amend this grant to issue the options under the Plan if the
shareholders approve this proposal to allocate additional shares to the Plan.
11
Although the Plan allows for the issuance of various types of awards, the
Company has only issued options pursuant to the Plan. The total number of shares
of common stock underlying outstanding options issued under the Plan is
1,511,270 (this number does not include shares underlying options and warrants
issued to certain persons outside the Plan). The total market value of the
common stock underlying the options based on the closing stock price of $1.31 on
August 31, 2004, is $1,979,764; the exercise price of the collective options
exceeds the market value of the common stock underlying the options based on the
closing price on said date. The Board of Directors issues Incentive Stock
Options to employees when the requirements of Section 422 of the Internal
Revenue Code are satisfied. Options which do not qualify as Incentive Stock
Options are issued as Nonqualified Options.
OVERVIEW OF OFFICERS AND SIGNIFICANT EMPLOYEES AND CONSULTANTS
Name Age Date of Hire Position(s) with the Company
- -----------------------------------------------------------------------------------------------------------
William L. Allender 53 November 15, 2003 Chief Financial Officer
Carelyn P. Fylling 56 December 1, 2001 Vice President of Professional Services
Lance P. Jones 44 December 1, 2003 Controller
Jimmy D. Swink 41 July 11, 2002 Consultant to the Board
Reorganization Consultant
Nadine C. Smith 47 April 1, 2003 Consultant to the Board
SECURITY OWNERSHIP OF THE BOARD AND MANAGEMENT
The following table sets forth information as of August 31, 2004, regarding the
beneficial ownership of Common Stock by the current Directors and nominees to
the Board, each person serving as Chief Executive Officer during 2003 and 2004,
each of the Company's current executive officers, the Company's controller, and
the Company's four outside Directors and three executive officers as a group.
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial Owner (Note 2)
(Note 1)
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Robert Burkett 256,865 shares (Note 3) 1.33%
19 Rock Hill Lane Direct ownership
Scarsdale, NY 10583
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock David Crews 491,331 shares (Note 4) 2.55%
2000 Union Nat'l Plaza (Indirect by self as trustee
Little Rock, AR 72201 for trust and by children)
- ------------------------- ---------------------------------------------- ---------------------------------------
Series A Convertible David Crews 63,985 shares 4.01%
Preferred Stock 2000 Union Nat'l Plaza (Indirect by self as trustee for
Little Rock, AR 72201 trust and by children)
- ------------------------- ---------------------------------------------- ---------------------------------------
Series B Convertible David Crews 119,538 shares 7.91%
Preferred Stock 2000 Union Nat'l Plaza (Indirect by self as trustee for
Little Rock, AR 72201 trust and by children)
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock David F. Drohan 30,000 shares (Note 5) *
One Baxter Parkway Direct Ownership
Deerfield, IL 60015
12
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial Owner (Note 2)
(Note 1)
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Mark T. McLaughlin 30,000 shares (Note 6) *
416 Hungerford Dr., Suite 330 Direct Ownership
Rockville, Maryland 20850
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Kshitij Mohan 500,000 shares (Note 7) 2.55%
416 Hungerford Dr., Suite 330 Direct Ownership
Rockville, Maryland 20850
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Carelyn P. Fylling 271,643 shares (Note 8) 1.40%
10952 Steamboat Loop NW Direct Ownership
Walker, MN 56484
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock William L. Allender 175,000 shares (Note 9) *
416 Hungerford Dr., Suite 330
Rockville, Maryland 20850
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Lance Jones 40,000 shares (Note 10) *
416 Hungerford Dr., Suite 330 Direct Ownership
Rockville, Maryland 20850
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Mark E. Cline 112,500 shares (Note 11) *
5104 Scarborough Lane Direct Ownership
Dallas, TX 75287
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Kent T. Smith 175,000 shares (Note 12) *
13319 Seagrove St. Direct Ownership
San Diego, CA 92130
- ------------------------- ---------------------------------------------- ---------------------------------------
Common Stock Group consisting of Current 1,767,339 shares 8.62%
Directors and Executive Officers:
Robert Burkett, David P. Crews,
David F. Drohan, Mark T.
McLouglin, Kshitij Mohan,
William L. Allender, Carelyn P.
Fylling.
- ------------------------- ---------------------------------------------- ---------------------------------------
* - Denotes less than one percent beneficially held.
Note 1 - For purposes of determining the amount of securities beneficially
owned, share amounts include all common stock owned outright plus all
convertible shares, warrants and options currently exercisable or exercisable
within 60 days of the preparation of this table.
Note 2 - The Percent of Class for common stock was calculated based on the
amounts calculated in Note 1 above divided by the sum of the outstanding common
stock as of August 31, 2004, 19,095,269, plus the individual's convertible
shares, warrants and options currently exercisable for common stock within 60
days of the preparation of this table. The Percent of Class for the preferred
stock was calculated based on 1,596,673 shares of Series A Convertible Preferred
Stock and 1,511,473 shares of Series B Convertible Preferred Stock outstanding
as of today's date.
Note 3 - This amount includes fully vested options representing the right to
purchase 200,000 shares of common stock at $1.50.
Note 4 - This amount includes fully vested options representing the right to
purchase 200,000 shares of common stock at $1.50. David Crews also purchased in
the 2002 Offering 12,500 Class A Warrants (exercisable for two years at $1.00)
and 7,500 Class B Warrants (exercisable for three years at $1.50). Crews
exercised his 12,500 Class A Warrants through a cashless exercise for 2,885
shares of common stock.
13
Note 5 - This amount includes fully vested options representing the right to
purchase 30,000 shares of common stock at $1.50.
Note 6 - This amount includes fully vested options representing the right to
purchase 30,000 shares of common stock at $1.50.
