BIOQUAL, Inc.
9600 Medical Center Drive
Rockville, Maryland 20850
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 23, 2001
The Annual Meeting of Shareholders of BIOQUAL, Inc. (the "Company"), a Delaware
corporation, will be held at the Hilton Gaithersburg, 620 Perry Parkway,
Gaithersburg, Maryland, on October 23, 2001 at 10:00 a.m. for the following
purposes:
1. To elect four directors each to hold office until the next Annual
Meeting of Shareholders or otherwise as provided in the by-laws;
2. To approve the appointment of Aronson, Fetridge & Weigle as
independent auditors for the Company; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 7, 2001, as
the record date for the determination of shareholders entitled to notice of and
vote at the Annual Meeting.
A list of shareholders of the Company entitled to vote at the Annual Meeting
will be available for examination by shareholders of the Company at the offices
of the Company, 9600 Medical Center Drive, Rockville, Maryland, during the ten
days immediately preceding the date of the Annual Meeting.
The Annual Report to Shareholders for the year ended May 31, 2001, accompanies
this notice.
Shareholders who do not expect to attend the meeting in person are urged to fill
out, sign, and mail promptly, the enclosed proxy.
/s/ Michael P. O'Flaherty
Michael P. O'Flaherty
Secretary
Rockville, Maryland
September 10, 2001
BIOQUAL, Inc.
9600 Medical Center Drive
Rockville, Maryland 20850
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by
BIOQUAL, Inc. (the "Company") of proxies to be voted at the Annual Meeting of
the Shareholders to be held at the Hilton Gaithersburg, 620 Perry Parkway,
Gaithersburg, Maryland, on October 23, 2001, at 10:00 a.m., or at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting. Shares represented by duly executed
proxies at the meeting will be voted at the meeting. Where shareholders specify
in the proxy a choice with respect to any matter to be acted upon, the shares
represented by such proxies will be voted as specified. A shareholder who signs
and returns a proxy in the accompanying form may revoke it at any time before it
is voted.
The Company, at the close of business on September 7, 2001, the record date for
determination of shareholders entitled to vote at the meeting (the "Record
Date"), had outstanding 882,592 shares of Common Stock, par value $0.01 per
share, each share being entitled to one vote with respect to each matter to be
voted on at the meeting. Votes submitted prior to the Annual Meeting by proxy
will be counted by the Company's transfer agent, Registrar and Transfer Company,
and the results will be provided to the Company prior to the Annual Meeting.
Shares voted by shareholders present at the meeting will be tabulated manually
by the Inspector of Elections and added to the totals provided by Registrar and
Transfer Company. Abstentions by proxy or in person and broker non-votes will be
counted as present for the purposes of determining whether a quorum is present.
Abstentions and broker non-votes will not be counted with respect to any matter
being voted upon.
The solicitation of proxies is made by and on behalf of the Board of Directors
of the Company. This statement is being mailed to the shareholders on or about
September 21, 2001.
SECURITY OWNERSHIP
To the knowledge of the Company on the Record Date, the only persons known to
hold more than 5 percent of the Common Stock of the Company are:
1
Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (1)
---------------- -------------------- ---------
John C. Landon 154,049 (2)(3) 17.00
S. David Leibowitt
2295 South Ocean Blvd.
Palm Beach, FL 33480 87,563 9.92
J. Thomas August 177,339 (4) 20.08
David H. Bishop
100 W. 57th St.
New York, NY 10019 60,509 (5) 6.86
(1) Assumes the exercise by such person or persons of the currently exercisable
options owned by him or them and does not give effect to any shares issuable
upon exercise by any other person or persons of options.
(2) Includes 4,178 shares in the name of John C. Landon's spouse.
(3) Assumes the exercise of currently exercisable options to purchase 23,500
shares.
(4) Assumes the exercise of currently exercisable options to purchase 500
shares.
(5) Includes 1,506 shares in the name of David H. Bishop's spouse.
