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[LOGO]SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant / / | ||
| Filed by a Party other than the Registrant / / | ||
Check the appropriate box: | ||
| /x/ | Preliminary Proxy Statement | |
| / / | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| / / | Definitive Proxy Statement | |
| / / | Definitive Additional Materials | |
| / / | Soliciting Material Pursuant to §240.14a-12 | |
BIOSPHERICS INCORPORATED | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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[BIOSPHERICS INCORPORATED LOGO TO COME]
12051 Indian Creek Court
Beltsville, Maryland 20705
Notice of Annual Meeting of Stockholders
to be held on May 15, 20002001
and Proxy Statement
The Annual Meeting of Stockholders of Biospherics®Biospherics® Incorporated (the "Company") will be held at the Company's headquarters, 12051 Indian Creek Court, Beltsville, Maryland 20705, on May 15, 2000,2001, at 2:00 p.m., Eastern Daylight Time.
The items of business are:
These items are more fully described in the following pages, which are hereby made part of this Notice.
The Company's Proxy Statement, Proxy Card, and Summary Annual Report for 19992000 accompany this Notice.
Pursuant to the Bylaws of the Company, the Board of Directors has fixed the close of business on March 16, 2000,19, 2001 as the Record Date for determination of Stockholders entitled to Notice and to vote at the Annual Meeting and any adjournment thereof. Only Common Stockholders of record on the date so fixed are entitled to vote.
BY ORDER OF THE BOARD OF DIRECTORS
Katherine M. Karen Levin,Brailer, Corporate Secretary
PLEASE EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. IF YOU DO ATTEND THE MEETING AND VOTE PERSONALLY, YOUR PROXY WILL AUTOMATICALLY BE REVOKED AT THAT TIME.
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
May 15, 2000 2001
This Proxy Statement is being mailed on or about April 23, 2000,2, 2001, with the solicitation of proxies in the accompanying form by the Board of Directors of Biospherics®Biospherics® Incorporated, a Delaware corporation. The Annual Meeting of its Stockholders will be held May 15, 2000,2001, at 2:00 p.m. E.D.T., at the Company's headquarters, 12051 Indian Creek Court, Beltsville, Maryland 20705. The cost of solicitation of Proxies will be borne by the Company. The Company will reimburse brokers, banks, and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending Company-supplied Proxy materials to the beneficial owners of the Common Stock. In addition to solicitations by mail, directors, officersDirectors, Officers and employees of the Company may solicit Proxies personally or by telegraph or telephone without additional compensation.
All shares represented by Proxy will be voted at the Meeting in accordance with the choices specified on the Proxy, and where no choice is specified, in accordance with the recommendations of the Board of Directors. Thus, where no choice is specified, the Proxies will be voted for the election of Directors, the approval of the proposed amendment to the Company's Charter,Certificate of Incorporation, for the proposed amendment of the 1997 Stock Option Plan, and for ratification of the appointment of independent accountants. A Stockholder giving a Proxy will have the power to revoke it at any time before it is exercised. A Proxy will be revoked automatically if the Stockholder who executed it is present at the Meeting and elects to vote in person.
Each Stockholder will be entitled to one vote for each share of Common Stock $.005 par value per share ("Common Stock") held by the Stockholder at the close of business on March 16, 2000.19, 2001. At that time, there were 10,575,607 shares of Common Stock outstanding.
In accordance with the laws of the State of Delaware and the Company's Certificate of Incorporation and By-Laws, a majority of the outstanding shares of Common Stock will constitute a quorum at the Meeting. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum.quorum for the transaction of business. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Abstentions and broker non-votes are not counted for purposes of the election of Directors. An abstention or broker non-votewill be counted as a vote against the approval of any other matter to come before the Annual Meeting. Broker non-votes will be counted as a vote against the proposal to amend the Company's charter. AbstentionsCertificate of Incorporation, and broker non-votes will have no effect on the outcome of any other matter scheduled to come before the Annual Meeting.
It is anticipated that the Directors and Officers will vote their shares of Common Stock in favor of the Nominees for election to the Board of Directors listed herein, for the approval of the proposed amendment to the Company's charter,Certificate of Incorporation, for the proposed amendment of the 1997 Stock Option Plan, and for ratification of the appointment of independent accountants listed herein.
ELECTION OF DIRECTORS (Item(Item 1 on the Proxy Card)
Directors are to be elected at the Annual Meeting to serve until the next Annual Meeting of Stockholders or, upon resignation or inability to serve, until their respective successors are duly appointed for the remainder of the year. The Bylaws of the Company authorize up to eleven (11) Directors. However, the Nominating Committee believes it is not presently necessary nor cost effective to fill all Board positions. Unless otherwise instructed, the persons named in the accompanying Proxy intend to vote the Shares represented by the Proxy FOR the election of the seven (7)eight (8) Nominees listed below. Although it is not contemplated that any Nominee will decline or be unable to serve as a Director, in such event, Proxies will be voted by the Proxy holder for such other persons
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as may be designated by the Board of Directors, unless the Board of Directors reduces the number of Directors to be elected. Election of a Board of Directors requires a plurality of the votes cast at the Meeting.
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The current Board of Directors are Gilbert V. Levin, Lionel V. Baldwin, David A. Blake, Thomas W. Gantt, George S. Jenkins, M. Karen Levin, and Anne S. MacLeod.
Mr. BlakeMacLeod, Thomas G. Moore, and Mr. Jenkins have declined to stand for re-election for the 2000 2001 term.Deborah S. Streb.
The following table sets forth certain information about the Nominees for Directors as of March 16, 2000.19, 2001.
Nominees for Election to Board of Directors
| Name | Age | Position | Director Since | |||
|---|---|---|---|---|---|---|
| Gilbert V. Levin | 76 | Chair, CEO, and Treasurer | 1967 | |||
| David H. Affeldt | 36 | President and COO | — | |||
| Lionel V. Baldwin | 68 | Director | 1976 | |||
| Thomas W. Gantt | 59 | Director | 1999 | |||
| M. Karen Levin | 81 | Director and Vice President for Communications | 1968 | |||
| Anne S. MacLeod | 70 | Director | 1992 | |||
| Thomas G. Moore | 61 | Director | 2000 | |||
| Deborah S. Streb | 45 | Director | 2000 |
Dr. Levin founded the Company in 1967 and has been Chair and PresidentCEO since incorporation. He previously served in the public health departments of Maryland, California, and the District of Columbia and as a research scientist and corporate official. Among his inventions are noncaloric sweeteners; Biological Nutrient Removal (BNR), a nitrogen removal process; and the Labeled Release life detection experiment that landed on Mars in 1976 aboard NASA's Viking Mission. He holds a Ph.D. from The Johns Hopkins University, where he also served on its Board of Trustees.Trustees and presently serves on its National Advisory Councils for the School of Engineering and for the University Libraries.
