<PAGE>
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:
/ / 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 Section240.14a-11(c) or
Section240.14a-12
Biospherics Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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<PAGE>
Biospherics-Registered Trademark- Incorporated
12051 Indian Creek Court
Beltsville, Maryland 20705
Notice of Annual Meeting of Stockholders
to be held on May 15, 1998
and Proxy Statement
The Annual Meeting of Stockholders of Biospherics(R) Incorporated (the
"Company") will be held at the Company's headquarters, 12051 Indian Creek Court,
Beltsville, Maryland 20705, on May 15, 1998, at 2:00 p.m., Eastern Daylight
Time.
The items of business are:
(1) Election of nine (9) Directors to serve until new Directors
are elected at the next Annual Meeting or, should any resign
after election or become incapable of serving, until the
respective successors are duly appointed for the remainder of
the year.
(2) Consideration of a proposal to approve the Biospherics
Incorporated 1997 Stock Option Plan.
(3) Ratification of the appointment of the independent
accountants.
(4) Transaction of other business that may properly come before
the Meeting.
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 Annual Report on Form
10-KSB for 1997 accompany this Notice.
Pursuant to the Bylaws of the Company, the Board of Directors has fixed
the close of business on March 16, 1998, 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
M. Karen Levin, 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.
1
<PAGE>
Biospherics-Registered Trademark- Incorporated
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
May 15, 1998
This Proxy Statement is being mailed on or about April 10, 1998, with the
solicitation of proxies in the accompanying form by the Board of Directors of
Biospherics(R) Incorporated, a Delaware corporation. The Annual Meeting of its
Stockholders will be held May 15, 1998, 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, 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, for approval of the Biospherics Incorporated 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, 1998. At that time, there were 8,788,584 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 for purposes of determining the presence or absence of a
quorum for the transaction of business.
In accordance with the laws of the State of Delaware and the Company's
Certificate of Incorporation and By-Laws: (i) for the election of Directors,
which require a plurality of the votes cast, only Proxies and ballots indicating
votes "FOR all Nominees," "WITHHELD from all Nominees," or specifying that votes
be withheld for one or more designated Nominees are counted to determine the
total number of votes cast, and broker non-votes are not counted, and (ii) for
the adoption of all other proposals, which are decided by a majority of the
shares of the Common Stock of the Company present in person or by Proxy and
entitled to vote, only Proxies and ballots indicating votes "FOR," "AGAINST," or
"ABSTAIN" on the proposal or providing the designated Proxies with the right to
vote in their judgment and discretion on the proposal are counted to determine
the number of Shares present and entitled to vote, and broker non-votes are not
counted.
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 approval of the Biospherics Incorporated 1997 Stock Option
Plan, and for ratification of the appointment of independent accountants listed
herein.
ELECTION OF DIRECTORS
(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 vacancies. Unless otherwise instructed, the persons named in
the accompanying Proxy intend to vote the Shares represented by the Proxy FOR
the election of the nine (9) 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
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.
2
<PAGE>
Biospherics-Registered Trademark- Incorporated
The following table sets forth certain information about the Nominees for
Directors as of March 16, 1998.
Nominees for Election to Board of Directors
<TABLE>
<CAPTION>
Director
Name Age Position Since
- ------------------------ ------------ -------------------------------------------------------------- ------------
<S> <C> <C>
Gilbert V. Levin 73 Chairman of the Board, CEO, President, and Treasurer 1967
Lionel V. Baldwin 65 Director 1976
David A. Blake 56 Director 1995
Jeffrey W. Church 41 Director and Executive Vice President and CFO -
A. Bruce Cleveland 54 Director 1987
Rita R. Colwell 63 Director 1996
George S. Jenkins 75 Director 1984
M. Karen Levin 78 Director and Vice President for Communications 1968
Anne S. MacLeod 67 Director 1992
</TABLE>
Dr. Levin founded the Company in 1967 and has been Chairman of the Board
and President 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; the PhoStrip(R) process for removing phosphorus from wastewater; 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.
Dr. Baldwin is President of the National Technological University, Fort
Collins, Colorado. Formerly, Dr. Baldwin was Dean of the College of Engineering
at Colorado State University, where he also coordinated research programs with
emphasis on environmental areas. He holds a Ph.D. from Case Institute of
Technology.
Dr. Blake is the Associate Director of the Health Science Center and Vice
President for Academic Health Affairs, Emory University. Formerly, he served as
Senior Vice President for Biomedical Research, Association of American Medical
Colleges, and as Senior Associate Dean of The Johns Hopkins University School of
Medicine. He has also held the posts of Associate Dean for Research, Director of
Research Administration and Associate Professor of Pharmacology and Molecular
Sciences in his 24 years at Johns Hopkins. Prior to that, he was Chairman of the
Department of Pharmacology and Toxicology at the University of Maryland School
of Pharmacy. He holds a Ph.D. from the University of Maryland School of
Medicine.
Mr. Church joined the Company in 1997 as Executive Vice President and
Chief Financial Officer. Prior to joining the Company, Mr. Church spent eleven
years with Meridian Medical Technologies, Inc., formerly Survival Technology,
Inc. (a Medical Device Manufacturer) as Senior Vice President and Chief
Financial Officer and seven years with the accounting firm of Price Waterhouse
LLP. He holds a B.S. in Accounting from the University of Maryland and is a CPA.
