<PAGE>
12051 Indian Creek Court
Beltsville, Maryland 20705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1999
AND PROXY STATEMENT
The Annual Meeting of Stockholders of Biospherics-Registered
Trademark-Incorporated (the "Company") will be held at the Company's
headquarters, 12051 Indian Creek Court, Beltsville, Maryland 20705, on
May 17, 1999, at 2:00 p.m., Eastern Daylight Time.
The items of business are:
(1) Election of seven (7) 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) Ratification of the appointment of the independent accountants.
(3) 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 Summary Annual Report for
1998 accompany this Notice.
Pursuant to the Bylaws of the Company, the Board of Directors has fixed
the close of business on March 18, 1999, 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.
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<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 1999
This Proxy Statement is being mailed on or about April 16, 1999, with
the solicitation of proxies in the accompanying form by the Board of
Directors of Biospherics-Registered Trademark- Incorporated, a Delaware
corporation. The Annual Meeting of its Stockholders will be held May 17,
1999, 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 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 18, 1999. At that time, there were 8,987,584 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 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 seven (7) 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.
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The following table sets forth certain information about the Nominees for
Directors as of March 18, 1999.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Director
Name Age Position Since
- ------------------------ ----------- -------------------------------------------------------------- -----------
<S> <C> <C> <C>
Gilbert V. Levin 74 Chair, CEO, President, and Treasurer 1967
Lionel V. Baldwin 66 Director 1976
David A. Blake 57 Director 1995
A. Bruce Cleveland 55 Director 1987
George S. Jenkins 76 Director 1984
M. Karen Levin 79 Director and Vice President for Communications 1968
Anne S. MacLeod 68 Director 1992
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Dr. Levin founded the Company in 1967 and has been Chair 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;
Biological Nutrient Removal (BNR), a nitrogen removal process; and the Labeled
Release life detection experiment that landed on Mars in 1976 aboard NASA's
Viking Mission. He holds a Ph.D. from The Johns Hopkins University, where he
also served on its Board of Trustees.
Dr. Baldwin is President of the National Technological University (NTU),
Fort Collins, Colorado. Prior to founding NTU in 1984, he served as Dean of the
College of Engineering at Colorado State University (CSU) for 20 years. In that
position, he also coordinated research programs with emphasis on the
environment. Dr. Baldwin is a leader in developing linkages between industry and
universities. In 1967, he created the first ITV program in the Nation employing
courier-carried videotape to deliver CSU graduate classes to several Colorado
industries. He has published over 50 technical papers on turbulent diffusion in
the atmosphere and educational technology issues. Dr. Baldwin holds a Ph.D. from
Case Institute of Technology.
Dr. Blake is the Associate Director of the Woodruff Health Sciences
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. 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, prior to that, was an investment banker with Drexel
Burnham Co. in New York. He is a graduate of Harvard University and received an
M.B.A. in finance from Harvard Business School.
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 National 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.
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<PAGE>
Dr. MacLeod is Professor, College of Library and Information Services and
former Acting Director of Libraries, University of Maryland, College Park. She
is also a specialist in the design of communications for specific audiences, and
is an authority on literature for children and youths. Dr. MacLeod holds a Ph.D.
in American history and an M.L.S., both from the University of Maryland.
In 1998, non-employee Directors as a group were conditionally granted
options for 5,000 shares of Common Stock under the new Biospherics Incorporated
1997 Stock Option Plan. The options have an exercise price of $5.7813 per share
and expire on November 16, 2003. 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 1998-1999
The Company's Board of Directors held four Regular Meetings from May 15,
1998, to February 1999, which were attended by all members. There were four (4)
special meetings. 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. 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; George S.
Jenkins; and Richard C. Levin (staff). 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, and M. Karen Levin. Two (2) meetings were held, attended by
both members.
The Technical Committee advises the Company on the direction of
technology development. The Technical Committee consists of David A. Blake,
Chair; Gilbert V. Levin; and James P. Saunders (staff). 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.
