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
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
Igene Biotechnology, Inc.
______________________________________________
(Name of Registrant as Specified in Its Charter)
N/A
___________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
Fee computed on table below per Exchange Act Rules
14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
______________________________________________________
(2) Aggregate number of securities to which transaction
applies:
______________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
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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 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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IGENE BIOTECHNOLOGY, INC.
Notice Of Annual Meeting Of Stockholders
To Be Held June 12, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of IGENE Biotechnology, Inc. (the "Company") will be
held at the offices of Kimelman & Baird, LLC, 100 Park Avenue,
21st floor, New York, New York 10017 at 10:30 a.m. local time on
June 12, 2001 for the following purposes:
1. To elect seven (7) Directors.
2. To authorize and approve an amendment to the Articles of
Incorporation of the Company to increase the number of
authorized shares of Common Stock to 750,000,000 shares.
3. To authorize and approve the Company's 2001 Stock
Incentive Plan.
4. To approve the appointment of Stegman & Company as
independent auditors of the Company for the fiscal year
ending December 31, 2001.
5. To transact such other business as may properly come
before the meeting, or any adjournment thereof.
Stockholders of record at the close of business on May 4,
2001, shall be entitled to notice of, and to vote at, the
meeting.
By order of the Board of Directors,
Stephen F. Hiu
President and Treasurer
Dated: Columbia, Maryland
May 10, 2001
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE
THAT YOUR SHARES ARE REPRESENTED AT THE MEETING.
IGENE BIOTECHNOLOGY, INC.
9110 RED BRANCH ROAD
COLUMBIA, MARYLAND 21045
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of
Directors of IGENE Biotechnology, Inc., a Maryland corporation
(the "Company"), for use at the Annual Meeting of Stockholders
(the "Meeting") to be held on June 12, 2001, or any adjournment
thereof, at which stockholders of record at the close of business
on May 4, 2001 (the "Record Date") shall be entitled to vote. The
cost of solicitation of proxies will be borne by the Company. The
Company may use the services of its directors, officers,
employees and others to solicit proxies, personally or by
telephone. Arrangements may also be made with brokerage houses
and other custodians, nominees, fiduciaries and stockholders of
record to forward solicitation material to the beneficial owners
of stock held of record by such persons. The Company may
reimburse such solicitors for reasonable out-of-pocket expenses
incurred by them in soliciting, but no compensation will be paid
for their services.
Each proxy executed and returned by a stockholder may be
revoked at any time before it is voted by timely submission of
written notice of revocation or by submission of a duly executed
proxy bearing a later date (in either case directed to the
Secretary of the Company at the above address) or, if a
stockholder is present at the Meeting, he may elect to revoke his
proxy by voting his shares in person at the meeting.
There is being mailed herewith to each stockholder of record
the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2000. The Notice, Proxy Statement and enclosed
form of Proxy will be mailed to stockholders beginning May 10,
2001, the date of this Proxy Statement.
On the Record Date, the Company had outstanding and entitled
to vote with respect to all matters to be acted upon at the
meeting 62,464,915 shares of Common Stock. Each holder of Common
Stock is entitled to one vote for each share of stock held by
such holder.
On the Record Date, the Company also had outstanding and
entitled to vote with respect to all matters to be acted upon at
the meeting 26,405 shares of 8% Cumulative Preferred Stock
("Series A Preferred Stock"). Each holder of Series A Preferred
Stock is entitled to two votes for each share of Preferred Stock
held by such holder. Holders of record of outstanding Common
Stock and Series A Preferred Stock will be entitled to vote
together as a single class on all matters to be voted on at the
Meeting.
Pursuant to the terms of the Company's Series A Preferred
Stock, as a consequence of the non-payment of dividends on such
stock for more than the past four consecutive dividend payment
dates, the holders of Series A Preferred Stock voting together as
a single class are entitled to elect two directors, in accordance
with the procedures set forth in the Charter and by-laws of the
Company. To date, the holders of the Series A Preferred Stock
have not exercised such right. In the event they exercise their
right, the Board would be expanded to ten directors.
The presence of holders representing a majority of all the
votes entitled to be cast at the meeting will constitute a quorum
at the meeting. In accordance with Maryland law, abstentions, but
not broker non-votes, are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
Each item on the agenda, except for proposals 1 and 2, must
receive the affirmative vote of a majority of the voting power
voted at the meeting in order to pass. In connection with
proposal 1, the affirmative vote of a plurality of shares present
at the meeting is required for the election of directors. In
connection with proposal 2, The affirmative vote of the holders
of at least two-thirds of the outstanding voting power of the
Company entitled to vote thereon is required to approve a
proposal for amendment to the Charter of the Company. For
purposes of proposal 2, abstentions and broker non-votes will
have the same effect as votes against the proposal. Abstentions
and broker non-votes are not counted in determining the votes
cast with respect to any of the matters submitted to a vote of
stockholders.
It is expected that the following business will be considered at
the meeting and action taken thereon:
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company and as permitted by
the Company's charter, the number of Directors of the Company has
been set at seven members. It is proposed to elect seven
Directors at this Meeting to hold office for a one-year term
until the 2002 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualify. Each of the
persons listed below has been nominated for election to the Board
of Directors of the Company at the Annual Meeting. All of the
nominees listed below are presently Directors of the Company. If
some unexpected occurrence should make necessary, in the Board of
Directors' judgment, the substitution of some other person or
persons for any of the nominees, shares will be voted for such
other person or persons as the Board of Directors may select. The
Board of Directors is not aware that any nominee may be unable or
unwilling to serve as a Director. The following table sets forth
certain information with respect to the nominees:
NOMINEES FOR ELECTION
Name Age Position(s) with IGENE
___________________ ___ ____________________________________
Michael G. Kimelman 62 Chairman of the Board of Directors
Thomas L. Kempner 73 Vice Chairman of the Board of
Directors
Stephen F. Hiu 44 Director, President, Treasurer,
and Director of
Research and Development
Patrick F. Monahan 50 Director, Secretary, and Director
of Manufacturing
Joseph C. Abeles 86 Director
John A. Cenerazzo 77 Director
Sidney R. Knafel 70 Director
MICHAEL G. KIMELMAN was elected a Director of the Company in
February 1991 and Chairman of the Board of Directors in March
1991. He is the Managing Partner of Kimelman & Baird, LLC. Mr.
Kimelman is currently a Director of the Harness Horse Breeders of
New York State and serves on the Board of the Hambletonian
Society.