Mr. Cleveland is President and founder of Presidential Savings Bank of
Bethesda, Maryland. Mr. Cleveland was also the founder and former Chief
Executive Officer of the GIT Investment Funds group of mutual funds and Bankers
Finance Investment Management Corporation of Arlington, Virginia. Previously he
served as Special Assistant for SBIC Industry Development with the U.S. Small
Business Administration and was an investment banker with Drexel Burnham Co. in
New York. He is a graduate of Harvard College and received an M.B.A. in finance
from Harvard Business School.
Dr. Colwell is President of the Biotechnology Institute, Director of
the Center for Marine Biology, and Vice President for Academic Affairs, all at
the University of Maryland where she also serves as Professor of Microbiology.
She is also Associate Professor of Biology at Georgetown University. Dr. Colwell
was the Chairman of the Board of the American Association for the Advancement of
Science for the 1996/97 year, and also served as President of the Association
from 1995 to 1996. She holds a Ph.D. from the University of Washington and is a
member of Phi Beta Kappa.
3
<PAGE>
Biospherics-Registered Trademark- Incorporated
Mr. Jenkins is a land developer, the owner of Locust Grove Farm, and
previously was Chairman of Consultation Networks, Inc., a Washington, D.C.,
environmental expert witness database firm. Mr. Jenkins was President of Greiner
Engineering and is a Past Chairman of the Building Research Board of the
National Academy of Sciences. He is a member of the Advisory Council of the
Whiting School of Engineering of The Johns Hopkins University. Mr. Jenkins
serves on the boards of directors for several other privately-owned companies.
He holds an M.S. in civil engineering from The Johns Hopkins University.
Mrs. Levin has been a full-time executive and Director of the Company
since 1968. She was a science and medical reporter and writer for the Washington
Bureau of Newsweek magazine, then served as writer and public information
consultant to the National Institute of Mental Health. She holds a B.A. in
English from Vassar College. Mrs. Levin and Dr. Levin are husband and wife.
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 the literature for children and youth. Dr. MacLeod holds
a Ph.D. in American history and an M.L.S., both from the University of Maryland.
In 1997, non-employee Directors as a group were conditionally granted
options for 12,000 shares of Common Stock under the new Biospherics Incorporated
1997 Stock Option Plan, which is subject to final approval by the Company's
Stockholders. The options have an exercise price of $6.1875 per share and expire
on November 20, 2002. 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.
Mr. Cleveland serves as a Director of Government Investors Trust, GIT
Tax-Free Trust, GIT Income Trust, and GIT Equity trust, all publicly-held
registered investment companies. No other Director serves as a Director of a
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.
Board Of Directors and Committee Meetings in Board Year
The Company's Board of Directors held four Regular Meetings from May 15,
1997, to February 1998, which were attended by all members. There were four (4)
special meetings during the year. The Board of Directors has seven Committees:
Executive; Compensation; Audit; Pension; Technical; Nominating; and Search.
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. In
1997-1998, its members are Gilbert V. Levin, Chair; A. Bruce Cleveland; George
S. Jenkins; Anne S. MacLeod; and Richard C. Levin (staff). There were two (2)
meetings, attended by a quorum of the 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 two (2) meetings, attended by all members.
The Audit Committee members are A. Bruce Cleveland, Chair, and George
S. Jenkins. 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 two (2) meetings, attended by both members.
The Biospherics Retirement Plan Administration ("Pension") Committee
oversees the management of the Company's Retirement Plan. Its members are David
A. Blake, Chair; Rita R. Colwell; M. Karen Levin; and Richard C. Levin (staff).
Two (2) meetings were held, attended by all members.
The Technical Committee advises the Company on the direction of
technology development. The Technical Committee consists of David A. Blake,
Chair; Rita R. Colwell; and Gilbert V. Levin. No meetings were held.
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.
4
<PAGE>
Biospherics-Registered Trademark- Incorporated
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, who held three (3) meetings, attended by all
members.
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, 1998. Except for
Gilbert V. Levin, Chairman of the Board, CEO and President, 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, 1998, RGC owned 750,000 shares
of Common Stock (representing 8.5% of the issued and outstanding shares) and
held warrants to acquire up to an additional 750,000 shares of Common Stock,
exercisable at prices of $4.00 and $4.50 per share. The warrants provide,
however, that the ownership of RGC and its affiliates will not exceed 9.9% of
the outstanding shares of Common Stock of the Company.
Beneficial Ownership of Common Stock by Officers and Directors
<TABLE>
<CAPTION>
Amount and Nature Percent
Title of Class Name of Beneficial Owner of Ownership Of Class
----------------- -------------------------- -------------------- ---------
<S> <C> <C> <C>
Common Gilbert V. Levin 1,939,940 (1)(2) 20.7%
Common M. Karen Levin 1,619,566 (2) 17.3%
Common Richard C. Levin 80,796 (2) *
Common Lionel V. Baldwin 19,818 (2) *
Common George S. Jenkins 17,000 (2) *
Common A. Bruce Cleveland 15,400 (2) *
Common Anne S. MacLeod 12,900 (2) *
Common David A. Blake 8,000 (2) *
Common Rita R. Colwell 5,000 (2) *
Common Raul Vera 1,378 (2) *
Common Jeffrey W. Church - (2) *
Common All Officers and
Directors as a Group 3,719,798 (2) 39.6%
</TABLE>
* Less than 1% of the outstanding shares of Common Stock of
the Company.
(1) Includes 1,600 shares held jointly with M. Karen Levin.
