Shareholders of Bioanalytical Systems, Inc.:
You are invited to attend the Annual Meeting of Shareholders of Bioanalytical Systems, Inc. ("BASi"(“BASi”) to be held Thursday, February 20, 2003,26, 2004, at 10:00 a.m. (EST) at BASi headquarters located at 2701 Kent Avenue, West Lafayette, Indiana.
At the meeting, shareholders will vote on the election of six persons to the Board of Directors, the amendment of the BASi 1997 Employee Incentive Stock Option Plan, the approval of the BASi 1997 Outside Director Stock Option Plan, as recently amended, and the ratification of the selection of Ernst & Young LLP as independent auditors for the current year. Details can be found in the accompanying Notice of Annual Meeting and Proxy Statement.
We hope you are able to attend the Annual Meeting personally, and we look forward to meeting with you. Whether or not you currently plan to attend, please complete, date and return the proxy card in the enclosed envelope. The vote of each shareholder is very important. You may revoke your proxy at any time before it is voted by giving written notice to the Secretary of BASi, by filing a properly executed proxy bearing a later date or by attending the annual meetingAnnual Meeting and voting in person.
On behalf of the Board of Directors and management of Bioanalytical Systems, Inc.,BASi, I extend our appreciationsincerely thank you for your continued support.
Sincerely,
Bioanalytical Systems, Inc.
Peter T. Kissinger, Ph.D.
Chairman, President and Chief Executive Officer
[LOGO]
BIOANALYTICAL SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 20, 200326, 2004
To the Shareholders of Bioanalytical Systems, Inc.:
The Annual Meeting of Shareholders of Bioanalytical Systems, Inc. (“BASi”) will be held at the principal executive offices of BASi, at 2701 Kent Avenue, West Lafayette, Indiana 47906 on Thursday, February 20, 200326, 2004 at 10:00 a.m. (EST) for the following purposes:
(a) To elect directors of BASi to serve for a one-year term;
Holders of BASi common shares of record at the close of business on December 31, 20022003 are entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors, |
January 27, 200323, 2004
West Lafayette, Indiana
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE
ANNUAL MEETING, OR IF YOU DO PLAN TO ATTEND BUT WISH TO VOTE
BY PROXY, PLEASE DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY.
A RETURN ENVELOPE IS PROVIDED FOR THIS PURPOSE.
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GENERAL INFORMATION[LOGO]
BIOANALYTICAL SYSTEMS, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 26, 2004
General Information
This proxy statement is furnished in connection with the solicitation by the Board of Directors of BASi of proxies to be voted at the Annual Meeting of Shareholders to be held at 10:00 a.m. (EST) on Thursday, February 20, 2003,26, 2004, and at any adjournment thereof. The meeting will be held at the principal executive offices of BASi, 2701 Kent Avenue, West Lafayette, Indiana 47906. This proxy statement and the accompanying form of proxy were first mailed to shareholders on or about January 27, 2003.2004.
A shareholder signing and returning the enclosed proxy may revoke it at any time before it is exercised by delivering written notice to the Secretary of BASi, by filing a properly executed proxy bearing a later date or by attending the annual meetingAnnual Meeting and voting in person. The signing of a proxy does not preclude a shareholder from attending the meetingAnnual Meeting in person. All proxies returned prior to the meetingAnnual Meeting, and not revoked, will be voted in accordance with the instructions contained therein. Any proxy not specifying to the contrary will be voted (1) FOR the election of the nominees for director named below, (2) FOR the proposal to amend the BASi 1997 Employee Stock Option Plan (the "Employee Option Plan"), as described below, (3) FOR the proposal to approve the BASi 1997 Outside Director Stock Option Plan, as amended (the "Director Option Plan"), as described below, and (4)(2) FOR the proposal to ratify the selection of Ernst & Young LLP as independent auditors for BASi for the fiscal year ending September 30, 2003.2004. Abstentions and broker non-votes are not counted for purposes of determining whether a proposal has been approved, but will be counted for purposes of determining whether a quorum is present.
As of the close of business on December 31, 2002,2003, the record date for the Annual Meeting, there were outstanding and entitled to vote 4,590,0454,869,502 common shares of BASi. Each outstanding common share is entitled to one vote. BASi has no other voting securities.securities outstanding. Shareholders do not have cumulative voting rights.
A quorum will be present if a majority of the common shares are present, in person or by proxy, at the meeting. TheAnnual Meeting. If a quorum is present, the nominees for director will be elected by a plurality of the votes cast assuming a quorum is present. The amendment of the Employee Option Plan must be approved by the holders of a majority of the outstanding shares. All other matters, including the approval of the Director Option Plan and the independent auditors will be approved by a majority of the votes cast.
A copy of the BASi Annual Report and Form 10-K, including audited financial statements and a description of operations for the fiscal year ended September 30, 2002, has preceded or2003, accompanies this proxy statement. The financial statements contained in the Annual Report and Form 10-K are not incorporated by reference in this proxy statement. The solicitation of proxies is being made by BASi, and all expenses in connection with the solicitation of proxies will be borne by BASi. BASi expects to solicit proxies primarily by mail, but directors, officers and other employees of BASi may also solicit proxies in person or by telephone.
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PROPOSALS FOR 2004 ANNUAL MEETINGProposals for 2005 Annual Meeting
Shareholder proposals to be considered for presentation and inclusion in the proxy statement tofor the 20042005 Annual Meeting of Shareholders must be submitted in writing and received by BASi on or before September 29, 2003.2004. If notice of any other shareholder proposal intended to be presented at the 20042005 Annual Meeting of Shareholders is not received by BASi on or before December 13, 2003,2004, the proxy solicited by the Board of Directors of BASi for use in connection with that meeting may confer authority on the proxies to vote in their discretion on such proposal, without any discussion onin the BASi proxy statement for that meeting of either the proposal or how such proxies intend to exercise their voting discretion.
The mailing address of the principal offices of BASi is 2701 Kent Avenue, West Lafayette, Indiana 47906.
BENEFICIAL OWNERSHIP OF COMMON SHARESBeneficial Ownership of Common Shares
The following table sets forth certain data with respect to those persons known by BASi to be the beneficial owners of five percent or more of the outstanding common shares of BASi as of December 31, 2002,2003, and also sets forth such data with respect to each director of BASi, each officer listed in the Executive Compensation table (on page 67 of this proxy statement), and all directors and executive officers of BASi as a group. Except as otherwise indicated in the notes to the table, each beneficial owner possesses sole voting and investment power with respect to the common shares indicated.
| Name(1) | Number | Percent | ||||
|---|---|---|---|---|---|---|
| Peter T. Kissinger(2) | 1,282,755 | 26 | .2% | |||
| Ronald E. Shoup(3) | 100,966 | 2 | .1% | |||
| Candice B. Kissinger(4) | 1,282,755 | 26 | .2% | |||
| William E. Baitinger(5) | 150,634 | 3 | .1% | |||
| Leslie B. Daniels(6) | 38,042 | 0 | .8% | |||
| W. Leigh Thompson(7) | 5,500 | 0 | .1% | |||
| Michael P. Silvon(8) | 4,500 | 0 | .1% | |||
| Eleven executive officers and directors as a group(9) | 1,804,070 | 36 | .8% | |||
| (1) |
| Ownership Includes |
| (2) | (i) | 430,947 | beneficially owned by Candice B. Kissinger, |
| (ii) | 598,504 | owned jointly by Dr. and Mrs. Kissinger |
| (iii) | 1,000 | options held by Mrs. Kissinger and |
| (3) | (i) | 93,966 | owned jointly by Dr. Shoup and his wife |
| (ii) | 7,000 | options exercisable within 60 days from December 31, |
| 252,309 | beneficially owned by Dr. Kissinger |
| (ii) | 598,504 | owned jointly by Dr. |
| (iii) | 1,000 | options exercisable within 60 days from December 31, |
| 148,412 | owned jointly by |
| (ii) | 5,500 | options exercisable within 60 days from December 31, |
| Excludes shares that may be acquired by Mr. Daniels upon conversion of a $100,000 convertible note, the conversion price for which is based upon the market price of the Company's common shares |
| (7) | 5.500 | options exercisable within 60 days from December 31, |
| 500 | owned jointly by Dr. Silvon and his wife |
| (ii) | 4,000 | options exercisable within 60 days from December 31, |
| 31,000 | options exercisable by various executive officers and directors within 60 days from December 31, |
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1. ELECTION OF DIRECTORS
NOMINEESNominees
The Bylaws of BASi provide for no fewer than seven and no more than nine directors, each of whom is elected for a one-year term. The terms of all incumbent directors will expire at the Annual Meeting. The Board of Directors has nominated all of the current directors for re-election at the Annual Meeting. The directors nominated for re-election are:
• Peter T. Kissinger,
• Ronald E. Shoup,
• Candice B. Kissinger,
• William E. Baitinger,
• Leslie B. Daniels and
• W. Leigh Thompson
(collectively, the “Nominated Directors”). Following the recent resignation of John A. Kraeutler, the Board of Directors is conducting a search for two new directors.