Note 7 - Dr. Mohan's employment agreement of April 20, 2004, provided for an
inducement award of stock options for 1,000,000 shares of our common stock at an
exercise price of $1.50 per share. Options for 500,000 shares vested
immediately. Options for 250,000 shares vest on April 20, 2005, and the
remaining 250,000 on April 20, 2006.
Note 8 - This amount includes options to purchase 269,077 shares of common stock
at $1.50.
Note 9 - This amount includes options representing the right to purchase 175,000
shares of common stock at $1.50 per share. These options vest on November 4,
2004, unless Mr. Allender's employment is terminated prior to such date.
Note 10 - This amount includes a fully vested option representing the right to
purchase 40,000 shares of common stock at $1.50.
Note 11 - Mark E. Cline was awarded options representing the right to purchase
175,000 shares of common stock at $1.50. 25,000 of the 175,000 options
originally awarded to Mr. Cline expired upon execution of his termination
agreement. The remaining 150,000 shall continue to vest as per the original
vesting schedule and will expire on November 15, 2008. This amount includes
fully vested options as of August 31, 2004, representing the right to purchase
112,500 shares of common stock at $1.50.
Note 12 - On December 1, 2003, Kent T. Smith voluntarily resigned as Chief
Executive Officer. On January 2, 2004, a termination agreement became effective
between Mr. Smith and us that specified that in exchange for all outstanding
vested and unvested options plus other considerations, we would grant to Mr.
Smith 175,000 warrants at $1.50 with an expiration date of January 3, 2007.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
For purposes of completing the table below we have relied upon statements
filed with the SEC under Section 13(d) or 13(g) of the Securities Exchange Act
of 1934, unless we knew or had reason to believe such statements are not
complete or accurate. The following persons are known to us to be the beneficial
owner of more than five percent of our voting securities as indicated below as
of August 31, 2004. The Percent of Class for common stock was calculated based
on the number of shares owned divided by the sum of the outstanding common stock
as of August 31, 2004, 19,095,269, plus the individual's convertible shares,
warrants and options currently exercisable for common stock within 60 days of
the preparation of this table.
14
Title of Class Name and Address of Amount and Nature Percent of Class
Beneficial Owner of Beneficial Owner
- ------------------------------------------------------------------------------------------------------------------
Common Stock Michael P. Markus 1,700,000 shares 8.81%
1600 Rockcliff Rd. (Note 1)
Austin, Texas 78746
- ------------------------------------------------------------------------------------------------------------------
Common Stock Ritchie Long/Short Trading Ltd. 3,432,300 shares 15.53%
c/o M&C Corporate Services (Note 2)
Limited
P.O. Box 309GT
Ugland House
South Church Street
George Town, Grand Cayman
Ritchie Capital Management,
L.L.C.
2100 Enterprise Avenue
Geneva, Illinois 60134
RAM Capital, L.L.C.
2100 Enterprise Avenue
Geneva, Illinois 60134
RAM Capital Investments, Ltd.
c/o Caledonian Bank & Trust
Caledonian House
P.O. Box 1043
George Town, Grand Cayman
THR, Inc.
2100 Enterprise Avenue
Geneva, Illinois 60134
A.R. Thane Ritchie
2100 Enterprise Avenue
Geneva, Illinois 60134
Ritchie Capital Multi-Strategy
Trading, Ltd.
2100 Enterprise Avenue
Geneva, Illinois 60134
Ritchie Capital Multi-Strategy
Fund, Ltd.
2100 Enterprise Avenue
Geneva, Illinois 60134
Ritchie Capital Multi-Strategy
Fund, L.L.C.
2100 Enterprise Avenue
Geneva, Illinois 60134
- ------------------------------------------------------------------------------------------------------------------
Common Stock Jimmy D Swink, Jr. 1,115,292 shares (Note 3) 5.69%
10 Levant (Indirect by BDR
Little Rock, AR Consulting, Inc.)
15
Note 1 - Includes 200,000 shares issuable upon exercise of warrants issued in
the 2004 Unit Offering at an exercise price of $1.50 per share. However,
pursuant to the terms of the warrants, the reporting person cannot exercise such
warrants if the exercise would result in the reporting person being the
"beneficial owner" of more than 9.999% of the outstanding common stock within
the meaning of Rule 13d-1 of the Securities Exchange Act of 1934.
Note 2 - Includes 432,300 shares of common stock, 1,500,000 shares of common
stock issuable upon conversion of Series C Convertible Preferred Stock, 750,000
shares of common stock issuable upon exercise of Series C-1 Warrants, and
750,000 shares of common stock issuable upon exercise of Series C-2 Warrants.
Pursuant to the terms of the Series C Convertible Preferred stock and the Series
C-1 and Series C-2 Warrants, the reporting persons cannot convert their Series C
Convertible Preferred Stock or exercise their Series C-1 or Series C-2 Warrants
if such exercise or conversion would result in the reporting persons being the
"beneficial owners" of more than 9.99% of the outstanding common stock within
the meaning of Rule 13d-1 of the Securities Exchange Act of 1934.
Note 3 - This number includes options to purchase 500,000 shares of common stock
which are fully vested and exercisable.
EXECUTIVE INFORMATION AND COMPENSATION
MR. WILLIAM L. ALLENDER, CPA, BBA, MBA, age 53, assumed the position of Chief
Financial Officer on November 15, 2003. He was formally appointed Secretary on
September 9, 2004. Mr. Allender has over 30 years of business, financial and
operational experience. His past service has includes Director of Audit at
Michigan General Corporation, a former fortune 500 conglomerate, where he
assumed for various lengths of time in addition to his role as Director of
Audit, subsidiary CFO and CEO positions responsible for designing and executing
turn-around business plans. Additionally, he developed and operated his own
Dallas-based CPA firm and most recently, was Senior Operations Analyst for
Selkirk, Inc., a manufacturer of HVAC related products Mr. Allender has a B.B.A
and a M.B.A, 1973 and 1977 respectively, from Southern Methodist University and
has been a licensed C.P.A. in the state of Texas since 1987.