(2) Included in the number of shares beneficially owned by G. V.
Levin, M. K. Levin, R. C. Levin, L. V. Baldwin , G. S.
Jenkins, A. B. Cleveland, A. S. MacLeod, D. A. Blake, R. R.
Colwell, R. Vera, J. W. Church, and All Officers and Directors
as a Group are 335,000, 80,000, 80,000, 8,000, 15,000, 14,400,
12,400, 8,000, 4,000, 1,250, 0, and 558,050 shares,
respectively, which such persons have a right to acquire
within 60 days pursuant to stock options.
As of March 16, 1998, Gilbert V. Levin, Chairman of the Board, Chief
Executive Officer, and President and M. Karen Levin, Vice President for
Communications, 3180 Harness Creek Rd., Annapolis, Maryland, beneficially owned
in the aggregate 3,559,506 shares of Common Stock (38% of the 9,383,709(1)
outstanding shares).
- ------------------------
(1) Includes 595,125 shares which could be acquired pursuant to stock options
within 60 days.
5
<PAGE>
Biospherics-Registered Trademark- Incorporated
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 3,719,798
shares of Common Stock, owned 39.6% of the outstanding shares(2). 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.
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. 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.
Executive Officers
Officers are elected annually by the Board of Directors. The Executive
Officers of the Company as of December 31, 1997, are listed in the following
table.
Executive Officers as of December 31, 1997
<TABLE>
<CAPTION>
Name Age Position
- --------------------------- -------------- --------------------------------------------------------
<S> <C> <C>
Gilbert V. Levin 73 Chairman of the Board, CEO, President, and Treasurer
Jeffrey W. Church 41 Executive Vice President and Chief Financial Officer
M. Karen Levin 78 Director, Vice President for Communications, and
Corporate Secretary
Richard C. Levin 45 Vice President, Planning
Raul Vera 38 Vice President, Information Technology
Lee Zehner 50 Vice President, Science Services
</TABLE>
Dr. and Mrs. Levin's experience is discussed above.
Jeffrey Church joined the Company in 1997 as Executive Vice President and
Chief Financial Officer. Prior to joining the Company, Mr. Church spent eleven
years with Meridian Medical Technologies, Inc., formerly Survival Technology,
Inc. (a Medical Device Manufacturer) as Senior Vice President and Chief
Financial Officer and seven years with the accounting firm of Price Waterhouse
LLP.
Richard Levin joined the Company in 1991 as Business Manager. Mr. Levin
has held various positions with the Company including Corporate Secretary and
Vice President and Chief Operating Officer. In November 1997, Mr. Levin was
named Vice President, Planning. 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.
Raul Vera joined the Company in 1995 as Director of Technology Services
and was subsequently promoted to Vice President, Information Technology, in
November 1997. Prior to joining the Company, Mr. Vera was the Director of
Computer Networks and Operations for SRI International. He was the chief systems
manager for major computerized transit industry programs using Oracle, Unix, and
Windows 95 technology.
Dr. Lee Zehner joined the Company in 1985 and helped in the invention
and development of the Company's proprietary low calorie sugars and other
products. Dr. Zehner retired in January 1998.
- ------------------------
(2) Includes 595,125 shares which could be acquired pursuant to
stock options within 60 days.
6
<PAGE>
Biospherics-Registered Trademark- Incorporated
Executive Compensation Tables
Summary of Compensation in Last Fiscal Year
The following summary of compensation table sets forth the compensation
paid by the Company during the year ended December 31, 1997, to Executive
Officers earning in excess of $100,000 during the year.
Summary of Compensation
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- ------------------------ -------------------
OTHER
ANNUAL NO. OF
COMPEN- RESTRICTED SECURITIES LTIP ALL OTHER
NAME AND BONUS SATION STOCK UNDERLYING PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) AWARDS OPTIONS (3) ($) SATION($)
- ----------------------------------- ---- ---------- ------ ------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gilbert V. Levin................... 1997 198,000 -- 7,800 -- 15,000(4) -- 4,000
Chief Executive Officer and 1996 189,673 -- 7,800 -- 10,000 -- 4,497
President 1995 181,767 -- 7,800 -- 145,000 -- 3,750
M. Karen Levin..................... 1997 163,359 -- 7,800 -- 20,000(4) -- 4,000
Vice President for Communications 1996 156,813 -- 7,800 -- 10,000 -- 2,083
1995 152,474 9,900 7,800 -- 15,000 -- 1,150
Richard C. Levin................... 1997 104,216 -- 7,800 -- 30,000(4) -- 2,790
Vice President, Planning 1996 99,844 -- 7,800 -- 30,000 -- 2,699
1995 96,054 -- 7,800 -- 15,000 -- 2,575
Lee R. Zehner...................... 1997 93,479 -- 10,925 -- -- -- 2,615
Vice President, Science Services 1996 89,311 -- 7,800 -- 10,000 -- 2,447
1995 87,037 -- 7,800 -- 14,000 -- 2,350
Raul Vera.......................... 1997 96,320 -- 3,600 -- 10,000 -- 1,308
Vice President, Information 1996 83,078 -- -- -- 5,000 -- --
Technology 1995 -- -- -- -- -- -- --
</TABLE>
[OBJECT OMITTED]
(1) Bonuses are based on the financial performance of the Company and are
awarded by the Board of Directors.
(2) Includes compensation expense for automobile allowances.