THOMAS L. KEMPNER is Vice Chairman of the Board of Directors and
has been a Director of the Company since its inception in October
1981. He is and has been Chairman and Chief Executive Officer of
Loeb Partners Corporation, investment bankers, New York, and its
predecessors since February 1978. He is currently a Director of
Alcide Corporation, CCC Information Services Group, Inc., Dyax,
Evercel, Inc., Fuel Cell Energy, Inc., Insight Communications
Co., Intermagnetics General Corp., and Roper Starch Worldwide,
Inc. He is a Director Emeritus of Northwest Airlines, Inc.
STEPHEN F. HIU was appointed President and Treasurer in March
1991, and elected a Director in August 1990. He has been Director
of Research and Development since January 1989 and, prior
thereto, was Senior Scientist since December 1985, when he joined
the Company. He was a post-doctoral Research Associate at the
Virginia Polytechnic Institute and State University, Blacksburg,
Virginia, from January 1984 until December 1985. Dr. Hiu holds a
Ph.D. degree in microbiology from Oregon State University and a
B. S. degree in biological sciences from the University of
California, Irvine.
PATRICK F. MONAHAN was appointed Director of Manufacturing and
elected a Director of the Company in April 1991 and was elected
Secretary in September 1998. He has managed the Company's
fermentation pilot plant since 1982, and the Company's
manufacturing operations since their inception in 1998. Prior
thereto, he was a technical specialist in the fermentation pilot
plant of W.R. Grace and Co. from 1975 to 1982. He received an
Associate in Arts degree in biology from Allegheny Community
College and a B. S. degree in biology with a minor in Chemistry
from Frostburg State College, Frostburg, Maryland.
JOSEPH C. ABELES, private investor, was elected Director of the
Company on February 28, 1991. Mr. Abeles is a Director Emeritus
of Intermagnetics General Corporation, Director Emeritus of
Bluegreen Corporation, and also serves as a Director of Ultralife
Batteries, Inc.
JOHN A. CENERAZZO was Chairman of the Board from November 1989
to April 1991. He served as President of the Company from August
1988 through September 1989 and has been a Director since
September 1987. He is a Director of U.S. Axle Corporation, Penn
Securities, Inc., and Investors Trust, Inc.
SIDNEY R. KNAFEL, a Director of the Company since 1982, has been
Managing Partner of SRK Management Company, a private investment
concern, New York, since 1981, Chairman of Insight
Communications, Inc. since 1985, and of BioReliance Corporation
since 1982. Mr. Knafel is currently a Director of General
American Investors Company, Inc., NTL Incorporated, and Source
Media.
Committees Of The Board Of Directors
The Company has two standing committees of the Board of
Directors, the Audit Committee and the Compensation Committee.
The Company does not have a standing nominating committee. Set
forth below is a description of the functions of each of the
Company's standing committees and the members of the Board of
Directors who serve on such committees.
Audit Committee
The responsibilities of the Audit Committee include
recommending to the Board of Directors the independent certified
public accountants to conduct the annual audit of the books and
accounts of the Company, reviewing the proposed scope of the
audit and approving the audit fees to be paid. The Audit
Committee also reviews, with the independent certified public
accountants and with the Company's management, the adequacy and
effectiveness of the internal auditing, accounting and financial
controls of the Company. Messrs. Kimelman, Abeles, and Cenerazzo
were appointed as members of the Audit Committee on February 1,
2001 and are currently serving as members of the Audit Committee.
All of the members of the audit committee are independent
directors as defined in Rule 4200 (a) (14) of the NASD's listing
standards. Prior to February 1, 2001, the Board of Directors
performed the functions of the audit committee. On February 1,
2001, the Company's Board of Directors adopted a written charter
for its Audit Committee. The Audit Committee Charter is set
forth in Appendix 2. There were no meetings of the Audit
Committee during 2000. There has been one meeting in 2001 for
the purpose of reviewing and reporting on the 2000 financial
statements as noted below.
Audit Committee Report
The audit committee has reviewed and discussed the fiscal
year 2000 audited financial statements with management; and has
discussed with the independent auditors the matters required to
be discussed by SAS 61 "Communication With Audit Committees"
issued by the Auditing Standards Board of the American Institute
of Certified Public Accountants ("AICPA"), as modified or
supplemented, and has received the written disclosures and the
letter from the independent auditors required by AICPA
Independence Standards Board Standard No. 1 "Independence
Discussions with Audit Committees", as modified or supplemented,
and has discussed with the independent auditor the auditors'
independence.
Based on the review and discussions referred to in the previous
paragraph, the audit committee recommends to the Board of
Directors that the audited financial statements be included in
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000.
Signed:
The Audit Committee
/s/ Michael G. Kimelman
_______________________
/s/ Joseph C. Abeles
_______________________
/s/ John A. Cenerazzo
_______________________
Compensation Committee
The Compensation Committee approves the salaries of all
officers and certain other employees of the Company. It also
supervises the administration of all benefit plans and other
matters affecting executive compensation, subject to further
approval of the Board of Directors. The Compensation Committee
will not be responsible for administering the 2001 Stock
Incentive Plan, if approved by the stockholders. The full Board
of Directors will administer the 2001 Stock Incentive Plan. The
members of the Compensation Committee during 2000 were Messrs.
Thomas L. Kempner and Sidney R. Knafel. The Compensation
committee held no meetings during 2000.
Board Compensation
During 2000, Directors were not compensated for their Board
or Committee activities. The Board of Directors held 3 meetings
in 2000. No Director of the Company attended fewer than 75% of
the total number of meetings held by all committees of the board
on which he served during 2000.
Executive Compensation
During 2000, the Company did not have a Chief Executive
Officer. The Company's Board of Directors, acting as a group,
performed the functions of Chief Executive Officer. No executive
officer received compensation during 2000 that exceeded $100,000.
