SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Under Rule 14a-12
BIOSYNTECH, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Persons(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:
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/ / 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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
-2-
BIOSYNTECH, INC.
475 Boulevard Armand-Frappier
Laval, Quebec, Canada H7V 4B3
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 30, 2004
--------------
To the Holders of Common Stock of BioSyntech, Inc. and
Holders of Exchangeable Preferred Stock of Bio Syntech Canada, Inc.:
We invite you to attend our annual meeting of stockholders on
January 30, 2004, at 10:00 a.m. eastern standard time, at the Montreal Marriott
Chateau Champlain, 1050 de La Gauchetiere West, Montreal, Quebec, Canada - Viger
Room - (Tel:1-800-200-5909). At the annual meeting, you will hear an update on
our operations, have a chance to meet some of our directors and executives and
act on the following matters:
1. To elect one Class III director to our board of directors to
serve for a three-year term;
2. To approve an amendment to our stock option incentive plan to
increase from 5,000,000 shares to 6,500,000 shares the total
number of shares of our common stock available for issuance
under such option plan;
3. To ratify the appointment by our board of directors of KPMG LLP
as our independent auditors for the fiscal year ending March
31, 2004; and
4. To consider and act upon such other business as may properly
come before the annual meeting and any adjournment thereof.
This booklet includes this formal notice of the annual meeting and
the proxy statement. The proxy statement tells you more about the agenda and
procedures for the annual meeting. It also describes how our board of directors
operates and gives personal information about our director nominees.
Stockholders of record at the close of business on December 8, 2003
will be entitled to vote at the annual meeting. In addition, holders of record
of shares of exchangeable preferred stock of our subsidiary, Bio Syntech Canada,
Inc., as of the close of business on December 8, 2003 have voting rights in that
number of shares of our common stock equal in number to the number of shares of
such exchangeable preferred stock held. Even if you only own a few shares, we
want your shares to be represented at the annual meeting. I urge you to
complete, sign, date, and return promptly in the enclosed envelope your proxy
card, if you hold shares of our common stock, or your voting instruction form,
if you hold shares of exchangeable preferred stock.
We have also provided you with the exact place and time of the
annual meeting if you wish to attend in person.
Dr. Amine Selmani
President, Chief Executive Officer and Secretary
December 9, 2003
Laval, Quebec
BIOSYNTECH, INC.
475 Boulevard Armand-Frappier
Laval, Quebec, Canada H7V 4B3
(450) 686-2437
PROXY STATEMENT
--------------------------------
GENERAL INFORMATION
This proxy statement contains information related to the annual
meeting of stockholders of BioSyntech, Inc. to be held on Friday, January 30,
2004, at 10:00 a.m. eastern standard time, at the Montreal Marriott Chateau
Champlain, 1050 de La Gauchetiere West, Montreal, Quebec, Canada - Viger -
(Tel:1-800-200-5909), and any adjournment thereof. This proxy statement was
first mailed to our stockholders and holders of exchangeable preferred stock on
or about December 12, 2003.
ABOUT THE ANNUAL MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, stockholders will hear an update on our
operations, have a chance to meet some of our directors and executives and will
act on the following matters:
1) To elect one Class III director to our board of directors to
serve for a three-year term;
2) To approve an amendment to our stock option incentive plan to
increase from 5,000,000 shares to 6,500,000 shares the total
number of shares of our common stock available for issuance
under such option plan;
3) To ratify the appointment by our board of directors of KPMG LLP
as our independent auditors for the fiscal year ending March
31, 2004; and
4) To consider and act upon such other business as may properly
come before the annual meeting and any adjournment thereof.
WHO MAY VOTE
Stockholders of BioSyntech, Inc., as recorded in our stock register
on December 8, 2003, may vote at the annual meeting. As of that date, we had
31,906,250 shares of common stock outstanding, which includes 7,661,666 shares
reserved for the exchange of the Class A Exchangeable Preferred Stock of our
subsidiary, Bio Syntech Canada Inc. We have only one class of voting shares. All
shares in this class have equal voting rights of one vote per share. Holders of
record of shares of exchangeable preferred stock of Bio Syntech Canada Inc. as
of December 8, 2003 have voting rights in the number of shares of our common
stock held in trust equal to the number of shares of such exchangeable preferred
stock held by them. References to "stockholders" in this proxy statement include
holders of exchangeable preferred stock, unless the context otherwise requires.
References to "proxy card" in this proxy statement should be interchanged with
"voting instruction form" if you hold shares of exchangeable preferred stock,
unless the context otherwise requires.
-1-
HOW TO VOTE
You may vote in person at the annual meeting or by proxy. We
recommend that you vote by proxy even if you plan to attend the annual meeting.
You can always change your vote at the annual meeting.
Our board of directors is asking for your proxy. Giving your proxy
means that you authorize us, or the trustee if you hold shares of exchangeable
preferred stock, to vote your shares at the annual meeting in the manner you
direct. You may vote for all, some, or none of our director nominees. You may
also vote for or against the other proposals or abstain from voting.
If you sign and return the enclosed proxy card but do not specify
how to vote, we will vote your shares in favor of all our director nominees, in
favor of the approval of the increase of shares reserved for issuance under our
stock option incentive plan and in favor of the ratification of the appointment
by our board of directors of KPMG LLP as our independent auditors.