(3) Represents the number of options.
(4) Includes options which were conditionally granted on August 8, 1996,
subject to the consummation of the agreement with MD Foods. The
agreement with MD Foods was subsequently consummated on January 7,
1997. The number of options conditionally granted to G. V. Levin, M. K.
Levin, and R. C. Levin was 5,000, 10,000, and 20,000, respectively. The
options have an exercise price of $7.00 and expire on January 7, 2002.
Option Grants in Last Fiscal Year
The following option of grants table sets forth the total options granted
by the Company during the year ended December 31, 1997, to the Executive
Officers earning in excess of $100,000 during the year.
Option Grants
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(5) Fiscal Year per Share ($) Date
- ------------------------ ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Gilbert V. Levin 10,000 11.4% 6.1875 11/20/02
M. Karen Levin 10,000 11.4% 6.1875 11/20/02
Richard C. Levin 10,000 11.4% 6.1875 11/20/02
Lee R. Zehner -- -- -- --
Raul Vera 10,000 11.4% 6.1875 11/20/02
</TABLE>
(5) Options were conditionally granted in November 1997 under the
Biospherics Incorporated 1997 Stock Option Plan (the "1997 Plan"),
which is subject to final approval by the Company's Stockholders. A
total of 88,000 options were conditionally granted to employees under
the 1997 Plan during the year ended December 31, 1997.
7
<PAGE>
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 may be made under
the 1987 Plan from and after May 14, 1997. As of December 31, 1997, there were
2,720,750 outstanding options granted to individuals including the above-named
Officers, including 591,125 that were exercisable as of such date.
The Biospherics Incorporated 1997 Stock Option Plan (the "1997 Plan") was
approved by the Board of Directors on November 17, 1997, subject to final
approval of the Company's Stockholders. 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 for the issuance for up to 400,000 shares of
Common Stock. As described in greater detail below, options for 100,000 shares
of Common Stock have been conditionally granted under this plan subject to
Stockholders' approval of the 1997 Plan.
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, 1997, and fiscal year-end (FYE)
1997 option values for those Executive Officers earning in excess of $100,000
during the year.
Aggregated Options Exercises
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the Money
Options at FYE Options at FYE
No. of
Shares Acquired Value Exercisable/ Exercisable ($)/
Name on Exercise Realized ($) Unexercisable Unexercisable ($)
- ------------------------ ---------------- ------------ ---------------------- -------------------
<S> <C> <C> <C> <C>
Gilbert V. Levin 40,000 160,000 335,000/1,030,000(1) 1,517,500/1,565,625
M. Karen Levin -- -- 80,000/1,010,000(1) 386,250/1,499,375
Richard C. Levin 15,000 49,375 80,000/30,000 485,625/155,000
Lee R. Zehner 43,472 153,263 6,000/39,500 36,188/170,813
Raul Vera -- -- 1,250/13,750 8,906/88,594
</TABLE>
(1) On November 18, 1994, Dr. and Mrs. Levin were granted Options for
1,000,000 shares each to purchase Common Stock under the 1987 Plan
subject to two additional conditions. The Options are exercisable only
in the event that (i) a third party acquires 5% or more of the issued
and outstanding Common Stock of the Company and (ii) the Option grants
are further subject to approval by the Board of Directors of the
Company. The Options were granted not for compensatory purposes but as
a means of protecting Shareholder value against unsolicited offers
deemed inadequate by the Board of Directors and to help ensure fair and
equal treatment of all shareholders.
Long-Term Incentive Plans - Awards in Last Fiscal Year
There were no long-term Incentive Plan awards during 1996 or 1997.
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 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
8
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attained the age of 21, have completed one year of service, and have worked a
minimum of 1,000 hours. The Company matches an amount equal to 50% of the
employees' contribution or 2.5% of the employees' eligible compensation,
whichever is less.
PROPOSAL TO APPROVE BIOSPHERICS INCORPORATED 1997 STOCK OPTION PLAN
(Item 2 on the Proxy Card)
General
The Biospherics Incorporated 1997 Stock Option Plan (the "1997 Plan") was
adopted by the Board of Directors on November 17, 1997, subject to the approval
by the holders of a majority of the Company's Common Stock represented at the
annual meeting. The 1997 Plan makes available up to 400,000 shares of Common
Stock for awards to select employees of the Company and its subsidiaries in the
form of stock options (collectively, "Awards"), all as more fully described
below.
The following description summarizes the material features of the 1997
Plan, a copy of which is attached as Attachment A to this Proxy Statement.
Purpose
The purpose of the 1997 Plan is to promote the success of the Company and
its subsidiaries by providing incentives to select employees that will promote
the identification of their personal interest with the long-term financial
success of the Company and with growth in shareholder value. The 1997 Plan is
designed to provide flexibility to the Company in its ability to motivate,
attract and retain the services of select employees upon whose judgment,
interest and special effort the successful conduct of its operation is largely
dependent.
Administration
The 1997 Plan will be administered by the Compensation Committee. The
Compensation Committee will have the power to determine the select employees to
whom Awards shall be made.
Each Award under the 1997 Plan will be made pursuant to a written
agreement between the Company and the recipient of the Award (the "Agreement").
In administering the 1997 Plan, the Compensation Committee will have the express
power, subject to the provisions of the 1997 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 will be 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 1997 Plan.
Subject to the terms, conditions and limitations of the 1997 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 therefor, 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 1997 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 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.