No Director of the Company received any consideration for his
service to the Company as a director or for acting in the
capacity of chief executive officer during 2000.
Stock Option Plan
In Addition to the 2001 Stock Incentive Plan (the "2001
Plan") proposed to be approved at the Annual Meeting, the
Company also has a 1986 Stock Option Plan (the "1986 Plan"), and
a 1997 Stock Option Plan (the "1997 Plan"), and a Simple IRA
Retirement Plan. The Company has no other profit sharing,
incentive compensation or retirement plans.
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth information as of April 2,
2001, with respect to beneficial ownership of shares of the
Company's outstanding Common Stock by (i) each person known to
the Company to own more than five percent of its Common Stock,
(ii) each Director, and (iii) all Directors and executive
officers as a group.
Common Stock Preferred Stock
_______________________ ______________________
Number of Number of
Name and Address Shares Percent* Shares Percent
___________________________ ______________ ________ _____________ ________
Directors and officers
______________________
Joseph C. Abeles 15,012,789(1) 19.98 7,375 27.93
220 E. 42nd Street
New York, NY 10017
John A. Cenerazzo 1,912,456(2) 2.99 --- ---
P.O. Box 4067
Reading, PA 19606
Stephen F. Hiu 5,065,300(3) 7.53 --- ---
9110 Red Branch Road
Columbia, MD 21045
Thomas L. Kempner 86,360,974(4) 66.30 --- ---
61 Broadway
New York, NY 10006
Security Ownership Of Certain Beneficial Owners And Management
(continued)
Common Stock Preferred Stock
_______________________ ______________________
Number of Number of
Name and Address Shares Percent* Shares Percent
___________________________ _____________ ________ _____________ ________
Directors and officers (continued)
______________________
Michael G. Kimelman 15,321,950(5) 20.08 --- ---
100 Park Avenue
New York, NY 10017
Sidney R. Knafel 83,802,046(6) 65.54 --- ---
126 East 56th Street
New York, NY 10022
Patrick F. Monahan 3,064,400(7) 4.70 --- ---
9110 Red Branch Road
Columbia, MD 21045
All Directors and Officers 210,539,715(8) 90.57 7,375 27.93
as a Group (7 persons)
Others
__________
Thomas R. Grossman 4,192,149(9) 6.58 --- ---
461 Grant Road
North Salem, NY 10560
Fraydun Manocherian 7,905,135(10) 11.85 --- ---
3 New York Plaza
New York, NY 10004
* Under the rules of the Securities and Exchange Commission, the
calculation of the percentage assumes for each person that
only that person's rights, warrants, options or convertible
notes or preferred stock are exercised or converted, and that
no other person exercises or converts outstanding rights,
warrants, options or convertible notes or preferred stock.
1. Includes the following: 2,109,404 outstanding shares; 2,250
shares issuable upon the conversion of 1,125 shares of
preferred stock; 3,782,083 shares issuable upon the conversion
of $311,663 in principal of long-term notes issued by Igene;
and 9,093,427 warrants, all held by Mr. Abeles directly.
Also includes 4,140 outstanding shares, and 12,500 shares
issuable upon conversion of 6,250 shares of preferred stock
and 8,985 warrants held by Mr. Abeles' wife.
2. Includes the following: 283,458 outstanding shares; 32,750
options currently exercisable; 492,321 shares issuable upon
the conversion of $40,622 in principal of long-term notes
issued by Igene; and 1,103,513 warrants, all held by Mr.
Cenerazzo directly. Also includes 414 outstanding shares held
by Mr. Cenerazzo's wife.
3. Includes 65,300 outstanding shares, and 5,000,000 options
currently exercisable, all held by Dr. Hiu directly.
Security Ownership Of Certain Beneficial Owners And Management
(continued)
4. Includes 386,972 outstanding shares and 536,920 warrants held
by Mr. Kempner directly. Also includes 8,166,916 outstanding
shares, 4,151,594 shares subject to the conversion of $394,425
in principal of notes issued by Igene; and 26,663,535
warrants, all held by a trust under which Mr. Kempner is one
of two trustees and the sole beneficiary. Also includes
8,126,918 outstanding shares; 4,151,594 shares subject to the
conversion of $394,425 in principal of notes issued by Igene;
and 26,641,933 warrants, all held a trust under which Mr.
Kempner is one of two trustees and one of his brothers is the
sole beneficiary. Also includes 1,482,987 outstanding
shares; 1,147,667 shares subject to the conversion of $79,200
in principal of notes issued by Igene; and 4,622,846 warrants,
all held by trusts under which Mr. Kempner is one of two
trustees and is a one-third beneficiary. Also includes
182,526 outstanding shares and 98,565 warrants held by Mr.
Kempner's wife.
5. Includes 1,264,360 outstanding shares; 1,500,000 options
currently exercisable, 804,568 shares subject to the
conversion of $63,070 in principal of notes issued by Igene;
and 11,753,022 warrants, all held directly or indirectly by
Mr. Kimelman or entities that he controls.
6. Includes 18,190,551 outstanding shares; 8,786,762 shares
subject to the conversion of $813,306 in principal of notes
issued by Igene; and 56,824,733 warrants, all owned or
beneficially owned by Mr. Knafel or entities that he controls.
7. Includes 64,200 outstanding shares; and 3,000,000, options
currently exercisable, all held by Mr. Monahan directly.
8. Includes 40,328,146 outstanding shares; 14,750 shares issuable
upon the conversion of 7,375 shares of preferred stock;
9,532,750 options currently exercisable; 23,316,590 shares
issuable upon the conversion of $2,096,711 in principal of
notes issued by Igene; and 137,347,479 warrants, all held
directly or indirectly, or beneficially owned, by the
directors and officers as a group.
9. Includes 2,753,399 outstanding shares and 1,438,750 warrants
held directly or beneficially by Mr. Grossman.
10. Includes 3,455,025 outstanding shares owned or beneficially
owned by Mr. Manocherian and 4,450,110 warrants held or
beneficially owned by Mr. Manocherian.