The Company has been advised that the shares of Common Stock owned by Dr. August
and Dr. Landon will be voted in favor of the four nominees for director, and in
favor of all propositions set forth below.
2
ITEM 1- ELECTION OF DIRECTORS
Four persons have been nominated for election as directors to serve until the
next Annual Meeting of Shareholders and until their respective successors are
duly elected and qualified. If you submit your proxy but do not make specific
choices, your enclosed proxy will be voted FOR the election as directors of the
persons named below. If any nominee becomes unavailable as a candidate for
election for any reason, it is intended that votes will be cast for a substitute
nominee designated by the Board of Directors. The Company has no reason to
believe that any nominees named below will be unable to serve if elected.
All four of the nominees currently are directors of the Company. J. Thomas
August has been a director of the Company since 1982, John C. Landon has been a
director since 1986, Charles C. Francisco has been a director since 1991, and
Charles F. Gauvin has been a director since 1992. The terms of all four
directorships will run from October 23, 2001, to the next Annual Meeting of the
Company's shareholders. Election of the four (4) nominees will require the
affirmative vote of the holders of a plurality of the shares of the Company's
Common Stock present in person or represented by proxy at the Annual Meeting.
The following table sets forth the name and principal occupation of each
nominee, the period without interruption for which he or she has been a director
of the Company, the names and titles of the Executive Officers of the Company,
and the amount and percent of class of stock of the Company beneficially owned
by each nominee, each Executive Officer, and the Executive Officers and
Directors as a group as of the Record Date. Unless otherwise indicated,
beneficial ownership consists of sole voting and investment power.
3
Director of
Company
Without Nature of
Principal Occupation & Business Interruption Beneficial Percent Of
Name and Address Age Experience Past Five Years Since Ownership Class Class(1)
---------------- --- -------------------------- ----- --------- ----- --------
John C. Landon 64 Nominee; Chairman of the Board 1986 154,049 Common 17.00
9600 Medical Ctr. Dr. (since February,1987) & CEO & (2)(3)
Rockville, MD 20850 President (since 1986) of the
Company.
Charles C. Francisco 63 Nominee; from July 1998 to 1991 3,834 Common 0.43
455 Fortune Blvd. present, CEO and Managing (4)
Milford, MA 01757 Member of EdgeTech, Inc.,
Milford, MA, a manufacturer of
acoustic underwater imaging
instruments; from July 1998 to
present, CEO, President and a
Director of C&W Fabricators,
Inc., Gardiner, MA, a
manufacturer of inlet and
exhaust systems for gas
turbine electric generators;
from 1993-1998 President, CEO
& a Director of Victoreen,
Inc., Cleveland, OH, a
manufacturer of radiation
measuring instrumentation.
J. Thomas August 73 Nominee; Prof. & former 1982 177,339 Common 20.08
School of Medicine Director of the Dept. of (5)
Johns Hopkins Univ. Pharmacology and Molecular
725 N. Wolfe St. Sciences at The Johns Hopkins
Baltimore, MD 21205 Univ. School of Medicine,
Baltimore, MD for more than
five years.
Charles F. Gauvin 45 Nominee; President and CEO 1992 3,834 Common 0.43
Trout Unlimited from 1994 and from 1991 to (4)
1500 Wilson Blvd. 1994 Executive Director of
Arlington, VA 22209 Trout Unlimited, Arlington,
VA, a nonprofit organization
dedicated to protection and
conservation of trout and
salmon and their habitats.
Michael P. O'Flaherty 64 Company Secretary and 18,218 Common 2.04
BIOQUAL, Inc. Corporate Vice President since (6)
9600 Medical Center Dr. June 1988, and Chief Operating
Rockville, MD 20850 Officer since June 1994; Mr.
O'Flaherty's duties for the
Company include most functions
of general management.
4
Jerry R. Reel 63 Vice President of the Division 1,884 Common 0.21
BIOQUAL, Inc. of Reproductive Endocrinology (7)
9600 Medical Center Dr. and Toxicology of BIOQUAL
Rockville, MD 20850 since June 1997; Vice
President, Science, of BIOQUAL since
October 1991.
