<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Bionutrics, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
BIONUTRICS, INC.
2425 E. CAMELBACK ROAD, SUITE 650
PHOENIX, ARIZONA 85016
-------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FOR THE YEAR ENDED OCTOBER 31, 1999
TO BE HELD ON MARCH 22, 2000
-------------------------------------------------------------
The Annual Meeting of Stockholders of Bionutrics, Inc., a Nevada
corporation (the "Company"), will be held at 2:00 p.m. (local time), on March
22, 2000, at the Ritz Carlton, 2401 E. Camelback Road, Phoenix, Arizona
85016, for the following purposes:
1. To elect two directors for a three-year term expiring in 2003.
2. To ratify the appointment of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending
October 31, 2000.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on February 1, 2000
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person. To
assure your representation at the meeting, however, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the postage-
prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
Sincerely,
/s/ Ronald H. Lane
Ronald H. Lane
President & Secretary
Phoenix, Arizona
February 16, 2000
<PAGE> 3
BIONUTRICS, INC.
2425 E. CAMELBACK ROAD, SUITE 650
PHOENIX, ARIZONA 85016
-------------------------------------------------------------
PROXY STATEMENT
-------------------------------------------------------------
VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Bionutrics, Inc., a Nevada
corporation (the "Company"), by the Company's board of directors (the "Board of
Directors") for use at the Annual Meeting of Stockholders to be held at 2:00
p.m. (local time), on March 22, 2000 (the "Meeting"), or at any adjournment
thereof, for the purposes set forth in this Proxy Statement and in the
accompanying Notice of Annual Meeting of Stockholders. The Meeting will be held
at the Ritz Carlton, 2401 E. Camelback Road, Phoenix, Arizona 85016.
These proxy solicitation materials were first mailed on or about February
18, 2000, to all stockholders entitled to vote at the Meeting.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on February 1, 2000 (the
"Record Date"), are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 20,820,181 shares of the
Company's common stock, $.001 par value per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of the
total number of shares of Common Stock outstanding constitutes a quorum for the
transaction of business at the Meeting. Each stockholder voting at the Meeting,
either in person or by proxy, may cast one vote per share of Common Stock held
on all matters to be voted on at the Meeting. Assuming that a quorum is present,
the affirmative vote of a majority of the shares of Common Stock of the Company
present in person or represented by proxy at the Meeting and entitled to vote is
required: (i) to elect two directors for a three-year term expiring in 2003 and
(ii) to ratify the appointment of Deloitte & Touche LLP as the independent
auditors of the Company for the fiscal year ending October 31, 2000.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it represents
will be voted at the Meeting as directed. If no specification is indicated, the
shares will be voted: (i) "for" the election of the nominees set forth in this
Proxy Statement; and (ii) "for" the ratification of the appointment of Deloitte
& Touche LLP as the independent auditors of the Company for the fiscal year
ending October 31, 2000.
1
<PAGE> 4
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
SOLICITATION
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies also may be solicited by certain of
the Company's directors and officers, personally or by telephone or telegram,
without additional compensation.
ANNUAL REPORT AND OTHER MATTERS
The 1999 Annual Report to Stockholders, which was mailed to stockholders
with or preceding this Proxy Statement, contains financial and other information
about the activities of the Company but is not incorporated into this Proxy
Statement and is not to be considered a part of these proxy soliciting
materials. The information contained in the "Report of the Compensation
Committee of the Board of Directors" below and "Company Performance Graph" below
shall not be deemed "filed" with the Securities and Exchange Commission (the
"SEC") or subject to Regulations 14A or 14C or to the liabilities of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide, without charge to each stockholder of record as
of the Record Date, a copy of the Company's annual report on Form 10-K for the
year ended October 31, 1999, as filed with the SEC. Any exhibits listed in the
Form 10-K report also will be furnished upon request at the actual expense
incurred by the Company in furnishing such exhibit. Any such requests should be
directed to the Company's Secretary at the Company's executive offices set forth
in this Proxy Statement.