The 1997 Plan will expire on December 31, 2007, unless sooner terminated
by the Board.
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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 1997 Plan or in the
1997 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 1997 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 generally 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.
On November 17, 1997, the Committee authorized the issuance of Options
for 100,000 shares of Common Stock, subject to the Stockholders' approval of the
1997 Plan, including Options for the following executive officers of the
Company:
<TABLE>
<CAPTION>
<S> <C>
Gilbert V. Levin - 10,000 shares
M. Karen Levin - 10,000 shares
Richard C. Levin - 10,000 shares
Jeffrey W. Church - 20,000 shares
Raul Vera - 10,000 shares
</TABLE>
Shares Subject to the Plan
Up to 400,000 shares of Common Stock may be issued under the 1997 Plan.
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 1997 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 which grants or awards may be made.
Change in Control
In order to maintain all the participants' rights in the event of a
change in control of the Company (that term being defined under the 1997 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 therefor, by the acquiring or surviving
corporation in such change in control.
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Certain Federal Income Tax Consequences
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. For the Option to qualify as an ISO
upon the optionee's death, the optionee must have been employed at the Company
for at least three months before his or her death.
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 these 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
result 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 the purposes of determining
alternative minimum taxable income.
Non-qualified Stock Options. A 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 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.
General. The rules governing the tax treatment of Awards that may be
granted under the 1997 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.
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<PAGE>
Effective Date
If approved by the stockholders, the 1997 Stock Option Plan will be
treated as effective as of November 17, 1997.
Vote Required
The affirmative vote of the holders of a majority of the common stock
represented in person or by proxy at the Annual Meeting, assuming a quorum is
present, is required to ratify and approve the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE BIOSPHERICS
INCORPORATED 1997 STOCK OPTION PLAN.
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RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 3 on the Proxy Card)
The Board of Directors has reappointed the firm of Coopers & Lybrand
L.L.P. to be the Company's independent accountants for the year 1998 and
recommends that Stockholders vote "FOR" ratification of that appointment. The
Company is advised that no member of the firm of Coopers & Lybrand L.L.P. has
any interest, financial or otherwise, direct or indirect, in the Company. A
representative from Coopers & Lybrand L.L.P. will attend the Annual Meeting,
will have the opportunity to make a statement if he or she desires to do so, and
will be available to answer questions. If the Stockholders, by the affirmative
vote of a majority of the shares of Common Stock represented at the Meeting, do
not ratify the selection of Coopers & Lybrand L.L.P., the selection of
independent accountants will be reconsidered by the Board of Directors.
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OTHER BUSINESS
(Item 4 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.
SHAREHOLDER PROPOSALS
Shareholders intending to present a proposal at the 1999 Annual Meeting
of Stockholders must submit such proposals to the Company at 12051 Indian Creek
Court, Beltsville, MD 20705, no later than December 15, 1998.
BY ORDER OF THE BOARD OF DIRECTORS,
M. Karen Levin, Corporate Secretary
14
<PAGE>
ATTACHMENT A
BIOSPHERICS INCORPORATED
1997 STOCK OPTION PLAN
ARTICLE 1
Establishment, Purpose and Duration
1.1 Establishment of the Plan. Biospherics Incorporated hereby
establishes a stock option plan to be known as the "1997 Stock Option Plan" as
set forth in this document. Unless otherwise defined herein, all capitalized
terms shall have the meanings set forth in Section 2.1 herein. The Plan permits
the grant of Incentive Stock Options and Non-Qualified Stock Options. The Plan
was adopted by the Board of Directors on, and shall become effective, as of
November 17, 1997 (the "Effective Date"), subject to the approval of the
stockholders of the Company in accordance with applicable laws. Awards may be
granted prior to stockholder approval of the Plan, but each such Award shall be
subject to the approval of the Plan by the stockholders.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success of the Company and its Subsidiaries by providing incentives to Select
Employees that will promote the identification of their personal interest with
the long-term financial success of the Company and with growth in stockholder
value. The Plan is designed to provide flexibility to the Company in its ability
to motivate, attract and retain the services of Select Employees upon whose
judgment, interest and special effort the successful conduct of its operation is
largely dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant
to Article 9 herein, until December 31, 2007 (the "Term"), at which time it
shall terminate, except with respect to Awards made prior to, and outstanding
on, that date which shall remain valid in accordance with their terms.
ARTICLE 2
Definitions
2.1 Definitions. Except as otherwise defined in the Plan, the following
terms shall have the meanings set forth below:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(b) "Agreement" means a written agreement implementing the grant
of each Award signed by an authorized officer of the Company and by the
Participant.
(c) "Award" means, individually or collectively, a grant under
this Plan of Incentive Stock Options or Non-Qualified Stock Options.
(d) "Award Date" or "Grant Date" means the date on which an
Award is made by the Committee under this Plan.
(e) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act.