The Board of Directors recommends that shareholders vote FOR the election of all of the Nominated Directors and, W. Leigh Thompson (collectively, the "Nominated Directors").
BASi is sad to report that Michael K. Campbell, it’s longtime director, passed away this year. BASi has not yet been able to locate a suitable replacement for Mr. Campbell. While the search continues, shareholders are being asked to elect only six directors at the annual meeting. Proxies may not be voted for more than six nominees.
Unlessunless authority to vote for any Nominated Director is withheld, the accompanying proxy will be voted FOR the election of all the Nominated Directors. However, the persons designated as proxies reserve the right to cast votes for another person designated by the Board of Directors in the event any Nominated Director becomes unable or for good cause will not serve. Proxies will not be voted for more than six nominees. ThoseIf a quorum is present, those nominees receiving at least a plurality of the votes eligible to be cast will be elected to the Board of Directors.
The directors of BASi as of December 31, 2002, which2003, who are also the Nominated Directors, are as follows:
| Name | Age | Position | Served as Director Since |
|---|---|---|---|
| Peter T. Kissinger, Ph.D. | 59 | Chairman of the Board President; Chief Executive Officer | 1974 |
| Ronald E. Shoup, Ph.D. | 52 | Chief Operating Officer, BASi Contract Research Services; Director | 1991 |
| Candice B. Kissinger | 52 | Senior Vice President; Director of Research; Director | 1978 |
| William E. Baitinger | 70 | Director | 1979 |
| Leslie B. Daniels | 56 | Director | 2003 |
| W. Leigh Thompson, Ph.D., M.D. | 65 | Director | 1997 |
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BUSINESS EXPERIENCE OF NOMINATED DIRECTORSBusiness Experience of Nominated Directors
Peter T. Kissinger, Ph.D.founded BASi in 1974 and has served as its Chairman, President and Chief Executive Officer since 1974. He is also a part-time Professor of Chemistry at Purdue University, where he has been teaching since 1975. Dr. Kissinger has a Bachelor of Science degree in Analytical Chemistry from Union College and a DoctoratePh.D. in Analytical Chemistry from the University of North Carolina.
Ronald E. Shoup, Ph.D. serves as Chief Operating Officer of BASi's BASiBASi’s Contract Research Services and is Managing Director of BASiBAS Analytics, Ltd. in the UK. He joined BASBASi in 1980 as an applications chemist, became Research Director in 1983 and initiatedlaunched the laboratoryContract Research services group within BASBASi in 1988. Dr. Shoup has a Bachelor of Science degree in Mathematics and Chemistry from Purdue University and then attended Michigan State and Purdue University for his Ph.D. in Analytical Chemistry. He has served on BASi's boardBASi’s Board of directorsDirectors since 1991 and is a member of the external advisory board to the Purdue University Department of Chemistry.
Candice B. Kissinger is currently serving asdevotes all of her time to branding, client relationship management, sales, product development, and managing installation and service for in vivo products and services, principally the Interim Director of Research.Culex® ABS. She has beenwas named Senior Vice President, Marketing sincein January 2000. She2000 and is currently Director of Research. From 1981 to 2000 she served as Vice President, International Sales and Marketing since July 1981. Mrs.Marketing. Ms. Kissinger has a Bachelor of Science degree in Microbiology from Ohio Wesleyan University and a Master of Science degree in Food Science from the University of Massachusetts. Mrs. Kissinger is the wife of Dr. Peter Kissinger. She has served as a director and Secretary of BASi since 1978.
William E. Baitinger has served as a director of BASi since 1979. Mr. Baitinger was Director of Technology Transfer for the Purdue Research Foundation from 1988 until 2000. In this capacity he was responsible for all licensing and commercialization activities from Purdue University. He currently serves as Special Assistant to the Vice President for Research at Purdue University. Mr. Baitinger has a Bachelor of Science degree in Chemistry and Physics from Marietta College and a Master of Science degree in Chemistry from Purdue University.
John A. Kraeutler has served as a director of BASi since January 1997. Mr. Kraeutler has been President and Chief Operating Officer of Meridian Bioscience, Inc., a life sciences manufacturer, since August 1992 and is also a director. Prior to joining Meridian Bioscience, Inc., Mr. Kraeutler held a progression of technical, marketing and general management positions with a number of healthcare companies, including Carter-Wallace, Becton Dickinson and Organon (Akzo Nobel). Mr. Kraeutler has Bachelor of Science degree in Biology from Fairleigh Dickinson University and a Master of Business Administration in Marketing and a Master of Science degree in Biology from Seton Hall University.
W. Leigh Thompson, Ph.D., M.D.,, has served as a director of BASi since January 1997. Since 1995, Dr. Thompson has been Chief Executive Officer of Profound Quality Resources, Inc., a scientific consulting firm. Prior to 1995, Dr. Thompson was Professor of Medicine at Case Western Reserve and Indiana Universities, President of the societySociety of Critical Care Medicine and Chief Scientific Officer at Eli Lilly and Company. He earned a Bachelor of Science degree in Biology from the College of Charleston, a Master of Science and a DoctoratePh.D. in Pharmacology from the Medical University of South Carolina, a Medical Doctor degree from The Johns Hopkins University and was awarded a DoctoratePh.D. of Science from the Medical University of South Carolina. Dr. Thompson is also a director of La Jolla Pharmaceutical Company, Diabetogen, Bioscience, Inc., Medarex, Inc., Guilford Pharmaceuticals, Inc., Inspire Pharmaceuticals, Inc., Sontra Medical Corp. and DepoMed, Inc.
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SCIENTIFIC ADVISORY BOARDLeslie B. Daniels joined the BASi Board of Directors in 2003. He was a director of PharmaKinetics Laboratories, Inc., acquired by BASi in 2003. Mr. Daniels is a founding partner of CAI, a private equity fund in New York City. He previously was President of Burdge, Daniels & Co., Inc., a principal in venture capital and buyout investments as well as trading of private placement securities, and before that, a Senior Vice President of Blyth, Eastman, Dillon & Co. where he had responsibility for the corporate fixed income sales and trading departments. Mr. Daniels is a former Director of Aster-Cephac SA, IVAX Corporation, MIM Corporation, Mylan Laboratories, Inc., NBS Technologies Inc. and MIST Inc. He was also Chairman of Zenith Laboratories, Inc. and currently serves as a Director of SafeGuard Health Enterprises, Inc.
Scientific Advisory Board
In 1985, BASi established a Scientific Advisory Board to assist BASi in its research and development activities. The Scientific Advisory Board is comprised of distinguished scientists from outside BASi who have significant accomplishments in areas of science and technology that are important to BASi'sBASi’s future. The Scientific Advisory Board interacts with BASi'sBASi’s scientific and management staff.
Each member of the Scientific Advisory Board is employed outside BASi and may have commitments to, or consulting or advisory contracts with, other entities that may conflict or compete with his or her obligations to BASi. Generally, members of the Scientific Advisory Board are not expected to devote a substantial portion of their time to BASi matters. Members of the Scientific Advisory Board do not receive any compensation in connection with attending meetings of the Scientific Advisory Board. They do, however, from time to time, receive compensation in connection with consulting services they render to BASi. In fiscal 2002, Dr. W. Leigh Thompson (also a director of BASi) received $3,700 for consulting services rendered to BASi. No other member of the Scientific Advisory Board was retained or received fees for consulting services.
FAMILY RELATIONSHIPSFamily Relationships
Peter T. Kissinger and Candice B. Kissinger are husband and wife. There is no other family relationship among the directors and executive officers of BASi.