2
<PAGE> 5
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS
AND NAMED EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock on February 15, 2000 by: (i) each
director and each nominee for director; (ii) the Named Executive Officers (as
defined herein) set forth in the Summary Compensation Table under the section
entitled "EXECUTIVE COMPENSATION;" (iii) all directors, nominees and executive
officers of the Company as a group; and (iv) each person known by the Company to
be the beneficial owner of more than five percent of the Common Stock.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) (2) PERCENT
- ----------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Ronald H. Lane, Ph.D.(3) ........................ 4,064,163 18.8%
John R. Palmer (4) .............................. 308,042 1.5
Howard Schneider (5) ............................ 66,667 *
Richard M. Feldheim (6) ......................... 922,916 4.4
Daniel S. Antonelli (7) ......................... 4,005,333 17.6
Y. Steve Henig, Ph.D.(8) ........................ 12,000 *
C. Everett Koop, M.D., Sc.D.(9) ................. 32,000 *
William M. McCormick (10) ....................... 1,086,167 5.0
Milton Okin (11) ................................ 556,250 2.7
Frederick B. Rentschler (12) .................... 198,092 *
Winston A. Salser, Ph.D.(13) .................... 909,027 4.4
Donald A. Winkler (14) .......................... 20,333 *
Robert B. Goergen (15) .......................... 570,333 2.7
Executive officers and directors as a group
(13 persons) ................................. 12,751,324 51.5%
OTHER 5% STOCKHOLDERS:
Lipogenics, Inc.(16) ............................ 1,202,886 5.8%
Bali Holdings LLC(17) ........................... 1,400,000 6.7
AC Humko Corp.(18) .............................. 4,000,000 17.6
</TABLE>
- ----------------------
*Denotes less than a 1% interest in the Company
(1) Except as indicated, and subject to community property laws when
applicable, the persons named in the table above have sole voting and
investment power and with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes shares of Common Stock issuable to the identified person pursuant
to stock options or warrants that may be exercised within 60 days after
February 15, 2000. In calculating the percentage of ownership, such shares
are deemed to be outstanding for the purpose of computing the percentage
of shares of Common Stock owned by such person, but are not deemed to be
outstanding for the purpose of computing the percentage of shares of
Common Stock owned by any other stockholders.
(3) Represents shares held of record by R.H. Lane Limited Partnership of which
Dr. Lane is a general partner. He shares voting power over these shares
with Richard M. Feldheim, a general partner. Dr. Lane disclaims beneficial
ownership of 300,000 shares held by such partnership for the benefit of
other partners and 900,000 shares held by the partnership for the benefit
of his wife. Includes 760,000 shares of Common Stock issuable upon
exercise of stock options.
(4) Includes 180,000 shares held of record by Bali Holdings LLC, a company of
which Mr. Palmer is one of three members. Also includes 66,667 shares of
Common Stock issuable upon exercise of stock options.
(5) Represents 66,667 shares of Common Stock issuable upon exercise of stock
options.
3
<PAGE> 6
(6) Includes 133,280 shares held of record by Millrich Corporation, a
corporation controlled by Mr. Feldheim, 19,826 shares held of record by
Abby's, Inc., a corporation controlled by Mr. Feldheim, 757,810 shares
held of record by the R. M. Feldheim Limited Partnership of which Mr.
Feldheim is the general partner. Does not include 3,268,185 shares held by
R.H. Lane Limited Partnership for the benefit of other partners. He shares
voting power over the shares held by Abby's, Inc. and R.H. Lane Limited
Partnership. Includes 12,000 shares of Common Stock issuable upon exercise
of stock options.
(7) Represents 2,000,000 shares of Common Stock and warrants for the purchase
of 2,000,000 shares held by AC Humko Corp. of which Mr. Antonelli
disclaims beneficial ownership. Mr. Antonelli is the President and CEO of
AC Humko Corp. Includes 5,333 shares of Commons Stock issuable upon
exercise of stock options.
(8) Represents 12,000 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 12,000 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 700,000 shares issuable upon exercise of warrants. Also includes
50,000 shares held by Mr. McCormick's wife and 25,000 shares held by Mr.
McCormick's minor children, of which shares he disclaims beneficial
ownership. Also includes 12,000 shares of Common Stock issuable upon
exercise of stock options.
(11) Includes 12,000 shares of Common Stock issuable upon exercise of stock
options.
(12) The shares are held of record by the Frederick B. Rentschler Trust.
Includes 12,000 shares of Common Stock issuable upon exercise of stock
options.
(13) Includes 114,300 shares held by the Salser Partnerships Nos. 1, 2, and 3.
Mr. Salser shares voting power with respect to these shares with other
family members. Also includes 12,000 shares of Common Stock issuable upon
exercise of stock options.
(14) Includes 5,333 shares of Common Stock issuable upon exercise of stock
options.
(15) Includes 25,000 shares held by The Goergen Foundation, of which Mr.
Goergen is President, and 40,000 shares held by the Robert B. Goergen
Living Trust, Robert B. Goergen, Trustee. Also includes 250,000 shares
held by Ropart Investments, LLC, of which Mr. Goergen is managing member,
and as to which he disclaims beneficial ownership except to the extent
that his individual interest in such shares arises from his interest in
such entity. Includes 250,000 shares issuable upon exercise of warrants
held by Ropart Investments, LLC. Also includes 5,333 shares of Common
Stock issuable upon exercise of stock options.