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<PAGE>
(f) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(g) "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(1) the acquisition by any individual, entity or group (within
the meaning of Section 13(d) (3) or 14 (d) (2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Voting
Securities") . Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, (D) any
acquisition pursuant to any compensatory stock option or stock
purchase plan for employees, (E) any acquisition or ownership by
Gilbert V. Levin or Karen M. Levin, or (F) any acquisition pursuant
to a reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (A), (B), and (C) of subsection (3) of this Section 2.1(g)
are satisfied; or
(2) Individuals who, as of the Effective Date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose
election or nomination for election was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board (with his or her predecessor thereafter ceasing to be
a member); or
(3) Approval by the stockholders of the Company of the
reorganization, merger or consolidation of the Company unless,
following such reorganization, merger, or consolidation, (A) more
than 60% of the then outstanding shares of common stock and the then
outstanding voting securities of the resulting corporation is then
beneficially owned by all or substantially all of the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such reorganization, merger,
or consolidation, (B) no Person (excluding (I) the Company, (II) any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger, or
consolidation, and (III) any Person beneficially owning, immediately
prior to such reorganization, merger, or consolidation, 20% or more
of the Outstanding Common Stock or Outstanding Voting Securities, as
the case may be) beneficially owns 20% or more of the then
outstanding shares of common stock or the combined voting power of
the then outstanding voting securities of the resulting corporation,
and (C) at least a majority of the members of the board of directors
of the resulting corporation were members of the Incumbent Board at
the time of the execution of the initial agreement providing for such
reorganization, merger, or consolidation; or
(4) Approval by the stockholders of the Company of (A) a
complete liquidation or dissolution of the Company, or (B) the sale
or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect
2
<PAGE>
to which following such sale or other disposition, (I) more than 60%
of the outstanding shares of common stock and the then outstanding
voting securities of such corporation is beneficially owned by all or
substantially all of the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such sale or disposition; (II) no Person
(excluding (x) the Company, (y) any employee benefit plan (or related
trust) of the Company or such corporation and (z) any Person
beneficially owning, immediately prior to such sale or other
disposition, 20% or more of the Outstanding Common Stock or
Outstanding Voting Securities, as the case may be) beneficially owns
20% or more of the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities of
such corporation, and (III) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such sale or other disposition of the assets of the corporation.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "Committee" means the Compensation Committee of the Board as
long as such Compensation Committee is composed solely of at least two (2)
non-employee directors; in the event the Compensation Committee does not have
the above-described composition, Board of Directors shall select a separate
stock option committee which shall be composed solely of at least two (2)
non-employee directors and such stock option committee shall constitute the
"committee" hereunder.
(j) "Company" means Biospherics Incorporated, or any successor
thereto as provided in Article 12 herein.
(k) "Fair Market Value" of a Share means the closing sales price
of the Stock on the relevant date if it is a trading date, or if not, on the
most recent date on which the Stock was traded prior to such date, as
reported by NASDAQ, or if, in the opinion of the Committee, this method is
inapplicable or inappropriate for any reason, the fair market value as
determined pursuant to a reasonable method adopted by the Committee in good
faith for such purpose.
(l) "Incentive Stock Option" or "ISO" means an option to
purchase Stock, granted under Article 6 herein, which is designated as an
incentive stock option and is intended to meet the requirements of Section
422 of the Code.
(m) "Non-Qualified Stock Option" or "NQSO" means an option to
purchase Stock, granted under Article 6 herein, which is not an Incentive
Stock Option.
(n) "Option" means an Incentive Stock Option or a Non-Qualified
Stock Option.
(o) "Participant" means a Select Employee who receives an Award
under the Plan.
(p) "Person" shall have the meaning ascribed to such term in
section 3 (a) (9) of the Exchange Act and used in Sections 13 (d) and 14 (d)
thereof, including a "group" as defined in Section 13(d).
(q) "Plan" means the 1997 Stock Option Plan, as described herein
and as hereafter from time to time amended.
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<PAGE>
(r) "Select Employee" means an officer or other employee of the
Company or its Subsidiaries, who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or perform
services of major importance to, the Company and its Subsidiaries.
(s) "Stock" or "Shares" means the Common Stock of the Company.
(t) "Subsidiary" shall mean a corporation, at least 50% of the
total combined voting power of all classes of capital stock of which is owned
by the Company, either directly or through one or more of its Subsidiaries.
ARTICLE 3
Administration
3.1 The Committee. Subject to the Board's right to retain
administration of the Plan, the Plan shall be administered by the Committee
which shall have all powers necessary or desirable for such administration. The
express grant in this Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. In addition to
any other powers and, subject to the provisions of the Plan, the Committee shall
have the following specific powers: (i) to determine the terms and conditions
upon which the Awards may be made and exercised; (ii) to determine all terms and
provisions of each Agreement, which need not be identical; (iii) to construe and
interpret the Agreements and the Plan; (iv) to establish, amend or waive rules
or regulations for the Plan's administration; (v) to accelerate the
exercisability of any Award; and (vi) to make all other determinations and take
all other actions necessary or advisable for the administration of the Plan.
3.2 Delegation of Certain Duties. The Committee may in its sole
discretion delegate all or part of its duties and obligations to designated
officer(s) to administer the Plan with respect to Awards to Select Employees.
3.3 Selection of Select Employees. The Committee shall have the
authority to grant Awards under the Plan, from time to time, to such Select
Employees as may be selected by it. Each Award shall be evidenced by an
Agreement.
3.4 Decisions Binding. All determinations and decisions made by the
Board or the Committee pursuant to the provisions of the Plan shall be final,
conclusive and binding.
3.5 Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Award granted or made hereunder, and against all amounts reasonably
paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, if such members acted in good faith and
in a manner which they believed to be in, and not opposed to, the best interests
of the Company and its Subsidiaries.
ARTICLE 4
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.4
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 400,000. Except as provided in
Sections 4.2 and 4.3 herein, the issuance of Shares in
4
<PAGE>
connection with the exercise of, or as other payment for Awards, under the Plan
shall reduce the number of Shares available for future Awards under the Plan.
