<PAGE>
ENERGY BIOSYSTEMS CORPORATION
4200 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 1998
------------------------
The Annual Meeting of the Stockholders of Energy BioSystems Corporation, a
Delaware corporation (the "Company"), will be held at the Company's offices,
4200 Research Forest Drive, The Woodlands, Texas, on Tuesday, June 2, 1998 at
10:00 a.m., local time, for the following purposes:
1. To elect eight directors to serve until the annual stockholders'
meeting in 1999 or until their successors have been elected and qualified;
2. To ratify and approve the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the 1998 fiscal year; and
3. To act upon such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 17, 1998 are
entitled to receive notice of, and to vote at, the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING OF
STOCKHOLDERS REGARDLESS OF THE SIZE OF YOUR HOLDINGS OR WHETHER YOU PLAN TO
ATTEND THE MEETING. THEREFORE, PLEASE MARK, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY. IF YOU ARE PRESENT AT THE MEETING, AND WISH TO DO SO, YOU
MAY REVOKE THE PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
/s/ Paul G. Brown, III
Paul G. Brown, III
SECRETARY
May 1, 1998
The Woodlands, Texas
<PAGE>
ENERGY BIOSYSTEMS CORPORATION
4200 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
------------------------
PROXY STATEMENT
---------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Energy
BioSystems Corporation (the "Company") for use at the 1998 Annual Meeting of
Stockholders to be held on Tuesday, June 2, 1998 and at any adjournments thereof
(the "Annual Meeting"). The Annual Meeting will be held at 10:00 a.m., local
time, at the Company's principal executive offices, 4200 Research Forest Drive,
The Woodlands, Texas. If the accompanying proxy is properly executed and
returned, the shares it represents will be voted at the Annual Meeting in
accordance with the directions noted thereon or, if no direction is indicated,
it will be voted in favor of the proposals described in this Proxy Statement. In
addition, the proxy confers discretionary authority to the persons named in the
proxy authorizing those persons to vote, in their discretion, on any other
matters properly presented at the Annual Meeting. The Board of Directors is not
currently aware of any such other matters.
Each stockholder of the Company has the unconditional right to revoke his
proxy at any time prior to its exercise, either in person at the Annual Meeting
or by written notice to the Company addressed to Secretary, Energy BioSystems
Corporation, 4200 Research Forest Drive, The Woodlands, Texas 77381. No
revocation by written notice will be effective unless such notice has been
received by the Secretary of the Company prior to the day of the Annual Meeting
or by the inspector of election at the Annual Meeting.
The principal executive offices of the Company are located at 4200 Research
Forest Drive, The Woodlands, Texas 77381. This Proxy Statement and the
accompanying Notice of Annual Meeting of Stockholders and proxy are being mailed
to the Company's stockholders on or about May 1, 1998.
QUORUM AND VOTING
The number of voting securities of the Company outstanding on April 17,
1998, the record date for the determination of stockholders of the Company
entitled to receive notice of, and to vote at, the Annual Meeting was (i)
12,281,591 shares of common stock, par value $0.01 per share (the "Common
Stock"), each share being entitled to one vote, and (ii) 698,100 shares of
Series B Convertible Preferred Stock, par value $0.01 per share (the "Preferred
Stock"). Shares of Preferred Stock have voting rights on all matters subject to
a vote of the holders of Common Stock on an as-converted basis. As of the record
date, the shares of Preferred Stock are entitled to an aggregate of 4,814,482
votes upon each of the matters to be voted on at the Annual Meeting. The total
number of votes that may be cast at the Annual Meeting is 17,096,073.
The presence, either in person or by proxy, of holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining whether a quorum is present. A plurality vote is required for the
election of directors. Accordingly, if a quorum is present at the Annual
Meeting, the eight persons receiving the greatest number of votes will be
elected to serve as directors. Withholding authority to vote for a director
nominee and broker non-votes in the election of directors will not affect the
outcome of the election of directors. All other matters to be voted on will be
decided by the vote of the holders of a majority of the shares present or
represented at the Annual Meeting and entitled to vote on such matter. On any
such matter, an abstention will have the same effect as a negative vote but,
because shares held by brokers will not be considered entitled to vote on
matters as to which the brokers withhold authority, a broker non-vote will have
no effect on such vote.
<PAGE>
All Proxies that are properly completed, signed and returned prior to the
Annual Meeting will be voted. Any Proxy given by a stockholder may be revoked at
any time before it is exercised by the stockholder (i) filing with the Secretary
of the Company an instrument revoking it, (ii) executing and returning a Proxy
bearing a later date or (iii) attending the Annual Meeting and expressing a
desire to vote his shares of Common Stock in person. Votes will be counted by
Harris Trust & Savings Bank, the Company's transfer agent and registrar.
PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
The Board of Directors has nominated and urges you to vote for the election
of the eight nominees identified below who have been nominated to serve as
directors until the next annual meeting of stockholders or until their
successors are duly elected and qualified. Each of the nominees listed below is
a member of the Company's present Board of Directors. Proxies solicited hereby
will be voted for all eight nominees unless stockholders specify otherwise in
their proxies.
If, at the time of or prior to the Annual Meeting, any of the nominees
should be unable or decline to serve, the discretionary authority provided in
the proxy may be used to vote for a substitute or substitutes designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required.
NOMINEES FOR DIRECTOR
The eight nominees for election as directors and certain additional
information with respect to each of them are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY BECAME A DIRECTOR
- ------------------------------------ --- -------------------------------------------------- -------------------
<S> <C> <C> <C>
William E. Nasser................... 58 Chairman of the Board, President and Chief 1992
Executive Officer
Ramon Lopez......................... 64 Director 1994
R. James Comeaux.................... 60 Director 1997
Edward B. Lurier.................... 67 Director 1991
Thomas E. Messmore, CFA............. 52 Director 1992
Daniel J. Monticello, Ph.D. ........ 42 Director and Vice President, Research and 1994
Development
John S. Patton...................... 63 Director 1997
William D. Young.................... 53 Director 1994
</TABLE>
WILLIAM E. NASSER. Mr. Nasser has served as Chairman of the Board,
President and Chief Executive Officer since April 1998 and has been a Director
since January 1992. Mr. Nasser formerly served as Chairman of the Board,
President and Chief Executive Officer of Petrolite Corporation from 1992 to 1995
and as President of Petrolite from 1988 to 1992. He retired in November 1995
after over 30 years of service. Mr. Nasser currently is a director of Laclede
Gas Company. He holds a B.S. degree in Chemical Engineering from the University
of Notre Dame and an M.S. degree from the University of Oklahoma.