You may receive more than one proxy card depending on how you hold
your shares. If you hold shares through someone else, such as a broker, you may
get materials from it asking how you want to vote. The latest proxy card
received from you will determine how your shares will be voted.
REVOKING A PROXY
The execution of a proxy or sending voting instructions to the
trustee, as the case may be, will in no way affect your right to attend the
annual meeting and to vote in person. Any proxy or voting instructions to the
trustee executed and returned by you may be revoked by you at any time
thereafter if you give written notice of revocation to our Secretary at the
address shown above prior to the vote to be taken at the annual meeting, or by
your execution of a later dated proxy or voting instruction to the trustee that
is presented at the annual meeting, or if you attend the annual meeting and vote
by ballot, except as to any matter or matters upon which a vote shall have been
cast under the authority conferred by such proxy or voting instruction to the
trustee prior to such revocation.
QUORUM
The holders of a majority of the outstanding shares of our common
stock, whether present in person or represented by proxy, will constitute a
quorum for each of the matters identified in the notice of this year's annual
meeting, as well as for any other matters that may come before the annual
meeting.
VOTES NEEDED
Broker "non-votes" and the shares as to which a stockholder abstains
from voting are included for purposes of determining whether a quorum of shares
is present at a meeting. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner. Brokers that do not
receive instructions from the stockholders are entitled to vote on the election
of directors and the ratification of the auditors.
A plurality of the votes cast is required for the election of our
Class III directors. In tabulating the vote on the election of directors,
abstentions and broker "non-votes" will be disregarded and will have no effect
on the outcome of such vote.
-2-
The affirmative vote of a majority of the votes cast is required to
approve the adoption of the increase of shares reserved for issuance under our
stock option incentive plan and the proposal to ratify the appointment by our
board of directors of KPMG LLP as our independent auditors. In tabulating the
votes on such proposals to approve the adoption of the increase of shares
reserved for issuance under our stock option incentive plan and ratify the
appointment of KPMG LLP, abstentions and broker non-votes are not considered
shares entitled to vote on the applicable proposals and are not included in
determining whether such proposals are approved.
ATTENDING IN PERSON
Only our stockholders and their proxy holders, holders of
exchangeable preferred stock and their trustee, and our invited guests may
attend the annual meeting. If you wish to attend the annual meeting in person
but you hold your shares through someone else, such as a broker, you must bring
proof of your ownership and an identification with a photo to the annual
meeting. For example, you could bring an account statement showing that you
owned our shares as of December 8, 2003 as acceptable proof of ownership.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information as of December 8, 2003
regarding the beneficial ownership of shares of our common stock by our current
directors and named executive officers and those persons or entities who, to our
knowledge, beneficially own more than 5% of our common stock. For the purposes
of calculating beneficial ownership, the shares of common stock beneficially
owned by Dr. Selmani and Messrs. Savard, Leduc, and Cloutier include shares of
our common stock issuable upon the exercise of stock options exercisable within
60 days after December 8, 2003. The address of all of our officers and directors
and owners of more than 5% of our common stock is 475 Boulevard Armand-Frappier,
Laval, Quebec, Canada H7V 4B3, unless otherwise specified. The percentages shown
below are based on 31,906,250 shares of common stock outstanding as of December
8, 2003.
Percentage of Outstanding
Shares of Common Common
Name and Address of Stock Beneficially Stock Beneficially
Beneficial Owner Owned Owned
---------------- ------------------ -------------------------
9083-1496 Quebec Inc. 7,640,000 23.9%
Amine Selmani 9,197,500 28.3%
Serge Savard 1,037,000 3.2%
1010 rue De la Gauchetiere
West, Suite 600
Montreal, Quebec, Canada
H3B 2N2
Claude Leduc 100,000 *
Gilles Cloutier 100,000 *
-3-
Percentage of Outstanding
Shares of Common Common
Name and Address of Stock Beneficially Stock Beneficially
Beneficial Owner Owned Owned
---------------- ------------------ -------------------------
All Officers and Directors 11,740,800 34.4%
as a group (8 persons)
The percentages shown with an `*' mean that the director or
executive officer owns less than 1.0% of the outstanding shares of our common
stock. The information shown above also includes rights to acquire shares of our
common stock through the exchange of exchangeable preferred stock.
Dr. Selmani has voting and dispositive power with respect to the
7,640,000 shares of exchangeable preferred stock owned by 9083-1496 Quebec Inc.
Dr. Selmani also holds 60,000 shares of our common stock and may be deemed the
beneficial owner of 412,500 shares of our common stock issuable upon exercise of
options held by him. Monique Jarry, spouse of Dr. Selmani, holds 885,000 shares
of our common stock and options to purchase 200,000 shares of our common stock,
which shares are also included in the beneficial ownership of Dr. Selmani
reported above.
All the shares of our common stock indicated as being beneficially
owned by Messrs. Leduc and Cloutier represent shares issuable upon the exercise
of options to purchase shares of our common stock. The common stock indicated as
being beneficially owned by Mr. Savard includes 150,000 shares issuable upon
exercise of options and 324,000 shares issuable upon exercise of common stock
purchase warrants.