Mr. Affeldt joined Biospherics in 1998 as Director of Support Services and, later that year was elected as Executive Vice President. He was elected by the Board to the Office of President and COO effective January 1, 2001. He is responsible for oversight of the Company's operations and finances. He works with the other Officers and top management to formulate policy and to develop business strategy. Before joining Biospherics, he was Vice President of Capital Technology Information Services, where he managed several aspects of that firm's successful growth from 17 to 150 persons. Previously, he served as Director of Information Systems of an advanced computer center for a Department of Defense program. Mr. Affeldt holds a B.S. from Towson University, specializing in computer technology, and is an MBA candidate at Loyola College.
Dr. Baldwin is President of the National Technological University (NTU), Fort Collins, Colorado. Prior to founding NTU in 1984, he served as Dean of the College of Engineering at Colorado State University (CSU) for 20 years. In that position, he also coordinated research programs with emphasis on the environment. Dr. Baldwin is a leader in developing linkages between industry and universities. In 1967, he created the first ITV program in the Nation employing courier-carried videotape to deliver CSU graduate classes to several Colorado industries. He has published over 50 technical papers on turbulent diffusion in the atmosphere and educational technology issues. Dr. Baldwin holds a Ph.D. from Case Institute of Technology.
Mr. Gantt, President of TWG Associates, a company he founded in 1996 to consult with government contractors on financial aspects of their businesses, previously served corporations in a variety of senior financial and administrative positions. His 25 years of such experience include the positions of Director of Finance and Contracts Administration at University Research Corporation,
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Comptroller and Manager of Administrative Services at Applied Management Sciences, Manager of Administration/Accounting at Hittman Associates and Director of Finance and Administration at the Graduate School of the U.S. Department of Agriculture. He also served as Executive Director and Chief Financial Officer of The Battle of Normandy Foundation. Prior to his nomination for a Board position, Mr. Gantt served Biospherics as a financial consultant. He obtained his B.S. degree in business administration and accounting at Texas A && M University in 1966, and took business graduate work at Fairleigh Dickinson University and The Johns Hopkins University. Mr. Gantt became a member of the Board of Directors in 1999.
Mrs. Levin is Vice President for Corporate Communications and Corporate Secretary.Communications. Mrs. Levin leads Biospherics' public relations information efforts and coordinates proposals for government and commercial business development. She served as Director of the Company's Information Services Division for 25 years, while it grew into a major sector spawning ourthe Government and Commercial Information Divisions. Previously, Mrs. Levin was science and medical reporter and writer for the Washington Bureau
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of Newsweek Magazine. She also served as writer and public information consultant to the National Institute of Mental Health. Mrs. Levin holds a B.A. in English from Vassar College. Mrs. Levin is the spouse of Dr. Levin.
Dr. MacLeod is Professor, College of Library and Information Services and former Acting Director of Libraries, University of Maryland, College Park. She is also a specialist in the design of communications for specific audiences, and is an authority on literature for children and youths. Dr. MacLeod holds a Ph.D. in American history and an M.L.S.,Master of Library Sciences, both from the University of Maryland.
Mr. Moore has beenwas President and Chief Executive Officer of Community Bank of Maryland since 1990.from 1990 until his retirement early in 2001. Prior to his career at Community, he was President and Chief Executive Officer at Farmers National Bank of Maryland and at Central National Bank of Maryland. After obtaining his B.A. in economics at the University of Maryland, Mr. Moore obtained his L.L.B. at the University of Baltimore. He has studied investment banking at the New York Institute of Finance, and completed the commercial banking program at the Stonier Graduate School of Banking of Rutgers University. Mr. Moore serves on the Board of the Bowie Health Center Foundation, and has been on the Boards of the Washington Adventist Hospital and the Anne Arundel Medical Center. A member of the Maryland Bankers Association and of the Robert Morris Associates, he is also active in a number of civic and social organizations.
Mrs. Streb is Chief Administrative Officer, UnitedHealthcare. Starting as Project Manager in 1988, she has served that company in increasingly responsible technical and administrative positions, becoming Vice President, Administration in 1997, and achieving her current position in 1998. After graduating with the degree of Bachelor of Science, Biomedical Communications from the Ohio State University College of Medicine School of Allied Medical Professions in 1977, Mrs. Streb's employment encompassed computer programming and analysis, systems analysis, documentation specialties and technical management at firms including Warner Amex, Bank One of Columbus, NA, and Rockwell International. Mrs. Streb serves on the Immunization Registry Advisory Council of Project LOVE, on the Board of Directors of the Columbus Cancer Clinic, and as a Trustee of the Central Ohio Chapter of the Leukemia Society of America.
In 1999,2000, each of the non-employee Directors was granted options for 1,000 shares of Common Stock. The options have an exercise price of $6.00$6.438 per share and expire on November 16, 2004.15, 2005. Each Director was paid an annual retainer of $2,000 and fees of $750 for each Meeting of the Board and each Committee Meeting they attended. Employee Directors are not paid for their services as Directors.
No Director serves as a Director of aany other publicly-held company. There is not and has not been for the previous two fiscal years any relationship between the Company and any public company in which any Director has a 1% or greater interest.
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Board Of Directors and Committee Meetings in Board Year 1999-2000 2000-2001
The Company's Board of Directors held four (4) Regular Meetings from May 15, 1999,2000, to February 2000,2001, three of which were attended by all members.members; Anne S. MacLeod was unable to attend the August 16, 2000 Meeting. There were three (3)no special meetings. The Board of Directors has sevenfive (5) Committees: Executive; Compensation; Audit; Pension; Technical; Nominating;Audit, Compensation, Employee Benefits, Executive, and Search.Nominating.
The
Executive Committee may act on behalf of the Board of Directors on matters requiring action in the interim between meetings of the full Board. Its members are Gilbert V. Levin,
Chair; George S. Jenkins; Anne S. MacLeod; and Richard C. Levin (staff). There was one (1) meeting, attended by teleconference by all members.
The
Compensation Committee recommends various incentives for key employees to encourage and reward increased financial performance, productivity and innovation. Its members are Lionel
V. Baldwin, Chair; David A. Blake; and Anne S. MacLeod. There were three (3) meetings, attended by all members.
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The Audit Committee members are A. Bruce Cleveland, Chair (retired, 1999); Thomas W. Gantt, Chair; GeorgeThomas G. Moore; and Deborah S. Jenkins; and Richard C. Levin (staff).Streb. The Committee has authority to review the financial records of the Company, deal with its independent auditors, recommend to the Board policies with respect to financial reporting, and investigate all aspects of the Company's business. There were four (4) meetings, which were attended by all Committee members.