David A. Newcomer 40 Acting Controller of BIOQUAL 2,718 Common 0.31
BIOQUAL, Inc. from May 1989 to June 1990; (8)
9600 Medical Center Dr. Controller from June 1990 to
Rockville, MD 20850 the present; and Chief
Financial Officer from June 1994 to
the present; Mr. Newcomer's duties
include the management of the
Company's financial functions.
Leanne DeNenno 47 Vice President of the Division 2,385 Common 0.27
BIOQUAL, Inc. of Laboratory Animal Sciences (9)
9600 Medical Center Dr. of BIOQUAL since June 1997;
Rockville, MD 20850 Vice President of Medical
Center Drive Division of BIOQUAL from
1991 to 1997; has been an employee
since 1982.
Marisa St. Claire 36 Vice President of the Division 2,184 Common 0.25
BIOQUAL, Inc. of Primate Biology and (10)
9600 Medical Center Dr. Medicine of BIOQUAL since
Rockville, MD 20850 September 2000; in 1996,
joined the Company as Deputy
Director of the Division of
Primate Biology and Medicine
All Executive Officers and 366,445 Common 39.24
Directors as a group (9
Persons)(2)(3)(4)(5)(6)(7)(8)(9)
(10)
(1) Assumes the exercise by such person or persons of the currently
exercisable options owned by him, her, or them and does not give effect
to any shares issuable upon exercise by any other person or persons of
options.
(2) Includes 4,178 shares in the name of John C. Landon's spouse.
(3) Assumes the exercise of currently exercisable options to purchase 23,500
shares.
(4) Assumes the exercise of currently exercisable options to purchase 3,834
shares.
(5) Assumes the exercise of currently exercisable options to purchase 500
shares.
(6) Assumes the exercise of currently exercisable options to purchase 11,668
shares.
(7) Assumes the exercise of currently exercisable options to purchase 1,834
shares.
(8) Assumes the exercise of currently exercisable options to purchase 2,001
shares.
(9) Assumes the exercise of currently exercisable options to purchase 2,385
shares.
(10) Assumes the exercise of currently exercisable options to purchase 1,634
shares.
5
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held three meetings in fiscal year 2001. All board
members were present at each meeting and at all committee meetings on which they
serve. The Board has established two committees, the Compensation Committee and
the Audit Committee.
The Compensation Committee (currently consisting of Messrs. Francisco and
Gauvin) meets as necessary to determine Dr. Landon's compensation. Dr. Landon
determines the compensation of the Company's other employees. The members of the
Committee are not employees of the Company and are independent directors. The
Compensation Committee had one formal meeting during fiscal year 2001.
There is unrestricted access between the Audit Committee and the independent
public accountants.
. The Audit Committee Report is set forth in Appendix A hereto.
. Audit fees paid to the independent public accountants are set forth in
Appendix B hereto.
. The full text of the Audit Committee charter is set forth in Appendix
C hereto.
The responsibilities of the Audit Committee (currently consisting of Messrs.
Francisco and Gauvin) include recommending to the full Board the selection of
the Company's independent public accountants, discussing the arrangements for
the proposed scope, and the results of the annual audit with management and the
independent public accountants; reviewing the scope of non-audit professional
services provided by the independent public accountants; obtaining from both
management and the independent public accountants their observations on the
Company's system of internal accounting controls. The members of the Committee
are not employees of the Company and are independent directors. There were two
formal meetings of the Audit Committee in fiscal year 2001.
Messrs. Francisco, August and Gauvin have agreements with the Company extending
through the term of their election. The agreements for Messrs. Francisco, August
and Gauvin provide for quarterly payments of $ 2,000 each as directors fees and
payments of $1,000 for attendance at Board of Directors meetings.