Compensation Committee Interlocks and Insider Participation
Thomas L. Kempner and Sidney R. Knafel are members of the
Compensation Committee. None of the executive officers of the
Company has served on the Board of Directors or compensation
committee of any other entity that has had any of such entity's
officers serve either on the Company's Board of Directors or
Compensation Committee.
Certain Relationships and Transactions
Since inception, the Company has been unable to pay its
operating expenses without outside assistance. Financing from
outside sources, including institutional lenders and customers,
has not been available to the Company. Due to the difficulty or
impossibility in obtaining adequate outside financing, and the
time delays and expense which would be occasioned in attempting
to secure such financing, the Company has raised operating
capital during 1999, 2000 and 2001 primarily through the issuance
of new stock or convertible securities in private placements to
certain Directors of the Company and other accredited investors
in order to ensure the Company's continued viability. The stock
or convertible securities were issued at the market price at the
time of the purchase commitment. In addition, the purchasing
Directors and investors also received that number of warrants to
purchase shares of Common Stock equivalent to the number share
purchased or obtainable through conversion of the convertible
securities. The warrants have an exercise price equal to the
market price at the time of the purchase commitment and a term of
ten years from date of issue.
During 1999, Igene issued 1,500,000 options to purchase
common shares, at $.05 per share (which was the market value of
the stock as of the date issued), to its Chairman of the Board,
Mr. Kimelman, under its 1997 Stock Option Plan.
During 1999, Igene issued to certain directors and other
accredited investors 24,791,668 new shares of common stock at
prices ranging from $.05 to $.08, based on the current market
price of Igene's stock at the time the commitment to purchase was
made. The total proceeds received in these issues was
$1,500,000. In return for committing to these investments, these
investors also received 24,791,668 warrants to purchase shares of
common stock at equivalent prices (ranging from $.05 to $.08 per
share, based on the current market price of Igene's stock at the
time of issue), expiring 10 years from the dates of issue. The
funds received in these transactions were used to continue
operations of Igene and to fund legal expenses associated with
on-going litigation. In these transactions: 11,145,834 of these
shares and an equivalent number of warrants were issued to Mr.
Kempner, a Director of Igene, or entities controlled by him;
11,145,834 of these shares and an equivalent number of warrants
were issued to Mr. Knafel, a Director of Igene, or entities
controlled by him; 1,000,000 of these shares and an equivalent
number of warrants were issued to Mr. Grossman, an accredited
investor; 750,000 of these shares and an equivalent number of
warrants were issued to a Company controlled by Mr. Kimelman,
Chairman of Igene's Board of Directors.
During 2000, Igene issued to certain directors and other
accredited investors 10,000,000 new shares of common stock at
$.10 per share, based on the current market price of Igene's
stock at the time the commitment to purchase was made. The total
proceeds received in these issues was $1,000,000. In return for
committing to these investments, these investors also received
10,000,000 warrants to purchase shares of common stock at the
price of $.10 per share, based on the current market price of
Igene's stock at the time of commitment, expiring 10 years from
the dates of issue. The funds received in these transactions
have been used to continue operations of Igene. In these
transactions: 5,000,000 of these shares and an equivalent number
of warrants were issued to Mr. Kempner, a Director of Igene, or
entities controlled by him; and 5,000,000 of these shares and an
equivalent number of warrants were issued to Mr. Knafel, a
Director of Igene, or entities controlled by him.
In March 2001, Igene issued $1,014,211 in original principal
of 8% convertible debentures to certain directors of Igene in
exchange for the cancellation of $800,000 of demand notes payable
to those directors (including accrued interest of $14,211) and
$200,000 in cash. $600,000 of these demand notes were issued
during 2000 and $200,000 were issued in 2001. These debentures
will convert automatically into 10,142,110 shares of Igene's
common stock at $.10 per share upon the effective date of an
increase in the number of authorized shares of common stock to
750,000,000 shares, as contemplated by proposal 2 to be
considered at the Annual Meeting.. These directors also each
received 10,142,110 warrants to purchase common stock at $.10 per
share, which are exercisable upon the effective date of an
increase in the number of authorized shares of common stock to
750,000,000 shares, as contemplated by proposal 2 to be
considered at the Annual Meeting. In these transactions,
$507,105 in original principal of these convertible debentures
and 5,071,055 warrants were issued to Mr. Kempner, a Director of
Igene, or entities controlled by him; and $507,105 in original
principal of these convertible debentures and 5,071,055 warrants
were issued to Mr. Knafel, a Director of Igene, or entities
controlled by him.
In March 2001, Igene issued 5,500,000 warrants to purchase
Igene common stock at $.08 per share (based on the current market
price of its common stock on the date of issuance) to its
Chairman of the Board, Mr. Kimelman. These warrants become
exercisable upon the effective date of an increase in the number
of authorized shares of common stock to 750,000,000 shares, as
contemplated by proposal 2 to be considered at the Annual
Meeting.
In March 2001, certain directors of Igene also committed to
provide additional funding by purchasing, in the form of 8%
convertible debentures, convertible securities in the amount of
$1,500,000 over the next six months. The initial installment of
$400,000 was received in March 2001. In consideration for this
commitment, these directors also received 18,750,000 warrants to
purchase common stock at $.08 per share, exercisable upon the
effective date of an increase in the number of authorized shares
of common stock to 750,000,000 shares, as contemplated by
proposal 2 to be considered at the Annual Meeting. These
debentures will convert into 18,750,000 shares of Igene's common
stock at $.08 per share upon the effective date of an increase in
the number of authorized shares of common stock to 750,000,000
shares, as contemplated by proposal 2 to be considered at the
Annual Meeting. In these transactions: $750,000 of the
convertible debentures and 9,375,000 of warrants were issued to
Mr. Kempner, a Director of Igene, or entities controlled by him;
and $750,000 of these convertible debentures and 9,375,000
warrants were issued to Mr. Knafel, a Director of Igene, or
entities controlled by him.
Section 16(A) Beneficial Ownership Reporting Compliance
Igene believes that, during 2000, all of its officers,
directors and holders of more than 10% of its common stock
complied with all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended, except as follows:
In 1997 certain directors of Igene made various loans to Igene.