MS. CARELYN FYLLING, RN, MSN, age 56, has served as the Company's Vice President
of Professional Services since December 2001. Ms. Fylling was director of
training and program development at the International Diabetes Center in
Minneapolis, Minnesota. She also has served on the national Board of Directors
of the American Diabetes Association and numerous national committees of the
American Diabetes Association. Ms. Fylling received the prestigious Ames Award
for Outstanding Educator in the Field of Diabetes. Subsequently, she joined
Curative Health Services and helped the company grow from three employees to
over 650 employees. During her 13 years at Curative, Ms. Fylling helped to
design the national wound database, developed clinical protocols, conducted
outcome studies, trained physicians and nurses in comprehensive wound
management, wrote scientific articles and abstracts, assisted in clinical trials
and marketing, and developed an Internet-based online wound care training
program for health professionals. Recently, she provided independent consulting
and outsourcing services to the health care industry through Fylling Associates,
LLC, which she wholly owns, and through Strategic Partners, LLC, in which she
holds a partnership interest.
The information below provides a summary of all compensation paid to the
two persons who served as Chief Executive Officer during 2003, the current Chief
Executive Officer, the two other executive officers of the Company, the
Company's Controller, and the Company's two Consultants to the Board
(hereinafter the "Named Officers and Consultants").
16
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Position Year Salary ($) Restricted Stock Securities underlying
award(s) ($) options
- ------------------------------------------------------------------------------------------------------------------------------------
Kent T. Smith 2003 $200,000.16 47,693 shares
Chief Executive Officer 2002 $201,583.08 $32,481 521,928 shares
(Resigned December 1, 2003) (Note 1) (Note 2)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Cline
President 2003 $ 15,625.02 175,000 shares
(From November 15, 2003 - (Note 3)
June 28, 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Carelyn P. Fylling 2003 $130,000.00 250,000 shares
VP of Professional Services 2002 $124,326.92 (Note 2)
- ------------------------------------------------------------------------------------------------------------------------------------
William L. Allender 2003 $11,875.02 175,000 shares
Chief Financial Officer (Note 4)
(Effective November 15, 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Lance Jones 2003 $55,000.08 40,000 shares
Controller 2002 $ 6,875.01 (Note5)
- ------------------------------------------------------------------------------------------------------------------------------------
Nadine C. Smith 2003 $93,750.00 1,000,000 shares
Consultant to the Board (Note 6)
- ------------------------------------------------------------------------------------------------------------------------------------
Jimmy D. Swink 2003 $108,000.00 200,000 shares
Consultant to the Board 2002 $ 51,815.39 $389,775 300,000 shares
$ 45,000.00 (Note 1) (Note 8)
(Note 7)
- ------------------------------------------------------------------------------------------------------------------------------------
Kshitij Mohan 2004 (Note 9) 1,000,000 shares
Director and CEO
(Beginning April 20, 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Note 1 - In conjunction with the Plan, a reorganization bonus of 32,481 shares
of restricted common stock was issued to Kent T. Smith and a reorganization
bonus of 389,775 shares of restricted common stock was issued to Jimmy D. Swink,
Jr. in 2002.
Note 2 - Options representing 569,621 shares were issued to Mr. Kent Smith,
former president of the Company. Effective January 2, 2004, we entered into a
Confidential Release and Settlement Agreement with Smith under which he
consented to the expiration of all vested and unvested options or other
stock-based incentives that had been awarded to him. In return, we granted Mr.
Smith warrants to purchase 175,000 shares of common stock at an exercise price
of $1.50.
Note 3 - Mark E. Cline was awarded options representing the right to purchase
175,000 shares of common stock at $1.50. 25,000 of the 175,000 options
originally awarded to Mr. Cline expired upon execution of his termination
agreement. The remaining 150,000 shall continue to vest as per the original
vesting schedule and will expire on November 15, 2008.
Note 4 - These options were granted to Mr. Allender under our Long-Term
Incentive Plan and in accordance with his employment agreement with an effective
date being the first day of employment; November 15, 2003. These options vest on
the one year anniversary of employment.
Note 5 - These options were granted to Mr. Jones under our Long-Term Incentive
Plan on January 4, 2003. These options vested immediately.
Note 6 - As part of her consulting agreement, Ms. Smith was awarded 1,000,000
warrants exercisable at $1.00 per share to expire in seven years.
17
Note 7 - Jimmy D. Swink, Jr. was paid $51,815.39 as an employee of the Company
during its bankruptcy in 2002 (through July 11, 2002). On July 11, 2002, the
Company entered into a consulting agreement with BDR, Inc. (president and sole
shareholder, Jimmy D. Swink, Jr.) under which BDR, Inc. receives compensation of
$108,000 per annum for services rendered to the Company. The Company paid BDR,
Inc. $45,000 during 2002.
Note 8 - On February 25, 2004, Jimmy D. Swink was awarded options representing
the right to purchase 200,000 shares of common stock at $1.50 per share.
Note 9 - Kshitij Mohan became the Company's CEO on April 20, 2004. Dr. Mohan
receives a base salary of $275,000 which will be increased by at least 10% for
the second year and each subsequent year. In order to induce Dr. Mohan to serve
as our CEO, we granted Dr. Mohan an inducement award. This inducement award
consists of stock options for 1,000,000 shares of our common stock at an
exercise price of $1.50 per share, of which options for 500,000 shares vest
immediately. Options for 250,000 shares vest on April 20, 2005, and the
remaining 250,000 vest on April 20, 2006.
OPTION GRANTS IN LAST FISCAL YEAR TO THE
COMPANY'S EXECUTIVE OFFICERS AND CONTROLLER
The following table provides all option grants in fiscal year 2003 to the
Company's Executive Officers and Controller. There have been no SAR grants under
the Company's Plan.