The agreement with Dr. August also provides payments of $2,500 per quarter for
services rendered to the Company as Scientific Adviser. Dr. August had a
separate agreement providing payment of $300 per hour for acting as Interim
Scientific Director of the Department of Discovery Research. This latter
agreement expired on June 27, 2001. The Company also reimburses Company related
travel expenses incurred by any of the Directors.
During fiscal year 2001, the Company paid the following cash compensation to
directors:
6
Attendance at Board Travel to
Directors Meetings and Board
Fees ($) Consultation Fees ($) Meetings ($)
-------- --------------------- ------------
Dr. J. Thomas August 8,000 19,600 332
Charles C. Francisco 8,000 3,000 904
Charles F. Gauvin 8,000 3,000 1,795
REMUNERATION OF EXECUTIVE OFFICERS AND RELATED MATTERS
The following table sets forth information with respect to remuneration paid
during the last three fiscal years to the Chief Executive Officer and the other
Company Officers whose compensation exceeded $ 100,000.
Other Annual
Name and Principal Salary Bonus Compensation
Position Year ($) ($) ($) /1,2
------------------ ---- --- --- --------
John C. Landon 2001 275,000 40,000 32,723
CEO, President, Chairman 2000 275,000 30,000 32,723
Of the Board 1999 275,000 40,000 32,723
Michael P. O'Flaherty 2001 156,250 36,564 10,593
Chief Operating Officer 2000 134,593 35,099 10,593
Secretary 1999 127,286 44,292 10,593
Jerry R. Reel 2001 134,876 6,946
Vice President 2000 121,402 5,550
1999 120,652 3,789
David A. Newcomer 2001 99,092 20,193 4,500
Chief Financial Officer 2000 91,726 19,378 4,500
1999 88,600 26,292 4,500
Marisa St.Claire 2001 98,002 5,000
Vice President 2000 84,058
1999 80,054
1/ Other annual compensation for the CEO for the years 2001, 2000, and 1999
represents premiums for a $1,000,000 Split Dollar Life Insurance Policy.
2/ Other annual compensation for the Chief Operating Officer and Chief
Financial Officer for the years 2001, 2000, and 1999 represents premiums
for $250,000 Split Dollar Life Insurance Policies.
Employment Contracts and Termination of Employment and Change-in-Control
------------------------------------------------------------------------
Arrangements
------------
Dr. Landon has an employment agreement with the Company, extending through July
13, 2002. Pursuant to this agreement, Dr. Landon's base compensation is $275,000
per year. The agreement provides for various additional incentive compensations
dependent upon the results of the Company's
7
operation each year through the term of employment. The Compensation Committee
of the Board of Directors determines the amount of incentive compensation for
Dr. Landon.
Dr. Landon's Employment Agreement has the following compensation upon
termination provisions: 1. If Dr. Landon's employment is terminated due to his
death, the Company shall pay his estate bi-weekly amounts equal to his base
annual salary for the twelve month period following his death; 2. If Dr. Landon
becomes disabled, he will receive base salary compensation up to six months
after becoming disabled and at the end of the six-month period his employment
will be terminated; 3. If, during the five-year term of Dr. Landon's agreement,
there is a change-in-control of the Company, the Agreement shall remain in
effect for the remainder of the five-year term or an additional two and one-half
years, whichever is greater; 4. If Dr. Landon is terminated for cause, or if the
Company and Dr. Landon mutually agree to terminate Dr. Landon's employment, the
Company shall have no further obligation to Dr. Landon under the Agreement.
Michael O'Flaherty and David Newcomer have severance agreements with the
Company. The terms of the severance agreements provide that in the event the
Company terminates the executive's employment with the Company for other than
the following reasons, termination for cause, voluntary resignation, disability
or death, the executive is entitled to receive severance pay equal to one year
of compensation, based on the base annual salary in effect at the time of
termination.
Annual Incentives
-----------------
Annual incentives for the executive officers named in the above table, excluding
the CEO, provide cash compensation opportunity for achieving various performance
objectives. These objectives include but are not limited to the following:
financial performance measures such as profit, sales, indirect cost controls,
contract renewal and contract award. Certain objectives have minimum and maximum
levels of performance set. No payment is made if performance fails to meet the
minimum level for a particular objective.