The loans were evidenced by notes and were convertible into
common stock. These directors also received warrants to purchase
shares of common stock in 1997 and 1998 in conjunction with the
1997 notes and with a 1998 rights offering. During 1999 and 2000,
certain directors and other accredited investors also purchased
stock through direct purchases of new stock and received warrants
in conjunction with these purchases. Igene believes that none of
the foregoing securities have been reported by Messrs. Kimelman,
Abeles, Cenerazzo or Knafel in Forms 3, 4 or Forms 5 pursuant to
Section 16(a) of the Exchange Act. In making this disclosure,
Igene has relied solely on written representations of its
directors, officers and more than 10% holders and on copies
furnished to Igene of reports that have been filed with the
Securities and Exchange Commission.
AMENDMENT TO ARTICLES OF INCORPORATION
INCREASING AUTHORIZED STOCK
The Company is proposing to amend Article Fifth of its
Articles of Incorporation to increase the number of authorized
shares of Common Stock from 250,000,000 shares to 750,000,000
shares. This proposal will enable the Company to have sufficient
shares of Common Stock to be issued or reserved for issuance to
accommodate its financing requirements, as such requirements may
develop in the future. Pursuant to Article Fifth of its Articles
of Incorporation, the Company is presently authorized to issue
250,000,000 shares of Common Stock, par value $.01 per share, of
which on the Record Date, 62,464,915 shares were issued and
outstanding. Approximately 185,171,000 of the Company's unissued
shares are reserved for issuance upon exercise of presently
outstanding stock options, exercisable warrants and conversion of
convertible securities. An additional 28,892,111 shares will be
issued and an additional 34,392,111 shares will be reserved
pursuant to convertible debentures and warrants which were issued
in March 2001 and convert into common shares (in the case of the
debentures) or become exercisable (in the case of the warrants)
upon the effective date of an increase in the number of
authorized shares of common stock to 750,000,000, as contemplated
by proposal 2 to be considered at the Annual Meeting. The Company
is also presently authorized to issue 1,500,000 shares of
Preferred Stock, par value $.01 per share, of which on the Record
Date, 26,405 shares were issued and outstanding.
It is proposed (the "Proposal") to amend Article Fifth of
the Articles of Incorporation of the Company in order to increase
the authorized number of shares of Common Stock of the Company
from 250,000,000 shares, par value $.01 per share, to 750,000,000
shares, par value $.01 per share, as follows:
ARTICLE FIFTH
The total number of shares of stock of
all classes which the Corporation has
authority to issue is Seven Hundred Fifty One
Million Five Hundred Thousand (751,500,000)
shares divided into Seven Hundred Fifty
Million (750,000,000) shares par value of One
Cent ($.01) per share of Common Stock, having
an aggregate par value of Seven Million Five
Hundred Thousand Dollars ($7,500,000.00) and
One Million Five Hundred Thousand (1,500,000)
shares of the par value of One Cent ($.01)
per share of Preferred Stock having an
aggregate par value of Fifteen Thousand
Dollars ($15,000.00). The aggregate par value
of all shares of stock is Seven Million Five
Hundred Fifteen Thousand Dollars
($7,515,000.00).
The authorized number of shares of Preferred Stock will not
be changed as the result of the Proposal. The Board of Directors
of the Company has approved the adoption of the Proposal. In
order for such Proposal to be adopted there will be required a
vote in favor by the holders of at least two-thirds of the
outstanding voting power of the Company entitled to be cast at
this meeting. The Board of Directors believes that it would be in
the best interests of the Company to amend Article Fifth of the
Articles of Incorporation to give effect to the Proposal.
Directors of the Company who hold approximately 65% of the
outstanding voting power of the Company have indicated that they
intend to vote all their shares in favor of the proposal to amend
the Articles of Incorporation of the Company.
The Board Of Directors Recommends A Vote For Approval Of The
Amendment To The Articles Of Incorporation.
Except for the transactions listed in the succeeding
paragraphs, no person who has been a director or executive
officer of the Company since the beginning of the last fiscal
year has any substantial interest, direct or indirect, in the
proposal to approve the amendment to the Company's Articles of
Incorporation. Also, except for the transactions listed in the
succeeding paragraphs, the Company has not entered into any
specific agreements or understandings relating to the issuance of
additional shares of Common Stock. However, the Company is
receptive to all methods of financing which may be reasonably
available and to other opportunities which may arise from time to
time. The Board of Directors believes that, in the future,
occasions may arise where the time required to obtain stockholder
approval might adversely delay the Company's ability to enter
into a desirable transaction. Authorized but unissued shares of
Common Stock will be issued by the Company from time to time as
appropriate and opportune situations arise.
The following agreements have been entered into by the
Company relating to the issuance of additional shares of Common
Stock:
In March 2001, Igene issued $1,014,211 in original principal
of 8% convertible debentures to certain directors of Igene in
exchange for the cancellation of $800,000 of demand notes payable
to those directors (including accrued interest of $14,211) and
$200,000 in cash. $600,000 of these demand notes were issued
during 2000 and $200,000 were issued in 2001. These debentures
will convert automatically into 10,142,110 shares of Igene's
common stock at $.10 per share upon the effective date of an
increase in the number of authorized shares of common stock to
750,000,000 shares, as contemplated by proposal 2 to be
considered at the Annual Meeting.. These directors also each
received 10,142,110 warrants to purchase common stock at $.10 per
share, which are exercisable upon the effective date of an
increase in the number of authorized shares of common stock to
750,000,000 shares, as contemplated by proposal 2 to be
considered at the Annual Meeting. In these transactions,
$507,105 in original principal of these convertible debentures
and 5,071,055 warrants were issued to Mr. Kempner, a Director of
Igene, or entities controlled by him; and $507,105 in original
principal of these convertible debentures and 5,071,055 warrants
were issued to Mr. Knafel, a Director of Igene, or entities
controlled by him.
In March 2001, Igene issued 5,500,000 warrants to purchase
Igene common stock at $.08 per share (based on the current market
price of its common stock on the date of issuance) to its
Chairman of the Board, Mr. Kimelman. These warrants become
exercisable upon the effective date of an increase in the number
of authorized shares of common stock to 750,000,000 shares, as
contemplated by proposal 2 to be considered at the Annual
Meeting.