- ---------------------------------------------------------------------------------------------------------------------------
Name Number of shares Percent of total options Exercise Expiration Date
of common stock granted to employees price per
underlying options and consultants in share
fiscal year
(a) (b) (c) (d) (e)
- ---------------------------------------------------------------------------------------------------------------------------
Kent T. Smith 47,693 shares 10.22% $1.25 08/07/2012
(Former CEO (Note 1)
Resigned 12/1/2003)
- ---------------------------------------------------------------------------------------------------------------------------
Mark E. Cline
(Former CEO 175,000 shares 37.49% $1.50 11/14/2013
Effective 11/15/2003 (Note 2)
Resigned 06/28/2004)
- ---------------------------------------------------------------------------------------------------------------------------
Carelyn P. Fylling 19,077 shares 4.08% $1.25 08/07/2012
(Notes 3)
- ---------------------------------------------------------------------------------------------------------------------------
William L. Allender 175,000 shares 37.49% $1.50 11/14/2013
(Note 4)
- ---------------------------------------------------------------------------------------------------------------------------
Lance Jones 40,000 shares 8.56% $1.50 01/03/2013
(Note 5)
- ---------------------------------------------------------------------------------------------------------------------------
Note 1 - These options were granted to Kent T. Smith on October 21, 2003, under
our Long-Term Incentive Plan and in accordance with his management contract. The
initial options granted on August 7, 2002 stipulated that a portion of the
option representing 70,000 shares vested immediately. 1/24th of the remaining
amount vests on each monthly anniversary of the date of grant over a two-year
period commencing on the date of grant. The options granted on October 21, 2003
were issued with an effective date of August 7, 2002 with vesting in accordance
with the original grant. On December 1, 2003, Kent T. Smith voluntarily resigned
as Chief Executive Officer. On January 2, 2004, a termination agreement became
effective between Mr. Smith and us that specified that in exchange for all
outstanding vested and unvested options plus other considerations, we would
grant to Mr. Smith 175,000 warrants at $1.50 with an expiration date of January
3, 2007.
18
Note 2 - These options were granted to Mr. Cline under our Long-Term Incentive
Plan and in accordance with his employment agreement with an effective date
being the first day of employment, November 15, 2003. These options were to vest
on November 15, 2004, unless Cytomedix terminated Mr. Cline's employment without
cause prior to such date, in which case 1/12th of the options vested on the 15th
day of each month beginning on November 15, 2003, and continuing until the date
of termination. On June 28, 2004, Mr. Cline and Cytomedix entered into a
separation agreement and release. Pursuant to this agreement, Mr. Cline tendered
his resignation as President and also resigned as a Director of Cytomedix.
Additionally, 25,000 of the 175,000 options originally awarded to Mr. Cline
expired upon execution of the agreement. The remaining 150,000 shall continue to
vest as per the original vesting schedule and will expire on November 15, 2008.
As of June 15, 2003, 87,500 options have vested.
Note 3 - These options were granted to Carelyn P. Fylling on October 21, 2003
under our Long-Term Incentive Plan and in accordance with her management
contract. The initial options granted on August 7, 2002 stipulated that a
portion of the option representing 80,000 shares vested immediately. 1/24th of
the remaining amount vests on each monthly anniversary of the date of grant over
a two-year period commencing on the date of grant. The options granted on
October 21, 2003 were issued with an effective date of August 7, 2002 with
vesting in accordance with the original grant.
Note 4 - These options were granted to Mr. Allender under our Long-Term
Incentive Plan and in accordance with his employment agreement with an effective
date being the first day of employment; November 15, 2003. These options vest on
the one year anniversary of employment.
Note 5 - These options were granted to Mr. Jones under our Long-Term Incentive
Plan on January 4, 2003. These options vested immediately.
AGGREGATED OPTION EXERCISES IN FY 2003 AND FY-END OPTION VALUES
Name and Principal Shares Acquired Value Realized Number of securities Value of unexercised
Position on Exercise on Exercise ($) underlying unexercised in-the-money options
options at FY-end ($)
Exercisable/ Exercisable
Unexercisable /Unexercisable
at FY-end
- --------------------------------------------------------------------------------------------------------------
Kent T. Smith 0 $0 569,621 shares 0
(Note 1) (403,081/166,540)
- --------------------------------------------------------------------------------------------------------------
Mark E. Cline 0 $0 175,000 shares 0
(Note 2) ( 0 /175,000)
- --------------------------------------------------------------------------------------------------------------
Carelyn P. Fylling 0 $0 269,077 shares 0
(206,051/63,026)
- --------------------------------------------------------------------------------------------------------------
William L. Allender 0 $0 175,000 shares 0
( 0 /175,000)
- --------------------------------------------------------------------------------------------------------------
Lance Jones 0 $0 40,000 shares 0
(40,000/0)
- --------------------------------------------------------------------------------------------------------------
Jimmy D. Swink, Jr. 0 $0 300,000 shares 0
(200,000/100,000)
- --------------------------------------------------------------------------------------------------------------
Note 1 - On December 1, 2003, Kent T Smith voluntarily resigned as Chief
Executive Officer. On January 2, 2004, a termination agreement became effective
between Mr. Smith and the Company that specified that in exchange for all
outstanding vested and unvested options plus other considerations, the Company
would grant to Mr. Smith 175,000 warrants at $1.50 with an expiration date of
January 3, 2007.
19
Note 2 - On June 28, 2004, Mr. Cline and Cytomedix entered into a separation
agreement and release. Pursuant to this agreement, Mr. Cline tendered his
resignation as President and also resigned as a Director of Cytomedix.
Additionally, 25,000 of the 175,000 options originally awarded to Mr. Cline
expired upon execution of the agreement. The remaining 150,000 shall continue to
vest as per the original vesting schedule and will expire on November 15, 2008.