The Compensation Committee recommends various incentives for key employees to encourage and reward increased financial performance, productivity and innovation. Its members are Lionel V. Baldwin, Chair; Thomas W. Gantt; and Anne S. MacLeod. There were two (2) meetings, the first attended by A.B. Cleveland, G.S. Jenkins,all members.
The Executive Committee may act on behalf of the Board of Directors on matters requiring action in the interim between meetings of the full Board. Its members are Gilbert V. Levin, Chair; Lionel V. Baldwin; Anne S. MacLeod; Thomas G. Moore; and R.C. Levin; the second attendedRichard C. Levin (staff). There were no meetings held by T.W. Gantt, G.S. Jenkins, and R.C. Lewin.this Committee.
The Biospherics Retirement Plan Administration ("Pension")Employee Benefits Committee oversees the management of the Company's Retirement Plan.Plan and all non-compensation fringe benefits. Its members are David A. Blake, Chair, andDeborah S. Streb, Chair; Thomas W. Gantt; M. Karen Levin.Levin; David H. Affeldt (staff). Three (3) meetings were held, attended by both members.
The
Technical Committee advises the Company on the direction of technology development. The Technical Committee consists of David A. Blake, Chair; Gilbert V. Levin; and James P.
Saunders (staff). James P. Saunders left the Company during 1999. One (1) meeting was held, attended by all members.
The Nominating Committee nominates the proposed Board for election by the Stockholders. Its members are Gilbert V. Levin and M. Karen Levin, who held one (1) meeting.
The
Search Committee advises the Company on recruitment of management personnel. The Search Committee members are Lionel V. Baldwin, Chair; Anne S. MacLeod; and A. Bruce Cleveland
(retired, 1999), who held one (1) meeting, attended by all members.
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Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth the shares of Common Stock beneficially owned by all Officers and Directors as a group as of March 16, 2000.19, 2001. Except for Gilbert V. Levin, Chair of the Board CEO and President,CEO, M. Karen Levin, Vice President for Communications, and RGC International Investors LDC ("RGC"), c/o Rose Glen Capital Management, L.P., 251 St. Asaphs Road, Suite 200, 3 Bala Plaza East, Bala Cynwyd, Pennsylvania 19004, no person is known by the Company to own beneficially more than 5% of the outstanding Common Stock. The ownership of Dr. and Mrs. Levin is detailed below. As of March 16,December 31, 2000, RGC owned 369,582 shares of Common Stock and held warrants to acquire up to an additional 1,660,973 shares of Common Stock, exercisable at prices ofranging from $6.40 $6.91, andto $8.00 per share. The warrants provide, however, that the ownership of RGC and its affiliates may not exceed 9.9% of the outstanding shares of Common Stock of the Company.
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Beneficial Ownership of Common Stock by Officers and Directors
| Title of Class | Name of Beneficial Owner | Amount and Nature of Ownership | Percent Of Class | |||||
|---|---|---|---|---|---|---|---|---|
| Common | Gilbert V. Levin | (1)(2) | ||||||
| Common | M. Karen Levin | |||||||
| Richard C. Levin | ||||||||
| Lionel V. Baldwin | ||||||||
| Anne S. MacLeod | ||||||||
| David H. Affeldt | (2) | |||||||
| Common | Roger A. | |||||||
| Thomas W. Gantt | ||||||||
| Common | Thomas G. Moore | (2) | ||||||
| Common | ||||||||
| Common | Katherine M. Brailer | (2) | ||||||
| Common | All Officers and Directors as a Group |
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As of March 16, 2000,19, 2001, Gilbert V. Levin, Chair, Chief Executive Officer, President, and Treasurer and M. Karen Levin, Vice President for Communications, and Corporate Secretary, 3180 Harness Creek Rd., Annapolis, Maryland, beneficially owned in the aggregate 3,258,087 shares of Common Stock (25.5%( % of the 12,801,205 outstanding shares1). Dr. Gilbert V. Levin and Mrs. M. Karen Levin are husband and wife. As principal Stockholders of the Company, they are considered control persons with respect to the Company.
All Directors and Officers as a group, as beneficial owners of 3,399,951 shares of Common Stock, owned 26.6%% of the 12,801,205 outstanding shares1. With the exception of RGC and Cede && Co., the holder of record for certain brokerage firms and banks, no other person is known by the Company to own beneficially more than 5% of the outstanding Common Stock of the Company.
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In 1978, with Stockholder approval, the Company entered into agreement with Gilbert V. Levin and M. Karen Levin whereby, upon their death, the Company would redeem from their estates the number of Common Shares necessary to pay estate taxes and administrative expenses of the estate, up to $5 million. This agreement is funded (at present values) by a life insurance policy on the Levins for which the Company is the beneficiary. Although the number of shares that would be redeemed is indeterminable, such redemption may affect ownership and control of the Company.
In February 2001, the Board of Directors adopted the Rights Agreement (the "Agreement"). The Agreement provides each stockholder of record a dividend distribution of one "right" for each outstanding share of the Company's common stock. Rights become exercisable at the earlier of ten days following: (1) a public announcement that an acquirer has purchased or has the right to acquire 10% or more of the Company's common stock, or (2) the commencement of a tender offer which would result in an offeror beneficially owning 10% or more of the outstanding common stock of the Company. All rights held by an acquirer or offeror expire on the announced acquisition date, and all rights expire at the close of business on December 31, 2010. Each right entitles a stockholder to acquire at a stated purchase price, 1/100 of a share of the Company's preferred stock, which carries voting and dividend rights similar to one share of its common stock. Alternatively, a right holder may elect to purchase for the stated price an equivalent number of shares of the Company's common stock (or in certain circumstances, cash, property or other securities of the Company) at a price per share equal to one-half of the average market price for a specified period. In lieu of the purchase price, a right holder may elect to acquire one-half of the common stock available under the second option. The purchase price of the preferred stock fractional amount is subject to adjustment for certain events as described in the Agreement. At the discretion of a majority of the Board and within a specified time period, the Company may redeem all of the rights at a price of $0.001 per right. The Board may also amend any provisions of the Agreement prior to exercise.
Officers are elected annually by the Board of Directors. The Executive Officers of the Company as of December 31, 1999,2000, are listed in the following table.