In March 2001, certain directors of Igene also committed to
provide additional funding by purchasing, in the form of 8%
convertible debentures, convertible securities in the amount of
$1,500,000 over the next six months. The initial installment of
$400,000 was received in March 2001. In consideration for this
commitment, these directors also received 18,750,000 warrants to
purchase common stock at $.08 per share, exercisable upon the
effective date of an increase in the number of authorized shares
of common stock to 750,000,000 shares, as contemplated by
proposal 2 to be considered at the Annual Meeting. These
debentures will convert into 18,750,000 shares of Igene's common
stock at $.08 per share upon the effective date of an increase in
the number of authorized shares of common stock to 750,000,000
shares, as contemplated by proposal 2 to be considered at the
Annual Meeting. In these transactions: $750,000 of the
convertible debentures and 9,375,000 of warrants were issued to
Mr. Kempner, a Director of Igene, or entities controlled by him;
and $750,000 of these convertible debentures and 9,375,000
warrants were issued to Mr. Knafel, a Director of Igene, or
entities controlled by him.
The Company entered into the financing agreements described
above in order to provide cash necessary to continue to conduct
operations, and specifically, to fund increases in accounts
receivable and inventory as required to permit expansion of the
Company in 2001. The Company entered into the agreement with Mr.
Kimelman to provide Mr. Kimelman with compensation necessary to
retain his services as the Company's Chairman of the Board.
These transactions will have the effect of diluting the Company's
stockholders on a pro-rata basis to the extent the warrants and
convertible debentures described therein are exercised or
converted.
The Board's Recommendation
The Board has unanimously concluded that, in its business
judgment, the issuance of additional shares of Common Stock is
the most viable financing alternative for the Company presently
available and is in the best interests of both the Company and
its stockholders. The Board Unanimously Recommends To The
Stockholders That They Vote For This Proposal.
Description Of Capital Stock
The summary of the terms of the capital stock of the Company
set forth below does not purport to be complete and is subject to
and qualified in its entirety by reference to the Company's
Articles of Incorporation and Bylaws.
Authorized Capital Stock
The authorized capital stock of the Company consists of
250,000,000 shares of Common Stock, and 1,500,000 shares of
Preferred Stock. The Company's stock is not presently listed on a
national securities exchange, but is traded on a limited basis
and is quoted on the National Quotation Bureau's over-the-counter
bulletin board. On April 2, 2001, the closing bid and ask prices
of a share of the Company's Common Stock, as quoted on the
National Quotation Bureau's over-the-counter bulletin board, were
$.077 and $0.084, respectively.
Common Stock
The holders of Common Stock are entitled to one vote for
each share held and have the sole right and power to vote on all
matters on which a vote of stockholders is taken, except as
otherwise provided by statute and subject to voting rights of any
holders of Preferred Stock. Subject to the rights of any holders
of Preferred Stock, the holders of shares of Common Stock are
entitled to receive dividends when, as and if declared by the
Board of Directors, out of funds legally available therefor and
to share pro rata in any distribution to stockholders. Upon
liquidation, dissolution, or winding up of the Company, subject
to the rights of the holders of any shares of Preferred Stock,
the holders of Common Stock are entitled to receive the net
assets of the Company in proportion to the respective number of
shares held by them. The holders of Common Stock do not have any
preemptive right to subscribe for or purchase any shares of any
class of stock. The outstanding shares of Common Stock are not
subject to further call or redemption and all outstanding shares
of Common Stock are validly issued, fully paid and non-
assessable.
Preferred Stock
The Company is authorized to issue 1,500,000 shares of
Preferred Stock. Such shares may be issued from time to time at
the discretion of the Board of Directors, without stockholder
approval. The Board of Directors is authorized to issue such
shares in different series and with respect to each series to
determine the dividend rate, the redemption provisions, voting
rights, conversion provisions, liquidation preferences and such
other rights and privileges not in conflict with the Company's
Articles of Incorporation and any qualifications, limitations or
restrictions on such shares.
The Company has designated 1,050,000 shares of its
authorized Preferred Stock as Series A Preferred Stock. Such
shares pay a cumulative 8% annual dividend ($.64 per share). The
stated value of the Series A Preferred Stock is $8.00 per share.
Each share of Series A Preferred Stock may be converted into
Common Stock at the rate of $4.00 per share (such conversion
ratio may be adjusted due to stock splits, stock dividends or
issuance of rights or warrants).
Holders of the Series A Preferred Stock are entitled to vote
on all matters requiring stockholder approval as one class with
the holders of Common Stock. Each holder of Series A Preferred
Stock is entitled to a number of votes equal to the number of
shares of Common Stock into which such holder of Series A
Preferred Stock would be entitled to convert his or her shares as
of the Record Date. Holders are currently entitled to two votes
per share of Series A Preferred Stock.
Pursuant to the Articles of Incorporation as amended, the
Series A Preferred Stock is entitled to special voting privileges
in the event of a dividend default. A dividend default occurs if
dividends have not been paid on the Series A Preferred Stock for
four consecutive dividend payment dates. In such a case, the
holders of Series A Preferred Stock, as a class, are entitled to
elect two directors.
While dividends have not been paid on the Series A Preferred
Stock for more than the past four quarters, the holders of the
Series A Preferred Stock have not exercised their special voting
privileges.
Shares of Series A Preferred Stock are redeemable for cash
in whole or in part at the option of the Company at any time at
the stated value, plus accrued and unpaid dividends. The Company
is required to redeem the Series A Preferred Stock in October
2002 for an aggregate of $447,828 based on a $16.96 per share
redemption price.
PROPOSAL TO APPROVE
THE 2001 STOCK INCENTIVE PLAN
Introduction
There will be presented to the annual meeting a proposal
that the shareholders approve the 2001 Stock Incentive Plan (the
"2001 Plan"). The purpose of the 2001 Plan is to further the
long term stability and financial success of the Company by
attracting and retaining employees through the use of stock-based
incentives, and to provide employees of the Company with an
additional incentive to promote the success of the Company. The
2001 Plan is set forth as Appendix 3.
Eligibility
All present and future employees of the Company that the
Board determines to have contributed or who can be expected to
contribute significantly to the Company will be eligible to
receive incentive awards under the 2001 Plan. The approximate
number of persons eligible to participate in the 2001 Plan is
eleven as of April 17, 2001.