RAMON LOPEZ. Mr. Lopez has been a Director since 1994 and served as
Chairman of the Board of Directors from April 1997 until April 1998. Mr. Lopez
served as Vice President--Safety, Environment and Technology of Shell Oil
Company from October 1992 until his retirement in October 1993. He started his
career with Shell in 1955 and held senior responsibilities in all areas of
petroleum refining and marketing, including positions as Vice President of
Manufacturing and Technical and General Manager of the
2
<PAGE>
Western and Eastern Regions for Refining and Marketing. Mr. Lopez holds a B.S.
degree in Chemical Engineering from the University of Florida.
R. JAMES COMEAUX. Mr. Comeaux has been a Director since April 1997. Mr.
Comeaux has been President and Chief Executive Officer of Petrochemical
Management Incorporated since 1993. From 1989 to 1993, Mr. Comeaux served as
President and Chief Executive Officer of Arcadian Corporation. He served as
Senior Vice President of Fina, Inc. from 1984 to 1989. Prior to joining Fina,
Mr. Comeaux spent 17 years at Gulf Oil Corporation. Mr. Comeaux is a director of
Ivex Packaging Corporation. Mr. Comeaux received a B.S. degree in Chemical
Engineering from Lamar University.
EDWARD B. LURIER. Mr. Lurier has been a Director since 1991. Since 1984,
Mr. Lurier has been the Chairman of the Board of Directors of Gryphon Management
Company, Inc. and general partner of Gryphon Financial Partners II, a venture
capital firm which he co-founded. Gryphon Financial Partners II is the general
partner of Gryphon Ventures II, Limited Partnership, a limited partnership of
which Ethyl Corporation is the sole limited partner. Mr. Lurier is a director of
IGEN International Inc.
THOMAS E. MESSMORE, CFA. Mr. Messmore has been a Director since 1992. Mr.
Messmore has been Managing Director of Zurich Centre Resources, Ltd., a
subsidiary of Zurich Insurance Group, since 1997. Previously, Mr. Messmore
served as President and Chief Executive Officer of UBS Asset Management (New
York), Inc. from 1995 until October 1996. Mr. Messmore served as Senior Vice
President of The Travelers Insurance Company from 1984 until his resignation in
January 1994. Prior thereto, he served as Senior Vice President and Chief
Financial Officer of the Keystone Massachusetts Group, an affiliate of The
Travelers Insurance Company. Mr. Messmore received a B.S. degree in Engineering
from West Virginia University and an M.B.A. from Harvard Business School.
DANIEL J. MONTICELLO, PH.D. Dr. Monticello was the Company's first
employee. He joined the Company in July 1990 as Vice President, Research and
Development and became a Director in 1994. From 1983 to 1990, Dr. Monticello was
employed by Miles Laboratories where he served in various capacities in the
Biotechnology Products Division, including Manager of Biochemistry Research. Dr.
Monticello earned his B.S. degree from the University of Michigan and his M.S.
and Ph.D. in Microbiology from Michigan State University. His post-doctoral
research at the University of Georgia from 1982 to 1984 concerned the microbial
desulfurization of fossil fuels.
JOHN S. PATTON. Mr. Patton has been a Director since January 1997. Since
1997, he has been the Director of Strategic Planning for Ethyl Corporation. He
served as the Director of Investor Relations for Ethyl Corporation from 1989
through 1997. Mr. Patton also serves as chairman of Ethyl Ventures, Inc., a
wholly-owned subsidiary of Ethyl Corporation which invests in early-stage
development companies. Mr. Patton has served in various positions at Ethyl
Corporation since 1974. Mr. Patton joined Sterling Seal Co. in 1957, where he
served in various positions until Sterling Seal was acquired by VCA Corporation
in 1972 and Ethyl Corporation in 1974. Mr. Patton currently is a regional
director of Mellon Bank Corporation. He received a B.A. degree in Economics from
Denison University and an M.B.A. from the University of Richmond.
WILLIAM D. YOUNG. Mr. Young has been a Director since 1994. Mr. Young has
been Chief Operating Officer of Genentech, Inc. since March 1997, with
responsibility for overseeing Genentech, Inc.'s operations, business development
and sales and marketing. Prior to joining Genentech, Inc. in 1980, Mr. Young
spent 14 years with Eli Lilly and Company. He received his B.S. degree in
Chemical Engineering from Purdue University and an M.B.A. from Indiana
University. Mr. Young is also a Director of IDEC Pharmaceuticals, Inc. and is a
member of the National Academy of Engineering.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE ABOVE-NAMED NOMINEES.
3
<PAGE>
All directors hold office until the next annual meeting of the stockholders
of the Company or until their successors have been duly elected and qualified.
The Company's officers are elected annually by, and serve at the pleasure of,
the Board of Directors, subject to the terms of any employment agreements.
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors on the Board shall be fixed from time to time by the Board
of Directors but shall not be less than three nor more than fifteen persons. The
Board in its discretion and in accordance with such authority has currently
fixed its size at eight members. No proxy will be voted for a greater number of
persons than the number of nominees named herein.
DIRECTORS' MEETINGS AND COMPENSATION
During 1997, the Board of Directors met nine times and took certain
additional actions by unanimous written consent in lieu of meetings. During
1997, no director of the Company attended fewer than 75 percent of the meetings
of the Board of Directors.