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Executive Officers as of December 31, 1999 2000
| Name | Age | Position | ||||
|---|---|---|---|---|---|---|
| Gilbert V. Levin | Chair, CEO, President, and Treasurer | |||||
| David H. Affeldt | Executive Vice President | |||||
| Katherine M. Brailer | 36 | Corporate Secretary | ||||
| M. Karen Levin | Director and Vice President for Communications | |||||
| Richard C. Levin | Vice President, |
Dr. and Mrs. Levin'sLevin, and Mr. Affeldt's experience is discussed above.
David
H. Affeldt Katherine M. Brailer joined the Company in 19981988 and currently serves as Corporate Secretary and Executive Vice President and. He is responsible for oversightAssistant. Ms. Brailer previously served as Manager of the Company's operationsWord Processing and finances. He works with the other officers
and top managementGraphics Department. Prior to formulate policy and to develop business strategy. Before joining Biospherics, heshe held office management positions at TechMatics Corporation and District Enterprises for the Blind.
Roger A. Downs was elected to the Office of Vice President of Capital Technology Information Services, where he managed several aspects
of that firm's successful growth from 17 to 150 persons. Previously, heOperations on February 16, 2001. Mr. Downs previously served as Director of Business Development and Director of the Commercial Information Systems of an advanced computer centerServices Division, where he grew a strong health-related pharmaceutical program for a Department of Defense program. Mr. Affeldt
holds a B.S. from Towson University, a Master of Computer Technology from the Institute of Research andFirm. Prior to joining Biospherics, he served as Senior Vice President-Quality Service at Standard Federal Savings Bank in Frederick, Maryland, Vice President-Sales at Dynatech Packet Technology in Washington, D.C.,Springfield, Virginia, and is an MBA candidateSenior Vice President-Retail Banking at Loyola College.Bankers Trust Company in Des Moines, Iowa.
Richard C. Levin joined the Company in 1991 as Business Manager. Mr. Levin has held various executive positions within the Company. In 2000,2001, Mr. Levin was namedelected to the newly established position of CFO and Vice President for Finance and Administration. Prior to joining Biospherics, he was the General Manager of the Catalyst Research Division of the Mine Safety Appliances Company. Mr. Levin holds a B.S. in business administration from the University of Baltimore and is a C.P.A. in the State of Maryland. Mr. Levin is the nephew of Dr. and Mrs. Levin.
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Executive Compensation Tables
Summary of Compensation in Last Three Fiscal Years
The following summary of compensation table sets forth the compensation paid by the Company during the three years ended December 31, 1999,2000, to Executive Officers earning in excess of $100,000 during any year.
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| Long-Term Compensation | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual Compensation | Awards | Payouts | ||||||||||||||||||||||||||||||
| Name and Principal Position | Salary($) | Bonus($)(1) | Annual Com- pensation(2)($) | Restricted Stock Awards | No. of Securities Underlying Options(3) | LTIP Payouts($) | All Other Compen- sation($) | |||||||||||||||||||||||||
| Gilbert V. Levin Chief Executive Officer | 2000 1999 1998 | 213,700 213,700 205,930 | 106,850 — | 7,200 7,200 7,800 | — — | 2,000 3,000 | — — | 4,250 | 3,094 4,000 | |||||||||||||||||||||||
| M. Karen Levin Vice President for Communications | 2000 1999 1998 | 88,100 132,150 169,852 | 30,835 — — | 7,200 7,200 7,800 | — — — | 2,000 1,000 25,000 | — — — | 2,375 4,000 | ||||||||||||||||||||||||
| David H. Affeldt Executive Vice President | 2000 1999 | 162,100 162,100 | 56,700 — | 7,200 7,200 | — — | — — | — — | 2,431 — | ||||||||||||||||||||||||
Richard C. Levin Vice President, | 2000 1999 1998 | 119,782 119,782 108,424 | 39,375 — — | 7,200 7,200 7,800 | — — — | 15,000 1,500 3,000 | — — — | 2,897 2,895 | ||||||||||||||||||||||||
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Option Grants in Last Fiscal Year
The following option grants table sets forth the total options granted by the Company during the year ended December 31, 1999,2000, to the Executive Officers earning in excess of $100,000 during the year.
| Name | Number of Securities Underlying Options Granted | % of Total Options Granted to Employees in Fiscal Year | Exercise or Base Price per Share ($) | Expiration Date | ||||
|---|---|---|---|---|---|---|---|---|
| Gilbert V. Levin | 5,000 | 11 | % | 7.0818 | 11/15/2005 | |||
| M. Karen Levin | 2,000 | 5 | % | 7.0818 | 11/15/2005 | |||
| Richard C. Levin | 15,000 | 34 | % | 6.4380 | 11/15/2005 |
The Biospherics Incorporated Nonqualified Stock Option Plan (the "1987 Plan") was established in May 1987 to provide certain selected key employees having substantial responsibilities for the direction and management of the Company with an additional incentive to promote its success and encourage them to remain in the employ of the Company. The 1987 Plan provided for the issuance of up to 4,400,000 shares of Common Stock. No further awards could be made under the 1987 Plan after May 14, 1997. As of December 31, 1999,2000, there were 482,450108,375 outstanding options granted to individuals including the above-named Officers, including 480,325 thatall of which were exercisable as of such date.
The Biospherics Incorporated 1997 Stock Option Plan (the "1997 Plan") was approved by the Company's Stockholders on May 15, 1998. The 1997 Plan provides for the grant of incentive stock options and non-qualified stock options to select employees of the Company. The 1997 Plan provides
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for the issuance for up to 400,000 shares of Common Stock. As of December 31, 1999,2000, there were 151,650182,125 outstanding options granted to individuals including the above-named Officers, including 77,27594,763 that were exercisable as of such date.
Aggregated Options Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following aggregated options table sets forth the total options exercised during the year ended December 31, 1999,2000, and fiscal year-end (FYE) 19992000 option values for those Executive Officers earning in excess of $100,000 during the year.
| Name | No. of Shares Acquired on Exercise | Value Realized ($) | Number of Securities Underlying Unexercised Options at FYE Exercisable/ Unexercisable | Value of Unexercised In-the-Money Options at FYE Exercisable ($)/ Unexercisable ($) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gilbert V. Levin | 110,000 | $ | 460,625 | 26,000/9,000 | $ | 176,284/$60,778 | ||||
| M. Karen Levin | — | — | 52,750/5,250 | $ | 349,541/$34,582 | |||||
| David H. Affeldt | 5,000 | $ | 28,907 | 5,000/10,000 | $ | 28,907/$57,813 | ||||
| Richard C. Levin | 30,000 | $ | 157,500 | 59,375/20,125 | $ | 414,828/$127,461 | ||||
Long-Term Incentive Plans—AwardsPlans-Awards in Last Fiscal Year
There were no long-term Incentive Plan awards during 19982000 or 1999.