The Board has the power and complete discretion to select
eligible employees to receive awards, and to determine the type,
terms and conditions of the awards. The Board may delegate to
the Compensation Committee, if any, or the President of the
Company the power to select which employees will receive awards,
the type of awards, the time when awards are granted, the number
of shares of Common Stock allocated to awards and the terms of
awards, except to the extent that such a delegation would prevent
compliance with applicable federal securities or tax laws, or
other applicable laws or regulations. Action taken by the
Compensation Committee (or the President) pursuant to such a
delegation must be ratified by the Board. The Company has not
determined how many employees would currently be eligible to
receive awards under the 2001 Plan.
Amount of Stock Available for Awards
The number of shares of the Company's Common Stock for which
incentive awards may be granted under the 2001 Plan is limited to
55,000,000, which is approximately 88% of the number of shares
outstanding at April 17, 2001. This limit, the option exercise
prices, the terms of incentive awards and the number of shares
subject to outstanding options, will be appropriately adjusted by
the Board for stock dividends, stock splits, re-capitalization,
mergers, combinations of shares and other changes affecting the
Company's Common Stock. Shares subject to options that expire or
terminate without being exercised may again be subjected to
incentive awards under the 2001 Plan. Stock options, stock
appreciation rights and restricted stock may be granted under the
2001 Plan. No more than 5,500,000 shares of common stock may be
allocated to the options or stock appreciation rights that are
granted to any individual employee during any single taxable year
of the Company.
The Company's Common Stock is not presently listed on a
national securities exchange, but is traded on the over-the
counter market on a limited basis. The Common Stock is quoted on
the National Quotation Bureau's over-the-counter bulletin board.
On April 2, 2001, the closing bid and ask prices of a share of
the Company's Common Stock were $.077 and $.084, respectively.
Stock Options and Stock Appreciation Rights
The Board may grant stock options to eligible employees, and
establish the terms and conditions for exercising each stock
option. Stock options may be either incentive stock options
(which are subject to favorable tax treatment under Section 422
of the Internal Revenue Code of 1986, as amended) or non-
qualified stock options (which are not entitled to such
treatment). Stock appreciation rights may be granted with
respect to all or any part of a stock option, and also are
subject to terms and conditions set by the Board. Stock
appreciation rights may be granted in connection with a stock
option or in a separate incentive award.
The exercise price of a nonqualified stock option granted to
an employee must be at least 85% of (i) the closing price of the
Company's Common Stock on the date of determination if the stock
is traded on a national securities exchange or quoted on the
NASDAQ National Market, (ii) the average of the closing bid and
asked prices per share for the Company's Common Stock on the date
of determination if the stock is not listed on a national
exchange or quoted on the NASDAQ National Market, or (iii) by the
Board in good faith if none of the above are applicable (the
"Fair Market Value"). The exercise price of an incentive stock
option must be at least 100% of the Fair Market Value (or 110% of
Fair Market Value in the case of a grant to an employee who is a
10% shareholder of the Company). The fair market value of
incentive stock options that become exercisable by an employee
for the first time in any calendar year is limited to $100,000.
In order to exercise a stock option, an employee must
provide the Company with written notice and the exercise price of
the stock option in full in cash, unless the terms of the stock
option agreement permit the employee to deliver mature shares
(shares of Common Stock to which the employee has good title,
free and clear of all liens, which the employee has either held
for at least six months or purchased on the open market), valued
at their Fair Market Value, in satisfaction of all or any part of
the exercise price. Alternatively, an employee's stock option
agreement may permit the employee to conduct a "broker-assisted"
exercise. A broker-assisted exercise occurs when the employee
delivers the exercise notice, together with irrevocable
instructions to a broker to deliver to the Company, from the sale
or loan proceeds with respect to the sale of Common Stock that is
the subject of the stock option or from a loan secured by Common
Stock that is the subject of the stock option, the amount
necessary to pay the exercise price and, if required by the terms
of the stock option, any applicable withholding taxes.
Stock options may be exercised in whole or in part at such
times as may be specified in the employee's stock option
agreement, subject to certain limitations with respect to
Incentive Stock Options. No Incentive Stock Option may be
exercised after the first to occur of (x) ten years from the Date
of Grant, (y) three months following the date of the employee's
retirement or termination of employment with the Company for
reasons other than disability or death, or (z) one year
following the date of the employee's termination of employment on
account of disability or death.
An Incentive Stock Option is exercisable in any calendar
year only to the extent that the aggregate fair market value
(determined on the date of grant) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time during the calendar year does not exceed $100,000.
Incentive Stock Options granted under the 2001Plan and all other
plans of the Company shall be aggregated for purposes of
determining whether this $100,000 limitation has been exceeded.
The Board may impose such conditions as it deems appropriate on
an Incentive Stock Option to ensure that the foregoing
requirement is met. If Incentive Stock Options that first become
exercisable in a calendar year exceed the $100,000 limitation,
the excess stock options will be treated as non-statutory stock
options to the extent permitted by law.
The Board may grant a stock appreciation right in connection
with all or any part of a stock option. A stock appreciation
right entitles the employee to receive an amount equal to the
excess of (i) the Fair Market Value of the Common Stock covered
by the stock appreciation right over (ii) the price of the Common
Stock on the date of the stock appreciation right was granted.
The stock appreciation right can be paid in stock or cash, or
both.
Restricted Stock
The Board may also grant shares of common stock that are
subject to certain terms and conditions (the "Restricted Stock").
Employees who receive Restricted Stock may not sell or transfer
the Restricted Stock until the restrictions have been met, and if
the restrictions are not met, the Restricted Stock will be
forfeited. Unless otherwise provided in the Restricted Stock
Agreement, a stockholder's agreement or any other agreement, a
holder of Restricted Stock will have all the rights of a Company
shareholder holding the same class or series of common stock,
including the right to vote the shares and the right to receive
cash dividends and distributions.