DISCLOSURE OF EQUITY COMPENSATION PLAN INFORMATION (AS OF MARCH 31, 2003)
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Plan Category Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding future issuance under equity
outstanding options, options, warrants compensation plans
warrants and rights and rights (excluding securities
reflected in column (A))
(A) (B) (C)
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Equity compensation 3,630,000 CDN $1.24 1,455,500
plans approved by
security holders
Equity compensation _ _ _
plans not approved by
security holders
Total 3,630,000 CDN $1.24 1,455,500
-4-
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our amended and restated certificate of incorporation provides for
the classification of our board of directors into three classes. The current
term of the Class III director will expire at this year's annual meeting and
when his successor is duly elected and qualifies. Our Class III director nominee
currently serves as a Class III director. Denis Beaudry, a former Class I
director, resigned on December 4, 2002 and was not replaced. Monique Lefebvre, a
former Class II director, resigned on June 18, 2003 and was not replaced. There
was no disagreement between our board of directors and either of Mr. Beaudry or
Mrs. Lefebvre
At a meeting of our board held on August 14, 2003, it was resolved
to maintain the number of directors on the board at its current level of four
directors for the coming year. Accordingly, only Dr. Amine Selmani, our
President and Chief Executive Officer, stands for reelection for a term of
office to expire at the annual meeting of stockholders in 2006 and until his
successor has been duly elected and qualifies. The Class I directors and Class
II director will continue to serve for the remainder of their respective terms,
with the Class II director having a term that will expire at the 2005 annual
meeting of stockholders and the Class I directors having a term that will expire
at the 2004 annual meeting of stockholders.
Provided below is a biography of our Class III director nominee, Dr.
Selmani. Management has no reason to believe that Dr. Selmani will be unable or
unwilling to serve as a director, if elected. Should Dr. Selmani not remain a
candidate for election, the consents will be voted in favor of a substitute
nominee selected by the board of directors.
AMINE SELMANI, PHD, 46 - CLASS III DIRECTOR - Dr. Selmani has served
as our President and Secretary since February 2000, as our Chief Executive
Officer from February 2000 to September 2000 and from January 2001 to the
present, as our Chairman of the Board from February 2000 until August 2002 and
Chairman of the Board, President and Chief Executive Officer of Bio Syntech
Canada and its predecessor corporation since its inception in November 1997.
Prior to founding the predecessor corporation of Bio Syntech Canada in May 1995,
Dr. Selmani had eight years of teaching experience at the Chemical Engineering
Department and Biomedical Institute of Ecole Polytechnique as an Associate
Professor from 1992 to 1997 and as an Assistant Professor from 1989 to 1992. Dr.
Selmani received his Bachelor of Science and Master of Science Degrees in
Physical Chemistry in 1979 and 1981, respectively, from the University of
Bordeaux, France. He also obtained his Doctoral and Post Doctoral Degrees in
Materials Science from the University of Montreal in 1985 and Dalhousy
University in 1988, respectively.
Class III directors must be elected by a plurality of the votes
cast, in person or by proxy, at this year's annual meeting.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ELECTION OF ITS DIRECTOR NOMINEE.
-5-
INFORMATION REGARDING OTHER DIRECTORS
SERGE SAVARD, 55 - CLASS I DIRECTOR - Mr. Savard has been a director
since August 2001 and has been our Chairman of the Board since August 2002.
Since 1993, Mr. Savard has been a partner with Thibault, Messier, Savard, a real
estate investment firm. Prior to 1993, Mr. Savard served in various capacities
with the Montreal Canadiens Hockey Club, including as Vice President and General
Manager. Mr. Savard is deeply involved in several aspects of amateur sports and
is associated with several philanthropic organizations.
CLAUDE LEDUC, 46 - CLASS I DIRECTOR - Mr. LeDuc has been a director
since December 2002. Since December 2000, Mr. Leduc has been employed by Genzyme
Biosurgery, a company offering biosurgery services, as Director for
International Markets. Mr. LeDuc has full marketing and management
responsibility for supporting and managing the BioOrthopaedics distribution
partners in all global assigned regions, as well as providing franchise support
to the worldwide country managers. From September 1998 to July 2001, Mr. LeDuc
was the National Director of Canada at Genzyme Canada (former Biomatrix, Inc.).
From January 1993 to December 2000, Mr. LeDuc was employed by Biomatrix, Inc., a
Biomaterial Medical applications company, where he was responsible for various
marketing, sales and business development activities in Canada and Europe. Mr.
LeDuc started his health industry career 18 years ago with Syntex Laboratories,
a multinational pharmaceutical company, winning a National Performance Award in
sales within his first two years. Mr. LeDuc then progressed to the Biotechnology
sector in 1991 with Serono Laboratories as a regional marketing and sales
manager.
GILLES CLOUTIER, PHD, 59 - CLASS II DIRECTOR - Dr. Cloutier has been
a director since December 2002. Dr.Cloutier has over thirty years of experience
in the pharmaceutical industry including five years with Contract Research
Organizations (organizations which provide basic and applied research and
technical services) providing support for to the biotechnology and
pharmaceutical industry. His experience includes US, Canada and European drug
development experience. He is associated with five regulatory approvals. Dr
Cloutier is the Founder of several pharmaceutical companies including CatoPharma
Canada, United Therapeutics, URRMA Biopharma and currently serving as a director
of several other companies including Theratechnologies, Vital States, Medical
Leasing International, and Fortamed. Dr Cloutier has also been working as a
consultant with major pharmaceutical companies such as Quintiles Inc.,
Burroughs-Wellcome, Abbott Laboratories and Sandoz Canada Inc. Dr Cloutier has a
Ph.D. in pharmacology, a M.Sc. in biochemical pharmacology and a B.Sc. in
Pharmacy. He is the author of over thirty medical/scientific publications.