Transactions With Management
----------------------------
On June 1, 1988, the Company and Dr. Landon agreed to consolidate the previous
loan facilities available to Dr. Landon into a single loan of $100,000. The loan
had a five year term with repayment of principal deferred for three years. The
loan bore interest at the six month certificate of deposit rate paid by Signet
Bank, Maryland, and the rate was adjusted quarterly. On September 29, 1989, the
Company agreed to increase the loan to $125,000. On September 21, 1990, the
Company agreed to increase the loan to $150,000. Pursuant to Dr. Landon's
previous employment agreement, the loan was to be repaid in five installments of
$30,000 plus interest within six weeks after the end of each of the next five
fiscal years beginning with fiscal year 1992.
On July 1, 1994, Dr. Landon made a payment of $2,745 on accrued interest. On
June 6, 1994, the Company agreed to defer Dr. Landon's third $30,000 repayment
and make the payment due as two $15,000 installments paid with the fourth and
fifth $30,000 repayments respectively. On October 11,
8
1995, the Company's shareholders affirmatively voted to approve the purchase of
Company stock from Dr. Landon at market value to fund the repayment by Dr.
Landon of the remainder of the Company loan. On October 16, 1996, the Board of
Directors affirmatively voted to extend the due date of the loan, maintaining
all other terms and conditions, until October 31, 1998.
On October 28, 1998, the Compensation Committee of the Board of Directors agreed
to extend the repayment period of the Company loan to Dr. Landon from October
31, 1998 to April 30, 2000. In accordance with the shareholders' prior approval
of the Company's plan to purchase shares of stock from Dr. Landon at market
value, the Company purchased, on a quarterly basis for four quarters, 9,000
shares, and for one quarter, 2,039 shares of Company stock from Dr. Landon at
market value. Dr. Landon made a cash payment of $20,000 on accrued interest in
December, 1999. Dr. Landon paid the remaining balance of $753 of accrued
interest on June 23, 2000. During fiscal year 1999, Dr. Landon made repayments
totaling $57,094. During fiscal year 2000, Dr. Landon repaid the balance
($32,906) of the note. The largest amount owed by Dr. Landon during the fiscal
year ended May 31, 2000 in respect to his loan facilities was $32,906, excluding
accrued interest of $753. There was no addition to the loan during this fiscal
year.
ITEM 2 - RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors recommends the ratification of the appointment of the
firm of Aronson, Fetridge & Weigle as independent auditors for fiscal year 2002.
A representative of Aronson, Fetridge & Weigle will be present at the Annual
Meeting with the opportunity to make a statement if the representative desires
to do so and will be available to respond to appropriate questions raised at the
meeting.
Services provided in connection with the audit function by Aronson, Fetridge &
Weigle for the fiscal year 2001 included primarily the examination of BIOQUAL's
consolidated financial statements, and the review of filings with the Securities
and Exchange Commission.
As reported in an 8-K filed by the Company on November 13, 2000, effective
November 7, 2000, the Company terminated the engagement of Deloitte & Touche LLP
as its independent public accountants. On the same day, the Company retained
Aronson, Fetridge & Weigle as its public accountants. The engagement of Aronson,
Fetridge & Weigle was recommended by the Audit Committee of the Company's Board
of Directors and approved by the Board of Directors. Aronson, Fetridge & Weigle
audited the Company's financial statements for the year ended May 31, 2001.
The audit reports by Deloitte & Touche LLP on the Company's financial statements
for each of the last two fiscal years ended May 31, 1999 and May 31, 2000,
respectively, did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audits of the Company's financial statements for each of
the two fiscal
9
years ended May 31, 1999 and May 31, 2000, respectively, and in the subsequent
interim period, there have been no disagreements between the Company and
Deloitte & Touche LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Deloitte & Touche LLP would have caused it to
make reference to the subject matter of the disagreement in connection with its
reports on the audited financial statements.