To ensure the availability of their services to the Company after their retirement, Dr. and Mrs. Levin each have entered into a consulting agreement with the Company, under which they will provide the Company post-retirement consulting services of not less than twenty-four (24) days per year for ten (10) years at a daily rate equal to 125% of their respective final average daily rate of salary adjusted in
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subsequent years for changes in the cost of living. In addition, Dr. and Mrs. Levin and the Company have entered into supplementary retirement plan agreements pursuant to which they will receive retirement compensation based on the difference between seventy percent (70%) of their average annual total compensation, and their social security payments plus assumed returns from investment of their funded pension plans. The supplementary retirement plan is unfunded.
Effective January 1, 1990, the Company established the Biospherics Incorporated 401(k) Retirement Plan. The Plan is a discretionary defined contribution plan and covers substantially all employees who have attained the age of 21, have completed six months of service, and have worked a minimum of 500 hours. The Company matches an amount equal to 50% of the employees' contribution, or 2.5%up to 5% of the employees' eligible compensation.
Report of the Compensation Committee
The following report of the Compensation Committee and the performance graphs included elsewhere in this proxy statement do not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this report or the performance graphs by reference therein.
The Company's compensation whicheverprogram for executives consists of three key elements:
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The Compensation Committee believes that this three-part approach serves the interests of the Company and its shareholders. It enables the Company to meet the requirements of the highly competitive environment in which the Company operates while ensuring that executive officers are compensated in a way that advances both the short-term and long-term interests of shareholders. Under this approach, compensation for these officers involves a high proportion of pay that is less."at risk"—namely, the annual bonus and stock options. The variable annual bonus is also based, in significant part, on Company performance. Stock options relate a significant portion of long-term remuneration directly to stock price appreciation realized by all of the Company's shareholders.
Base Salary—Base salaries for the Company's executive officers other than the Chief Executive Officer, as well as changes in such salaries, are based upon recommendations by the Chief Executive Officer, taking into account such factors as competitive industry salaries, a subjective assessment of the nature of the position and the contribution and experience of the officer and the length of the officer's service.
Annual Bonus—Annual bonuses for 2000 paid to executive officers of the Company were granted under the Company's Amended And Restated Incentive Compensation Plan (the "Incentive Plan"). The Incentive Plan, which permits the payment of awards in cash, is administered by the Committee, subject to Board approval, and provides for performance-based bonuses. For 2000, the Committee established overall Company performance targets based upon the achievement of specified levels of both net income and adjusted net income for the Company as a whole. After the end of the year, the Committee confirmed that the 2000 targets had been achieved and accordingly the Board approved the payment of annual bonuses under the Incentive Plan. The amounts of the bonuses are set forth in the Executive Compensation Summary Table.
Stock Options—The final component of the Company's executive compensation program is the periodic grant of stock options. The number of options granted will be based on the executives' level of responsibility, Company performance and individual performance. As is the case with annual bonuses, the Compensation Committee intends to use stock options to incent and motivate the key managers of the Company's operations as well as Company executive officers. As an additional objective, stock option grants to executive officers are intended to induce the executive to remain in the employment of the Company. Accordingly, the Compensation Committee intends for stock options generally to be exercisable only after an employee has satisfied a minimum tenure requirement.
As Chief Executive Officer, Dr. Levin is compensated pursuant to an employment agreement entered into in November, 1995 and which extends through November 17, 2001, subject to earlier termination under certain circumstances. The agreement, as amended, provides for an annual base salary of $224,400 and the opportunity for annual bonuses under the Incentive Plan. In November 2000, Dr. Levin was granted options for 5,000 shares of the Company's Common Stock under its 1997 Stock Option Plan. Dr. Levin was awarded a $106,850 bonus in February 2001, payable over two years, as a result of exceeding the 2000 performance targets.
This report is submitted by the Compensation Committee of the Board of Directors:
Lionel V. Baldwin, Chair
Thomas W. Gantt
Anne S. MacLeod
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of Biospherics during the fiscal year ended December 31, 2000 consisted from time to time of Messrs. Lionel V. Baldwin, Thomas W. Gantt, and Ms. Anne S. MacLeod. None of such individuals have served as an officer or employee of the Company nor is there
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any other relationship between any member of the Compensation Committee and the Company which is required to be disclosed under applicable proxy regulations.
10Report of the Audit Committee
The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this report by reference therein.
During fiscal 2000, the Audit Committee of the Board of Directors developed a charter for the Committee, which was approved by the full Board on May 15, 2000. The complete text of the charter, which reflects standards set forth in new SEC regulations and stock exchange rules, is reproduced as Attachment A to this proxy statement.
In overseeing the preparation of the Company's financial statements, the Committee met with both management and the Company's outside auditors to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the Committee discussed the statements with both management and the outside auditors. The Committee's review included discussion with the outside auditors of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication With Audit Committees).
With respect to the Company's outside auditors, the Committee, among other things, discussed with the auditors matters relating to its independence, including the disclosures made to the Committee as required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
On the basis of these reviews and discussions, the Committee recommended to the Board of Directors that the Board approve the inclusion of the Company's audited financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, for filing with the Securities and Exchange Commission.
This report is submitted by the Audit Committee of the Board of Directors:
Thomas W. Gantt, Chair
Thomas G. Moore
Deborah S. Streb
Grant Thornton LLP Fees For Fiscal 2000
Audit Fees. Audit fees billed to the Company by Grant Thornton LLP with respect to the 2000 annual audited and quarterly reviewed financial statements were $68,500.
Financial Information Systems Design And Implementation Fees. No services were performed by, or fees incurred to, Grant Thornton LLP in connection with financial information systems design and implementation projects for 2000.
All Other Fees. All other fees billed by Grant Thornton LLP with respect to 2000 were $10,000 related to tax services.
The Audit Committee considered whether the provision of services referenced above under "All Other Fees" is compatible with maintaining Grant Thornton's independence.
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Performance Graph
The following graph assumes $100 was invested on December 31, 1995 in Biospherics common stock, the S&P 500 Index and the Peer Group (as described below). It compares the cumulative total return on each, assuming reinvestment of dividends, for the five-year period ended December 31, 2000.
Represents Biospherics common stock's total return over the past five years including reinvestment of dividends.
S&P 500
Represents the S&P 500 Index's total return over the past five years including reinvestment of dividends.
Peer Group
Represents the comparable peers' total return over the past five years including reinvestment of dividends.