Members of the Board of Directors are reimbursed for out-of-pocket expenses
incurred in attending Board of Directors and committee meetings. During 1997,
each of Messrs. Comeaux, Lopez, Nasser and Young received $1,000 for each board
meeting attended. Directors who are employees of the Company do not receive any
additional compensation for their services as a director. Mr. Lopez was paid
$22,500 and received an option in 1997 to purchase 25,000 shares of Common Stock
in connection with his service as Chairman of the Board and consulting services
rendered to the Company. As amended, the option granted to Mr. Lopez entitles
him to purchase such shares at an exercise price of $3.875 per share, subject to
vesting requirements. No other director received compensation for consulting
services in 1997.
Under the Company's Non-Employee Director Option Plan, each nonemployee
director (except for directors who received options during the preceding year
for more than 4,000 shares of Common Stock under any other plan or agreement and
subject to the right of each eligible nonemployee director to decline such
grant) receives an automatic annual grant of non-qualified options to purchase
4,000 shares of Common Stock at an exercise price per share equal to the fair
market value per share of Common Stock on the date the option is granted.
BOARD COMMITTEES
The Company's Board of Directors has an Audit Committee and a Compensation
Committee. The Board of Directors does not have a Nominating Committee. The
Audit Committee's functions include making recommendations concerning the
engagement of independent public accountants, reviewing with the independent
public accountants the plan and results of the auditing engagement, approving
professional services provided by the independent public accountants, and
reviewing the adequacy of the Company's internal accounting controls. The
current members of the Audit Committee are Messrs. Lopez, Lurier and Messmore.
The Compensation Committee makes recommendations concerning compensation,
including incentive arrangements, for the Company's officers. The Compensation
Committee also administers the Company's Stock Compensation Plan. The current
members of the Compensation Committee are Messrs. Lurier and Messmore.
During 1997, the Audit Committee met one time and the Compensation Committee
met two times and took certain additional actions by unanimous written consent
in lieu of meetings. During 1997, no director of the Company attended fewer than
75 percent of the number of meetings of committees on which he served.
4
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers of
the Company, including the business experience of each during the past five
years.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
William E. Nasser......................... 58 Chairman of the Board, President and Chief Executive Officer
Daniel J. Monticello, Ph.D. .............. 42 Vice President, Research and Development
Paul G. Brown, III........................ 37 Vice President, Finance and Administration
William E. Heck........................... 68 Vice President, Engineering
Michael A. Pacheco, Ph.D. ................ 41 Vice President, Process Development
</TABLE>
Information regarding the business experience of Mr. Nasser and Dr.
Monticello is set forth above under the heading "Proposal Number 1: Election of
Directors--Nominees for Director."
PAUL G. BROWN, III. Mr. Brown has served as Vice President, Finance and
Administration of the Company since September 1993. From February 1992 to
September 1993, he served as Corporate Controller of the Company. Mr. Brown
spent 10 years with Arthur Andersen & Co. from 1982 to 1992, serving most
recently as a Tax Manager. Mr. Brown earned his B.S. degree in Accounting from
the University of New Orleans.
WILLIAM E. HECK. Mr. Heck has served as Vice President, Engineering of the
Company since September 1992. He has over 35 years of experience in petroleum
refinery management and operations. Mr. Heck spent 17 years with Tenneco Oil
Company from 1972 to 1989, where he served in various executive and supervisory
positions, most recently as Refining Technology Manager. From 1989 to September
1992, Mr. Heck was employed as the Engineering Manager of Murphy Oil U.S.A.,
Inc. Mr. Heck earned his B.S. degree in Chemical Engineering from the University
of Houston and completed management programs at the University of Southern
California and Harvard University.
MICHAEL A. PACHECO, PH.D. Dr. Pacheco has served as Vice President, Process
Development of the Company since April 1997. From 1984 to 1997, Dr. Pacheco held
a variety of positions in the Refining Business Group of Amoco Corporation. He
is a registered professional engineer in the State of California. Dr. Pacheco
received his B.S. in Chemical Engineering from Clarkson University and his Ph.D.
in Chemical Engineering from the University of California at Berkeley.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Board of Directors of
the Company currently consists of Edward B. Lurier and Thomas E. Messmore,
neither of whom is an officer or employee of the Company. The Committee is
responsible for evaluating the performance of management, determining the
compensation for certain executive officers of the Company and administering the
Company's stock plans under which grants of stock options and restricted stock
may be made to employees of the Company. The Committee has furnished the
following report on executive compensation for 1997:
Under the supervision of the Committee, the Company has developed a
compensation policy which is designated to attract and retain key executives
responsible for the success of the Company and motivate management to enhance
long-term stockholder value. The annual compensation package for executive
officers primarily consists of (i) a cash salary which reflects the
responsibilities relating to the position and individual performance, (ii)
variable performance awards payable in cash or stock and tied to the achievement
of certain personal or corporate goals or milestones and (iii) long-term stock
based incentive
5
<PAGE>
awards which strengthen the mutuality of interests between the executive
officers and the Company's stockholders.
In determining the level and composition of compensation of each of the
Company's executive officers, the Committee takes into account various
qualitative and quantitative indicators of corporate and individual performance.
Although no specific target has been established, the Committee generally seeks
to set salaries at the median to high end of the range in comparison with peer
group companies. In setting such salaries, the Committee considers its peer
group to be certain companies in the biotechnology and environmental industries
with market capitalizations similar to that of the Company. Such competitive
group does not necessarily include the companies comprising the Peer Group Index
reflected in the performance graph in this Proxy Statement. Because the Company
is still in the development stage, the use of certain traditional performance
standards (E.G., profitability and return on equity) is not currently
appropriate in evaluating the performance of the Company's executive officers.
Consequently, in evaluating the performance of management the Committee takes
into consideration such factors as the Company's achieving specified milestones
or goals under various research or development programs. In addition, the
Committee recognizes performance and achievements that are more difficult to
quantify, such as the successful supervision of major corporate projects,
demonstrated leadership ability, and contributions to the industry and community
development. For 1997, the Committee included in its evaluation the significant
progress made by the Company, including the continuing advancement of the
Company's research development under existing research and collaboration
agreements.