COMPENSATION OF DIRECTORSCompensation of Directors
Directors who are not employees of BASi receive $1,500 for each Board meeting attended, plus out-of-pocket expenses incurred in connection with attendance at such meetings. Directors of BASi or an affiliate of BASi who are not employed by BASi or any affiliate may also participate in the BASi 1997 Outside Director Stock Option Plan, as may be approved from time to time by the Compensation Committee. No optionsOptions were issued pursuant to the planWilliam E. Baitinger and W. Leigh Thompson in fiscal 2002.2003, in the amount of 9,000 shares each. Directors who are employees of BASi do not receive any additional compensation for their services as directors.
7
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORSCertain Relationships and Transactions
Leslie B. Daniels, a director of the Company currently up for reelection, was a director of PKLB at the time it was acquired by the Company in June 2003. As a result of that acquisition, Mr. Daniels received a 6% convertible subordinated note in the amount of $498,809 due January 1, 2008 (the “6% Note”), in exchange for Series A Convertible Preferred Shares of PKLB which he held at the effective time of the acquisition. The 6% Note is convertible at any time after June 30, 2004, into a total of approximately 31,175 of the Company’s common shares. In addition, prior to the acquisition of PKLB, Mr. Daniels made various loans to PKLB totaling $350,000. These loans were consolidated into a $350,000 promissory note which was convertible into shares of common stock of PKLB (the “PKLB Note”). On December 31, 2003, BASi Maryland, Inc. (the former PKLB) assigned the PKLB Note to the Company. On that same date, the Company issued a $350,000 8% convertible note (the “New Note”) to Mr. Daniels in exchange for the PKLB Note, which was cancelled. The New Note matured on June 1, 2005 and was convertible into the Company’s common shares at a price based upon the market price of the Company’s common shares at or about the time of conversion. Immediately following the issuance of the New Note on December 31, 2003, the Company prepaid $100,000 of the outstanding principal amount of the New Note, plus approximately $31,000 in accrued interest, and Mr. Daniels converted $150,000 of the principal amount of the New Note into 38,042 of the Company’s common shares. Following the payment and conversion, the Company issued a new 8% convertible note due June 1, 2005, to Mr. Daniels on substantially the same terms as the New Note for the remaining $100,000 principal amount.
Committees and Meetings of the Board of Directors
The Board of Directors has established a Compensation and Incentive Stock Option, Committee, an Audit, Committee and an Executive Committee. The CompensationCommittees. Scheduled meetings are supplemented by frequent informal exchange of information and Incentive Stock Option Committee (the “Compensation Committee”) is comprised of Peter T. Kissinger, Candice B. Kissinger, John A. Kraeutler and William E. Baitinger. The responsibilitiesactions taken by unanimous votes without meetings.
No member of the Board of Directors attended fewer than 75% of the meetings of the Board of Directors and meetings of any committee of the Board of Directors of which he or she was a member. Four out of six members of the Board of Directors attended the 2003 Annual Meeting of shareholders. All of the members of the Board of Directors are encouraged, but not required, to attend BASi’s annual meetings. The following chart shows the number of meetings of each of the committees of the Board of Directors and meetings of the Board of Directors at which a quorum was present:
| Committee | Members | Meetings in 2003 |
| Compensation and Incentive Stock Option | Peter T. Kissinger Candice B. Kissinger William E. Baitinger | 0 |
| Audit | William E. Baitinger Leslie B. Daniels W. Leigh Thompson | 2 |
| Executive | Peter T. Kissinger Ronald E. Shoup William E. Baitinger W. Leigh Thompson | 0 |
| Board of Directors | 6 |
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TheCompensation Committee include making makes recommendations to the Board of Directors with respect to:
• compensation arrangements for the executive officers of BASi;BASi,
• policies relating to salaries and job descriptions;descriptions,
• insurance programs; andprograms,
• benefit programs, including retirement plans. The Compensation Committee administersplans,
• administration of the 1990 and 1997 Employee Incentive Stock Option Plans, and
• the 1997 Outside Director Stock Option Plan. Due to a salary freeze implemented by the Board of Directors, the Compensation Committee did not meet during fiscal 2002.
TheAudit Committee of the Board of Directors is comprised of William E. Baitinger and John A. Kraeutler. The Audit Committee reviewsresponsible for:
• reviewing with the auditors the scope of the audit work performed,
• establishing audit practices, any questions arising in the course of the audit work and inquiries as to other pertinent matters such as
• establishing internal accounting controls,
• reviewing financial reporting, security and
• accounting personnel staffing.
The Board of Directors has adopted a written charter for the Audit Committee. Audit Committee members are not employees of BASi and, in the opinion of the Board of Directors, meetare “independent” (as defined by Rule 4200(a)(15) of the independence requirementsNASD listing standards). The Board of NASDAQ. Directors has determined that Leslie B. Daniels is an “audit committee financial expert” (as defined by Item 401(h) of Regulation SK) and is “independent” (as defined by Item 7(d)(3)(iv) of Schedule 14A).
The Audit Committee met twice during fiscal 2002.
The Executive Committee is comprised of Messrs. Kissinger, Shoup, Baitinger, Kraeutler and Thompson. The Executive Committee may exercise all of the authority of the Board of Directors, subject to certain limitations with respect to payment of dividends, filling of vacancies on the Board, amendment of the Articles of Incorporation or Bylaws, approval of significant corporate transactions, issuance of shares and other matters specified under Indiana law. The Executive Committee did not meet during fiscal 2002.2003.
The Board of Directors has no nominating committee.Nominating Committee. Nominees for the Board of Directors are currently selected by the entire Board of Directors. The Board of Directors will consider for nomination as directors persons recommended by shareholders. Such recommendations must be in writing and delivered to Bioanalytical Systems, Inc., Attention: Corporate Secretary, 2701 Kent Avenue, West Lafayette, Indiana 47906.
The NASD has adopted new rules regarding the process for selecting nominees to the Board of Directors met four times during fiscal 2002. No director attended fewer than 75%Directors. These new NASD rules are effective as of the meetingsdate of the Annual Meeting and the Board of Directors and meetingsis in the process of any committee ofreviewing its nominating procedures to ensure that BASi is in compliance with the Board of Directors of which he or she wasnew rules on a member.timely basis.
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EXECUTIVE COMPENSATIONExecutive Compensation
The following table sets forth information with respect to the aggregate compensation paid during each of the last three years to BASi’s President and Chief Executive Officer and each of the other executive officers of BASi whose total compensation exceeded $100,000 during fiscal 20022003 (the “Named Executive Officers”).
| Peter T. Kissinger, Ph.D. | 2002 | $101,001 | $ — | $28,353(1) | |
| Chairman of the Board; President | 2001 | $ 85,000 | $16,000 | $26,067(1) | |
| and Chief Executive Officer | 2000 | $ 85,000 | $ — | $25,965(1) |
| Ronald E. Shoup, Ph.D. | 2002 | $113,000 | $ — | $ 7,438(2) | |
| Chief Operating Officer, BASi Contract | 2001 | $108,000 | $18,000 | $ 6,403(2) | |
| Research Services, Director | 2000 | $107,000 | $ — | $ 6,407(2) |
| Candice B. Kissinger | 2002 | $ 90,700 | $ — | $27,822(3) | |
| Senior Vice President, Marketing | 2001 | $ 85,200 | $18,000 | $26,078(3) | |
| Secretary and Director | 2000 | $ 84,450 | $ — | $25,922(3) |
| Michael P. Silvon, Ph.D. | 2002 | $ 94,800 | $ — | $ 7,074(4) | |
| Vice President, Planning and | 2001 | $ 88,800 | $16,000 | $ 5,434(4) | |
| Development | 2000 | $ 88,325 | $ — | $ 5,293(4) |
OPTIONS
A total of 95,000 common shares have been reserved for issuance under the Employee Option Plan and a total of 5,000 common shares have been reserved for issuance under the Director Option Plan. There were no options granted under either the Employee Option Plan or the Director Option Plan during fiscal 2002. Options to purchase an aggregate of 5,000 common shares pursuant to the Employee Option Plan, each with an exercise price of $2.88, were granted during fiscal 2000 and remain outstanding at December 31, 2002. Options to purchase an aggregate of 73,000 common shares, each with an exercise price of $4.25, were granted pursuant to the Employee Option Plan during fiscal 1999, and 44,000 remain outstanding at December 31, 2002. Options to purchase an aggregate of 35,000 common shares pursuant to the Employee Option Plan and 4,000 common shares pursuant to the Director Option Plan, all at an exercise price of $8.00, were granted during fiscal 1998, and 29,000 and 4,000, respectively, remain outstanding at December 31, 2002. Options to purchase a total of 19,585 common shares remain outstanding at December 31, 2002 under the 1990 Employee Incentive Stock Option Plan at a weighted average exercise price of $1.72 per share. No further options may be granted under the 1990 Employee Incentive Stock Option Plan. There were no grants of options, restricted stock options to Named Executive Officersor stock appreciation rights in fiscal 2002.2003.