As of August 31, 2004, 112,500 options have vested.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Act requires our officers, directors and persons who own
more than ten percent of a registered class of our equity securities within
specified time periods to file certain reports of ownership and changes in
ownership with the SEC. Mark E. Cline received options under an employment
agreement signed March 25, 2004 (but effective November 15, 2003) and therefore
filed a Form 4 within two business days of the date the employment agreement was
signed. William L. Allender entered into an employment agreement signed March
25, 2004 (but effective November 15, 2003) and therefore filed a Form 3 within
two business days of the date the employment agreement was signed. The Company
announced that Mark McLouglin was appointed to the Board on June 7, 2004.
Although the Form 3 was not filed within two days of that announcement, the
Company did file a Form 8-K regarding the appointment on July 7, 2004, and Mr.
McLouglin filed a Form 4 within two business days of his receipt of options
under the Plan on August 18, 2004. On July 13, 2004, the Company announced that
David F. Drohan was appointed to the Board. Although Form 3 was not filed within
two days of that announcement, the Company did file a Form 8-K regarding the
appointment on July 13, 2004. Mr. Drohan filed a Form 4 within two business days
of his receipt of options.
EMPLOYMENT AND TERMINATION AGREEMENTS
Mr. Kent T. Smith was appointed as President in October 2001 and Ms. Carelyn P.
Fylling was hired in December 2001. Subsequently, upon emerging from bankruptcy
in 2002, we entered into formal employment agreements with both Smith and
Fylling.
On December 1, 2003, Mr. Smith voluntarily resigned thereby terminating his
employment agreement. Effective January 2, 2004, the Company entered into a
termination agreement with Kent Smith that granted him 175,000 warrants to
purchase the Company's common stock at $1.50 per share in exchange for all
previously issued and vested stock options granted to him plus other
considerations. The warrants vested immediately and expire in three years. The
options that were cancelled under the agreement totaled 569,621 of which 403,080
were fully vested.
The employment agreement with Ms. Carelyn P. Fylling to serve as Vice President
of Professional Services is also a one-year contract and provides for an
extension of the contract for an additional two years. After the two-year
extension, both parties may make additional extensions in one-year increments
thereafter. Under the contract, Ms. Fylling's base salary is $130,000 (which may
be increased by consent of the Board), stock options, annual bonus in accordance
with our performance, and various benefits. In the event that Ms. Fylling is
terminated as a result of a change of control of Cytomedix, she is entitled to a
severance payment equal to six months or her base salary in effect on the date
of termination and a prorated bonus and prorated Plan payment. For twelve months
following her termination associated with a change in control, Ms. Fylling would
be entitled to all medical, disability, life and dental benefits in effect on
the date of her termination, and she would be entitled to all deferred
compensation owed to her under any other agreements. Additionally, all of her
issued and unvested stock options would immediately become fully vested and
exercisable, and the exercise date of all options would be extended for a term
of twelve months from the date of termination.
The employment agreements with Mr. Mark E. Cline, to serve as President, and Mr.
William L. Allender, to serve as Chief Financial Officer, were signed on March
25, 2004, but became effective as of November 15, 2003. Under these agreements,
Cline and Allender are to receive base salaries of $125,000 and $95,000
respectively (which may be increased by consent of the Board). They each
received ten-year options to purchase 175,000 shares of our common stock at an
exercise price of $1.50 per share. These options vest one year from the date of
grant. The employment agreements provide that Cline and Allender are eligible
for participation in our bonus plan. Further, they are eligible for other
standard benefits we offer our officers and employees. In the event that Mr.
Allender is terminated as a result of a change in control of Cytomedix, he is
entitled to a lump sum payment equal to fifty percent of his base salary at the
time of the change of control. Additionally, all unvested options or other
stock-based incentives that have been awarded prior to the change of control
become immediately vested.
20
On June 28, 2004, Mr. Cline and Cytomedix entered into a separation agreement
and release. Pursuant to this agreement, Mr. Cline tendered his resignation as
President and also resigned as a Director of Cytomedix. The agreement included a
general release of all potential claims. As consideration for the agreement,
Cytomedix agreed to pay Mr. Cline his base salary, as well as certain other
benefits, until July 31, 2004. Additionally, 25,000 of the 175,000 options
originally awarded to Mr. Cline expired upon execution of the agreement. The
remaining 150,000 shall continue to vest as per the original vesting schedule
and will expire on November 15, 2008. As of August 31, 2004, 112,500 options
have vested.
Dr. Kshitij Mohan became our Chief Executive Officer on April 20, 2004. Prior to
becoming Chief Executive Officer, Dr. Mohan was a consultant to Cytomedix under
a Consulting Agreement effective January 1, 2004. On April 20, 2004, Dr. Mohan
and Cytomedix entered into a Termination Agreement whereby the Consulting
Agreement was terminated. Under the Consulting Agreement, we had agreed to
indemnify and hold harmless Dr. Mohan against claims and expenses arising out of
his services as a consultant under the Consulting Agreement. Under the
Termination Agreement, we agreed to extend the indemnification provisions of the
Consulting Agreement until the expiration of any applicable statute of
limitations period.