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 18, 1999. 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
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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 18, 1999, RGC held warrants to
acquire up to an additional 625,000 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>
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Amount and Nature Percent
Title of Class Name of Beneficial Owner of Ownership Of Class
--------------------- ---------------------------------- ---------------------------- --------
<S> <C> <C> <C>
Common Gilbert V. Levin 1,965,440 (1)(2) 20.3%
Common M. Karen Levin 1,647,066 (2) 17.0%
Common Richard C. Levin 85,796 (2) *
Common Lionel V. Baldwin 22,818 (2) *
Common George S. Jenkins 17,000 (2) *
Common A. Bruce Cleveland 16,000 (2) *
Common Anne S. MacLeod 15,500 (2) *
Common David A. Blake 11,000 (2) *
Common David H. Affeldt - (2) *
Common All Officers and
Directors as a Group 3,780,620 (2) 39.1%
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</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, D. H. Affeldt and All
Officers and Directors as a Group are 360,600, 107,500, 85,000,
11,000, 15,000, 15,000, 15,000, 11,000, 0, and 620,000 shares,
respectively, which such persons have a right to acquire within 60
days pursuant to stock options.
As of March 18, 1999, Gilbert V. Levin, Chair, Chief Executive Officer,
President, and Treasurer and M. Karen Levin, Vice President for Communications,
3180 Harness Creek Rd., Annapolis, Maryland, beneficially owned in the aggregate
3,612,506 shares of Common Stock (37.3% of the 9,673,3091 outstanding shares).
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 3,780,620
shares of Common Stock, owned 39.1% of the 9,673,309 outstanding shares2. 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)
- -------------------------
1 Includes 685,725 shares which could be acquired pursuant to stock options
within 60 days.
2 Includes 685,725 shares which could be acquired pursuant to stock options
within 60 days.
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<PAGE>
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, 1998, are listed in the following
table.
EXECUTIVE OFFICERS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Name Age Position
- ----------------------- -------- -------------------------------------------------------------------------------
<S> <C> <C>
Gilbert V. Levin 73 Chairman of the Board, CEO, President, and Treasurer
David H. Affeldt 34 Executive Vice President
M. Karen Levin 78 Director, Vice President for Communications, and Corporate Secretary
Richard C. Levin 45 Vice President, Business Strategies
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Dr. and Mrs. Levin's experience is discussed above.
David H. Affeldt joined the Company in 1998 as Executive Vice President
and Director of Information Technology. He is responsible for oversight of the
Company's diverse information technology programs and projects. He works with
the other officers and top management to formulate policy and to develop
strategy for implementing programs. Before joining Biospherics, he was Vice
President of Capital Technical Information Service, where he managed several
aspects of that firm's successful growth from 17 to 100 persons. Previously, he
served as Director of Information Systems on an advanced computer center for a
Department of Defense program. Mr. Affeldt holds a Master of Computer Technology
degree from the Institute of Research and Technology in Washington, D.C. and a
B.S. from Towson University.
Richard Levin joined the Company in 1991 as Business Manager. Mr. Levin
has held various executive positions within the Company. In 1998, Mr. Levin was
named Vice President, Business Strategies. Prior to joining Biospherics, he was
the General Manager of the Catalyst Research Division of the Mine Safety
Appliances Company. Mr. Levin holds a B.S. in business administration from the
University of Baltimore and is a C.P.A. in the State of Maryland. Mr. Levin is
the nephew of Dr. and Mrs. Levin.
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<PAGE>
EXECUTIVE COMPENSATION TABLES
SUMMARY OF COMPENSATION IN LAST THREE FISCAL YEARS
The following summary of compensation table sets forth the compensation
paid by the Company during the three years ended December 31, 1998, to Executive
Officers earning in excess of $100,000 during any year.