(16) The address of Lipogenics is 2425 E. Camelback Road, Suite 650, Phoenix,
Arizona 85016. Lipogenics is a wholly owned subsidiary of the Company, and
as such for consolidation purposes these shares are classified as treasury
shares.
(17) The address of Bali Holdings LLC is 970 Douglas Road, Batavia, Illinois
60510. The members of the management committee are three U.S. citizens
residing in Illinois and Connecticut. A member of the limited liability
company includes John R. Palmer, an executive officer of the Company.
(18) The address of AC Humko Corp. is 7171 Goodlett Farms Parkway, Memphis,
Tennessee 38018.
4
<PAGE> 7
PROPOSAL TO ELECT DIRECTORS
NOMINEES
The Company's Restated Articles of Incorporation provide that the number
of directors shall be fixed from time to time by resolution of the Board of
Directors or stockholders. As of the meeting date, the number of directors is
fixed at ten and that number of directors is divided into three classes, with
one class standing for election each year for three-year terms. The Board of
Directors has nominated Milton Okin and Frederick Rentschler for election as
Class III directors for three-year terms expiring in 2003 or until their
respective successors are elected and qualified. The terms of the current Class
III directors are to expire in 1999 or until their successors are duly elected
and qualified. Any vacancies may be filled by a vote of a majority of the
directors then in office. The Annual Meeting for the election of directors is
held in the calendar year immediately following the fiscal year end.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for each of the nominees named above. In the event that any of
the nominees is unable or declines to serve as a director at the time of the
Meeting, the proxies will be voted for a nominee, if any, designated by the
current Board of Directors to fill the vacancy. It is not expected that any of
the nominees will be unable or will decline to serve as a director.
The Board of Directors recommends a vote "For" the nominees named herein.
The following table sets forth certain information regarding the directors
and nominees for directors of the Company:
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
Ronald H. Lane, Ph.D.(2) 55 Chairman of the Board, 2001
Chief Executive Officer
and President
Daniel S. Antonelli(2) 47 Director 2001
Richard M. Feldheim(2)(3) 59 Director 2001
Robert B. Goergen(1) 61 Director 2002
Y. Steve Henig, Ph.D.(1) 57 Director 2002
William M. McCormick(2) 59 Director 2001
Milton Okin 84 Director 1999
Frederick B. Rentschler(1) 60 Director 1999
Winston A. Salser, Ph.D. 60 Director 2002
Donald Winkler(3) 51 Director 2002
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee.
5
<PAGE> 8
RONALD HOWARD LANE, PH.D. has served as Chairman of the Board, Chief
Executive Officer and President of the Company since December 1994 and its
predecessor, NutraGenics (Delaware) since April 1994 and served as President
and Chief Executive Officer of LipoGenics from July 1992 to October 1997.
Dr. Lane received a Ph.D. and post-doctorate NIH fellowship from the
University of Wisconsin (Madison) in Neurophysiology and is responsible for
directing Bionutrics' corporate development and growth. Dr. Lane spearheaded
the development of the technology at LipoGenics and has been employed
previously with Norcap Financial Corporation, The National Western Group,
Inc. (an investment company), and Taylor Pearson Corporation.
DANIEL S. ANTONELLI has been a member of the Board of Directors since
September 1998. He has served as President and Chief Executive Officer of AC
Humko Corp. since August 1995. From 1974 to 1995 he held a number of senior
positions in finance, operations and general management at Kraft, Inc. He
received a Bachelor of Business at the University of Michigan, an MBA from
DePaul University Graduate School of Business, and attended the PMD (General
Management) program at Harvard.
RICHARD M. FELDHEIM has been a director of the Company since October
1995. He served as a director, Secretary and Chief Financial Officer of
LipoGenics from July 1992 until October 1996. Mr. Feldheim has served as
Chairman and Co-Chief Executive Officer of Abby's, a restaurant chain in
Oregon since 1991. He was in private practice as a lawyer prior thereto, has
previously been employed with Goldman Sachs & Co.; Donaldson, Lufkin &
Jenrette; J. Aron Company; and Price Waterhouse, and was President of Norcap
Financial Corporation. Mr. Feldheim received a B.S., B.A., a Master's Degree
in Accounting, and a J.D. from the University of Arizona, as well as an LL.M.
in Taxation from New York University. He is a Certified Public Accountant.