There are no family relationships among our directors and executive
officers.
MEETINGS AND COMMITTEES
Our board of directors held four formal meetings during the fiscal
year ended March 31, 2003 and, from time to time, our board of directors also
acted by unanimous written consent. All our current directors attended all the
meetings of the board of directors. Our board has an audit committee, a
strategic development committee and a compensation committee. We do not have a
standing nominating committee. The customary functions of such committee are
performed by the entire board of directors.
The compensation committee administers our stock option incentive
plan and makes recommendations concerning salaries and incentive compensation
for executive officers, employees and consultants. For the fiscal year ended
March 31, 2003, the compensation committee was composed of Mr. Savard
(Chairman), Mr. Selmani and Ms. Lefebvre. Mrs. Lefebvre resigned as a director
and a member of the compensation committee on June 18, 2003. Since the
compensation committee did not have any formal meetings during the fiscal year
ended March 31, 2003, options were granted by the entire board of directors.
-6-
AUDIT COMMITTEE REPORT
The audit committee reviews our financial statements and accounting
policies, resolves potential conflicts of interest, receives and reviews the
recommendations of our independent auditors and confers with our independent
auditors with respect to the training and supervision of internal accounting
personnel and the adequacy of internal accounting controls. As of March 31,
2003, the members of our audit committee were Mr. Savard (Chairman), Mrs.
Lefebvre, and Mr. LeDuc. Mrs. Lefebvre resigned as a director and a member of
the audit committee on June 18, 2003. All present members of our audit committee
are independent as such term is defined in Rule 4200(a)(14) of the NASD listing
standards. The board of directors has adopted a written charter of the audit
committee, which was included in our proxy statement for our 2001 annual meeting
of stockholders. The Audit Committee presently does not have a member who is a
financial expert, as defined in Section 7265 of the Sarbanes-Oxley Act of 2002,
but the board of directors plans to nominate a director who is a financial
expert in the next fiscal year.
The audit committee held four meetings during the fiscal year ended
March 31, 2003. All of its members were present for at least three meetings. The
members of the audit committee have reviewed and discussed our audited financial
statements with our management and have discussed matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380) with KPMG LLP, our independent auditors for the fiscal year ended
March 31, 2003. The audit committee has received the written disclosures and the
letter from KPMG LLP, as required by the Independent Standards Board Standard
No. 1, has discussed with KPMG LLP its independence, and has recommended that
the audited financial statements for the fiscal year ended March 31, 2003 be
included in our annual report.
Submitted by the Audit Committee
Serge Savard
Claude LeDuc
BOARD OF DIRECTORS COMPENSATION
We do not currently compensate directors for their service on the
board of directors. Our directors are reimbursed for their expenses incurred in
attending meetings of the board of directors. Under the terms of our stock
option incentive plan, directors are eligible for the grant of stock options.
On August 22, 2002, options to purchase 100,000 shares of our common
stock at an exercise price of CDN $0.62 per share were granted to Mr. Savard. On
March 13, 2003, options to purchase 50,000 shares of our common stock at an
exercise price of CDN $0.62 per share were granted to each of Mr. Leduc and Mr.
Cloutier. On March 26, 2003, options to purchase 50,000 shares of our common
stock at an exercise price of CDN $0.59 per share were granted to each of Mr.
Leduc and Mr. Cloutier.
The board of directors will determine the remuneration of our
directors during the current and subsequent fiscal years.
-7-
MANAGEMENT
EXECUTIVE OFFICERS
Our other executive officers are as follows:
MICHAEL BUSCHMANN, PHD, 41 - Dr. Buschmann has been our Vice
President, Discovery since October 2003. From May 2002 to September 2003, he was
our Vice President of Research and Development Division. Since 1994, Dr.
Buschmann has been Professor of Chemical and Biomedical Engineering at Ecole
Polytechnique. He received a Ph.D. in Medical Engineering and Medical Physics
from the Division of Health Sciences and Technology at Harvard University and
the Massachusetts Institute of Technology in 1992, and completed postdoctoral
training at the University of Bern in Switzerland in 1994. In 1994, Dr.
Buschmann established a research program at Ecole Polytechnique in fields
dealing with cartilage and arthritis. In 1999, he received an infrastructure
grant from the Canadian Foundation for Innovation (FCI) to construct a number of
integrated multidisciplinary laboratories at Ecole Polytechnique. In 2001, he
was awarded a Senior Canada Research Chair in Cartilage Tissue Engineering at
Ecole Polytechnique to pursue a research program investigating cartilage
physiology, function, pathology, diagnosis and repair. A second FCI grant was
awarded in 2002 to equip additional nanotechnology laboratories in the newly
constructed "Technopole", the research showcase of the University of Montreal
and Ecole Polytechnique. Since 1999, Dr. Buschmann has been co-director of the
Bioengineering Theme within the federally funded Canadian Arthritis Network of
Centres of Excellence and is currently a scientific reviewer for the Canadian
Institutes of Health Research, the Natural Sciences and Engineering Research
Council of Canada, The National Science Foundation (USA), in addition to acting
as Associate Editor of the Journal of Histochemistry and Cytochemisty, and as
advisor to the National Institutes of Health (USA) SCORE program in
Osteoarthritis. He has received a number of teaching awards at Ecole
Polytechnique and several distinctions for innovation in research. Dr. Buschmann
has published over 100 scientific articles which have been referenced in various
medical journals, has addressed numerous bioengineering conferences, has
authored three published patents, which Ecole Polytechnique licensed to us for
development into cartilage repair and cartilage diagnostic products, with three
other patents under review.