Base compensation is established through negotiation between the Company and
the executive officer at the time the executive is hired, and then subsequently
adjusted when such officer's base compensation is subject to review or
reconsideration. While the Company has entered into employment agreements with
certain of its executive officers, such agreements provide that base salaries
after the initial year will be determined by the Committee after review. When
establishing or reviewing base compensation levels for each executive officer,
the Committee, in accordance with its general compensation policy, considers
numerous factors, including the responsibilities relating to the position, the
qualifications of the executive and the relevant experience the individual
brings to the Company, strategic goals for which the executive has
responsibility, and compensation levels of companies at a comparable stage of
development who compete with the Company for business, scientific, and executive
talents. As stated above, such comparable companies are generally those with
similar market capitalizations and are not necessarily among the companies
comprising the Peer Group Index reflected in the performance graph in this Proxy
Statement. No predetermined weights are given to any one of such factors. In
addition, in 1994 and 1995 the Company hired an independent compensation
consultant to advise the Committee on general compensation matters and to
prepare a report for the Committee with respect to the Company's compensation
policy. Base salaries for each of the executive officers other than the Chief
Executive Officer, as discussed below, were increased in 1996 following the
Committee's review of recommendations made by the Chief Executive Officer and
based on the consultant's report. Base salaries for the executive officers
remained unchanged for 1997. The base salaries for the executive officers for
fiscal 1997 were at the median level in comparison to the Company's peer group
companies.
In addition to each executive officer's base compensation, the Committee may
award cash bonuses and/or grant awards under the Company's stock compensation
plans to chosen executive officers depending on the extent to which certain
defined personal and corporate performance goals are achieved. Such corporate
performance goals are the same as discussed above. Because the Company's
technology is still in the early stages of development, the Company has granted
minimal bonuses to its executive officers. Bonuses were awarded to the Company's
executive officers in 1997 in minimal amounts.
All employees of the Company, including its executive officers, are eligible
to receive long-term stock-based incentive awards under the Company's stock
compensation plans as a means of providing such individuals with a continuing
proprietary interest in the Company. Such grants further the mutuality of
interest between the Company's employees and its stockholders by providing
significant incentives for such
6
<PAGE>
employees to achieve and maintain high levels of performance. The Company's
stock compensation plans enhance the Company's ability to attract and retain the
services of qualified individuals. Factors considered in determining whether
such awards are granted to an executive officer of the Company include the
executive's position in the Company, his or her performance and
responsibilities, the amount of stock options and restricted stock, if any,
currently held by the officer, the vesting schedules of any such options or
restricted stock and the executive officer's other compensation. While the
Committee does not adhere to any firmly established formulas or schedules for
the issuance of awards such as options or restricted stock, the Committee will
generally tailor the terms of any such grant to achieve its goal as a long-term
incentive award by providing for a vesting schedule encompassing several years
or tying the vesting dates to particular corporate or personal milestones. For
example, Messrs. Monticello, Brown, Heck, Pacheco and John were granted options
to acquire an aggregate of 116,000 shares of Common Stock in 1997 in recognition
of their continuing contributions to the Company, with vesting contingent on the
Company accomplishing specific goals. See "Executive Compensation--Option Grants
in Last Fiscal Year."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Company paid its former President and Chief Executive Officer, John H.
Webb, $225,000 in annual base salary during 1997, including three months of base
salary paid under his severance agreement with the Company. Mr. Webb left the
Company's employment as of October 1, 1997. Mr. Webb's base salary was initially
set at $175,000 pursuant to an employment agreement effective September 16, 1991
and was increased by $12,500 (or approximately 7.1 percent) to $187,500 in
January 1993 to keep pace with salaries being paid to other chief executive
officers of similar companies and in recognition of the Company's progress in
1992. In January 1994, the Committee increased Mr. Webb's base salary by $37,500
(or approximately 20 percent) to $225,000. The Committee did not increase Mr.
Webb's base salary after that date. In evaluating whether to increase Mr. Webb's
base annual salary, the Committee considered a combination of factors, including
Mr. Webb's responsibilities as the Company's President and Chief Executive
Officer, the corporate goals for which he had responsibility, his contribution
to the achievement of certain corporate and personal milestones, and the base
salary paid to presidents of comparable peer group companies. Mr. Webb did not
receive a bonus award for 1997.
Mr. Webb's severance agreement obligated the Company to continue to pay Mr.
Webb his base monthly salary of $18,750 through December 31, 1997 and to pay to
Mr. Webb a lump-sum cash payment of $187,500 on January 15, 1998. The Company
also agreed to continue certain employee benefits for Mr. Webb and his
dependents through October 1998. The Committee also approved the extension of
the vesting period of, and the exercisability period for, all of Mr. Webb's
outstanding stock options through October 31, 1998, as part of his severance
package.
As of April 9, 1998, William E. Nasser was elected as the Company's Chairman
of the Board, President and Chief Executive Officer. Mr. Nasser's employment
agreement with the Company specifies an initial base annual salary of $200,000.
In setting this initial base salary for Mr. Nasser, the Committee evaluated the
compensation package for chief executive officers of peer group companies with
similar market capitalizations. The Committee expects that when it reevaluates
Mr. Nasser's base salary level in the future, it will consider a variety of
factors, including Mr. Nasser's responsibilities, his general background and
qualifications, his achievement of various corporate and personal milestones set
by the Committee from time to time, and compensation levels for executives in
Mr. Nasser's position and with his background at peer group companies. The
Committee has not attached any particular relative weighting to the foregoing
factors (or any other factors which the Committee may also consider in reaching
compensation decisions for the Company's executive officers).