4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this
Plan (for which no material benefits of ownership have been received, including
dividends) terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, any Stock subject to such Award again shall be available
for the grant of an Award under the Plan.
4.3 Delivery of Shares as Payment. In the event a Participant pays the
Option price for Shares pursuant to the exercise of an Option with previously
acquired Shares, the number of Shares available for future Awards under the Plan
shall be reduced only by the net number of new Shares issued upon the exercise
of the Option.
4.4 Capital Adjustments. The number and class of Shares subject to each
outstanding Award, the Option price and the aggregate number and class of Shares
for which Awards thereafter may be made shall be subject to such adjustment, if
any, as the Committee in its sole discretion deems appropriate to reflect such
events as stock dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Company.
ARTICLE 5
Eligibility
Persons eligible to participate in the Plan include all employees of
the Company and its Subsidiaries who, in the opinion of the Committee, are
Select Employees.
ARTICLE 6
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Select Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Select Employee; provided, however, that the aggregate Fair Market Value
(determined at the time the Award is made) of Shares with respect to which any
Select Employee may first exercise ISOs granted under the Plan during any
calendar year may not exceed $100,000 or such amount as shall be specified in
Section 422 of the Code and rules and regulations thereunder.
6.2 Option Agreement. Each Option grant shall be evidenced by an
Agreement that shall specify the type of Option granted, the Option price, the
duration of the Option, the number of Shares to which the Option pertains, any
conditions imposed upon the exercisability of Options in the event of
retirement, death, disability or other termination of employment, and such other
provisions as the Committee shall determine. The Agreement shall specify whether
the Option is intended to be an ISO within the meaning of Section 422 of the
Code, or a Non-Qualified Stock Option not intended to be within the provisions
of Section 422 of the Code.
6.3 Option Price. The exercise price per share of Stock covered by an
Option shall be determined by the Committee subject to the following
limitations. The Option price shall not be less than 50% of the Fair Market
Value of such Stock on the Grant Date; provided, however, that the Option price
shall not be less than 100% of the Fair Market Value of such Stock on the Grant
Date for all Incentive Stock Options. In addition, an ISO granted to an employee
who, at the time of grant, owns (within the meaning of Section 425(d) of the
Code) Stock possessing more than 10% of the total combined voting power of all
classes of Stock of the Company, shall have an Option price which is at least
equal to 110% of the Fair Market Value of the Stock.
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<PAGE>
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that (i) no
ISO shall be exercisable later than the tenth (10th) anniversary date of its
Award Date and (ii) no ISO granted to an employee who, at the time of grant,
owns (within the meaning of Section 425(d) of the Code) Stock possessing more
than 10% of the total combined voting power of all classes of Stock of the
Company, shall be exercisable later than the fifth (5th) anniversary date of its
Award Date.
6.5 Exercisability. Options granted under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall determine, which need not be the same for all Select Employees.
6.6 Method of Exercise. An Option shall be exercised by the delivery of
a written notice to the Company in the form prescribed by the Committee setting
forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares which shall be deemed to include
arrangements approved by the Committee for the delivery to the Company of the
proceeds of a sale or margin loan in the case of a "cashless" exercise. The
Option price shall be payable to the Company in full either in cash (including
the proceeds of a cashless exercise in the Committee's discretion) , by delivery
of Shares of Stock valued at Fair Market Value at the time of exercise, delivery
of a promissory note (in the Committee's discretion) or by a combination of the
foregoing. As soon as practicable after receipt of written notice and payment,
the Company shall deliver to the Participant, stock certificates in an
appropriate amount based upon the number of Options exercised, issued in the
Participant's name. No Participant who is awarded Options shall have rights as a
stockholder until the date of exercise of the Options.
6.7 Restrictions on Stock Transferability. The Committee shall impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable.
6.8 Transferability of Options. The Committee may, in its discretion,
authorize all or a portion of the Options to be granted to a Participant to be
on terms which permit transfer by such Participant to (i) the spouse, children
or grandchildren of the Participant ("Immediate Family Members"), (ii) a trust
or trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which such Immediate Family Members are the only partners, or
(iv) other persons or entities permitted by the Committee; provided that (x) the
agreement pursuant to which such Options are transferred must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with this Section, and (y) subsequent transfers of transferred Options shall be
prohibited except those occasioned by will or the laws of descent and
distribution. Following transfer, any such Options shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer. The events of termination of employment shall continue to be applied
with respect to the original Participant, following which the Options shall be
exercisable by the transferee only to the extent, and for the periods specified
herein.
ARTICLE 7
Change in Control
The Committee, as constituted before a Change in Control, in its sole
discretion may, as to any outstanding Award, either at the time the Award is
made or any time thereafter, take any one or more of the following actions with
respect to a Change in Control: (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 such Award
by the Company, upon a 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
6
<PAGE>
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 therefor, by the acquiring or surviving
corporation in such Change in Control.
ARTICLE 8
Modification, Extension and Renewals of Awards
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to the
extent not yet exercised) granted under the Plan and authorize the granting of
new Awards pursuant to the Plan in substitution therefor, and the substituted
Awards may specify a longer term than the surrendered Awards or may contain any
other provisions that are authorized by the Plan; provided, however, that the
substituted Awards may not specify a lower exercise price than the surrendered
Awards. The Committee may also modify the terms of any outstanding Agreement.