ROBERT B. GOERGEN has been a member of the Board of Directors since
March 1999. Mr. Goergen has been the Chairman since 1977 and the Chief
Executive Officer since 1978, of Blyth Industries, Inc., a public company
that manufactures and imports candles, home decorating accessories and home
fragrance products. Mr. Goergen has served as President of Blyth Industries,
Inc. since 1994. From 1990 to the present, Mr. Goergen has served as
Chairman of XTRA Corporation, a public company in the trailer leasing
industry. From 1979 to the present, he has been Chairman of The Ropart
Group, a private company, whose business is investing in securities for its
own account. Mr. Goergen currently serves as the Chairman of Blyth
Industries, Inc., and as a director of XTRA Corporation and Leading Edge
Packaging, Inc., and serves on the compensation committee of XTRA
Corporation. Mr. Goergen received a B.A. from the University of Rochester
and an M.B.A. from the Wharton Graduate School at the University of
Pennsylvania.
Y. STEVE HENIG, PH.D. has been a member of the Board of Directors since
October 1995 and served as a director of LipoGenics from August 1992 until
October 1996. He has served as Senior Vice President of Technology and
Innovation for Ocean Spray Cranberries, Inc. since January 1999. He served as
Senior Vice President of Technology and Marketing Services for Hunt-Wesson, Inc.
from 1992 until December 1998. He joined Hunt-Wesson in 1983 as Vice President
of Research and Development. His previous position was Vice President of
Corporate Research & Development and Corporate Engineering for Land O'Lakes,
Inc. in Minneapolis, Minnesota. Prior to that he held positions with Pillsbury
Company and General Foods Corporation. Dr. Henig received his Bachelor of
Science Degree in Chemical Engineering and a Master of Science Degree in Food
and Biotechnology from the Technion-Israel Institute of Technology. He earned
his Ph.D. Degree in Food Science from Rutgers University, New Brunswick, New
Jersey.
6
<PAGE> 9
WILLIAM M. MCCORMICK has been a member of the Board of Directors since May
1996. Mr. McCormick was President and Chief Executive Officer of PennCorp
Financial Group, Inc., a NYSE company, from 1990 to 1995 and was a director from
1990 until 1997. Prior thereto, Mr. McCormick was employed by the American
Express Company. His titles ranged from Senior Vice President Finance, Systems &
Operations of the American Express International Banking Corporation to
President of American Express' Travel Related Services Company. Mr. McCormick
then spent five years as Chairman and CEO of Fireman's Fund Insurance. After
graduating from Yale, Mr. McCormick spent his early years in investment banking
and management consulting with Donaldson, Lufkin & Jenrette and McKinsey &
Company, Inc., respectively.
MILTON OKIN has been a member of the Board of Directors since October
1995. Mr. Okin has many years of diet and health food development experience,
having created Weight Watchers low calorie foods that he subsequently sold to
Weight Watchers International. Mr. Okin developed a unique all natural Vitamin C
from acerola berry grown in plantations in Puerto Rico and Florida. The acerola
operation was sold to Booker McConnell Ltd. of England in 1978. Mr. Okin has
owned and operated a chain of health food related retail stores including
outlets in Sears Roebuck and Company, and presently owns a mail order vitamin
and health products business in Hastings, N.Y. Mr. Okin is a biochemist graduate
of New York City College with graduate research at Mount Sinai Hospital in
lipids, cholesterol and vitamins.
FREDERICK B. RENTSCHLER has been a member of the Board of Directors since
October 1995 and served as a director of LipoGenics from January 1993 until
October 1996. He is Chairman of the Board of the Salk Institute in La Jolla,
California. He serves on the board of directors and compensation committee of
International Game Technology, a NYSE company, and is a director of Sibia
Neurosciences, Inc., a public company. He served as President and Chief
Executive Officer of Beatrice Companies from 1987 to 1990, having completed a
leveraged buyout of Beatrice Companies in 1986 with the firm of Kohlberg,
Kravis, Roberts & Company. Prior to Beatrice, Mr. Rentschler was employed as
President/Chief Executive Officer of Armour-Dial and subsequently had the same
responsibility at Hunt-Wesson. Following his retirement from Beatrice, he served
as President/Chief Executive Officer of Northwest Airlines and remains on their
Board of Directors. Mr. Rentschler's current affiliations in addition to the
Salk Institute include: ESCAgenetics Corporation, Woods Hole Oceanographic
Institution (Massachusetts), and Hamilton Foundry and Machine Company. In
addition, he is President of the Heard Museum National Advisory Board (Arizona),
and a member of the Alumni Board of Vanderbilt University and Advisory Board of
Canned Foods, Inc. (California). Mr. Rentschler received his B.A. in Economics
and History from Vanderbilt University and MBA from Harvard Business School.