Mr. Nasser will be eligible to receive such bonuses as may be determined by
the Committee. The Committee will retain discretion to determine the amount of
any incentive bonus awards to be paid to Mr. Nasser, and the Committee expects
that it will evaluate a number of factors in reaching this decision, including
the Company's strategic goals for which Mr. Nasser has responsibility, his other
responsibilities,
7
<PAGE>
his initiatives and contributions to the Company's achievement of various
corporate and strategic goals, and his own achievement of certain personal
milestones as determined by the Committee from time to time.
In connection with his election as the Company's Chairman of the Board,
President and Chief Executive Officer, Mr. Nasser was granted a stock option to
purchase 125,000 shares of Common Stock at an exercise price of $2.50 per share,
which option grant was negotiated by the Company and Mr. Nasser as part of his
employment agreement. The stock option was vested and exercisable on the date of
grant with respect to 50,000 shares, with the remaining 75,000 shares vesting at
a rate of 6,250 shares per month. Prior to his election as the Company's
Chairman of the Board, President and Chief Executive Officer, Mr. Nasser was
granted a fully vested stock option in January 1998 to purchase 50,000 shares of
Common Stock at an exercise price of $2.00 per share, and was granted an
additional stock option in January 1998 to purchase 50,000 shares of Common
Stock at an exercise price of $2.00 per share vesting at a rate of 5,000 shares
for each month in which Mr. Nasser provided consulting services pending the
Company's selection of a new Chief Executive Officer to replace Mr. Webb. The
Committee expects that Mr. Nasser will participate in the Company's stock
compensation plans on the same general terms as other participants in such plans
with respect to future stock option grants that he may be granted from time to
time, although the amount of shares underlying option grants to Mr. Nasser will
be potentially larger than for other employees as a result of his position.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), added by the Revenue Reconciliation Act of 1993, places a $1 million
cap per executive on the deductible compensation that can be paid to certain
executives of publicly-traded corporations. Amounts that qualify as "performance
based" compensation under Section 162(m)(4)(c) of the Code are exempt from the
cap and do not count toward the $1 million limit. Generally, stock options will
qualify as performance based compensation. The Committee has discussed and
considered and will continue to evaluate the potential impact of Section 162(m)
on the Company in making compensation determinations, but has not established a
set policy with respect to future compensation determinations.
The foregoing report is given by the following members of the Compensation
Committee:
Edward B. Lurier
Thomas E. Messmore
The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes certain information regarding aggregate cash
compensation, stock option and restricted stock awards and other compensation
earned by each of the five most highly compensated executive officers and the
Company's former President and Chief Executive Officer during the last three
years.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ------------------------
RESTRICTED SECURITIES
--------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS (#) COMPENSATION
- ------------------------------------------ --------- ---------- --------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Monticello, Ph.D. .............. 1997 $ 161,000 $ 1,442 -- 10,000 $ 12,800(1)
Vice President, Research and Development 1996 $ 161,000 -- -- 13,000 $ 13,673(2)
1995 $ 153,117 $ 709 $ 15,625(4) 15,000 $ 13,248(3)
Paul G. Brown, III ....................... 1997 $ 126,600 -- -- 20,000 $ 10,080(1)
Vice President, Finance and 1996 $ 124,203 -- -- 15,000 $ 9,936(2)
Administration 1995 $ 117,553 $ 709 $ 9,375(4) 14,000 $ 9,404(3)
William E. Heck .......................... 1997 $ 75,500 -- -- 5,000 $ 6,040(1)
Vice President, Engineering 1996 $ 75,500 -- -- -- $ 6,040(2)
1995 $ 73,036 $ 818 -- -- $ 5,843(3)
Michael A. Pacheco, Ph.D.(5).............. 1997 $ 91,537 $ 311 -- 79,000 $ 32,667(1)(6)
Mark W. John(7) .......................... 1997 $ 127,000 -- -- 2,000 $ 10,160(1)
Vice President, Sales and Marketing 1996 $ 127,000 -- -- 12,000 $ 10,160(2)
1995 $ 122,250 $ 810 $ 12,500(4) 14,000 $ 9,780(3)
John H. Webb(8) .......................... 1997 $ 225,000 -- -- 9,000 --
Former President and Chief Executive 1996 $ 225,000 -- -- -- $ 21,592(2)
Officer 1995 $ 225,000 $ 709 -- 70,000 $ 16,000(3)
</TABLE>
- --------------------------
(1) Represents Company contributions to the Company's Simplified Employee
Pension Plan ("SEP"). During the year ended December 31, 1997, perquisites
for each individual named in the Summary Compensation Table aggregated less
than 10% of the total annual salary and bonus reported for such individual
in the Summary Compensation Table. Accordingly, no such amounts are included
in the Summary Compensation Table.
(2) Represents Company contributions to the SEP. During the year ended December
31, 1996, perquisites for each individual named in the Summary Compensation
Table aggregated less than 10% of the total annual salary and bonus reported
for such individual in the Summary Compensation Table. Accordingly, no such
amounts are included in the Summary Compensation Table.
(3) Represents Company contributions to the SEP. During the year ended December
31, 1995, perquisites for each individual named in the Summary Compensation
Table aggregated less than 10% of the total annual salary and bonus reported
for such individual in the Summary Compensation Table. Accordingly, no such
amounts are included in the Summary Compensation Table.
(4) Messrs. Monticello, Brown and John were granted 2,500, 1,500 and 2,000
shares of restricted stock, respectively, on January 3, 1995, under the
Company's Stock Compensation Plan. All of such shares vested on June 3,
1995. The restricted stock value shown in the table is based upon the
closing price of the Common Stock on The Nasdaq Stock Market on the date of
grant.
(5) Dr. Pacheco joined the Company in April 1997 at an annual salary of
$120,000.
(6) Includes $30,000 of relocation expenses paid for Dr. Pacheco.
(7) Mr. John resigned as an officer of the Company effective April 13, 1998.
(8) Mr. Webb resigned as an officer of the Company effective September 30, 1997.