Audit Fees paid to Deloitte & Touche LLP and to Aronson, Fetridge & Weigle are
----------
presented in Appendix B attached hereto.
Financial Information Systems Design and Implementation Fees were not paid to
------------------------------------------------------------
the independent accounting firms.
All Other Fees (for preparation of tax returns and expenses related to the
--------------
change in independent auditors) are presented in Appendix B attached hereto.
The Board of Directors recommends a vote FOR the approval of Aronson, Fetridge &
Weigle as independent auditors for the fiscal year 2002. Proxies solicited by
the Board will be so voted unless shareholders specify a contrary choice on the
proxy card. The affirmative vote of a majority of the shares entitled to vote
and present at the meeting, in person or by proxy, is required to approve the
appointment of Aronson, Fetridge & Weigle.
SHAREHOLDER PROPOSALS
Shareholders who wish to submit proposals at the next Annual Meeting of
Shareholders should submit such proposals to the Company at its headquarters at
9600 Medical Center Drive, Rockville, Maryland 20850. Such proposals must be
received by the Company by June 1, 2002.
The Company will not be required to include in its Proxy Statement or form of
proxy, a shareholder proposal which is received after that date or which
otherwise fails to meet requirements for shareholder proposals established by
regulations of the Securities and Exchange Commission. Shareholders who wish to
submit a proposal at the 2002 annual meeting (but do not wish to seek inclusion
of the proposal in the Company's proxy material) must submit their notice to the
Company on or before August 7, 2002.
10
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, among others, to file with the
Securities and Exchange Commission (the "SEC") and the Chicago Stock Exchange an
initial report of ownership of the Company's stock on Form 3 and reports of
changes in ownership on a Form 4 or a Form 5. Persons subject to Section 16 are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms that they file. Under SEC rules, certain forms of indirect ownership
and ownership of Company stock by certain family members are covered by these
reporting rules. As a matter of practice, the Company's administrative staff
assists the Company's executive officers and directors in preparing initial
reports of ownership and reports of changes in ownership and in filing these
reports on their behalf. Based solely on a review of the copies of such forms
furnished to the Company, and on written representation from certain reporting
persons, the Company believes that during fiscal year 2001, all of its executive
officers and directors filed the required reports on timely basis under Section
16(a).
Proxy Preparation
-----------------
The expense of preparing, assembling, printing, and mailing the form of proxy
material used for the solicitation of proxies will be borne by the Company. The
Company has not retained any firm to solicit proxies on behalf of the Company.
Company directors and officers of the Company may solicit proxies in person or
by telephone and will request brokerage houses and other custodians, nominees
and fiduciaries to forward soliciting material to beneficial owners of Common
Stock. So far as the Board of Directors is aware, only the aforementioned
matters will be acted upon at the meeting. If any other matters properly come
before the meeting, it is intended that the accompanying proxy may be voted on
such matters in accordance with the best judgment of the person or persons
voting said proxy.
THE COMPANY'S REPORT ON FORM 10-KSB FOR ITS FISCAL YEAR ENDED MAY 31, 2001,
ACCOMPANIES THIS PROXY STATEMENT. UPON THE WRITTEN REQUEST OF A SHAREHOLDER OF
THE COMPANY ADDRESSED TO MICHAEL P. O'FLAHERTY, SECRETARY OF THE COMPANY, AT
9600 MEDICAL CENTER DRIVE, ROCKVILLE, MARYLAND 20850, THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO SUCH SHAREHOLDER A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB FOR ITS FISCAL YEAR ENDED MAY 31, 2001, INCLUDING THE FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES
EXCHANGE ACT OF 1934.
By Order of the Board of Directors
/s/ Michael P. O'Flaherty
Michael P. O'Flaherty
Secretary
11
APPENDIX A
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the system of
internal controls. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted accounting principles and to issue a report
thereon. The Committee monitors these processes.
In this context, the Committee met and held discussions with management and
the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Committee
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The Committee also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Codification of Statements on Auditing Standards, AU 380), as amended.