WINSTON A. SALSER, PH.D. has served as a member of the Board of
Directors since October 1995, served as a director of LipoGenics from August
1992 until October 1996 and is Chairman of Bionutrics' Scientific Advisory
Board. Dr. Salser has been a Professor of Molecular Biology at the
University of California, Los Angeles since 1968. Dr. Salser was the
founding President of Amgen, Inc. and formed its Scientific Advisory Board.
He received a B.S. from the University of Chicago in physics, a Ph.D. from
the Massachusetts Institute of Technology in molecular biology, and was a
Helen Hay Whitney Foundation Postdoctoral Fellow.
DONALD A. WINKLER has served as a member of the Board of Directors since
March 1999. Mr. Winkler has served as the Chairman and Chief Executive Officer
of Ford Motor Credit Co. since November 1999. He served as Chairman and Chief
Executive Officer of Finance One Corporation from 1993 to 1999. Finance One
Corporation is a $41 billion non-bank finance subsidiary of Bank One Corporation
with a national line of business encompassing consumer, indirect and commercial
finance. Prior to this, Mr. Winkler spent 1976 through 1993 with Citibank in
various positions which included managing consumer business in Southern Europe,
the Middle East and Africa. Mr. Winkler is a graduate of Northrop University and
attended the Wharton School, University of Pennsylvania, Executive MBA program.
7
<PAGE> 10
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's bylaws authorize the Board of Directors to appoint among its
members one or more committees composed of one or more directors. As of February
1, 2000, the Board of Directors had appointed the following standing committees:
a Compensation Committee, an Executive Committee, and an Audit Committee.
Compensation Committee. The Compensation Committee reviews and acts on
matters relating to compensation levels and benefit plans for key executives of
the Company. The Compensation Committee also reviews the succession planning for
key executive personnel, monitors employee relations issues and oversees senior
management structure. The Compensation Committee also administers the Company's
1996 Stock Option Plan. The Committee held three meetings during the fiscal year
ended October 31, 1999.
Executive Committee. The Company's Executive Committee held six meetings
during the fiscal year ended October 31, 1999. The Executive Committee acts as a
liaison between management and the Board of Directors. At times the Board of
Directors empowers the Executive Committee to take certain actions on behalf of
the Board of Directors between regularly scheduled meetings.
Audit Committee. The Company's Audit Committee held one meeting during the
fiscal year ended October 31, 1999. The Audit Committee reviews the annual
financial statements and significant accounting issues and the scope of the
audit with the Company's independent auditors and is available to discuss with
the auditors any other audit related matters that may arise during the year.
The Board of Directors of the Company held a total of four meetings
during the fiscal year ended October 31, 1999. Dr. C. Everett Koop, Dr.
Steve Henig and Messrs. Goergen and Winkler attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors, and
(ii) the total number of meetings held by all committees of the Board on
which he was a member.
DIRECTOR COMPENSATION AND OTHER INFORMATION
The Company pays all of its Board members reimbursement for expenses for
each Board meeting attended. Options for 2,000 shares of Common Stock
exercisable at $2.00 were granted to each existing member of the Board of
Directors during the fiscal year ended October 31, 1999. Messrs. Goergen and
Winkler were granted options to purchase 10,000 shares of Common Stock at $4.00
per share on becoming directors.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth the total compensation received for
services rendered in all capacities to the Company for the fiscal years ended
October 31, 1997, 1998, and 1999 by the Company's Chief Executive Officer, and
its two most highly compensated executive officers whose aggregate cash
compensation exceeded $100,000 (together the "Named Executive Officers").
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- -------------------------
RESTRICTED
OTHER ANNUAL STOCK SECURITIES ALL OTHER
NAME AND COMPENSATION AWARD(S) UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($) OPTIONS(#) ($)
- ------------------ ---- --------- -------- ----------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald H. Lane, Ph.D ...... 1999 $202,947 $100,000(3) -- -- -- $ 7,308(8)
Chief Executive Officer and 1998 $202,947 -- -- -- -- $ 6,942(2)
President ................. 1997 $202,296 $100,000(4) -- -- -- $ 4,000(5)
John R. Palmer(6) ......... 1999 $130,769(7) -- -- -- -- $ 4,631(8)
Chief Executive Officer and 1998 $196,924 -- -- -- 100,000(9) $ 4,984(8)
President of InCon ........ 1997 -- -- -- -- -- --
Technologies Inc. .........
Howard Schneider(6) ....... 1999 $150,000 -- -- -- --
President, LipoGenics, Inc. 1998 $144,808 -- -- -- -- $ 4,500(8)
1997 -- -- -- -- 100,000(9) $ 1,558(8)
</TABLE>
- ------------------
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of
the total salary and bonus for any of the Named Executive Officers except
as noted.