| Fiscal Year | Salary | Bonus | All Other Compensation | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Peter T. Kissinger, Ph.D | 2003 | $ | 30,683 | $ | --- | $ | 22,829 | (1) | ||||||
| Chairman of the Board, President | 2002 | $ | 101,001 | $ | --- | $ | 28,067 | (1) | ||||||
| and Chief Executive Officer | 2001 | $ | 85,000 | $ | 16,000 | $ | 25,965 | (1) | ||||||
| Ronald E. Shoup, Ph.D | 2003 | $ | 112,700 | $ | --- | $ | 6,837 | (2) | ||||||
| Chief Operating Officer, BASi Contract | 2002 | $ | 113,000 | $ | --- | $ | 7,438 | (2) | ||||||
| Research Services; Director | 2001 | $ | 108,000 | $ | 18,000 | $ | 6,403 | (2) | ||||||
| Candice B. Kissinger | 2003 | $ | 94,300 | $ | --- | $ | 26,900 | (3) | ||||||
| Senior Vice President & Research Director, | 2002 | $ | 90,700 | $ | --- | $ | 27,822 | (3) | ||||||
| Secretary and Director | 2001 | $ | 85,200 | $ | 18,000 | $ | 26,073 | (3) | ||||||
| Michael P. Silvon, Ph.D | 2003 | $ | 98,500 | $ | --- | $ | 6,304 | (4) | ||||||
| Interim Chief Financial Officer; | 2002 | $ | 94,800 | $ | --- | $ | 7,074 | (4) | ||||||
| Vice President, Planning and Development | 2001 | $ | 88,800 | $ | 16,000 | $ | 5,434 | (4) | ||||||
(1) Includes premiums paid on a life insurance policy on the life of Dr. Kissinger and Mrs. Kissinger, the beneficiary of which is a trust established for their benefit, in the amount of $20,865 in each of 2003, 2002 and 2001 and contributions to BASi’s 401(k) plan on Dr. Kissinger’s behalf.
(2) Represents contributions to BASi’s 401(k) plan on Dr. Shoup’s behalf.
(3) Includes premiums paid on a life insurance policy on the lives of Mrs. Kissinger and Dr. Kissinger, the beneficiary of which is a trust established for their benefit, in the amount of $20,865 in each of 2003, 2002 and 2001 and contributions to BASi’s 401(k) plan on Mrs. Kissinger’s behalf
(4) Represents contributions to BASi’s (401k) plan on Dr. Silvon’s behalf.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values
The following table sets forth certain information concerning exercisable and unexercisable options held by the Named Executive Officers at September 30, 2002.2003:
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| Number of Securities Underlying Unexercised Options At September 30, 2003 | Value of Unexercised In-The-Money Options At September 30, 2003(1) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares Acquired on Exercise (#) | Value Realized ($) | Exerciseable | Unexerciseable | Exerciseable | Unexerciseable | |||||||||||||||
| Peter T. Kissinger, Ph.D. | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Candice B. Kissinger | --- | --- | 750 | 250 | --- | --- | ||||||||||||||
| Ron E. Shoup, Ph.D. | 15,057 | $ | 21,961 | 6,250 | 750 | $ | 9,675 | $ | 3,225 | |||||||||||
| Michael P. Silvon, Ph.D. | --- | --- | 3,500 | 500 | $ | 6,450 | $ | 2,150 | ||||||||||||
(1) Calculated on the basis of $4.30 per share, which was the closing price of the common shares as reported on the NASDAQ National Market System on September 30, 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUESEquity Compensation Plan Information
Number of Securities Underlying Unexercised Options at September 30, 2002 | Value of Unexercised (1) In-The-Money Options at September 30, 2002 | |||||
Shares Acquired on Exercise (#) | Value Realized ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | |
| Peter T. Kissinger, Ph.D. | —— | —— | —— | —— | —— | —— |
| Ronald E. Shoup, Ph.D. | —— | —— | 19,557 | 2,500 | $46,526 | —— |
| Candice B. Kissinger | —— | —— | 500 | 500 | —— | —— |
| Michael P. Silvon, Ph.D. | —— | —— | 2,500 | 1,500 | —— | —— |
The CompanyBASi maintains a stock option planplans that allowsallow for the granting of options to certain key employees and directors of the Company.BASi. The following table gives information about equity awards under the Plan.stock option plans of BASi:
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under the Equity Compensation Plan (excluding Securities) Reflected in First Column | Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance under the Equity Compensation Plan (Excluding Securities Reflected in First Column) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | 109,114 | $4.46 | 10,250 | 103,527 | $ | 4 | .60 | 320,750 | ||||||
| Equity compensation plans not approved by security holders | 4,000 | $8.00 | 1,000 | 3,000 | $ | 8 | .00 | --- | ||||||
| Total | 113,114 | $4.59 | 11,250 | 106,527 | $ | 4 | .70 | 320,750 | ||||||
For additional information regarding the Company'sCompany’s stock option plans, please see Note 89 in the Notes to Consolidated Financial Statements in the Company'sCompany’s Annual Report on Form 10-K for the fiscal year ended September 30, 2003, which is incorporated herein by reference.
REPORT OF THE COMPENSATION AND INCENTIVE STOCK OPTION COMMITTEEReport of the Compensation and Incentive Stock Option Committee
Peter T. Kissinger, Candice B. Kissinger John A. Kraeutler and William E. Baitinger serve on the Compensation Committee. The Compensation Committee has responsibility for BASi'sthe administration of BASi’s executive Compensation Program.compensation program. Dr. Kissinger, the President and Chief Executive Officer of BASi, does not participate in decisions regarding his compensation. None of BASi'sBASi’s executive officers serves as a director of, or in any compensation-related capacity for, companies with which members of the Compensation Committee are affiliated.
The following report is submitted by the members of the Compensation Committee.Committee:
BASi'sBASi’s executive compensation program is designed to align executive compensation with financial performance, business strategies and Companythe values and objectives. BASi'sobjectives of BASi. BASi’s compensation philosophy is to ensure that the delivery of compensation, both in the short and long term, is consistent with the sustained progress, growth and profitability of BASi and acts as an inducement to attract and retain qualified individuals. This program seeks to enhance the profitability of BASi, and thereby enhance shareholder value, by linking the financial interests of BASi'sBASi’s executives with those of its long-term shareholders. Under the guidance of BASi'sBASi’s Compensation Committee, BASi has developed and implemented an executive compensation program to achieve these objectives while providing executives with compensation opportunities that are competitive with companies of comparable size in related industries.
BASi's11
BASi’s executive compensation program has been designed to implement the objectives described above and is comprised of the following fundamental elements:
Base Salary. The salary, and any periodic increase thereof, of the President and Chief Executive Officer were and are determined by the Board of Directors of BASi based on recommendations made by the Compensation Committee, excluding Dr. Kissinger. The salaries, and any periodic increases thereof, of all other executive officers were and are also determined by the Board of Directors based on Committee recommendations.
BASi, in establishing base salaries, levels of incidental and/or supplemental compensation, and incentive compensation programs for its officers and key executives, assesses periodic compensation surveys and published data covering both the BASi industry and other industries. The level of base salary compensation for officers and key executives is determined by both the scope of their responsibility and the salary ranges for officers and key executives of BASi established by the Board of Directors and the Compensation Committee. Periodic increases in base salary are dependent on the executive'sexecutive’s proficiency of performance in the individual'sindividual’s position for a given period and on the executive'sexecutive’s competency, skill and experience.
Due toOn his own initiative the salary freeze implemented by the Board of Directors,fiscal 2003 compensation levels for fiscal 2002level for the President and Chief Executive Officer was significantly reduced and redistributed to select BASi staff. Dr. Kissinger has expressed his intention to stay at this compensation level until BASi’s financial performance improves. Base salary increases for other eligible BASi staff were distributed in the other Executive Officersfirst fiscal quarter of 2004.