Dr. Mohan's two-year employment contract provides for extensions of one year
unless Dr. Mohan's employment is terminated in accordance with the provisions of
the contract. Under the contract, Dr. Mohan receives a base salary of $275,000
which will be increased by at least 10% for the second year and each subsequent
year. In order to induce Dr. Mohan to serve as our CEO, we granted Dr. Mohan an
inducement award. This inducement award consists of stock options for 1,000,000
shares of our common stock at an exercise price of $1.50 per share, of which
options for 500,000 shares vest immediately. The options for the remaining
500,000 shares vest at points throughout the term of the contract. Also included
in our inducement award to Dr. Mohan is an anti-dilution provision, which
assures Dr. Mohan a 2.76% target percentage of the outstanding common stock on a
fully diluted basis. If we issue additional shares of common stock or other
security convertible into or exercisable for common stock, then we will issue
Dr. Mohan additional options to purchase common stock at an exercise price of
$1.50 so that he will remain the beneficial owner of the target percentage of
the outstanding common stock on a fully diluted basis. However, the number of
shares of common stock issuable upon the exercise of the inducement award
options shall never exceed 2,000,000. Our inducement award to Dr. Mohan also
includes provision regarding adjustments in the event of a stock split or a
stock dividend. In addition to his base salary and inducement award, Dr. Mohan
will receive an annual bonus. In the first year, his annual bonus will be
$100,000 notwithstanding the achievement of any performance criteria. In the
first and second year, if we meet certain performance criteria, Dr. Mohan's
annual bonus will be $150,000. Dr. Mohan is also entitled to $25,000 in fringe
benefits.
If Dr. Mohan's employment is terminated as a result of a change in control or in
connection with a change in control and Dr. Mohan is not offered post-closing
employment by Cytomedix or its successor-in-interest on substantially the same
terms as the terms of his employment immediately prior to the change in control,
then we shall pay him severance in an amount equal to two years of his base
salary in effect on the date of termination, plus annual bonus and inducement
awards for the two years. Furthermore, if Dr. Mohan's employment is terminated
as a result of a change in control, all of his issued and unvested stock options
will immediately become fully vested and exercisable until the original date of
expiration.
CERTAIN CONSULTING AGREEMENTS
The Company entered into a consulting agreement with BDR Consulting, Inc.
(president and sole shareholder Jimmy D. Swink, Jr.) on July 11, 2002 continuing
until June 30, 2005. Under this agreement, BDR receives compensation of $108,000
per annum for services rendered to the Company. In addition, we have granted BDR
stock options representing the right to purchase a total of 500,000 shares of
the Company's common stock at $1.50 per share.
21
The Company entered into a consulting agreement with Nadine C. Smith on April 1,
2003 and continuing through March 30, 2004 to provide general business
consulting services. Under this agreement, Smith receives compensation of
$125,000 per year. Additionally, we granted to Smith 1,000,000 warrants with an
exercise price of $1.00 per share to expire March 31, 2010. All of these
warrants have vested. This agreement automatically renews for a successive
twelve month period unless either party provides written notice thirty days in
advance of the end of the consulting term. Additionally, this agreement may be
terminated by either party upon thirty days advance notice.
The Carmen Group, Inc. was engaged during the second quarter of 2003 as a
business consultant to strategically position and represent the Company before
the federal government and the various federal agencies affecting Cytomedix.
Effective on October 1, 2003, a formal agreement was signed with the Carmen
Group, Inc. for a period of one year to provide services for the company for a
flat fee of $15,000 per month plus expenses. Additionally, the agreement
stipulates that the Company would issue to The Carmen Group, Inc. an option to
purchase 100,000 shares immediately exercisable at $1.25 with an additional
100,000 shares being issuable one year from the date of agreement at an exercise
price of $2.00.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CHARLES E. WORDEN, SR. Although no longer a director of the Company, Charles E.
Worden, Sr. was a director of the Company through July 11, 2002. In November
1999, following AWT's merger into Informatix Holdings, Inc., Mr. Worden was no
longer an officer, director or majority shareholder of Cytomedix, although he
did enter into a royalty agreement and consulting agreement with Cytomedix.
During 2000, Mr. Worden asserted that Cytomedix had defaulted under its
agreements; thus, Mr. Worden claimed a reversionary ownership interest in the
Worden Patent and, on this basis, caused the Worden Patent to be issued in his
name by the U.S. Patent & Trademark Office on October 16, 2001. When issued, the
Worden Patent listed Mr. Worden, and not Cytomedix, as the owner of the Worden
Patent. Cytomedix asserted ownership of the Worden Patent and certain claims
against Mr. Worden.
Cytomedix and Mr. Worden subsequently resolved their differences through
execution of a letter of understanding, dated November 14, 2001. This letter of
understanding delineated the terms to be included in a plan of reorganization
regarding Mr. Worden's claimed intellectual property rights in the Worden Patent
and the treatment of his Claims he asserted against Cytomedix. Pursuant to this
letter of understanding, Mr. Worden assigned the Worden-Related Patents to
Cytomedix, subject to a condition subsequent reversionary interest during
bankruptcy should certain projected events (such as confirmation of a plan of
reorganization incorporating the terms of the letter of understanding) fail to
materialize.
The parties also agreed in the letter of understanding to the terms and
conditions of the following three agreements (the "Worden Agreements"), which
became effective on July 11, 2002:
(i) a patent license agreement, whereby Cytomedix would license to Mr. Worden
and his assigns the use of the Worden-Related Patents for veterinary
applications;
(ii) a substitute royalty agreement, whereby Cytomedix would (A) pay a five
percent royalty from profits derived by Cytomedix from the sale, licensing, or
other exploitation of the Worden-Related Patents (with a minimum of $6,250 per
month and up to a maximum of $600,000 per year), and (B) grant Mr. Worden a
security interest in the Worden-Related Patents to secure payment of these
royalties only; and (iii) mutual general releases.
BDR CONSULTING, INC. BDR Consulting, Inc. is a consulting firm owned solely by
Jimmy D. Swink, Jr. The Company entered into a consulting agreement with BDR,
Inc. dated July 11, 2002 continuing until June 30, 2005. Under this agreement,
BDR is to receive compensation of $108,000 per annum for services rendered to
the Company. In addition, we granted BDR stock options under the Plan
representing the right to purchase 300,000 shares of the Company's common stock
at $1.50 per share (the fair market value on the date of grant). These options
have fully vested.