In addition, the Committee discussed with the independent auditors the
auditor's independence from the Company and its management, and the independent
auditors provided to the Committee the written disclosures and letter required
by the Independence Standards Board Standard No. 1 (Independence Discussions
With Audit Committees).
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee met with the independent
auditors, with and without management present, to discuss the results of their
examinations, the evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. The Committee did not
consider whether the provision of the services rendered by the auditors, other
than audit services, is compatible with maintaining the principal accountant's
independence. Fees for services other than audit services consisted of fees for
preparing corporate tax returns and fees related to the change in independent
auditors.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Company's Annual Report on Form
10-KSB for the year ended May 31, 2001, for filing with the Securities and
Exchange Commission. The Committee and the Board also have recommended, subject
to shareholder approval, the selection of the Company's independent auditors for
fiscal year 2002.
AUDIT COMMITTEE
Charles F. Gauvin, Chairman
Charles C. Francisco
APPENDIX B
INDEPENDENT AUDITOR
FEE DISCLOSURE
Fiscal Year
Ended
Professional Services Provided May 31, 2001
------------------------------ ----------------
Audit Fees:
----------
Deloitte & Touche, LLP $ 46,600
Aronson, Fetridge & Weigle 5,000
----------------
Total Audit Fees $ 51,600
----------------
Financial Information Systems Design and Implementation Fees: $ - 0 -
------------------------------------------------------------
All Other Fees:
--------------
Deloitte & Touche, LLP (1) $ 20,550
Aronson, Fetridge & Weigle - 0 -
----------------
Total All Other Fees $ 20,550
----------------
TOTAL FEES $ 72,150
================
(1) Includes fees for preparing corporate tax returns and fees related to
the change in independent auditors.
APPENDIX C
AUDIT COMMITTEE CHARTER
The purpose of the Audit Committee is to provide assistance to the
Board of Directors in fulfilling its fiduciary responsibilities by assuring that
the Company's accounting and reporting practices, internal controls and audit
coverage are adequate.
Authority
Primary responsibility for the Company's financial reporting and
internal operating controls is vested in senior operating management as overseen
by the Board of Directors ("Board"). Pursuant to the Bylaws of the Company, an
Audit Committee is hereby established by the Board of Directors as a standing
committee. The Committee shall act only as a Committee with individual members
possessing no authority to act on their own.
The Audit Committee shall have unrestricted access to Company personnel
and documents and will be given the resources necessary to discharge its
responsibilities. The Audit Committee will meet at least annually and call
special meetings as required.
Responsibilities
1. Financial Reporting - The responsibility of the Audit
-------------------
Committee in the area of financial reporting is to oversee
that financial disclosures made by management reasonably
present the Company's financial condition, results of
operations, and plans and long-term commitments in accordance
with generally accepted accounting principles. To accomplish
this, the Audit Committee will:
a. Oversee the external audit process, including:
Annual recommendation to the Board of the selection,
retention or termination of the independent certified
public accountants
Monitoring of audit results
b. Review significant accounting policies and accounting
policy decisions.
c. Review the financial statements, including:
Interim consolidated financial statements
and auditor's report prior to publication.
Annual consolidated financial statements and
auditor's report, prior to publication.
Annual financial statements and auditor's
report for any subsidiary of BIOQUAL, Inc.
that has an independent audit. Further, each
Committee member shall receive a copy of the
financial statements and auditor's report
for any subsidiary, partnership or joint
venture with other than a standard "clean"
audit report or with any unusual or
significant disclosures.
10-QSB.
10-KSB.
d. Arrange for periodic reports from management and the
independent certified public accountants to assess
the impact of significant regulatory changes and
accounting or reporting developments proposed by the
Financial Accounting Standards Board or the SEC or
any other significant matters that may affect the
Company.
e. Review with management the management's discussion
and analysis section of the annual report.
f. Ask management and the independent certified public
accountants if there were any significant reporting
or operational issues affecting the financial
statements that were discussed during the accounting
period.
g. Obtain from management a notification of issues and
responses whenever a second opinion is sought from an
independent certified public accountant.
h. Review the letter of management representations given
to the independent public certified accountants and
inquire whether any difficulties were encountered in
obtaining the letter.