SUMMARY OF COMPENSATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
-------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------- ------------------------ -----------------------
No. of
Other Restricted Securities All Other
Name and Annual Com- Stock Underlying LTIP Compen-
Principal Position Year Salary ($) Bonus ($)(1) pensation ($) (2) Awards Options (3) Payouts ($) sation ($)
- ------------------ ---- ---------- ------------ ----------------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gilbert V. Levin 1998 205,930 - 7,800 - 3,000 - 4,000
Chief Executive 1997 198,000 - 7,800 - 15,000 (4) - 4,000
Officer & President 1996 189,673 - 7,800 - 10,000 - 4,497
M. Karen Levin 1998 169,852 - 7,800 - 25,000 - 4,000
Vice President for 1997 163,359 - 7,800 - 20,000 (4) - 4,000
Communications 1996 156,813 - 7,800 - 10,000 - 2,083
Richard C. Levin 1998 108,424 - 7,800 - 3,000 - 2,895
Vice President, 1997 104,216 - 7,800 - 30,000 (4) - 2,790
Business Strategies 1996 99,844 - 7,800 - 30,000 - 2,699
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 MDFI. The agreement with
MDFI 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, 1998, to the Executive
Officers earning in excess of $100,000 during the year.
OPTION GRANTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year per Share ($) Date
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gilbert V. Levin 3,000 3.4% 6.3594 11/16/03
M. Karen Levin 25,000 28.1% 6.3594 11/16/03
Richard C. Levin 3,000 3.4% 6.3594 11/16/03
- ---------------------------------------------------------------------------------------
</TABLE>
The Biospherics Incorporated Nonqualified Stock Option Plan (the "1987
Plan") was established in May 1987 to provide certain selected key employees
having substantial responsibilities for the direction and management of the
Company with an additional incentive to promote its success and encourage them
to remain in the employ of the Company. The 1987 Plan provided for the issuance
of up to 4,400,000 shares of Common Stock. No further awards could be made under
the 1987 Plan after May 14, 1997. As of December 31, 1998, there were 2,705,100
outstanding options granted to individuals including the above-named Officers,
including 627,225 that were exercisable as of such date.
The Biospherics Incorporated 1997 Stock Option Plan (the "1997 Plan") was
approved by the Company's Stockholders on May 15, 1998. The 1997 Plan provides
for the grant of incentive stock options and non-qualified stock options to
select employees of the Company. The 1997 Plan provides for the issuance for up
to 400,000 shares
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<PAGE>
of Common Stock. As of December 31, 1998, there were 95,750 outstanding options
granted to individuals including the above-named Officers, including 37,250 that
were exercisable as of such date.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following aggregated options table sets forth the total options
exercised during the year ended December 31, 1998, and fiscal year-end (FYE)
1998 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 - - 350,500/1,017,500 (1) 1,585,172/1,517,031
M. Karen Levin - - 107,500/1,007,500 (1) 560,704/1,483,906
Richard C. Levin 10,000 35,000 85,000/18,000 519,844/104,859
- --------------------------------------------------------------------------------------------------------------
</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 1997 or 1998.
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 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.
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<PAGE>
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 2 ON THE PROXY CARD)
The Board of Directors has reappointed the firm of PricewaterhouseCoopers
L.L.P. (formerly Coopers & Lybrand L.L.P.) to be the Company's independent
accountants for the year 1999 and recommends that Stockholders vote "FOR"
ratification of that appointment. The Company is advised that no member of the
firm of PricewaterhouseCoopers L.L.P. has any interest, financial or otherwise,
direct or indirect, in the Company. A representative from PricewaterhouseCoopers
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 PricewaterhouseCoopers L.L.P., the selection of independent accountants will
be reconsidered by the Board of Directors.
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<PAGE>
OTHER BUSINESS
(ITEM 3 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 2000 Annual Meeting
of Stockholders must submit such proposals to the Company at 12051 Indian Creek
Court, Beltsville, MD 20705, no later than December 15, 1999.
BY ORDER OF THE BOARD OF DIRECTORS,
M. KAREN LEVIN, CORPORATE SECRETARY
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