9
<PAGE>
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options under the Company's Stock Compensation Plan during 1997 to the executive
officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------
NAME GRANTED(1) 1997 SHARE DATE 5% 10%
- ----------------------------------------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Monticello, Ph.D............... 10,000 3.1% $ 4.625 4/03/07 $ 29,086 $ 73,711
Paul G. Brown, III....................... 20,000 6.2% $ 4.625 4/03/07 $ 58,173 $ 147,421
William E. Heck.......................... 5,000 1.5% $ 4.625 4/03/07 $ 14,543 $ 36,855
20,000 6.2% $ 6.00 4/03/07 $ 75,467 $ 191,249
50,000 15.4% $ 4.75 4/03/07 $ 137,351 $ 348,631
Michael A. Pacheco, Ph.D................. 2,000 0.6% $ 4.625 4/03/07 $ 5,817 $ 14,742
Mark W. John............................. 9,000 2.8% $ 4.625 4/03/07 $ 26,178 $ 66,340
John H. Webb............................. -- -- -- -- -- --
</TABLE>
- --------------------------
(1) No stock appreciation rights ("SARs") or other instruments were granted in
tandem with the options reflected in this table.
(2) The Securities and Exchange Commission requires disclosure of the potential
realizable value or present value of each grant. The disclosure assumes the
options will be held for the full ten-year term prior to exercise. Such
options may be exercised prior to the end of such ten-year term. The actual
value, if any, an executive officer may realize will depend upon the excess
of the stock price over the exercise price on the date the option is
exercised. There is no assurance that the stock price will appreciate at the
rates shown in the table. If the assumed annual rate of stock price
appreciation of 5% or 10% per year should occur, the market value per share
of Common Stock at the end of the ten-year option term would be (i) $7.53
and $12.00, respectively, for the options granted to Messrs. Monticello,
Brown, Heck, John and Webb, (ii) $9.77 and $15.56, respectively, for the
option for 20,000 shares granted to Mr. Pacheco and (iii) $7.13 and $11.35,
respectively, for the option for 50,000 shares granted to Mr. Pacheco.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option exercises and
the value of unexercised options held by the executive officers of the Company
named in the Summary Compensation Table.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997
AND OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS HELD
OPTIONS HELD AT DECEMBER AT DECEMBER 31, 1997(1)
SHARES VALUE 31, 1997 (#) ($)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Monticello, Ph.D..... -- -- 219,860 32,660 $ 447,774 0
Paul G. Brown, III............. -- -- 44,206 48,814 0 0
William E. Heck................ -- -- 18,248 16,952 0 0
Michael A. Pacheco, Ph.D....... -- -- 13,000 59,000 0 0
Mark W. John................... -- -- 75,960 70,754 $ 93,933 $ 88,542
John H. Webb................... 183,000 $ 851,758 63,600 260,140 $ 17,641 $ 276,696
</TABLE>
- --------------------------
(1) Computed based on the difference between aggregate fair market value and
aggregate exercise price. The fair market value of the Company's Common
Stock on December 31, 1997, was $3.25 based on the average of the high and
low prices on the Nasdaq National Market on December 31, 1997.
SIMPLIFIED EMPLOYEE PENSION PLAN
In April 1992, the Company adopted a Simplified Employee Pension Plan (the
"SEP") for all employees. Under the terms of the SEP, employees are eligible to
participate after completion of six months of service. The Company has the
discretion to determine how much, if anything, it will contribute to the
employee's accounts in the SEP each year. Currently, the Company contributes an
amount equal to eight percent of the employees' monthly compensation to the SEP.
Employees are vested immediately and there is at present no employee
contribution. Total expense under the SEP was approximately $316,150 for the
year ended December 31, 1997.
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the Nasdaq Combined Composite Index and an index of Peer Group
companies for the period beginning March 12, 1993 and ending December 31, 1997.
The "Peer Group" is composed of companies in the environmental services industry
(Air and Water Technologies, American Ecology Corp., Catalytica Inc.,
Environmental Elements Corp., Gundle/SLT Environmental Inc., Layne Christensen
Co, Philip Services Corp. and Wahlco Environmental Systems). The index of Peer
Group companies is weighted according to the respective market capitalization of
its component companies as of December 31, 1997. The graph assumes that the
value of the investment in the Company's Common Stock and each index was $100 at
March 12, 1993, and that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS 3/12/93 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Energy BioSystems Corporation 100.00 191.67 104.17 116.67 100.00 54.17
Nasdaq Combined Composite Index 100.00 116.29 110.15 155.78 191.60 235.12
Peer Group Index 100.00 91.90 54.52 63.07 91.06 94.78
</TABLE>
COMPARISON OF CUMULATIVE RETURN
AMONG ENERGY BIOSYSTEMS CORPORATION,
NASDAQ COMBINED COMPOSITE INDEX AND
PEER GROUP INDEX
<TABLE>
<CAPTION>
3/12/93 12/31/93 12/30/94 12/29/95 12/31/96
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Energy BioSystems Corporation.......................... 100 191.67 104.17 116.67 100.00
Nasdaq Combined Composite Index........................ 100 116.29 110.15 155.78 191.60
Peer Group Index....................................... 100 91.90 54.52 63.07 91.06
<CAPTION>
12/31/97
-----------
<S> <C>
Energy BioSystems Corporation.......................... 54.17
Nasdaq Combined Composite Index........................ 235.12
Peer Group Index....................................... 94.78
</TABLE>
The Company is using the Peer Group Index for purposes of the performance
graph because of the discontinuation of the Standard & Poor's Pollution Control
Index used in its performance graphs in prior years.
The foregoing stock price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates such comparisons by reference,
and shall not otherwise be deemed filed under such acts.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above. The
Company will not make or endorse any predictions as to future stock performance.
12
<PAGE>
EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into an employment agreement with Dr.
Daniel J. Monticello providing for an initial annual salary of $161,000, which
is to be reviewed no less than annually by the Board of Directors. The agreement
expires in April 2002. If Dr. Monticello is terminated without cause, as that
term is defined in the agreement, the Company is obligated to pay Dr. Monticello
an amount not greater than one year of his salary at the time of termination.