Notwithstanding the foregoing, however, no modification of an Award shall,
without the consent of the Participant, adversely affect the rights or
obligations of the Participant.
ARTICLE 9
Amendment, Modification and Termination of the Plan
9.1 Amendment, Modification and Termination. At any time and from time
to time, the Board may terminate, amend, or modify the Plan. Such amendment or
modification may be without stockholder approval except to the extent that such
approval is required by the Code, by NASDAQ or any other exchange or system on
which the Stock is then listed or reported, by any regulatory body having
jurisdiction with respect thereto or under any other applicable laws, rules or
regulations.
9.2 Awards Previously Granted. No termination, amendment or
modification of the Plan other than pursuant to Section 4.4 herein shall in any
manner adversely affect any Award theretofore granted under the Plan, without
the written consent of the Participant.
ARTICLE 10
Withholding
10.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan.
10.2 Stock Withholding. With respect to withholding required upon the
exercise of Non-Qualified Stock Options, or upon the occurrence of any other
similar taxable event, participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares of Stock having a Fair Market Value equal to
the amount required to be withheld. The value of the Shares to be withheld shall
be based on Fair Market Value of the Shares on the date that the amount of tax
to be withheld is to be determined. All elections shall be irrevocable and be
made in writing, signed by the Participant on forms approved by the Committee in
advance of the day that the transaction becomes taxable.
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ARTICLE 11
Successors
All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of
the business and/or assets of the Company.
ARTICLE 12
General
12.1 Requirements of Law. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies as may be
required.
12.2 Effect of Plan. The establishment of the Plan shall not confer
upon any Select Employee any legal or equitable right against the Company, a
Subsidiary, or the Committee, except as expressly provided in the Plan. The Plan
does not constitute an inducement or consideration for the employment of any
Select Employee, nor is it a contract between the Company or any of its
Subsidiaries and any Select Employee. Participation in the Plan shall not give
any Select Employee any right to be retained in the service of the Company or
any of its Subsidiaries.
12.3 Creditors. The interests of any Participant under the Plan or any
Agreement are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered.
12.4 Governing Law. The Plan, and all Agreements hereunder, shall be
governed, construed and administered in accordance with and governed by the laws
of the State of Delaware and the intention of the Company is that ISOs granted
under the Plan qualify as such under Section 422 of the Code.
12.5 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
Approved by Biospherics Board of Directors on November 17, 1997.
/s/ Gilbert V. Levin
--------------------------------
Gilbert V. Levin, Chair
/s/ Lionel V. Baldwin
--------------------------------
Lionel V. Baldwin, Chair
Compensation Committee
ATTEST:
/s/ Karen M. Levin (SEAL)
- --------------------------------
Karen M. Levin, Secretary
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
BIOSPHERICS -REGISTERED- INCORPORATED
May 15, 1998
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A /x/ Please mark your
votes as in this
box.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR all nominees WITHHOLD
listed to right AUTHORITY
(except as market to to vote for all FOR AGAINST ABSTAIN
the contrary below) nominees listed at right Nominees: L.V. Baldwin 2. PROPOSAL TO APPROVE THE / / / / / /
1. ELECTION D.A. Blake BIOSPHERICS INCORPORATED
OF / / / / J.W. Church STOCK OPTION PLAN AS
DIRECTORS A.B. Cleveland APPROVED BY THE BOARD
R.L. Colwell OF DIRECTORS IN 1997.
INSTRUCTION: To withhold authority to vote for any G.S. Jenkins
individual nominee, strike a line through the nominee's G.V. Levin 3. PROPOSAL TO RATIFY THE / / / / / /
name in the list to the right. M.K. Levin APPOINTMENT OF COOPERS
A.S. MacLeod & LYBRAND LLP as the
independent accountants
of the Corporation for
the fiscal year ending
December 31, 1998.
I plan to attend the Annual
Meeting in Beltsville, MD. / /
at 2:00 p.m. on May 15, 1998
This proxy will be voted as specified hereon.
If no indication to the contrary is made hereon,
this proxy will be voted for all nominees for
Directors listed in Proposal 1 and for Proposals
2 and 3. BIOSPHERICS' DIRECTORS RECOMMEND A FOR
VOTE ON EACH ITEM, AND SHARES WILL BE SO VOTED
UNLESS OTHERWISE INDICATED.
________________________________________ _________________________ ______________________ Dated __________, 1998
PLEASE SIGN HERE AND RETURN PROMPTLY PLEASE PRINT YOUR NAME NUMBER OF SHARES VOTED
NOTE: If signing as Attorney, Administrator, Executor, Guardian or Trustee, please add your title as such.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
BIOSPHERICS -REGISTERED- INCORPORATED
BOARD OF DIRECTORS PROXY
ANNUAL MEETING OF STOCKHOLDERS
Gilbert V. Levin and M. Karen Levin, Corporate Secretary, each with the
power of substitution, are hereby appointed Proxies of the undersigned to
vote all shares of Common Stock of Biospherics Incorporated owned by the
undersigned at the Annual Meeting of Stockholders, to be held at the Company
headquarters, 12051 Indian Creek Court, Beltsville, Maryland, on May 15,
1998, at 2:00 p.m. EDT, or any adjournment thereof, upon the proposals set
forth on the reverse and, in their discretion, upon all other matters as
may properly be brought before the meeting.
(Continued and to be signed on the reverse side.)