The peer group consists of the following companies:
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APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TOCOMPANY INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK (Item(Item 2 on the Proxy Card)
The Board of Directors has determined that it is in the best interests of the Company and our Stockholders to amend the Company's Certificate of Incorporation, as amended, (the "Certificate of Incorporation"), authorizesto change the issuance of 18,000,000 shares of Common Stock,
$.005 par value, and 2,000,000 shares of Preferred Stock, $.01 par value. In February, 2000, the Board of Directors of the Company approved an amendmentCompany's name from "Biospherics Incorporated" to the Certificate of Incorporation to increase
the authorized number of shares of Common Stock from 18,000,000 to 50,000,000 and to submit the proposed amendment to the Stockholders at this meeting.
Purpose and Effect of the Amendment
The general purpose and effect of the proposed amendment to the Certificate of Incorporation will be to authorize 32,000,000 additional shares of Common Stock.
The Board of Directors believes that it is prudent to have the additional shares of Common Stock available for general corporate purposes, including payment of stock dividends, stock splits or other
recapitalizations, acquisitions, equity financings and grants of stock options.
Although"Spherix Incorporated." Accordingly, the Board of Directors has not decidedproposed such an amendment for submission to effect a stock split,our Stockholders at the Board wants2001 annual meeting.
Purpose and Effect
If the amendment to maintain the ability to do so. TheCompany's Certificate of Incorporation is approved by the Stockholders, the Company declared such a split in 1996, which was
effected by making a dividend of one additional share for each share then owned. In considering stock splits, the Board's philosophy continueswill cause to be guided byfiled with the Secretary of State of Delaware a conviction not only thatCertificate of Amendment in the form attached hereto as Attachment B.
The primary reason for the name change is to better reflect the Company's ownership, andbusiness. Changing the liquidity afforded its stockholders, expands in relation toname of the number of shares outstanding, but also that the Company's shares become more attractive to individual investors when
it is possible to acquire a larger number of them for the same total dollar amount. The Board of Directors considers a number of factors, including general market conditions, in deciding whether or
when to effect a stock split, andCompany will not alter any of these factors could cause the Board to decide against effecting a stock split at any particular time. The Company has determined that securing stockholder
approval of additional authorized shares of Common Stock would be appropriate in order to provide the Company with the flexibility to consider a combination of possible actions, including acquisitions
or stock splits, that might require the issuance of additional shares of Common Stock.
The
Company currently has 18,000,000 authorized shares of Common Stock. As of February 29, 2000, the Company had approximately 10,595,000 shares issued and outstanding andrights of the remaining 7,405,000 authorized but unissued shares,Stockholders. Since the beginning of 2001, the Company has reserved approximately 2,272,000 shares pursuantbeen doing business as Spherix in anticipation of Stockholder approval of this proposed amendment.
Vote Required
If the amendment to the Company's option plans and outstanding warrants.
Except
in connection with the reserved shares described above, the Company currently has no arrangements or understandings for the issuanceCertificate of additional shares of Common Stock,
although opportunities for acquisitions and equity financings could arise at any time. If this proposalIncorporation is approved, all or any of the authorized shares may be issued without further share action
(unless such approval is required by applicable law or regulatory authorities) and without first offering those shares to the stockholders for subscription. The issuance of shares otherwise than on a
pro-rata basis to all stockholders would reduce the proportionate interest in the Company of each share.
The
increase in the authorized number of shares of Common Stock could have an anti-takeover effect. If the Company's Board of Directors desired to issue additional shares in the
future, such issuance could dilute the voting power of a person seeking control of the Company, thereby deterring or rendering more difficult a merger, tender offer, proxy contest or an extraordinary
corporate transaction opposed by the Company. A copy of the proposed amendment is attached hereto as attachment A.
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If
adopted, the amendmentname change will become effective upon the filing of the amendment with the Delaware Secretary of State as required by the General Corporation Law of Delaware. It is anticipated that thisDelaware, which filing will occurbe made promptly following the date ofafter the annual meeting. If the amendment to the Company's Certificate of Incorporation is approved, we will likely cause our common stock to be traded under the symbol "SPEX" on the NASDAQ National Market System.
Vote
The affirmative vote of a majority of the outstanding shares of Common Stockcommon stock entitled to vote at the meeting will be required to ratify and approve the amendment to the Certificate of Incorporation increasingchanging the name of the Company to Spherix Incorporated.
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AMENDMENT OF THE 1997 STOCK OPTION PLAN
(Item 3 on the Proxy Card)
The Board of Directors recommends that Stockholders approve an amendment to the Company's 1997 Stock Option Plan (the "Plan") to provide for an increase in the number of shares of common stock reserved for issuance under the plan by 600,000 shares for a total of 1,000,000 shares. The proposed amendment is attached hereto as Attachment C.
The Plan plays an important role in the Company's efforts to attract and retain employees of outstanding ability, and to align the interests of employees with those of the Stockholders through increased employee ownership of the Company. The shares of common stock originally reserved for issuance under the Plan were fully utilized in early 2001. In order to continue to provide the appropriate equity incentives to employees in the future, the Board of Directors has approved an increase in the number of reserved shares, subject to Stockholder approval.
The amendment to the Plan to increase the number of shares reserved must be approved by the holders of at least a majority of the shares of common stock represented at the annual meeting.
The purposes of the Plan are to provide long-term incentives and rewards to employees of the Company, to assist the Company in attracting and retaining individuals with experience and/or ability on a basis competitive with industry practices and to associate the interest of these individuals with those of the Company's Stockholders by providing for the issuance of stock options ("Awards"). The following is a summary of the principal features of the plan.
Administration
The Plan is administered by the Compensation Committee. The Compensation Committee has the power to determine the select employees to whom Awards shall be made.
Each Award under the Plan is made pursuant to a written agreement between the Company and the recipient of the Award (the "Agreement"). In administering the Plan, the Compensation Committee has the express power, subject to the provisions of the Plan, to determine the terms and conditions upon which Awards may be made and exercised and to determine terms and provisions of each Agreement.
The members of the Compensation Committee are indemnified by the Company against the reasonable expenses incurred by them, including attorneys' fees, in the defense of any action, suit or proceeding, or any appeal therein to which they may be a party by reasons of any action taken or failure to act under the Plan.
Subject to the terms, conditions and limitations of the Plan, the Compensation Committee may modify, extend or renew outstanding Awards, or, if authorized by the Board of Directors, accept the surrender of outstanding Awards and authorize new Awards in substitution therefore, but may not substitute Awards with lower exercise prices than the surrendered Awards. The Compensation Committee may also modify any outstanding Agreement, provided that no modification may adversely affect the rights or obligations of the recipient without the consent of the recipient.