Dr. Monticello's current annual salary is $169,000.
In July 1995, Mr. Brown entered into a five-year employment agreement with
the Company providing for an initial annual salary of $119,840 which is to be
reviewed no less than annually by the Board of Directors. If he is terminated
without cause, as that term is defined in the agreement, the Company is
obligated to pay him an amount not greater than six months of his salary at the
time of termination. Mr. Brown's current annual salary is $135,500.
In August 1991, John H. Webb, the Company's former President and Chief
Executive Officer, entered into a five-year employment agreement with the
Company effective September 16, 1991 providing for Mr. Webb to serve as
President for an initial annual salary of $175,000, to be reviewed no less than
annually by the Board of Directors. The agreement was extended in January 1996
through January 2001. The agreement also provided that Mr. Webb will serve as a
director of the Company if the Company so requested. If Mr. Webb were terminated
without cause, as that term is defined in the agreement, the Company was
obligated to pay Mr. Webb an amount not greater than one year of his salary at
the time of termination. On September 30, 1997, Mr. Webb and the Company entered
into a severance agreement in connection with Mr. Webb's resignation as an
officer of the Company. The severance agreement obligated the Company to
continue to pay Mr. Webb his base monthly salary of $18,750 through December 31,
1997 and to pay to Mr. Webb a lump-sum cash payment of $187,500 on January 15,
1998. The Company also agreed to continue certain employee benefits for Mr. Webb
and his dependents through October 1998. The vesting period of, and the
exercisability period for, all of Mr. Webb's outstanding stock options was
extended through October 31, 1998, as part of his severance package.
In October 1997, Dr. Pacheco entered into a five-year employment agreement
with the Company providing for an initial annual salary of $120,000, which is to
be reviewed no less than annually by the Board of Directors. If Dr. Pacheco is
terminated without cause, as that term is defined in the agreement, the Company
is obligated to pay Dr. Pacheco an amount not greater than six months of his
salary at the time of termination. Dr. Pacheco's current annual salary is
$148,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company
currently consists of Messrs. Lurier and Messmore. No member of the Compensation
Committee of the Board of Directors of the Company was, during 1996, an officer
or employee of the Company, or was formerly an officer of the Company or had any
relationships requiring disclosure by the Company under Item 404 of Regulation
S-K.
During fiscal 1996, no executive officer of the Company served as (i) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
on the Compensation Committee of the Board of Directors, (ii) a director of
another entity, one of whose executive officers served on the Compensation
Committee of the Board of Directors of the Company or (iii) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.
13
<PAGE>
CERTAIN TRANSACTIONS
Ramon Lopez, a director of the Company, was paid $22,500 and received an
option in 1997 to purchase 25,000 shares of Common Stock in connection with his
service as Chairman of the Board and consulting services rendered to the
Company. As amended, the option granted to Mr. Lopez entitles him to purchase
such shares at an exercise price of $3.875 per share, subject to vesting
requirements.
PROPOSAL NUMBER 2:
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Arthur Andersen LLP as the
Company's independent public accountants to make an examination of the accounts
of the Company for the fiscal year ending December 31, 1998, subject to
ratification by the Company's stockholders. Representatives of Arthur Andersen
LLP will be present at the Annual Meeting and will have an opportunity to make a
statement, if they desire to do so. They will also be available to respond to
appropriate questions from stockholders attending the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, AND PROXIES EXECUTED
AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED
THEREON.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1998, certain information
with respect to the shares of Common Stock and Series B Preferred Stock
beneficially owned by (i) each person known by the Company to be the beneficial
owner of more than five percent of the Common Stock or the Series B Preferred
Stock, (ii) each director of the Company, (iii) each of the executive officers
of the Company named in "Executive Compensation" and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
AMOUNT AND NATURE OWNERSHIP OF
OF BENEFICIAL SERIES B
OWNERSHIP OF PERCENT OF PREFERRED PERCENT OF
NAME OF BENEFICIAL OWNER COMMON STOCK(1) CLASS STOCK(1) CLASS
- --------------------------------------------------- ------------------ ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Gryphon Ventures II, Limited Partnership .......... 2,136,078 17.4% -- --
222 Berkeley Street, Suite 1600
Boston, Massachusetts 02116
Zesiger Capital Group LLC ......................... 2,321,577(2) 17.3% 160,300 23.0%
320 Park Avenue, 30th Floor
New York, New York 10022
Ethyl Corporation ................................. 1,319,316(3) 9.9% 160,000 22.9%
300 South Fourth Street
Richmond, Virginia 23217
State of Wisconsin Investment Board ............... 942,500 7.7% -- --
121 E. Wilson Street, 2nd Floor
Madison, Wisconsin 53702
Keystone, Inc. .................................... 732,862(4) 5.8% 40,000 5.7%
200 Crescent Court, Suite 500
Dallas, Texas 75201
General Motors Employees Domestic Group Trust...... 689,655(5) 5.3% 100,000 14.3%
c/o Pecks Management
One Rockefeller Plaza
New York, New York 10020
Farmers Insurance Group of Companies .............. 579,066(6) 4.5% 80,000 11.5%
4680 Wilshire Boulevard
Los Angeles, California 90010
Froley Revy Investment Co., Inc. .................. 275,862(7) 2.2% 40,000 5.7%
1900 Wilshire Boulevard, Suite 1050
Los Angeles, California 90024
Ramon Lopez........................................ 39,500(8) * -- --
R. James Comeaux................................... 25,000 * -- --
Edward B. Lurier................................... 2,162,078(9) 18.4% -- --
Thomas E. Messmore................................. 47,000(10) * -- --
Daniel J. Monticello, Ph.D......................... 222,410(11) 1.8% -- --
William E. Nasser.................................. 150,650(12) * -- --
William D. Young................................... 27,000(13) * -- --
Paul G. Brown, III................................. 45,706(14) * -- --
William E. Heck.................................... 18,248(15) * -- --
Mark W. John....................................... 75,960(16) * -- --
Michael A. Pacheco................................. 13,000(17)
All directors and executive officers as a group (13 2,825,532(18) 21.8% -- --
persons).........................................