22
On February 25, 2004, we granted BDR an additional warrant to purchase 200,000
shares of our common stock at $1.50 per share. These warrants were not awarded
under our Long-Term Incentive Plan. The warrants vested and were exercisable
immediately upon issuance, and expire on February 25, 2014.
MS. NADINE SMITH. On April 1, 2003, we entered into a consulting agreement with
Ms. Nadine Smith, pursuant to which she receives compensation of $125,000 per
annum for services rendered. Under the terms of the agreement, as partial
consideration for the services provided by Ms. Smith, we issued warrants to
purchase 1,000,000 shares of common stock at an exercise price of $1.00 per
share. The warrants expire on April 1, 2010. The number of shares of common
stock issuable upon exercise of the warrants is subject to adjustment for stock
splits, stock dividends and similar transactions.
THE CARMEN GROUP. The Carmen Group, Inc. was engaged during the second quarter
of 2003 as a business consultant to strategically position and represent us
before the federal government and the various federal agencies affecting
Cytomedix. A director, Robert Burkett, is also a consultant with the Carmen
Group, Inc. Effective on October 1, 2003, a formal agreement was signed with the
Carmen Group, Inc. for a period of one year to provide services for a flat fee
of $15,000 per month plus expenses. Additionally, the agreement stipulates that
we would issue to The Carmen Group, Inc. an option to purchase 100,000 shares
immediately exercisable at $1.25 with an additional 100,000 shares being
issuable one year from the date of agreement at an exercise price of $2.00.
DAVID P. CREWS AS SELLING AGENT. David Crews, a Director, is a registered
broker-dealer and participated as a selling agent in the 2002 Offering. Like
other selling agents, Mr. Crews was paid a ten percent commission (of which 50%
was payable in shares of stock - one share for each $1.00 of commission owed).
In 2002, Mr. Crews was issued 6,500 shares of restricted common stock for his
earned commissions, and the brokerage house with which he is associated and is
executive vice-president, Crews & Associates, Inc., was paid $6,500 in cash for
the selling efforts by Mr. Crews. Crews & Associates, Inc. was paid an
additional $34,125 for the cash portion of commissions earned by another selling
agent employed by Crews & Associates, Inc. in connection with the same offering.
KSHITIJ MOHAN. Prior to becoming Chief Executive Officer on April 20, 2004,
Kshitij Mohan was a consultant to Cytomedix under a Consulting Agreement
effective January 1, 2004. On April 20, 2004, Dr. Mohan and Cytomedix entered
into a Termination Agreement whereby the Consulting Agreement was terminated.
Under the Consulting Agreement, we had agreed to indemnify and hold harmless Dr.
Mohan against claims and expenses arising out of his services as a consultant
under the Consulting Agreement. Under the Termination Agreement, we agreed to
extend the indemnification provisions of the Consulting Agreement until the
expiration of any applicable statute of limitations period. Mr. Mohan recently
served as Chief Executive Officer of International Remote Imaging System Inc.,
the predecessor company to Iris International ("IRIS"). Currently, Cytomedix
uses IRIS as a supplier of centrifuges. As a part of his termination agreement
with IRIS, Mr. Mohan was given the title Senior Consultant and will receive
through the end of 2004 $260,000 per annum. Mr. Mohan has not provided any
consulting services for IRIS since before joining Cytomedix and does not
anticipate providing any material time or services in the immediate future. In
addition, pursuant to the termination agreement any requests for consulting
services by IRIS are subordinate to Mr. Mohan's contractual obligations to
Cytomedix.
MARK E. CLINE. Pursuant to an employment agreement effective as of November 15,
2003, Mr. Mark E. Cline assumed the position of President. Under his employment
agreement, Mr. Cline was to receive a base salary of $125,000 per annum. Mr.
Cline also received options to purchase 175,000 shares of our common stock at a
price of $1.50 per share. These options were to vest on November 15, 2004,
unless Cytomedix terminated Mr. Cline's employment without cause prior to such
date, in which case 1/12th of the options vested on the 15th day of each month
beginning on November 15, 2003, and continuing until the date of termination.
Mr. Cline also was appointed as a Director by resolution of the Board of
Directors on March 1, 2004.
On June 28, 2004, Mr. Cline and Cytomedix entered into a separation agreement
and release. Pursuant to this agreement, Mr. Cline tendered his resignation as
President and also resigned as a Director of Cytomedix. Mr. Cline also agreed to
a covenant not to sue and a release of all known or unknown, fixed or contingent
claims which he may have against Cytomedix. As consideration for the agreement,
Cytomedix agreed to pay Mr. Cline his base salary, as well as certain other
benefits, until July 31, 2004. Additionally, 25,000 of the 175,000 options
originally awarded to Mr. Cline expired upon execution of the agreement. The
remaining 150,000 shall continue to vest as per the original vesting schedule.
As of August 31, 2004, 112,500 options have vested. These options will expire on
November 15, 2008.
23
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of L J Soldinger &
Associates, LLC to audit the financial statements for fiscal year ending
December 31, 2004. Because of the timing of the Company's 2004 meeting, the
Company is not seeking ratification of this appointment. The Company plans to
seek ratification of the appointment of independent public accountants at its
2005 annual meeting. Although L J Soldinger & Associates, LLC will not be in
attendance at the special meeting, one or more representatives of the accounting
firm will be available via telephone. The representatives will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
Effective August 21, 2002, KPMG LLP was dismissed as our independent
auditors. The decision to dismiss KPMG was unanimously approved by the Board. In
connection with the audit of the fiscal year ended December 31, 2000, and
through the subsequent interim period through August 21, 2002, there were no
disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to KPMG's satisfaction, would have caused them to
make reference to the subject matter of the disagreement in connection with
their report.