The Board may terminate, amend or modify the Plan from time to time in any respect without Stockholder approval, unless the particular amendment or modification requires Stockholder approval under the Internal Revenue Code of 1986, as amended (the "Code"), or the rules and regulations of the exchange or system on which the common stock is listed or reported or pursuant to any other applicable laws, rules or regulations. Currently the Code and regulations governing ISOs (as herein defined) require Stockholder approval of any amendments which would (i) materially increase the benefits accruing to participants, (ii) materially increase the number of securities which may be issued or (iii) materially modify the requirements as to eligibility for participation.
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The Plan expires on December 31, 2007, unless sooner terminated by the Board.
Eligibility
Employees of the Company and its subsidiaries who are deemed to be select employees ("Select Employees") by the Committee are eligible for Awards under the Plan. Select Employees include officers or other employees of the Company and its subsidiaries who, in the opinion of the Committee, contribute significantly to the growth and profitability of, or perform services of major importance to, the Company and its subsidiaries. Unless specified below in the description of the particular Awards available under the Plan or in the Plan itself, the prices, expiration dates, consideration to be received by the Company, and other terms of each Agreement shall be determined by the Committee.
Certain Terms of Awards
Options may be transferable to recipients' family members if authorized by the Committee.
The Plan authorizes the grant of incentive stock options within the meaning of Section 422 of the Code ("ISOs") and non-qualified stock options ("NQSOs") (collectively, "Options"). The terms applicable to such Options will be determined by the Committee, but an Option will not be exercisable after ten years from its grant. All Options granted as ISOs shall comply with all applicable provisions of the Code and all other applicable rules and regulations governing ISOs. All other Option terms will be determined by the Committee in its sole discretion.
Shares Subject to the Plan
Up to 400,000 shares of Common Stock may be issued under the Plan as initially adopted. As set forth herein, the proposed amendment to the Plan would revise the number of shares which may be issued under the Plan to 1,000,000. Except as set forth below, shares of Common Stock issued in connection with the exercise of, or as other payment for, an Award will be charged against the total number of shares issuable under the Plan. If any Award granted (for which no material benefits of ownership have been received, including dividends) terminates, expires or lapses for any reason other than as a result of being exercised, Common Stock subject to such Award will be available for further Awards to participants.
In order to reflect such events as stock dividends, stock splits, recapitalization, mergers, consolidations or reorganizations by the Company, the Committee may, in its sole discretion, adjust the number of shares subject to each outstanding Award, the exercise price and the aggregate number of shares from 18,000,000which grants or awards may be made.
Change in Control
In order to 50,000,000.maintain all the participants' rights in the event of a change in control of the Company (that term being defined under the Plan), the Committee, as constituted before such change in control, in its sole discretion, may, as to any outstanding Award either at the time an Award is made or any time thereafter, take any one or more of the following actions: (i) provide for the acceleration of any time periods relating to the exercise or realization of any such Award so that such Award may be exercised or realized in full on or before a date initially fixed by the Committee; (ii) provide for the purchase or settlement of any Award by the Company, upon the participant's request, for an amount of cash equal to the amount which could have been obtained upon the exercise of such Award or realization of such participant's rights had such Award been currently exercisable or payable; (iii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such change in control; or (iv) cause any such Award then outstanding to be assumed, or new rights substituted therefore, by the acquiring or surviving corporation in such change in control.
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Certain Federal Income Tax Consequences
THE
BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK FROM 18,000,000 TO 50,000,000,
AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS Incentive Stock Options. An optionee will not recognize income on the grant of an ISO, and an optionee generally will not recognize income on the exercise of an ISO, except as described in the following paragraph. Under these circumstances, no deduction will be allowable to the employer corporation in connection with either the grant of such Options or the issuance of shares upon exercise thereof.
However, if the exercise of an ISO occurs more than three months after the optionee ceased to be an employee for reasons other than death or disability (or more than one year thereafter if the optionee ceased to be an employee by reason of permanent and total disability), the exercise will not be treated as the exercise of an ISO, and the optionee will be taxed in the same manner as on the exercise of a NQSO, as described below.
To the extent the aggregate fair market value (determined at the time the Options are granted) of shares subject to an ISO that become exercisable for the first time by any optionee in any calendar year exceeds $100,000, the Options will be treated as Options which are not ISOs, and the optionee will be taxed upon exercise of those excess Options in the same manner as on the exercise of NQSO, as described below.
Gain or loss from the sale or exchange of shares acquired upon exercise of an ISO generally will be treated as capital gain or loss. If, however, shares acquired pursuant to the exercise of an ISO are disposed of within two years after the Option was granted or within one year after the shares were transferred pursuant to the exercise of the Option, the optionee generally will recognize ordinary income at the time of the disposition equal to the excess over the exercise price of the lesser of the amount realized or the fair market value of the shares at the time of exercise (or, in certain circumstances, at the time such shares became either transferable or not subject to a substantial risk of forfeiture). If, however, such disposition is not a sale or exchange with respect to which a loss (if sustained) would be recognized, the ordinary income is the excess of the fair market value of the shares at the time of exercise (or, in certain circumstances, at the time they became either transferable or not subject to substantial risk of forfeiture) over the exercise price. Gain recognized on the disposition in excess of the ordinary income resulting therefrom will be capital gain and any loss recognized on the disposition will be capital loss. If an optionee recognizes ordinary income as a result of a disposition as described in this paragraph, the employer corporation will be entitled to a deduction of the same amount.
The exercise of an ISO may result in a tax to the optionee under the alternative minimum tax because as a general rule the excess of the fair market value of stock received on the exercise of an ISO over the exercise price is defined as an item of "tax preference" for purposes of determining alternative minimum taxable income.
Non-qualified Options. A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.participant will not recognize income on the grant of a NQSO, but generally will recognize income upon the exercise of a NQSO. The amount of income recognized upon the exercise of a NQSO will be measured by the excess, if any, of the fair market value of the shares at the time of exercise over the exercise price, provided that the shares issued are either transferable or not subject to a substantial risk of forfeiture.
If shares received on the exercise of a NQSO are nontransferable and subject to a substantial risk of forfeiture then, unless the optionee elects to recognize income at the time of receipt of such shares, the optionee will not recognize ordinary income until the shares become either transferable or not subject to a substantial risk of forfeiture.
In the case of ordinary income recognized by an optionee as described above in connection with the exercise of a NQSO, the employer corporation will be entitled to a deduction in the amount of ordinary income so recognized by the optionee.
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General. The rules governing the tax treatment of Awards that may be granted under the Plan are quite technical, so that the above description of tax consequences is necessarily general in nature and does not purport to be complete. Moreover, statutory provisions are, of course, subject to change, as are their interpretations, and their application may vary in individual circumstances.