</TABLE>
- ------------------------
* Represents less than 1% of the class.
15
<PAGE>
(1) Unless otherwise indicated, each of the stockholders designated above has
sole voting and investment power with respect to the securities shown to be
owned by such stockholder.
(2) Includes 1,105,517 shares issuable upon conversion of Series B Preferred
Stock.
(3) Includes 1,103,448 shares issuable upon conversion of Series B Preferred
Stock owned by Ethyl Corporation ("Ethyl"). Excludes 2,136,078 shares of
Common Stock beneficially owned by Gryphon Ventures II, Limited Partnership
("Gryphon"), a limited partnership of which a wholly-owned subsidiary of
Ethyl is the sole limited partner, and as to which Ethyl has no voting or
dispositive power, based upon information provided in a Schedule 13D filed
by Ethyl with the Securities and Exchange Commission on November 7, 1994, as
amended.
(4) Includes 275,862 shares of Common Stock issuable upon conversion of Series B
Preferred Stock.
(5) Represents 689,655 shares of Common Stock issuable upon conversion of Series
B Preferred Stock.
(6) Includes 551,724 shares of Common Stock issuable upon conversion of Series B
Preferred Stock.
(7) Represents 275,862 shares of Common Stock issuable upon conversion of Series
B Preferred Stock.
(8) Represents 39,500 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(9) Includes 2,136,078 shares of Common Stock held by Gryphon, which Mr. Lurier
may be deemed to beneficially own due to his status as an affiliate of the
general partner of Gryphon.
(10) Includes 16,000 shares of Common Stock subject to stock options exercisable
within 60 days of March 31, 1998.
(11) Includes 219,860 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(12) Represents 150,650 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(13) Represents 23,000 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(14) Includes 44,206 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(15) Represents 13,208 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(16) Represents 63,130 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(17) Represents 13,000 shares of Common Stock subject to stock options that are
exercisable within 60 days of March 31, 1998.
(18) Includes an aggregate of 569,554 shares of Common Stock subject to stock
options that are exercisable within 60 days of March 31, 1998. Includes
2,136,078 shares of Common Stock held by Gryphon which Mr. Lurier may be
deemed to beneficially own due to his status as an affiliate of the general
partner of Gryphon.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than ten percent
of the Common Stock, to file initial reports of ownership and reports of changes
in ownership (Forms 3, 4, and 5) of Common Stock with the Securities
16
<PAGE>
and Exchange Commission (the "SEC") and The Nasdaq Stock Market. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish to Company with copies of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and on written representations by
certain reporting persons that no reports on Form 5 were required, the Company
believes that during the fiscal year ended December 31, 1997, all Section 16(a)
filing requirements applicable to its officers, directors and ten percent
stockholders were complied with.
PROPOSALS OF STOCKHOLDERS
Any proposal of a stockholder intended to be presented at the next annual
meeting must be received at the Company's principal executive offices no later
than December 31, 1998, if the proposal is to be considered for inclusion in the
Company's Proxy Statement relating to such meeting.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K, including any financial
statements and schedules and exhibits thereto, may be obtained without charge by
written request to Paul G. Brown, III, Vice President of Finance and
Administration, Energy BioSystems Corporation, 4200 Research Forest Drive, The
Woodlands, Texas 77381.
OTHER MATTERS
The Company will bear the cost of preparing and mailing proxy materials as
well as the cost of solicitation of proxies. The Company will reimburse banks,
brokerage firms, custodians, nominees, and fiduciaries for their expenses in
sending proxy materials to the beneficial owners of Common Stock and Preferred
Stock. The Company has retained Corporate Communications Center, Inc.
("Corporate Communications") to assist in the solicitation of proxies and will
pay approximately $800 for certain brokerage searches and proxy solicitations
performed by Corporate Communications. In addition to solicitation by mail,
certain directors, officers and regular employees of the Company and Corporate
Communications may solicit proxies by fax, telex, telephone and personal
interview.
By Order of the Board of Directors
/s/ Paul G. Brown, III
Paul G. Brown, III
VICE PRESIDENT, FINANCE AND
ADMINISTRATION
May 1, 1998
The Woodlands, Texas
17
<PAGE>
ENERGY BIOSYSTEMS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS JUNE 2, 1998
The undersigned hereby constitutes and appoints William E. Nasser
and Paul G. Brown III, and each or either of them, his true and lawful
attorneys and proxies with full power of substitution, for and in the name,
place and stead of
P
the undersigned, to attend the Annual Meeting of Stockholders of Energy
BioSystems Corporation to be held at the Company's offices, 4200
Research Forest Drive, The Woodlands, Texas on Tuesday, June 2, 1998, at 10:00
a.m., central daylight time, and any adjournment(s) thereof, with all
powers the undersigned would posses if personally present and to
R
vote there at, as provided on the reverse side of this card, the number
of shares the undersigned would be entitled to vote if personally
present. In accordance with their discretion, said attorneys and proxies are
authorized to vote upon such
O
other business as may properly come before the meeting or any
adjournment thereof.
Election of Directors, Nominees: William E. Nasser, Ramon Lopez, R.
James Comeaux, Edward B. Lurier, Thomas E.
X
Messmore, Daniel J. Monticello, Ph.D., John S. Patton, and William D.
Young.
1. ELECTION OF DIRECTORS / / FOR,
except vote withheld from the following nominee(s):
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------
2. Ratification of the appointment of Arthur Andersen LLP
as the Company's independent public accountants for
the fiscal year ending December 31, 1998.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS
MADE ON THE REVERSE SIDE OF THIS CARD. IF NOT OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2. ALL PRIOR PROXIES ARE HEREBY REVOKED.
DATED: _________________ , 1998
_______________________________
Signature(s)
_______________________________
Signature(s)
NOTE: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such.
Change of address:
_______________________________
_______________________________
_______________________________