Bonus. In years in which the after-tax net income of BASi did not increase.exceeds 7% of revenue, the Compensation Committee is authorized to award bonuses to any BASi employee at the Committee’s discretion.
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Option Plans. Granting of options pursuant to BASi’s option plans is intended to align executive interest with the long-term interests of shareholders by linking executive compensation with enhancement of shareholder value. In addition, grants of options motivate executives to improve long-term stock market performance by allowing them to develop and maintain a significant long-term equity ownership position in BASi’s common shares. No options were granted to executives or staff in fiscal 2002.2003.
Respectfully submitted,
Peter T. Kissinger
Candice B. Kissinger
William E. Baitinger
AUDIT COMMITTEE REPORTAudit Committee Report
The Audit Committee reviews BASi’s financial reporting process on behalf of the Board of Directors. In fulfilling its responsibilities, the Committee has reviewed and discussed the audited financial statements contained in the 2002 Annual Report on Securities & Exchange Commission (“SEC”) Form 10-K for the year ended September 30, 2003 with BASi’s management and the independent auditors. These discussionsreviews included quality, not just acceptability, of accounting principles, reasonableness of significant judgments, and clarity of disclosures in financial statements. Management is responsible for the financial statements and the reporting process, including administering the systems of internal controls.control. The independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States.
The Committee discussed with the independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the Committee has discussed with the independent auditors the auditors’ independence from BASi and its management, including the matters in the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as amended, and considered the compatibility of non-audit services with the auditorsauditors’ independence.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in BASi’s Annual Report on SEC Form 10-K for the year ended September 30, 2002,2003 for filing with the SEC, and the Board has so approved the audited financial statements.
Respectfully submitted,
William E. Baitinger
Leslie B. Daniels
W. Leigh Thompson
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STOCK PRICE PERFORMANCE GRAPHStock Price Performance Graph
The line graph below compares yearly percentage change in the cumulative total stockholder return on BASi’s common shares against the cumulative total return on the NASDAQ Composite Index and a composite index based on a group of ten publicly traded contract research and chemical instrumentation organizations (the “Peer Group Index”) for the period commencing November 24, 1997, the date of BASi’s initital public offering,September 30, 1998 and ending September 30, 2002.2003.
The Peer Group Index is comprised ofof:
• AAIpharma, Inc.;
• Bioreliance Corporation;
• Covance, Inc.;
• Kendle International;
• Isco, Inc.;
• Molecular Devices Corporation;
• New Brunswick Scientific Co., Inc.; Isco, Inc.; Molecular Devices Corporation;
• OI Corporation;
• Covalent Group, Inc.; Covance, Inc.; and
• Pharmaceutical Product Development, Inc. Because shares of its stock were no longer publicly traded at September 30, 2002, BEI Medical Systems Co., Inc. was replaced with Covance, Inc. The graph is presented as if Covance, Inc. was a component of the peer index on November 24, 1997.
The comparison of total return on investment (change in year-end stock price plus reinvested dividends) for the applicable period assumes that $100 was invested on November 24, 1997,September 30, 1998 in each of BASi, (at the initial public offering price), the NASDAQ Composite Index and the Peer Group Index.
COMPARISON OF CUMULATIVE TOTAL RETURNComparison of Cumulative Total ReturnAMONG BIOANALYTICAL SYSTEMS, INC.among Bioanalytical Systems, Inc., THEthe NASDAQ
Composite Index and the Peer Group IndexCOMPOSITE INDEX AND THE PEER GROUP INDEX
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bioanalytical Systems, Inc. | 100 | .00 | 57 | .00 | 50 | .00 | 109 | .00 | 57 | .00 | 80 | .00 | ||||||||
| Nasdaq Composite Index | 100 | .00 | 173 | .00 | 231 | .00 | 94 | .00 | 74 | .00 | 113 | .00 | ||||||||
| Peer Index | 100 | .00 | 74 | .00 | 131 | .00 | 98 | .00 | 91 | .00 | 110 | .00 | ||||||||
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OFCompliance with Reporting Requirements of Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the BASi directors and executive officers and persons who own more than ten percent of a registered class of the BASi equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common shares and other equity securities of BASi. Officers, directors and greater-than-ten-percent shareholders are required by SEC regulation to furnish BASi with copies of all Section 16(a) reports they file. BasedExcept as set forth below and based solely upon the review of Section 16(a) reports furnished to BASi during or with respect to fiscal 20022003 and written representations by the BASi officers, directors and greater-than-ten-percent beneficial owners that no other reports were required, BASi is not aware of any instance of noncompliance or late compliance with Section 16(a) during or with respect to fiscal 2002.2003.
Mr. Daniels was late in filing a Form 3. Messrs. Baitinger, Thompson and Kraeutler each was late filing a Form 4 relating to certain option grants in June, 2003. Each of them attempted to file the Form 4 to report this grant in a timely fashion, but the original paper filings were rejected by the SEC pursuant to SEC Release No. 33-8235. Messrs. Baitinger, Thompson and Kraeutler are in the process of filing these Form 4s.
2. APPROVAL OF AMENDMENT TO THE 1997 EMPLOYEE INCENTIVE STOCK OPTION PLAN
On October 23, 1997,Communications with the Board of Directors
Currently, BASi shareholders may send communications directly to Peter T. Kissinger, Chairman of BASi adopted the Employee Option Plan, which was subsequently approved by the shareholders of BASi prior to the initial public offering. On January 24, 2003, the BASi Board of Directors, approved an amendment tounder the Employee Option Plan, described below, subject to approval by the shareholders of BASi.
The principal features“Ask Pete” portion of the Employee Option Plan, including an explanation of the material change contemplated by the proposed amendment, are described below, but such description is qualified entirely by reference to the text of the Employee Option Plan, a copy of which is attached to this Proxy Statement as Appendix A. Except as otherwise described below in the explanation of the proposed amendment, all other existing provisions of the Employee Option Plan are not changed.
PROPOSED PLAN AMENDMENT; INCREASE IN AUTHORIZED SHARES
As of December 31, 2002, 10,250 common shares remained available for additional option grants under the Employee Option Plan.BASi website found athttp://www.bioanalytical.com/. The Board of Directors amended the Employee Option Plan, subject to shareholder approval, to increase the number of shares available for issuance under the Employee Option Plan. Because of historic grant patterns and expansion plans for the company, the Board of Directors believe the number of shares presently available for grant and those which may become availableis also in the future will not give BASi sufficient flexibilityprocess of implementing a shareholder communication policy in order to structure future incentives. Therefore, ifbetter facilitate communications between shareholders approve the proposed amendment, an additional 300,000 shares would become available for grants under the Employee Option Plan.
SUMMARY OF THE EMPLOYEE OPTION PLAN
General. The purpose of the Employee Option Plan is to further the growth, development and financial success of BASi by providing additional incentives to certain eligible employees and permitting those persons to benefit directly from the growth, development and financial success of BASi.
Administration. The Employee Option Plan is administered by an Incentive Stock Option Committee consisting of three (3) or moreall members of the Board of Directors of BASi (the “Employee Committee”). The Employee Committee has the authority to interpret and construe the provisions of the Employee Option Plan or any option granted under it, determine exercise periods, and prescribe, amend and rescind rules and regulations with regard to the Employee Option Plan.
Eligibility. Options under the Employee Option Plan may be granted only to those persons who are employees of BASi and who are eligible to participate. Eligibility shall be determined by the Employee Committee from time to time; provided that no option shall be granted to any employee of BASi who, at the time such option is granted, owns shares (together with such person’s brothers, sisters, spouse, ancestors and lineal descendants) possessing more than ten percent (10%) of the total combined voting power of all classes of shares of BASi or any parent or subsidiary of BASi (a “10% Shareholder”). The percentage limitations do not apply if at the time such option is granted the option price is at least one hundred ten percent (110%) of the fair market value of the shares subject to the option and such option is not exercisable after the expiration of five (5) years from the date such option is granted.
Maximum Number of Shares. As amended by the Board of Directors of BASi, subject to approval by the shareholders of BASi, the aggregate number of shares for which options may be granted under the Employee Option Plan is 395,000, subject to adjustments for recapitalizations. Any shares subject to an option that expires or is terminated shall again become available for grant. Prior to the amendment by the Board of Directors of BASi, the aggregate number of shares for which options could be granted under the Employee Option Plan was 95,000, subject to adjustments for recapitalizations.