The audit report of KPMG on our financial statements as of and for the
year ended December 31, 2000, did not contain any adverse opinion or disclaimer
of opinion, nor was the audit report qualified or modified as to uncertainty,
audit scope, or accounting principles, except as follows: KPMG's report on our
financial statements as of and for the year ended December 31, 2000, contained a
separate paragraph stating that ". . . the Company has suffered recurring losses
from operations that raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty."
The Board unanimously authorized our engagement of the independent
certified public accounting firm of L J Soldinger & Associates, LLC to audit our
financial statements beginning with those from the year ended December 31, 2001.
These events were reported on Forms 8-K filed with the SEC on August 21, 2002
and August 26, 2002.
AUDIT FEES AND TAX FEES
The following table presents fees for professional services rendered by L
J Soldinger & Associates, LLC for the fiscal years 2003 and 2002.
SERVICES PERFORMED 2003 2002
-------- --------
Audit Fees (Note 1) $173,000 $158,000
Audit-Related Fees (Note 2) -- --
Tax Fees (Note 3) 1,300 11,000
All Other Fees (Note 4) -- --
-------- --------
Total Fees $174,300 $169,000
======== ========
Note 1 - Audit fees represent fees billed for professional services provided in
connection with the audit of our annual financial statements, reviews of our
quarterly financial statements and audit services provided in connection with
statutory and regulatory filings for those years.
24
Note 2 - Audit-related fees represent fees billed primarily for assurance and
related services reasonably related to the performance of the audit or reviews
of our financial statements.
Note 3 - Tax fees principally represent fees billed for tax preparation, tax
advice and tax planning services.
Note 4 - All other fees principally would include fees billed for products and
services provided by the accountant, other than the services reported under the
three captions above.
SHAREHOLDER PROPOSALS
The deadline for submitting shareholder proposals for inclusion in the Company's
proxy statement for the next annual meeting is December 1, 2004. If a
shareholder notifies the Company after February 15 of an intent to present a
proposal at the 2005 annual meeting of shareholders, the Company will have the
right to exercise its discretionary voting authority with respect to such
proposal without including information regarding such proposal in its proxy
materials.
OTHER MATTERS
The Board of Directors knows of no other matters which will come before the
meeting. However, if any matters other than those set forth in the notice should
be properly presented for action, the persons named in the proxy intend to take
such action as will be in harmony with the policies of the Company and, in that
connection, will use their discretion.
25
CYTOMEDIX, INC.
SHAREHOLDER'S PROXY AND CONFIDENTIAL VOTING
INSTRUCTION CARD Special Meeting of Shareholders in lieu of
2004 Annual Meeting - October 19, 2004
The undersigned hereby appoints Robert Burkett and Kshitij Mohan (the "Proxy
Committee"), and each or any of them, as proxies to represent the undersigned
and to vote all shares of the Company which the undersigned is entitled to vote
at the meeting of shareholders to be held on Tuesday, October 19, 2004, at 10:00
a.m. in Rockville, Maryland, and at any adjournments or postponements thereof.
This proxy card will be voted as indicated on the reverse side of this card for
the election of Directors and on the proposals listed, and, at their discretion,
on such other matters as may properly come before the meeting. If you sign and
return this card without marking the designated boxes, this proxy card will be
treated as being FOR the election of Directors and FOR proposals 2 and 3.
This proxy is solicited on behalf of the Board of Directors of Cytomedix, Inc.
This card should be mailed in the enclosed envelope in time to reach the
Company's proxy tabulator, StockTrans, 44 West Lancaster Ave., Ardmore, PA
19003, by 5:00 p.m. on Monday, October 18, 2004. Phone voting is available 24
hours a day, 7 days a week. Please see voting instructions on the reverse of
this card. StockTrans will report to the Proxy Committee as to proxies received.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
The Board of Directors recommends a vote FOR the following action.
Vote on Directors
1. Election of Directors (to serve until the next meeting of shareholders)
Nominees:
(1) Robert Burkett, (2) David Crews, (3) David F. Drohan, (4) Kshitij
Mohan, and (5) Mark T. McLoughlin
|_| FOR ALL NOMINEES |_| WITHHOLD AUTHORITY
(except as designated to the contrary*) FOR ALL NOMINEES
* To withhold authority to vote for any individual nominee(s), write the name of
said nominee(s) in the space provided below.
----------
The Board of Directors recommends a vote FOR the following proposals proposed by
the Company:
Vote on Proposals For Against Abstain
2. Approve amendment to Amended and Restated Articles |_| |_| |_|
of Incorporation to authorize additional shares of
common stock.
3. Approve amendment to Long-Term Incentive Plan to |_| |_| |_|
reserve and allocate additional shares of common stock
to the Plan.
Do you plan to attend the Annual Meeting? |_| Yes |_| No
IF YOU DO NOT PLAN TO VOTE BY TELEPHONE, PLEASE RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, YOU MUST ONLY SIGN THE REVERSE SIDE; NO BOXES NEED TO BE
MARKED.
26
NOTE: Please sign exactly as name(s) appear hereon. When shares are held
jointly, both holders should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full name as such.
- --------------------------------------- --------------------------------------
Signature Signature (For Joint Owners)
Date: _____________________ Date: _____________________
YOUR VOTE IS IMPORTANT
VOTE TODAY IN ONE OF TWO WAYS
1. VOTE BY TELEPHONE: After you call the phone number below, you will be asked
to enter the control number at the bottom of the page. You will need to respond
to only a few simple prompts. Your vote will be confirmed and cast as directed.
Call toll-free in the U.S. or Canada at
1-866-626-4508 on a touch-tone telephone
OR
2. VOTE BY MAIL: If you do not wish to vote by telephone, please complete, sign,
date and return the above proxy card in the pre-paid envelope provided.
YOUR CONTROL NUMBER IS:
----------------------
You may vote by telephone 24 hours a day, 7
days a week. Your telephone vote authorizes the named proxies
to vote in the same manner as if you
marked, signed and returned your proxy card.
27