ERIC DESROSIERS, PHD, MBA, 36 - Dr. DesRosiers has been our
Vice-President of Research and Development since October 2003. From May 2002 to
September 2003, he was our Vice-President of the Tissue Repair and Manufacturing
Division. He also served as our Director of Soft Tissue Regeneration from May
2000 to May 2002. From October 1994 to May 2000, Dr. DesRosiers was an employee
of Apotex Research Inc., a Canadian pharmaceutical company, Dr. DesRosiers
headed a Research and Development team based at the National Research Council
through the different aspects of developing a cell-based tissue engineered
product for wound repair. In 1988 and 1989, Dr. DesRosiers obtained bachelor
degrees in Biology and Biochemistry from the University of Ottawa. In 1991, he
received an M.Sc.A degree and, in 1995, a Ph.D. in biomedical engineering from
the Universite de Montreal / Ecole Polytechnique. He graduated in 2003 from an
executive MBA program specializing in the management of bio-industries at
l'Universite du Quebec a Montreal. He published 13 peer-reviewed scientific
articles, three patent applications and more than 50 scientific conference
proceedings.
-8-
MATTHEW SHIVE, PHD, 32 - Dr. Shive has been our Vice President of
Product Development since October 2003. Since October of 2000, Dr. Shive has
overseen in-house biological research of new materials, as well as directing
product pre-clinical and clinical development activities. He has been
responsible for interactions with regulatory agencies, and has been active in
initiating business development discussions with potential industrial partners
for BioSyntech products. In October 2001, Dr. Shive became Director of Product
Development & Regulatory Affairs of the company, and in May of 2002 he was named
Vice President of Biocompatibility & Regulatory Affairs. Prior to joining the
company in 2000, he worked as a research assistant at Cleveland Clinic
Foundation from April 1995 to January 1996. In May 1993, Dr. Shive received a
Bachelors of Science degree from John Hopkins University. Dr. Shive obtained a
Masters of Science degree in May 1998, followed by a Ph.D. degree in August
2000, both from Case Western Reserve University. All of Dr. Shive's degrees are
in Biomedical Engineering with a primary focus on materials science. Dr. Shive's
scientific expertise lies in the interactions between implanted biomaterials and
biological systems, and he has published over 30 scientific articles and
conference proceedings in this area.
LUCIE DUVAL, 44 - Mrs. Duval has been our Vice President Finance
since October 2003. Previously, Mrs. Duval served as the controller of the
company since February 2000 and controller of Bio Syntech Canada and its
predecessor corporation since June 1999. From 1986 to 1996, Mrs. Duval was a
financial counselor for the City of Montreal, Canada. Ms. Duval obtained a
Bachelor of Business Administration in Finance at Universite de Sherbrooke in
1981 and, in 1999 she received a certificate in personal financial planning from
Universite Laval in Quebec City.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVES
The following table sets forth all compensation awarded to Dr.
Selmani, our President and Chief Executive Officer. No other executive officers
received annual compensation in excess of USD $100,000 during the periods
indicated.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
(CDN $) Compensation (Awards):
------- ----------------------
Securities
Fiscal Year Salary Bonus Underlying Options (#)
- --------------------------------------------------------------------------------
2003 $185,000 $0 0
2002 $185,000 $0 362,500
2001 $185,000 $0 50,000
OPTION GRANTS
We did not grant options to Dr. Selmani during the fiscal year ended
March 31, 2003. We have never granted any stock appreciation rights.
-9-
AGGREGATED FISCAL YEAR-END OPTION EXERCISES AND OPTION VALUES
Dr. Selmani did not exercise any options during the fiscal year
ended March 31, 2003. The following table sets forth certain information
regarding unexercised stock options held by Dr. Selmani as of March 31, 2003.
Number of Securities Underlying Value of Unexercised In-The-Money
Unexercised Options at Options at
March 31, 2003(#) March 31, 2003 (in USD)
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
412,500/0 0/0
The value of the unexercised in-the-money options is based on the
market value, as reported on the Over the Counter Electronic Bulletin Board, of
USD $0.42 per share of our common stock at March 31, 2003 and an exercise price
from USD $0.50 (CDN $0.79) to USD $4.00 per share of our common stock.
OTHER COMPENSATION PLANS
We have no pension plan or other compensation plans for our
executive officers or directors.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Dr. Amine Selmani dated
as of August 26, 2002. Dr. Selmani serves as Chief Executive Officer with duties
and responsibilities that are determined by our board of directors from time to
time. The agreement has a three-year term, starting on June 13, 2002. Dr.