Maximum Exercise Rule. The Employee Option Plan limits the aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time during any calendar year to $100,000.
Exercise Price. Any grant of options under the Employee Option Plan shall have an exercise price of not less than the fair market value per share of the shares on the date of granting of the option. The exercise price of an option granted under the Employee Option Plan may be paid (i) in cash, (ii) by certified check or bank cashier’s check, (iii) through the tender to BASi of shares of BASi or through the withholding of shares of BASi that are subject to the option, or (iv) by a combination of the foregoing; provided that the Employee Committee may impose limitations on the use of shares to exercise options. Any grant of options under the Employee Option Plan to a 10% Shareholder in an amount per share not less than one hundred ten percent (110%) of the fair market value per share of the shares on the date of the granting of the option.
Term of Options. No term of any option granted under the Employee Option Plan shall be in excess of ten (10) years; provided, however, if the person to whom the option is granted is a 10% Shareholder, the term shall not be longer than five (5) years.
Termination of Employment. Upon cessation of employment with BASi or certain entities affiliated with BASi, all options granted under the Employee Option Plan held by such employee shall terminate as to any unexercised portion thereof; provided, however, that if the cessation of employment is due to retirement with the consent of BASi such employee may exercise any such options within three (3) months after such cessation and if the cessation of employment is due to permanent or total disability or death such employee or such employee’s personal representative, as the case may be, may exercise any such options within 12 months after such cessation of employment.
Merger, Dissolution or Liquidation. Upon merger or consolidation, BASi may terminate any option outstanding on 30 days written notice. Upon dissolution or liquidation of BASi, BASi shall provide 30 days written notice to all holders of options and each unexercised option shall terminate upon dissolution or liquidation.
Assignability. Options may not be assigned or transferred, except by will or by the laws of descent and distribution, and during an optionee’s lifetime may be exercised only by the optionee.
Term of the Employee Option Plan. The Employee Option Plan may be terminated by the Board of Directors of BASi at any time with respect to shares as to which options have not been granted. No options may be granted under the plan after its termination.
Amendment. The Board of Directors of BASi may amend, suspend or discontinue the Employee Option Plan with respect to any shares as to which options have not been granted. The approval of the holders of a majority of the outstanding shares of each class of voting shares of BASi is required for any amendment to the Employee Option Plan relating to (i) an increase in the number of shares for which options may be granted, (ii) a change in the class of shares for which options may be granted, and (iii) a change in the manner in which the option price is determined.
Withholdings. The Employee Committee has the right to require persons receiving options to remit to BASi amounts sufficient to satisfy any federal, state or local income tax withholding requirements.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of an employee's participation in the Employee Option Plan are complex and subject to change. The following discussion is only a summary of the general rules applicable to stock options granted under the Employee Option Plan as of the date hereof. The application of state and local income taxes and other federal taxes is not discussed. For individuals resident outside the United States, the tax consequences to the individual and to BASi are determined by the applicable tax laws of the foreign jurisdiction.
The grant of an incentive stock option under the Employee Option Plan generally will have no federal income tax consequences for BASi or the optionee. Except for alternative minimum tax purposes, the exercise of an incentive stock option pursuant to the Employee Option Plan will have no federal income tax consequences to BASi or the optionee. An optionee generally will recognize capital gain or loss upon the sale of shares acquired in exercising an incentive stock option, provided that the shares are sold at least two years after the date of grant of the option and at least one year after the optionee acquires the shares. An optionee generally will recognize ordinary income upon the sale of shares acquired in exercising an incentive stock option if the sale is made within two years of the date the option was granted or within one year of the date the shares were transferred to the optionee. In such event, the amount of ordinary income recognized by the optionee generally will equal the difference between the option price and the fair market value of the shares on the date of exercise. BASi may take an income tax deduction for compensation conveyed by an incentive stock option only in situations (and the taxable year) in which the employee must recognize ordinary income.
Furthermore, if the compensation attributable to awards is not "performance-based" within the meaning of Section 162(m) of the Internal Revenue Code, BASi may not be permitted to deduct the aggregate non performance-based compensation in excess of $1,000,000 in certain circumstances.
VOTE REQUIRED
The approval of the amendment to the Employee Option Plan requires the affirmative vote of the holders of a majority of the outstanding common shares.
The Board of Directors of BASi recommends a vote FOR the approval of the amendment to the Employee Option Plan.
NEW PLAN BENEFITS
BASi currently anticipates that it will, as a general matter, grant options on an annual basis. However, future option grant recipients, and future option grant levels, have not been determined. Therefore, the number, amount and type of awards to be received by or allocated to eligible persons in the future under the Employee Option Plan cannot be determined at this time. BASi has not approved any awards under the Employee Option Plan that are conditioned upon shareholder approval of the proposed plan amendment. On January 20, 2003, the closing price of a common share of BASi was $3.52.
3. APPROVAL OF THE 1997 OUTSIDE DIRECTOR STOCK OPTION PLAN, AS AMENDED
On October 23, 1997, the Board of Directors of BASi adopted the Director Option Plan. On January 24, 2003, the Board of Directors of BASi approved an amendment to the Director Option Plan to increase the number of shares for which options can be granted from 5,000 to 30,000. The Board of Directors is seeking approval of the Director Option Plan, as amended.
The principal features of the Director Option Plan, as amended, are described below, but such description is qualified entirely by reference to the text of the Director Option Plan, a copy of which is attached to this Proxy Statement as Appendix B.
SUMMARY OF THE DIRECTOR OPTION PLAN
Purpose. The purpose of the Director Option Plan is be an incentive to, and to encourage ownership of the shares of BASi by, outside directors in order to provide such outside directors with a direct and proprietary interest in the welfare and success of BASi and to encourage continuity on the Board of Directors.
Administration The Director Option Plan is administered by the Director Option Committee consisting of three (3) or more members of the Board of Directors of BASi (the "Director Committee"). The Director Committee has authority to interpret and construe the provisions of the Director Option Plan or any option granted under it, to select outside directors to whom grants of options shall be made, to prescribe, amend and rescind rules and regulations relative to the Director Option Plan, to determine the terms and conditions of each option granted and to make any other determinations regarding the Director Option Plan not addressed therein.
Eligibility. Options under the Director Option Plan may be granted only to persons who are outside directors of BASi. Eligibility shall be determined by the Director Committee from time to time.
Maximum Number of Shares. As amended by the Board of Directors of BASi, the aggregate number of shares for which options may be granted under the Director Option Plan is 30,000, subject to adjustments for recapitalizations. Any shares subject to an option that expires or is terminated shall again become available for grant. Prior to the amendment by the Board of Directors of BASi, the aggregate number of shares for which options could be granted under the Director Option Plan was 5,000, subject to adjustments for recapitalizations.
Exercise Price. Any grant of options under the Director Option Plan shall have an exercise price of not less than the fair market value per share of the shares on the date of granting of the option. The exercise price of an option granted under the Director Option Plan may be paid (i) in cash, (ii) by certified check or bank cashier's check, (iii) through the tender to BASi of shares of BASi or through the withholding of shares of BASi that are subject to the option, or (iv) by a combination of the foregoing; provided that the Director Committee may impose limitations on the use of shares to exercise options.
Term of Options and Time of Exercise. No term of any option granted under the Director Option Plan shall be in excess of ten (10) years. Each option granted under the Director Option Plan shall be exercisable in four (4) equal installments. The option may be exercised as to the shares covered by the first installment from and after the second anniversary of the grant of the option, with second, third and fourth installments becoming exercisable on the three (3) succeeding anniversary dates; provided that any such limitation on the exercise of an option may be rescinded, modified or waived by the Director Committee.
Termination of Service as a Director. In the event an individual ceases to serve as a director of BASi or of any one of certain entities affiliated with BASi, all options granted under the Director Option Plan held by such individual shall terminate as to any unexercised portion thereof; provided that if the cessation of service is due to retirement with the consent of BASi such individual may exercise any such options within three (3) months after such cessation and if the cessation of service is due to permanent or total disability or death such individual or such individual's personal representative, as the case may be, may exercise any such options within 12 months after such cessation of service.
Adjustments upon Merger or Dissolution. Upon merger or consolidation, BASi may terminate any option outstanding on 30 days written notice. Upon dissolution or liquidation of BASi, BASi shall provide 30 days written notice to all holders of options and each unexercised option shall terminate upon dissolution or liquidation.