Finally, the tax consequences under applicable state laws may not be the same as under the federal income tax laws.
Vote Required
The affirmative vote of the holders of a majority of the shares of common stock represented in person or by proxy at the Annual Meeting, assuming a quorum is present, is required to ratify and approve the amendment to the Plan.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS (Item 3(Item 4 on the Proxy Card)
The Board of Directors has appointed the firm of Grant Thornton LLP to be the Company's independent accountants for the year 20002001 and recommends that Stockholders vote "FOR" ratification of that appointment.
On April 5, 2000, Pricewaterhouse CoopersPricewaterhouseCoopers LLP declined to stand for re-election as the independent accountsaccountants for the Company for calendar year 2000. The reports of PricewaterhouseCoopers LLP on the financial statements for the past two fiscal years 1999 and 1998 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. In connection with its audits for the two most recent fiscal years 1999 and 1998 and through April 5, 2000, there have been no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make reference thereto in their report on the financial statements for such years. During the two most recent fiscal years 1999 and 1998 and through April 5, 2000, there have been no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)). The Company has requested that PricewaterhouseCoopers LLP furnish it with a letter addressed to Securities and Exchange Commission stating whether or not it agrees with the above statements and PricewaterhouseCoopers LLP has provided such a letter stating that it agrees with the foregoing.
The Company has engaged (" ")Grant Thornton LLP to act as its independent auditors, effective
,for the year 2000. During the Company's two (2) most recent fiscal years and any subsequent interim period prior to engaging ,Grant Thornton LLP, the Company has not consulted Grant Thornton LLP regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, and Grant Thornton LLP did not provide either a written report or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement or a reportable event, each as defined in Item 304 of Regulation S-K. The Company has provided Grant Thornton LLP with a copy of these disclosures; has asked Grant Thornton LLP to review the disclosures; and has provided Grant Thornton LLP the opportunity to express any disagreement or clarification with respect to the disclosures in a writing addressed to the Securities and Exchange Commission. Grant Thornton LLP has orally advised the Company that it concurs with these disclosures and will not provide any such writing.
The Company is advised that no member of the firm of Grant Thornton LLP has any interest, financial or otherwise, direct or indirect, in the Company. Representatives from Grant Thornton LLP will attend the Annual Meeting, will have the opportunity to make a statement if he or she desires to
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do so, and will be available to answer questions. Representatives from PricewaterhouseCoopers LLP are not expected to attend the Annual Meeting. If the Stockholders, by the affirmative vote of the holders of a majority of the shares of Common
12
Stock represented in person or by proxy at the Meeting, do not ratify the selection of ,Grant Thornton LLP, the selection of independent accountants will be reconsidered by the Board of Directors.
OTHER BUSINESS (Item 4(Item 5 on the Proxy Card)
As of the date of this statement, the management of Biospherics Incorporated has no knowledge of any business that may be presented for consideration at the Meeting, other than that described above. As to other business, if any, that may properly come before the Meeting, or any adjournment thereof, it is intended that the Proxy hereby solicited will be voted in respect of such business in accordance with the judgment of the Proxy holders.
SHAREHOLDERSTOCKHOLDER PROPOSALS
Shareholders Stockholders intending to present a proposal at the 20012002 Annual Meeting of Stockholders must submit such proposals to the Company at 12051 Indian Creek Court, Beltsville, MD 20705, no later than December 23, 2000.3, 2001.
BY ORDER OF THE BOARD OF DIRECTORS,
Katherine M. Karen Levin,Brailer, Corporate Secretary
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ATTACHMENT A
BIOSPHERICS INCORPORATED
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial reports and other financial information provided by the Corporation to any governmental body or the public; the Corporation's systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; and the Corporation's auditing, accounting and financial reporting processes generally. Consistent with this function, the Audit Committee should encourage continuous improvement of, and should foster adherence to, the Corporation's policies, procedures and practices at all levels. The Audit Committee's primary duties and responsibilities are to:
The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be independent directors, and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. All members of the Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Committee shall have accounting or related financial management expertise.
The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their succession shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee should meet at least annually with management and the independent accountants in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. In addition, the Committee or at least its Chair should meet with the independent accountants and management quarterly to review the Corporation's financials.
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IV. RESPONSIBILITIES AND DUTIES
The Audit Committee shall:
Documents/Reports Review
Independent Accountants
Financial Reporting Processes
Process Improvement
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Ethical and Legal Compliance
The duties and responsibilities of the members of the Committee are in addition to those duties set out for a member of the Board of Directors.
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ATTACHMENT B
Biospherics Incorporated, a corporation organized and existing under the Delaware General Corporation Law (the "Corporation"), by virtue of a Certificate of Incorporation filed with the Secretary of State of Delaware on May 1, 1992, as amended by a Certificate of Amendment filed with the Secretary of State of Delaware on May 21, 1996, and a Certificate of Amendment filed with the Secretary of State of Delaware on May 30, 2000, does hereby certify that:
FIRST
FIRST:: The charter of the Corporation is hereby amended by deleting the first paragraph in Article FOURTHFIRST in its entirety and by sustitutingsubstituting in lieu thereof the following:
FIRST. The total numbername of shares of stock which the corporation has authority to issue is fifty-two million (52,000,000) shares, fifty million (50,000,000) of which shall be Common Stock of the par value of
one-half cent ($0.005) per share, and two million ($2,000,000) of which shall be Preferred Stock of the par value of one cent ($0.01) per share.Spherix Incorporated.
SECOND
SECOND:: The foregoing amendment of the Corporation's charter was duly adopted by the Corporation's boardBoard of directorsDirectors and stockholdersStockholders pursuant to the requirements of Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, BIOSPHERICS INCORPORATED has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunder affixed and attested by its Secretary on this day of May, 2000.2001.
| ATTEST: | BIOSPHERICS INCORPORATED | |
Gilbert V. Levin, |
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ATTACHMENT C
AMENDMENT NO. 1
TO
BIOSPHERICS INCORPORATED 1997 STOCK OPTION PLAN
This Amendment No. 1 to Biospherics Incorporated 1997 Stock Option Plan (this "Amendment") is made as of this 16th day of February, 2001.
The Board of Directors of Biospherics Incorporated (the "Company") adopted the Biospherics Incorporated 1997 Stock Option Plan (the "Plan") on November 17, 1997. The stockholders of the Company approved the Plan on May 15, 1998.
The Board of Directors of the Company has determined that it is advisable to increase the maximum number of shares available for issuance under the Plan from 400,000 to 1,000,000. On the date hereof, the Board of Directors authorized the adoption of this Amendment subject to the approval of the Stockholders of the Company.
NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the parties hereto agree as follows:
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