Selmani is entitled to an annual base salary of CDN $185,000, which is to be
reviewed annually. Dr. Selmani is subject to a confidentiality and
non-solicitation agreement during the term of his employment and for an
additional three-year period following the termination of his employment. Dr
Selmani will be entitled to receive his full salary for a period of 12 months if
we terminate the agreement without cause and he will not be entitled to receive
any salary if he is terminated for cause.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our officers and directors, and persons or entities who own more than
10% of our common stock to file with the Securities and Exchange Commission
reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5.
Such persons and entities are also required by these rules to furnish us with
copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by
us, or written representations from certain reporting persons, we believe that
during the fiscal year ended March 31, 2003, except for the filings listed
below, there was compliance with the Form 3, Form 4 and Form 5 filing
requirements applicable to our officers, directors and 10% stockholders:
1. The Form 3 for each of Messrs. Shive, DesRosiers and Buschmann
dated May 29, 2002 was filed on August 13, 2002.
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2. The Form 4 for Mr. Savard reporting a purchase of 10,000 shares
of common stock on June 26, 2002 was filed on July 11, 2002.
3. The Form 4 of Mr. Savard reporting the grant on August 22, 2002
of options to purchase 100,000 shares of common stock was filed
on October 30, 2002.
4. The Form 4 for each of Messrs. Shive, DesRosiers and Mrs. Duval
reporting the grant on August 22, 2002 of options to purchase
50,000, 70,000 and 10,000 shares of common stock, respectively,
was filed on October 10, 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOAN BY CHIEF EXECUTIVE OFFICER AND PRESIDENT
On July 8, 2003, we obtained a CDN $750,000 loan from our Chief
Executive Officer and President. We issued to him an unsecured convertible
debenture in the principal amount of CDN $750,000, which matures on July 8, 2004
and bears interest at an annual rate of 7%, payable on a monthly basis. The
debenture is convertible into shares of our common stock on the maturity date or
any business day thereafter until the debenture has been repaid in full. The
number of shares to be issued upon conversion shall be determined by using a
conversion rate equal to USD $0.35 per share, based on the exchange rate for
U.S. dollars published by the Bank of Canada for the business day prior to the
conversion date. The number of shares issuable on conversion and the conversion
price are subject to certain adjustments.
PARTICIPATION OF DIRECTOR IN PRIVATE PLACEMENT
On August 29, 2003, we completed a private placement pursuant to
which we issued a total of 813 units at a price of USD $1,000 per unit for
proceeds of USD $813,000. Each unit comprises 3,000 shares of our common stock
and warrants to purchase 3,000 additional shares at a price of USD $1.00 per
share exercisable until February 28, 2005. Serge Savard, a director of the
corporation, purchased 108 Units for an aggregate purchase price of USD
$108,000.
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PROPOSAL NO. 2
APPROVAL OF INCREASE OF SHARES RESERVED FOR ISSUANCE
UNDER THE STOCK OPTION INCENTIVE PLAN
Our board of directors proposes that an amendment to our stock
option incentive plan be approved to increase from 5,000,000 shares to 6,500,000
shares of common stock the authorized number of shares reserved for issuance
upon the exercise of options granted or to be granted under such plan.
Throughout this section, we will refer to our stock option incentive plan as the
"option plan."
The option plan is administered by the compensation committee of the
board of directors. The compensation committee may from time to time designate
individuals to whom options to purchase shares of common stock may be granted,
and the number of shares subject to such options. The total number of shares of
common stock subject to outstanding options granted to any one individual may
not exceed 5% of the outstanding shares of our common stock. The option price of
any option is fixed by the compensation committee when such option is granted
and cannot involve a discount to the then current market price of our common
stock. The term of an option may not exceed 10 years. In the event of basic
changes in our organization and capitalization, including a reorganization,
merger or consolidation, or the purchase of shares pursuant to a tender offer
for shares of our common stock, in the discretion of the compensation committee,
each option may become immediately exercisable in full.
The option plan may be amended, suspended, reinstated or terminated
by the board of directors; provided, however, that without approval of affected
optionees, no amendment may be made that adversely affects the benefits accruing
to them.
Options granted under the option plan are not assignable or
transferable, except by will or the laws of descent and distribution. Stock
options granted under the option plan may be exercised by the optionee (or the
optionee's legal representative) only while the optionee is employed by us, or
within 90 days after termination of employment due to a permanent disability, or
within one year after termination of employment due to retirement. The executor
or administrator of a deceased optionee's estate or the person or persons to
whom the deceased optionee's rights thereunder have passed by will or by the
laws of descent and distribution will be entitled to exercise the option within
one year after the decedent's death. Stock options expire immediately in the
event an optionee's services to us are terminated with cause. All of the
aforementioned exercise periods are subject to the further limitation that an
option will not, in any case, be exercisable beyond its stated expiration date.
A majority of our stockholders approved the option plan at the 2000
annual meeting. A majority of our stockholders approved an increase in the
number of shares available for issuance under the Plan from 2,500,000 to
3,900,000 at the 2001 annual meeting and from 3,900,000 to 5,000,000 at the 2002
annual meeting. The option plan enables us to remain highly competitive and to
provide sufficient equity incentives to attract and retain highly-qualified and
experienced employees. The option plan allows our board of directors to grant
options to (i) our directors, officers and other full-time salaried employees
with managerial, professional or supervisory responsibilities, and (ii)
consultants and advisors who render us bona fide services, in each case, if the
compensation committee determines that such officer, employee, consultant or
advisor has the capacity to make a substantial contribution to our success.