Assignability. Options may not be assigned or transferred except by will or by the laws of descent and distribution and during an optionee's lifetime may be exercised only by the optionee.
Term of the Director Option Plan. Options may be granted under the Director Option Plan until the ten (10) year anniversary of the adoption of the Director Option Plan.
Amendment. The Board of Directors of BASi may amend, suspend or discontinue the Director Option Plan with respect to any shares as to which options have not been granted. The approval of the holders of the options under the Director Option Plan is required for any amendment to the Director Option Plan that would alter any of the rights or obligations of BASi or any holder of options with respect to the outstanding option.
Withholdings. The Director Committee has the right to require persons receiving options to remit to BASi amounts sufficient to satisfy any federal, state or local income tax withholding requirements.
FEDERAL INCOME TAX CONSEQUENCES
The holder of an option will not be subject to tax at the time a nonqualified option is granted; however, a director who exercises a nonqualified option must include in income as of the date of exercise the difference between (i) the amount paid for the shares upon exercise of the option and (ii) the fair market value of the shares. The recognized income may be subject to withholding for federal, state and local income and other payroll taxes. The optionee's federal income tax cost basis for the shares will be the amount paid for the shares plus the income recognized. If an optionee uses shares in full or partial payment of the exercise price of a nonqualified option, the exchange should not affect the federal income tax treatment of the exercise. The optionee will realize no gain or loss with respect to the shares so used. The net additional shares received upon such exercise by the optionee will have a federal income tax cost basis equal to the ordinary income recognized as a result of the option exercise (plus the amount of any cash used in the option exercise) and a holding period commencing upon the date such income is recognized. Subsequent sale of such shares will result in a capital gain or loss equal to the difference between the optionee's federal income tax cost basis for the shares and the sale price.
BASi will be entitled to a federal income tax deduction in the amount of the ordinary income recognized by the optionee as of the date the optionee recognizes ordinary income.
VOTE REQUIRED
The approval of the Director Option Plan requires that the votes cast for approval of the Director Option Plan by the shareholders of BASi exceed those case against approval of the Director Option Plan by the shareholders of BASi.
The Board of Directors of BASi recommends a vote FOR the approval of the Director Option Plan.
NEW PLAN BENEFITS
The following table sets forth certain information regarding the benefits expected to be received by persons in each indicated group under the Director Option Plan, as amended. The original 5,000 shares authorized by the Director Option Plan were available for grants only to non-executive directors of BASi. As of December 31, 2002, options to purchase 4,000 of such shares had been granted, and 1,000 remained available for grant.
NEW PLAN BENEFITS1997 BIOANALYTICAL SYSTEMS, INC. OUTSIDE DIRECTOR STOCK OPTION PLAN
Name and Position | Dollar Value($) | Number of Units | |
| CEO | 0 | 0 | |
| Executive Group | 0 | 0 | |
| Non-Executive Director Group | 0 | 25,000 | |
| Non-Executive Officer Employee Group | 0 | 0 |
4.2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Audit Committee of the Board of Directors has selected Ernst & Young LLP as independent auditors for BASi for the fiscal year ending September 30, 2003.2004. BASi has been advised by such firm that neither it nor any of its associates has any direct or material indirect financial interest in BASi.
The Board of Directors recommends that shareholders vote FOR ratification of the appointment of Ernst & Young LLP as independent auditors for fiscal year ending September 30, 2003.2004. Unless authority to vote for the ratification of the appointment of Ernst & Young LLP as independent auditors for fiscal year ending September 30, 2004 is withheld, the accompanying proxy will be voted FOR such ratification.
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Ernst & Young LLP hashave acted as independent auditors for BASi since 1994. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions concerning the audits of BASi'sBASi’s financial statements.
AUDIT FEESAudit Fees
| 2003 | 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Aggregate fees for annual audit, quarterly reviews, | $ | 316,015 | $ | 180,081 | ||||
| SEC registration, and acquisitions | ||||||||
Tax Fees
| 2003 | 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| Income tax services related to compliance with tax laws | $ | 64,920 | $ | 50,425 | ||||
BASi’s policies require that the scope and cost of all work to be performed for BASi by its independent auditors must be approved by the Audit Committee. Prior to the commencement of any work by the independent auditor on behalf of BASi, the independent auditor provides an engagement letter describing the scope of the work to be performed and an estimate of the fees. The aggregateAudit Committee and the Chief Financial Officer must review and approve the engagement letter and the estimate before authorizing the engagement. Where fees forcharged by the 2002 annual auditindependent auditor exceed the estimate, the Audit Committee must review and quarterly reviews were $115,364.
ALL OTHER FEES
All otherapprove the excess fees amountedprior to $115,142, including audit related services of $64,717 and income tax services of $50,425. Audit related services related to fees for SEC registration statements.their payment.
5.3. OTHER MATTERS
As of the date of this proxy statement, the Board of Directors of BASi has no knowledge of any matters to be presented for consideration at the Annual Meeting other than those referred to above. If (a) any matters not within the knowledge of the Board of Directors as of the date of this proxy statement should properly come before the meeting; (b) a person not named herein is nominated at the meeting for election as a director because a nominee named herein is unable to serve or for good cause will not serve; (c) any proposals properly omitted from this proxy statement and the form of proxy should come before the meeting; or (d) any matters should arise incident to the conduct of the meeting, then the proxies will be voted in accordance with the recommendations of the Board of Directors of BASi.
By Order |
January 27, 2003
APPENDIX A
BIOANALYTICAL SYSTEMS, INC.1997 EMPLOYEE INCENTIVE STOCK OPTION PLAN(As Amended January 24, 2003)
1. Purpose. This 1997 Employee Incentive Stock Option Plan (hereinafter referred to as the "Plan") is intended to be an incentive to, and to encourage share ownership by, key employees of Bioanalytical Systems, Inc. and its subsidiaries (hereinafter collectively referred to as the "Employer") in the manner contemplated by Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), in order to provide such employees with a more direct and proprietary interest in the welfare and success of the Employer and to insure their continuation as employees of the Employer.
2. Administration. The Plan shall be administered by an Incentive Stock Option Committee (hereinafter referred to as the "Committee") consisting of three (3) or more members of the Board of Directors, of Bioanalytical Systems, Inc. (the "Company") who are appointed from time to time by the Board of Directors of the Company. The Board of Directors of the Company may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors of the Company. The Committee shall have the power to interpret and construe the provisions of the Plan or any option granted under it, and such interpretation or construction shall be final and binding. The Committee may prescribe, amend and rescind rules and regulations relative to the Plan or its construction or interpretation. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. No member of the Committee shall be liable for any action or determination made in good faith.
3. Eligibility. Only those persons who are employees of the Employer shall be eligible to participate in the Plan. The Committee shall determine from time to time the particular employees of the Employer who shall be eligible to participate in the Plan and the extent of their participation therein. No option shall be granted under the Plan to any employee of the Employer who, at the time such option is granted, owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any parent or subsidiary corporation of the Company or any parent or subsidiary corporation of any of the foregoing (such employee being hereinafter referred to as a "10% Shareholder"), except as provided below. In determining whether the percentage limitations of this paragraph are met, an employee shall be considered as owning any shares owned, directly or indirectly, by or for his brothers or sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. For purposes of this paragraph 3, shares owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. The percentage limitations of this paragraph 3 shall not apply, however, if at the time such option is granted the option price is at least one hundred ten percent (110%) of the fair market value of the shares subject to the option and such option by its terms is not exercisable after the expiration of five (5)years from the date such option is granted.
4. Shares. The shares subject to the options and other provisions of the Plan shall be shares of the Company's authorized, but unissued, or reacquired Common Shares (the "Common Shares"). The total amount of the Common Shares on which options may be granted shall not exceed in the aggregate Three Hundred Ninety-Five Thousand (395,000) shares, except as such number of shares shall be adjusted in accordance with the provisions set forth in paragraph 6(g) hereof. In the event any outstanding option under the Plan expires or is terminated for any reason prior to the end of the period during which options may be granted, the Common Shares allocable to the unexercised portion of such option may again be subject to an option under the Plan. During the period that any options granted hereunder are outstanding, the Employer shall reserve and keep available such number of Common Shares as will be sufficient to satisfy all outstanding, unexercised options.
5. Maximum Exercise Rule. The aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year under all such plans of the Employer and any parent or subsidiary corporation of the Employer shall not exceed One Hundred Thousand Dollars ($100,000.00).