(2) Represents directors' fees and contributions to a 401K plan.
(3) Represents a bonus, which is payable one-half in cash in fiscal 2000
contingent upon receipt of $5,000,000 of new financing and the balance
through the issuance of 28,571 shares of Common Stock, which has been
approved but not yet issued.
(4) Represents a bonus, which amount was reduced in 1998 from $250,000. Of
this amount, one-half was paid in 1999 and the balance was paid through
the issuance in 1999 of 7,407 shares of Common Stock.
(5) Represents directors' fees.
(6) Messrs. Palmer and Schneider joined the Company in November 1997.
(7) Represents compensation through June 1999, after which Mr. Palmer's
compensation became payable by InCon Processing, LLC.
(8) Represents contributions to a 401K plan.
(9) Such options to acquire Common Stock were cancelled and reissued in
September 1998.
9
<PAGE> 12
OPTION HOLDINGS
The following table represents certain information respecting the options
held by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ON VALUE ------------------------------ ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Lane, Ph.D...... --- --- 760,000 0 $0 $0
John R. Palmer............ --- --- 66,667 33,333 0 0
Howard Schneider.......... --- --- 66,667 33,333 0 0
</TABLE>
- -----------------
(1) There are no in-the-money options calculated based on $1.75, which was the
closing sales price of the Common Stock as quoted on the Nasdaq SmallCap
Market on October 29, 1999.
EMPLOYMENT AGREEMENTS
As of June 25, 1999, the Company entered into an Employment Agreement with
Mr. John R. Palmer that superceded, in its entirety, the 1997 Employment
Agreement previously executed. The new agreement was entered into in connection
with formation of InCon Processing, LLC ("InCon Processing"), and was assumed by
InCon Processing effective January 1, 2000. The Employment Agreement will expire
at the end of August, 2004.
The Employment Agreement provides for a base salary of $200,000. It
further grants to Mr. Palmer, continued participation in the Company's 1996
Stock Option Plan pursuant to which Mr. Palmer currently has options to acquire
100,000 shares of the Company's Common Stock, and entitles Mr. Palmer to
participate in any other generally available benefit programs. Mr. Palmer will
also receive incentive compensation based on the profitability of InCon
Processing pursuant to an annual incentive plan and a bonus payable at the
expiration of the agreement.
The Employment Agreement contains certain restrictive covenants pursuant
to which Mr. Palmer has agreed not to compete with the Company for a period of
two years or to solicit any clients or employees of the Company for a period of
three years after his employment ceases. In the event that Mr. Palmer's
agreement is terminated without cause, as such term is defined in the Employment
Agreement, Mr. Palmer will be entitled to a severance payment in an amount equal
to his base salary, payable monthly for a period of 24 months. In the event that
the agreement is terminated for cause, Mr. Palmer will not be entitled to any
severance or continued benefits under the Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended October 31, 1999, the Company's
Compensation Committee consisted of Messrs. Frederick B. Rentschler, Y. Steve
Henig and Robert B. Goergen.
10
<PAGE> 13
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by it during the fiscal year ended October 31, 1999, and written representations
that no other reports were required, the Company believes that each person who,
at any time during such fiscal year, was a director, officer or beneficial owner
of more than 10% of the Company's Common Stock complied with all Section 16(a)
filing requirements during such fiscal year or prior fiscal years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with a forward triangular merger of a subsidiary of
Nutrition Technology with InCon on October 31, 1997, the Company issued a total
of 1,400,000 shares of restricted Common Stock to the sole shareholder of InCon,
a limited liability company one of whose members is John R. Palmer, an executive
officer of the Company. Mr. Palmer has a beneficial interest in 180,000 of such
shares. Also in connection with the merger, the Company acquired certain
business opportunities and by license agreement certain technology of entities
related to InCon. Under such license agreement, an affiliate of Mr. Palmer is
entitled to royalties for the greater of five years or four years after the
start of commercial production of the initial product. Pursuant to his
employment agreement, he is entitled to incentive compensation keyed to excess
profits of InCon Processing. Mr. Palmer has a controlling interest in a
partnership from which the Company leased its Batavia, Illinois facility until
June 25, 1999, which was subsequently assigned to InCon Processing. Payments
under the lease were $164,121 for fiscal 1999.
On February 3, 1998, Mr. Frederick B. Rentschler, a director, extended an
unsecured loan for $100,000 to the Company, with interest of "prime plus one"
percent, payable within 120 days. The Company repaid this loan in full during
fiscal 1999
On April 24, June 18, and July 29, 1998, Mr. Milt Okin, a director, loaned
$225,000, $1,000,000, and $400,000 to the Company, for a total of $1,625,000,
with interest at 9.5% per annum, repayable on demand. The Company repaid these
loans in full during fiscal 1999.