2. Internal Controls - The Audit Committee shall:
a. Meet privately with the independent certified public
accountants to discuss pertinent matters, including
quality of management, financial, accounting and
internal audit personnel, and to determine if any
restrictions have been placed by management on the
scope of their examination or if there are other
matters that should be discussed.
b. Direct special investigations into significant
matters brought to its attention within the scope of
its duties.
c. Review letters from the independent certified public
accountants related to recommendations for
improvements in the system of internal control and
accounting procedures.
Membership
The members of the Audit Committee shall meet the independence
requirements of the Chicago Stock Exchange and be comprised of at least two
independent members of the Board of Directors. A director is considered
independent if he/she is not an officer or employee of the Company or its
subsidiary and has no relationship with the Company that may interfere with the
exercise of their independence in carrying out the responsibilities of a
director. The members shall be designated annually by the Board of Directors
upon the recommendation of the Chairman of the Board. The Committee membership
may be temporarily expanded by the Chairman of the Board or the Chairman of the
Audit Committee as either may determine necessary for special reviews or
investigations. In addition, the Committee may have in attendance at any
meeting, members of management, independent or internal auditors as it deems
necessary to carry out its duties. A majority of the Committee shall constitute
a quorum for the transaction of business. The action of a majority of those
present at a meeting, at which a quorum is present, shall be the act of the
Committee. The Committee shall keep a record of its actions and proceedings and
make a report thereof from time to time to the Board of Directors.
Adopted by the Committee
Approved by the Board
COMMON STOCK PROXY
BIOQUAL, INC.
ANNUAL MEETING OF SHAREHOLDERS, OCTOBER 23, 2001
The undersigned hereby appoints John C. Landon and Michael P. O'Flaherty
and each of them, with power of substitution in each, as proxies or proxy to
represent the undersigned at the Annual Meeting of the Shareholders of BIOQUAL,
Inc. (the "Company") to be held at the Hilton Gaithersburg, 620 Perry Parkway,
Gaithersburg, Maryland, on Tuesday, October 23, 2001, at 10:00 a.m., local time,
and at any adjournment or postponement thereof, and to vote the number of shares
of Common Stock which the undersigned would be entitled to vote if personally
present, (a) in the manner designated herein with respect to the election of
directors and the other identified proposal and (b) in their discretion on such
other matters as may properly come before the meeting or any adjournments
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted "For" all nominees and
the proposal.
BIOQUAL, Inc. Annual Meeting
Of Shareholders
Tuesday, October 23, 2001
10:00 a.m.
The Hilton Gaithersburg
620 Perry Parkway
Gaithersburg, Maryland
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING AND DESIRE TO HAVE THEIR
STOCK VOTED AT THE MEETING ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ABOVE
PROXY ON THE REVERSE SIDE AND RETURN THE SAME IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
1. ELECTION OF DIRECTORS: J. Thomas August, M.D., Charles C. Francisco,
Charles F. Gauvin, John C. Landon, Ph.D.
FOR ALL NOMINEES WITHHOLD (To withhold authority to vote for any
listed except as AUTHORITY individual nominees, write the name of
otherwise indicated to vote for all such nominee(s) on the following line.)
with respect to nominees listed
individual nominees
[__] [__] _________________________________
2. RATIFICATION OF INDEPENDENT AUDITORS:
Ratification of the selection of Aronson, Fetridge & Weigle as the Company's
independent auditors.
FOR AGAINST ABSTAIN
[__] [__] [__]
Dated:
_______________________________________
Signature(s)
Please sign exactly as your name appears on
this proxy. When signing as attorney,
executor, administrator, trustee, guardian,
etc. or as an officer of a corporation, give
full title. For joint accounts obtain both
signatures.