6. Terms and Conditions of Options. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall from time to time prescribe, which agreements shall comply with and be subject to the following terms and conditions:
7. Term of Plan. The Plan shall become effective upon the approval by the holders of a majority of the issued and outstanding shares of each class of the voting shares of the Company voting in person or by proxy at a duly held shareholders' meeting; provided, however, that the Plan shall become effective only if approved by such shareholders within twelve (12) months before or after the date the Plan is adopted by the Company Board of Directors. The Board of Directors may, in its sole discretion, terminate the Plan at any time with respect to any shares as to which options have not been granted. No option shall be granted under the Plan thereafter.
8. Amendment of the Plan. The Board of Directors of the Company may from time to time, alter, amend, suspend, or discontinue the Plan with respect to any shares as to which options have not been granted; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the issued and outstanding shares of each class of voting shares of the Company:
9. Application of Funds. The proceeds received by the Company from the sale of shares pursuant to options granted hereunder will be used for general corporate purposes.
10. No Obligation to Exercise Option. The granting of an option hereunder shall impose no obligation upon the optionee to exercise such an option.
11. Continuance of Employment. Neither the adoption of the Plan nor the granting of an option hereunder shall impose any obligation on the Employer to continue the employment of an optionee.
12. Applicability of Amendments. All outstanding options shall be deemed to be amended so as to include, to the extent applicable thereto, any amendments made to the Plan subsequent to the granting of such options.
13. Withholdings. The Committee shall have the right to require optionees to remit to the Company amounts sufficient to satisfy any federal, state or local income tax withholding requirements (or make other arrangements satisfactory to the Company with regard to such taxes) at such times as the Company deems necessary or appropriate for compliance with such laws.
APPENDIX B
1997 BIOANALYTICAL SYSTEMS, INC.OUTSIDE DIRECTOR STOCK OPTION PLAN(As Amended
Candice B. Kissinger
Secretary
January 24, 2003)
1. Definitions. The following terms shall have the meanings hereinafter set forth:
2. Purpose. This Plan is intended to be an incentive to, and to encourage ownership of the Common Shares by, Outside Directors of the Company and its Affiliates in order to provide such Outside Directors with a more direct and proprietary interest in the welfare and success of the Company and to encourage their continuation as directors of the Company. The Plan is further intended to promote continuity of membership on the Board of Directors and to increase the incentive to promote the welfare of the Company by those who are primarily responsible for shaping and carrying out the long-term plans and objectives of the Company, thereby furthering and securing the Company's continued growth and financial success. It is contemplated that only Nonstatutory Stock Options will be granted under the Plan.
3. Administration. The Plan shall be administered by the Committee which shall consist of three or more members of the Board of Directors who are appointed from time to time by the Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee shall have the power (a) to interpret and construe the provisions of the Plan or any option granted under it, and such interpretation or construction shall be final and binding; (b) to select Outside Directors to whom grants of options under the Plan shall be made as more particularly set forth in paragraph 4 hereof; (c) to determine the terms and conditions of each option granted hereunder; (d) to determine the time at which such grants shall be made and the number of Common Shares to be optioned under such grant; and (e) to make any other determinations regarding the Plan which are not otherwise expressly provided herein. The Committee may prescribe, amend and rescind rules and regulations relative to the Plan or its construction or interpretation. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by the vote of a majority of its members; provided, however, that if there are fewer than three (3) members of the Committee at any time, all determinations shall be a joint determination of its members. No member of the Committee shall be liable for any action or determination made in good faith.
4. Eligibility. Only those persons who are Outside Directors shall be eligible to participate in the Plan. The Committee shall determine from time to time the particular Outside Directors who shall be eligible to participate in the Plan and the extent of their participation therein.
5. Shares. The shares subject to the options and other provisions of the Plan shall be the Company's authorized, but unissued, or reacquired Common Shares. The total number of the Common Shares on which options may be granted under the Plan shall not exceed in the aggregate thirty thousand (30,000) shares, except as such number of shares shall be adjusted in accordance with the provisions set forth in paragraph 6(g) hereof. In the event any outstanding option under the Plan expires or is terminated for any reason prior to the end of the period during which options may be granted, the Common Shares allocable to the unexercised portion of such option may again be subject to an option under the Plan. During the period that any options granted hereunder are outstanding, the Company shall reserve and keep available such number of Common Shares as will be sufficient to satisfy all outstanding, unexercised options.
6. Terms and Conditions of Options. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall from time to time prescribe, which agreements shall comply with and be subject to the following terms and conditions:
7. Term of the Plan. The Plan shall become effective upon the date the Plan is adopted by the Board of Directors. The Plan shall terminate ten (10) years after the date the Plan is adopted by the Board of Directors, or on such earlier date as the Board of Directors may determine. No option shall be granted under the Plan after such termination date.
8. Amendment of the Plan. The Board of Directors may from time to time, alter, amend, suspend, or discontinue the Plan with respect to any Common Shares as to which options have not been granted; provided, however, that no action may be taken hereunder which would alter or impair any of the rights or obligations of the Company or any Optionee with respect to any outstanding option without the consent of the Optionee thereof.
9. Application of Funds. The proceeds received by the Company from the sale of Common Shares pursuant to options granted hereunder will be used for general corporate purposes.
10. No Obligation to Exercise Option. The granting of an option hereunder shall impose no obligation upon the Optionee to exercise such an option.
11. No Right to Reelection. Neither the adoption of the Plan, the granting of an option hereunder, nor any other action taken relating to the Plan shall impose any obligation on the Company or any Affiliate or the Board of Directors of either to nominate any Outside Director for reelection as a director by the shareholders of the Company or any Affiliate.
12. Applicability of Amendments. All outstanding options shall be deemed to be amended so as to include, to the extent applicable thereto, any amendments made to the Plan subsequent to the granting of such options.
13. Withholdings. The Committee shall have the right to require the Optionee to remit to the Company amounts sufficient to satisfy any applicable withholding requirements set forth in the Code or under state or local law relating to options granted to the Optionee. The Company shall have the right, to the extent permitted by law, to deduct from any payment of any kind otherwise due to an Optionee who exercises an option any federal, state or local taxes of any kind required by law to be withheld with respect to the Common Shares subject to such option.
REVOCABLE PROXYBIOANALYTICAL SYSTEMS, INC.ANNUAL MEETING OF SHAREHOLDERS TO BE HELDFEBRUARY 20, 2003
23, 2004
The undersigned shareholder of Bioanalytical Systems, Inc. ("BASi") hereby appoints Peter T. Kissinger, Michelle Troyer, and each of them as proxy for the undersigned, to vote all shares of BASi which the undersigned is entitled to vote at the Annual Meeting of Shareholders (the “Meeting”) of BASi to be held on Thursday, February 20, 2003, at 10:00 a.m., at the principal executive offices of BASi, 2701 Kent Avenue, West Lafayette, Indiana, or any adjournment thereof, in connection with all votes taken on the following proposals, all of which were described in the Proxy Statement received by the undersigned with the Notice of the Meeting:
PROXY MUST BE SIGNED AND DATED — SEE REVERSE SIDE
PRESENTLY NO OTHER BUSINESS IS SCHEDULED TO BE PRESENTED AT THE MEETING. HOWEVER, BY SIGNING THIS PROXY YOU ARE GIVING THE HOLDER OF THIS PROXY DISCRETIONARY AUTHORITY TO ACT IN ACCORDANCE WITH THE DIRECTION OF THE BOARD OF DIRECTORS ON SUCH MATTERS.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this Proxy will be voted FOR Proposals 1, 2, 3 and 4 with respect to all votes taken on such proposals.
All proxies previously given by the undersigned are hereby revoked. Receipt of the Notice of Meeting of Shareholders of the Company, the Proxy Statement, and the Company's 2002 Annual Report is hereby acknowledged.
This Revocable Proxy may be revoked by the undersigned at any time before it is exercised by (i) executing and delivering to the Company a later-dated Proxy, (ii) attending the Meeting and voting in person, or (iii) giving written notice of revocation to the Secretary of the Company.
Please date this proxy and sign this proxy exactly as the name appears on your stock certificate. If the shares are jointly held, both shareholders must sign. If signing as attorney, executor, administrator, guardian, or in any other representative capacity, please give your full title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE DATE, SIGN, AND RETURN AS SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE, YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Do you plan to personally attend the Annual Meeting of Shareholders? Yes No16