In January 1999, the Company sold 250,000 shares of Common Stock at $2.00
per share and 750,000 warrants exercisable at $2.00 per share to Ropart
Investments, LLC, of which Robert B. Goergen is a managing member. At the end of
fiscal 1999, 250,000 warrants had expired unexercised, 250,000 expired January
31, 2000 and 250,000 remain outstanding.
In February 1999, the Company issued 100,000 shares of Common Stock to
William McCormick at the fair market value of $1.25 per share in connection with
services to be performed for fiscal 1999.
On December 29, 1999, Mr. Milt Okin extended an unsecured loan to the
Company in the amount of $500,000, with interest at 9.5% per annum, payable
within 120 days. To date, the Company has not repaid this loan.
All future transactions, including any loans from the Company to its
officers or directors, will be approved by a majority of the Board of Directors,
including a majority of the disinterested members of the Board of Directors, and
will be on terms no less favorable to the Company than can be obtained from
unaffiliated third parties.
11
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
OVERVIEW AND PHILOSOPHY
The Company's Board of Directors has appointed a Compensation Committee
(the "Committee") consisting entirely of non-management directors, which made
decisions on compensation of the Company's executives during fiscal 1999. The
Compensation Committee makes every effort to ensure that the compensation plan
is consistent with the Company's values and is aligned with the Company's
business strategy and goals.
The Company's compensation program for executive officers consists
primarily of base salary, bonus, and long-term incentives in the form of stock
options. Executives also participate in various other benefit plans, including
medical and retirement plans, which generally are available to all employees of
the Company.
The Company's philosophy is to pay base salaries to executives at levels
that enable the Company to attract, motivate, and retain highly qualified
executives. The bonus program is designed to reward individuals for performance
based on the Company's financial results as well as the achievement of personal
and corporate objectives that contribute to the long-term success of the Company
in building stockholder value. Stock option grants are intended to result in
minimal or no rewards if stock price does not appreciate, but may provide
substantial rewards to executives as stockholders benefit from stock price
appreciation.
The Company follows a subjective and flexible approach rather than an
objective or formulaic approach to compensation. Various factors (as discussed
herein) receive consideration without any particular weighting or emphasis on
any one factor. In establishing compensation for the year ended October 31,
1999, the Committee took into account, among other things, the financial results
of the Company, the achievement of corporate and product development goals,
compensation paid in prior years, and compensation of executive officers
employed by companies of similar size in similar industries.
BASE SALARY AND ANNUAL INCENTIVES
Base salaries for executive positions are established relative to the
Company's corporate and financial performance and comparable positions in
similarly sized companies. From time to time, the Company may use competitive
surveys and outside consultants to help determine the relative competitive pay
levels. The Company targets base pay at the level required to attract and retain
highly qualified executives. In determining salaries, the Committee also will
take into account individual experience and performance, salary levels relative
to other positions with the Company, and specific needs particular to the
Company. The Committee's evaluation of the above factors is subjective and the
Committee does not assign a particular weight to any one factor.
Annual incentive awards are based on the Company's financial performance
and the efforts of its executives. Performance is measured based on the
successful achievement of corporate and product development goals and on the
achievement of personal goals. The Company did not award any bonuses to its
officers in fiscal 1999.
STOCK OPTION GRANTS
The Company strongly believes in tying executive rewards directly to the
long-term success of the Company and increases in stockholder value through
grants of executive stock options. Stock option grants also will enable
executives to develop and maintain a significant stock ownership position in the
Company's Common Stock. The amount of options granted takes into account options
previously granted to an individual. The Company did not grant any options to
the named executive officers during the year ended October 31, 1999.
OTHER BENEFITS
Executive officers are eligible to participate in benefit programs
designed for all full-time employees of the Company. These programs include
medical insurance, a qualified retirement program allowed under Section 401(k)
of the Internal Revenue Code, and life insurance coverage.
12
<PAGE> 15
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee evaluates the various factors described above in evaluating
the base salary and other compensation of Ronald Lane, the Company's President
and Chief Executive Officer. The Committee's evaluation of Dr. Lane's base
salary is subjective, with no particular weight assigned to any one factor. The
Committee believes that Dr. Lane's base salary is competitive with the base
salary paid to chief executive officers of comparable companies. The bonus
accrued for 1997 was reduced in 1998 and one-half was paid during fiscal 1999
and the balance has been paid in December 1999 through the issuance of 7,407
shares of Common Stock. The bonus accrued for 1999 is payable one-half in fiscal
2000 contingent upon receipt of $5,000,000 of new financing and through the
issuance of 28,571 shares of Common Stock, which has been approved but not yet
issued.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993 and effective
in 1994, generally disallows a tax deduction to public companies for
compensation in excess of $1 million paid to each of the corporation's chief
executive officer and four other most highly compensated executive officers.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met.