By unanimous written consent on November 20, 2003 our board of
directors voted to increase the authorized number of shares available for
issuance under the option plan from 5,000,000 to 6,500,000 shares of our common
stock, an increase of less than 5%of our outstanding shares of common stock. The
board of directors believes that approval of this amendment is in our best
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interest because the availability of an adequate reserve of shares under the
option plan is an important factor in attracting, motivating and retaining
qualified officers and employees essential to our success and in aligning their
long-term interests with those of the stockholders.
As of December 8, 2003, stock options to purchase 4,265,000 shares
of common stock were outstanding, or 85% of the number of shares authorized to
be issued under the plan, at exercise prices ranging from USD$0.32 to USD$4.00
and from CDN$0.49 to CDN$1.58 per share, vesting at the date of the grant or
over periods of one to three years. As of December 8, 2003, none of the options
have been exercised, with the exception of options to purchase (i) 100,000
shares of common stock at a price of CDN$0.75 which were exercised by one
consultant and (ii) 10,000 shares of common stock at a price of CDN $0.62 which
were exercised by one employee. As of December 8, 2003, 215,000 shares of common
stock are available for grant under the option plan. A delay in increasing the
number of shares available for the grant of options under the option plan may
prevent us from retaining or attracting highly-qualified and experienced
employees. If the amendment is approved, we will be authorized to issue options
for a maximum of 6,500,000 shares of our common stock, less than 20% of the
currently outstanding shares of our common stock.
Since the adoption of the option plan, options to purchase shares of
common stock have been granted pursuant to the option plan to (i) the chief
executive officer, (ii) all current executive officers as a group (iii) all
employees, including all current officers who are not executive officers, as a
group, and (iv) non-employee directors as follows:
Dollar Value (USD $) Number of Options Granted
-------------------- -------------------------
Dr. Amine Selmani,
Chief Executive Officer $175,890 412,500
and President
Executive Group $393,970 870,000(1)
Non-Executive Officer Employee Group N/A N/A
Non-Executive Director Group $179,066 350,000
- ----------------------------------
(1) Consists of options granted to Drs. Buschmann, DesRosiers, Shive and to Ms.
Duval.
The affirmative vote of a majority of the votes cast by holders of
our common stock is required to approve the increase.
REGISTRATION OF SHARES
We filed a registration statement on Form S-8 under the Securities
Act of 1933, as amended, with respect to the 2,500,000 shares of common stock
issuable pursuant to the option plan on April 3, 2001. We plan to file a second
registration statement with respect to the additional shares of our common stock
issuable pursuant to the option plan, including the 1,500,000 shares of common
stock that are the subject of the proposed amendment, if such amendment is
approved.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL
OF THE INCREASE OF SHARES RESERVED FOR ISSUANCE UNDER
OUR STOCK OPTION INCENTIVE PLAN
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PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On October 7, 2002, we, by action of our board of directors,
terminated our relationship with Ernst & Young LLP, the independent auditors
previously engaged to audit our financial statements, effective with the date of
completion of the review by Ernst & Young of the financial statements for the
period ended September 30, 2002. On October 18, 2002, our board of directors
appointed KPMG LLP as our independent auditors for the fiscal year ended March
31, 2003.
The audit reports of Ernst & Young on our financial statements for
the fiscal years ended March 31, 2002 and March 31, 2001 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope, or accounting principles, except such report dated
May 24, 2002 was modified to include an explanatory paragraph for a going
concern uncertainty. In connection with the audits of our financial statements
for each of the two fiscal years ended March 31, 2002 and March 31, 2001, and in
the subsequent interim period through October 7, 2002, the date of termination,
we had no disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures which, if not resolved to the satisfaction of Ernst & Young would
have caused Ernst &Young to make reference to the matter in its report.
During the fiscal years ended March 31, 2002, March 31, 2001 and the
subsequent interim period through October 7, 2002, the date of termination, and
prior to such appointment, we did not consult with KPMG LLP regarding the
application of generally accepted accounting principles to a specific
transaction, either proposed or completed, or the type of audit opinion that
might be rendered on our financial statements.
While we are not required to do so, our board of directors is
submitting to stockholders for ratification the appointment of KPMG LLP as our
independent auditors for the fiscal year ending March 31, 2004 in order to
ascertain the stockholders' views. If the stockholders do not ratify the
appointment of KPMG LLP, our board of directors will consider the appointment of
other independent auditors. Our auditors for the fiscal year ended March 31,
2003 were KPMG LLP.
Representatives of KPMG LLP are expected to attend the annual
meeting and will have the opportunity to make a statement if they so desire.
They are also expected to be available to respond to appropriate questions.
AUDIT FEES
Ernst & Young billed us and our subsidiaries an aggregate of CDN
$132,500 for the following professional services: audit of our annual
consolidated financial statements for the fiscal year ended March 31, 2002
included in our annual report on Form 10-KSB and review of our interim financial
statements included in our quarterly reports on Form 10-QSB for the periods
ended June 30, 2001, September 30, 2001, December 31, 2001, June 30, 2002 and
September 30, 2002.
KPMG billed us and our subsidiaries an aggregate of CDN $42,500 for
the following professional services: audit of our annual consolidated financial
statements for the fiscal year ended March 31, 2003 included in our annual
report on Form 10-KSB and review of our interim financial statements included in
our quarterly reports on Form 10-QSB for the period ended December 31, 2002.