The Company currently intends to structure the performance-based portion
of the compensation of its executive officers in a manner that complies with
Section 162(m).
Compensation Committee
Frederick B. Rentschler
Y. Steve Henig
Robert B. Goergen
13
<PAGE> 16
COMPANY PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder return,
assuming reinvestment of dividends, for: (i) the Common Stock; (ii) the Nasdaq
Combined Composite Index (the "Index"); and (iii) the Nasdaq Pharmaceutical
Index (the "Pharmaceutical Index").
The graph assumes an investment of $100 in each of the Company's Common
Stock, the Index, and the Pharmaceutical Index on October 31, 1995. The
Company's shares were traded on the Nasdaq Bulletin Board from October 1995
until November 1997. The Company became a reporting company under Section 12 of
the Exchange Act in March 1997 and began trading on the Nasdaq SmallCap market
on November 19, 1997. The graph covers the period from October 31, 1995 through
October 31, 1999. Trading prior to October 31, 1995 was limited and reliable
information is not available.
The calculation of cumulative stockholder return on the Company's Common
Stock does not include reinvestment of dividends because the Company did not pay
dividends during the measurement period. The performance shown is not
necessarily indicative of future performance.
[LINE GRAPH OMITTED]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
10/31/1995 10/31/1996 10/31/1997 10/30/1998 10/29/1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BIONUTRICS $ 100.00 $ 418.75 $ 387.50 $ 75.00 $ 87.50
- ----------------------------------------------------------------------------------------------------------------------
NASDAQ COMPOSITE $ 100.00 $ 118.32 $ 154.94 $ 172.96 $ 290.55
- ----------------------------------------------------------------------------------------------------------------------
NASDAQ PHARMACEUTICAL $ 100.00 $ 119.62 $ 132.65 $ 128.52 $ 206.28
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from
Bloomberg Financial Markets.
14
<PAGE> 17
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending October 31, 2000 and recommends that
stockholders vote in favor of the ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. The Board of Directors anticipates that representatives of
Deloitte & Touche LLP will be present at the Meeting, will have the opportunity
to make a statement if they desire, and will be available to respond to
appropriate questions.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented by stockholders at
the annual meeting of stockholders of the Company for the fiscal year ending
October 31, 2000, to be included in the proxy statement and form of proxy
relating to such meeting, must be received by the Company no later than October
21, 2000.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
Dated: February 16, 2000
15
<PAGE> 18
This Proxy is Solicited on Behalf of the Board of Directors
BIONUTRICS, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned stockholder of BIONUTRICS, INC., a Nevada corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company, each dated February 16, 2000,
and hereby appoints Ronald H. Lane, a proxy and attorney-in-fact, with full
power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 2000 Annual Meeting of Stockholders of the
Company, to be held on March 22, 2000, at 2:00 p.m., local time, at the Ritz
Carlton, 2401 E. Camelback, Road, Phoenix, Arizona 85016, and at any adjournment
or adjournments thereof, and to vote all shares of Common Stock that the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below.
1. ELECTION OF DIRECTORS:
[ ] FOR the two nominees listed below, except as indicated
[ ] WITHHOLD AUTHORITY to vote for the two nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list below:
Milton Okin and Frederick B. Rentschler
2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING OCTOBER 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and upon such other matters that may properly come before the meeting or any
adjournment or adjournments thereof.
(Continued on reverse side)
<PAGE> 19
(Continued from reverse side)
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, FOR THE ELECTION OF DIRECTORS; FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY;
AND AS SAID PROXY DEEMS ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
A majority of such attorneys or substitutes as shall be present and shall
act at said meeting or an adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
Dated:
--------------------------------, 2000
--------------------------------
SIGNATURE
--------------------------------
SIGNATURE
(THIS PROXY SHOULD BE DATED,
SIGNED BY THE STOCKHOLDER(S)
EXACTLY AS HIS OR HER NAME
APPEARS HEREON, AND RETURNED
PROMPTLY IN THE ENCLOSED
ENVELOPE. PERSONS SIGNING IN A
FIDUCIARY CAPACITY SHOULD SO
INDICATE. IF SHARES ARE HELD BY
JOINT TENANTS OR AS COMMUNITY
PROPERTY, BOTH STOCKHOLDERS
SHOULD SIGN.)