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AUDIT RELATED FEES
Ernst & Young billed us and our subsidiaries an aggregate of CDN
$23,375 for audit related services rendered during the fiscal year ended March
31, 2002 in connection with, among other things, the preparation of a
Registration Statement on Form SB-2 and Current Reports on Form 8-K.
KPMG did not render any audit related services rendered during the
fiscal year ended March 31, 2003.
TAX FEES
Ernst & Young LLP billed us and our subsidiaries an aggregate of CDN
$20,900 for tax compliance services rendered during the fiscal year ended March
31, 2002 and the subsequent interim period through October 7, 2002.
KPMG billed us and our subsidiaries an aggregate of CDN $4,000 for
tax compliance services rendered during the fiscal year ended March 31, 2003.
ALL OTHER FEES
Neither Ernst & Young LLP nor KPMG rendered any other professional
services for the fiscal year ended March 31, 2003 other than those disclosed
herein.
The Audit Committee has considered whether the provision by Ernst &
Young, LLP and KPMG of the services covered by the fees other than the audit
fees are compatible with maintaining their respective independence and believes
that they are compatible.
The affirmative vote of a majority of the votes cast by holders of
our common stock is required to ratify the appointment of KPMG LLP as our
independent auditors for fiscal year ending March 31, 2004.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE APPOINTMENT OF KPMG LLP AS OUR
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2004
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SOLICITATION OF PROXIES
We will bear all expenses in connection with the solicitation of
proxies. In addition to the use of the mails, solicitations may be made by our
regular employees, by telephone, telegraph or personal contact, without
additional compensation. We will, upon their request, reimburse brokerage houses
and persons holding shares of common stock in the names of nominees for their
reasonable expenses in sending solicited material to their principals.
STOCKHOLDER PROPOSALS
Stockholder proposals made in accordance with Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, and intended to be presented at our
next annual meeting of stockholders must be received by us at our principal
office in Laval, Quebec, Canada no later than September 13, 2004 for inclusion
in the proxy statement for that annual meeting.
In addition, our bylaws require that a stockholder give advance
notice to us of nominations for election to our board of directors and of other
matters that the stockholder wishes to present for action at an annual meeting
of stockholders (other than matters included in our proxy statement in
accordance with Rule 14a-8). Such stockholder's notice must be given in writing,
include the information required by our bylaws, and be delivered or mailed by
first class United States mail, postage prepaid, to our Secretary at our
principal offices. We must receive such notice not less than 45 days prior to
the date next year that corresponds to the date when we first mailed our proxy
materials for this year's annual meeting of stockholders. While we have not yet
set the date of our next annual meeting of stockholders, if it were held on
January 31, 2005 (the first business date after the date that corresponds to
this year's annual meeting), notice of a director nomination or stockholder
proposal made otherwise than in accordance with Rule 14a-8 would be required to
be given to us no later than October 28, 2004.
ANNUAL REPORT
We have sent, or are concurrently sending, all of our stockholders
of record as of December 8, 2003 a copy of our annual report for the fiscal year
ended March 31, 2003. Such annual report contains our certified consolidated
financial statements for the fiscal year ended March 31, 2003.
OTHER MATTERS
Our board of directors knows of no other business that will be
presented to the annual meeting. If any other business is properly brought
before the annual meeting, it is intended that proxies in the enclosed form will
be voted with respect to any such matters in accordance with the judgment of the
persons voting the proxies.
By order of the board of directors,
Amine Selmani
President, Chief Executive Officer and Secretary
December 9, 2003
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BIOSYNTECH, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 30, 2004
The undersigned hereby appoints Amine Selmani and Lucie Duval as the
undersigned's proxy, with full power of substitution, to vote all of the
undersigned's shares of Common Stock in BioSyntech, Inc. (the "Company"), at the
Annual Meeting of Stockholders of the Company to be held on January 30, 2004, at
10:00 a.m. eastern standard time, at the Montreal Marriott Chateau Champlain,
1050 de La Gauchetiere West, Montreal, Quebec, Canada - Viger Room -
(Tel:1-800-200-5909), or at any adjournment, on the matters described in the
Notice of Annual Meeting of Stockholders and Proxy Statement and upon such other
business as may properly come before such annual meeting or any adjournments
thereof, hereby revoking any proxies heretofore given.
PROPOSAL 1 To elect Amine Selmani as a Class III director of the Board of
Directors for a term of three years:
Withhold Authority
For To Vote For
Nominee ___ Nominee ___
PROPOSAL 2 To approve an amendment to Company's Stock Option Incentive
Plan to increase from 5,000,000 shares to 6,500,000 shares the
total number of shares of Common Stock available for issuance
under such option plan:
____ FOR ____ AGAINST ____ ABSTAIN
PROPOSAL 3 To ratify the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ending March 31, 2004:
____ FOR ____ AGAINST ____ ABSTAIN
DISCRETIONARY AUTHORITY:
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the annual meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 2 AND PROPOSAL 3 AND FOR THE DIRECTOR NOMINEE.
Dated: _____________________________
____________________________________
(Signature)
____________________________________
(Signature)
Please sign your name exactly as it appears hereon. When shares are held by
joint owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership or limited liability company, please sign in full
entity name by authorized person.