Federal Income Tax Consequences
A participant generally will not incur federal income tax
when he or she is granted a nonqualified stock option, an
incentive stock option or a stock appreciation right. Upon
exercise of a nonqualified stock option or a stock appreciation
right, the participant will be treated in most circumstances as
having received ordinary income equal to the difference between
the fair market value of the common stock on the date of the
exercise and the exercise price.
This income is subject to income tax withholding by the
Company. When a participant exercises an incentive stock option,
he or she generally will not recognize taxable income, unless the
participant is subject to the alternative minimum tax, subject to
satisfying applicable holding period requirements.
A participant will generally not incur federal income tax
when he or she is granted restricted stock. When the restrictions
imposed on the restricted stock lapse, the participant will be
treated as having received ordinary income equal to the fair
market value of the restricted stock on the date the restrictions
lapsed. A participant may make a special election under the Code
to be taxed on the fair market value of the restricted stock at
the time the restricted stock is granted. If such an election is
made, the participant generally will not be taxed when the
restrictions on the restricted stock later lapse. Income
recognized by a participant in connection with restricted stock
is subject to income tax withholding by the Company.
The Company usually will be entitled to a business expense
deduction at the time and in the amount that the recipient of an
award recognizes ordinary income. As stated above, this usually
occurs upon exercise of nonqualified stock options and stock
appreciation rights, and upon the lapse of restrictions on
restricted stock. No deduction is allowed in connection with an
incentive stock option unless the employee disposes of the common
stock received upon exercise in violation of certain holding
period requirements. There may be circumstances when a deduction
is not allowed for certain transfers of common stock or payments
to participants upon the exercise of an award that has been
accelerated as a result of a change of control. Also, Section
162(m) of the Code imposes a $1,000,000 limit on the amount of
the annual compensation deduction allowable to a publicly-held
company with respect to its CEO and each of its other four most
highly compensated officers, and the Company will not be able to
deduct the payment of compensation to any of these persons in
excess of the $1,000,000 annual limit.
This summary of federal income tax consequences of stock
options, stock appreciation rights and restricted stock is not
complete. State, local and federal income taxes may also be
applicable to these transactions.
Administration
As presently contemplated, the Board of Directors will
administer the 2001 Plan. The Board may, however, delegate the
responsibility for administering the 2001 Plan to the
Compensation Committee of the Board, provided the Compensation
Committee consists solely of non-employee, outside directors, as
defined in Section 162(m) of the Code and Rule 16b-3 of the
Exchange Act. The 2001 Plan may be terminated, modified or
amended by the shareholders of the Company. The Board of
Directors may also terminate the 2001 Plan or modify or amend it
in certain respects as set forth in the 2001 Plan.
Plan Amendment and Termination
The Board may amend or terminate the 2001 Plan in such respects
as it shall deem advisable. However, if the Internal Revenue
Code so requires, no change may be made that increases the total
number of shares of common stock reserved for issuance pursuant
to incentive awards granted under the 2001 Plan (except in
connection with a business combination, re-capitalization, stock
dividend or combination and the like), materially modifies the
requirements as to eligibility for participation in the 2001
Plan, or materially increases the benefits accruing to
participants under the 2001 Plan, unless the change is authorized
by the stockholders of the Company. The Board may, however,
amend the 2001 Plan and unilaterally amend incentive awards under
the 2001 Plan as it deems appropriate to ensure compliance with
applicable federal or state securities laws or regulations, or
any applicable NASDAQ or securities exchange listing requirement,
or to cause incentive stock options issued under the 2001 Plan to
meet the requirements of the Internal Revenue Code and applicable
regulations. Except as indicated in this paragraph, a termination
or amendment of the 2001 Plan will not, without the consent of
the participant, detrimentally affect the participant's rights
under an incentive award previously granted to the participant.
The 2001 Plan will terminate automatically on April 30, 2011.
Vote Required For Approval
The affirmative vote of a majority of the votes cast on the
proposal to approve the 2001 Plan is required for approval of
the 2001 Plan.
The Board Of Directors Of The Company Recommends A Vote For
Approval Of The 2001 Stock Incentive Plan.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Stegman &
Company as independent auditors of the Company for the fiscal
year ending December 31, 2001. A representative of Stegman &
Company is not expected to be present at the meeting. The
Company has engaged Stegman & Company, subject to stockholder
approval.
Berenson & Company served as the Company's independent
auditor for the years ended December 31, 2000 and 1999. The
Company dismissed Berenson & Company on April 30, 2001. Berenson
& Company's reports on the financial statements for the years
ended December 31, 2000 and 1999 did not contain any adverse
opinion or disclaimer of opinion, and were not modified as to
audit scope or accounting principles or practices. However, the
audit reports for each of the years ended December 31, 2000 and
1999 were modified as to uncertainty about the Company's ability
to continue as a going concern due to recurring losses and
limited capitalization. The decision to change accountants has
been recommended by the Audit Committee. There were no
disagreements with Berenson & Company, whether or not resolved,
on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if
not resolved to Berenson & Company's satisfaction, would have
caused Berenson & Company to make reference to the subject matter
of the disagreement(s) in connection with its report.
Audit Fees
The aggregate fees billed by Berenson & Company for
professional services rendered for the audit of the Company's
annual financial statements for 2000 and the reviews of the
financial statements included in the Company's Forms 10-QSB for
that fiscal year were $25,000.
Financial Information Systems Design and Implementation Fees
No fees were billed for professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X, and no such
services were rendered by Berenson & Company for the two most
recent fiscal years.
All Other Fees
No other fees were billed, or services provided, by Berenson
& Company, other than disclosed above.
The Board Of Directors Of The Company Recommends A Vote For
Approval Of The Appointment Of Stegman & Company As The
Company's Auditors for fiscal year 2001.
OTHER MATTERS
Stockholder Proposals
Proposals of stockholders intended to be presented at the
Company's 2002 Annual Meeting of Stockholders must be received by
the Company no later than 5:00 P.M. local time on February 1,
2002, to be eligible for inclusion in the Company's Proxy
Statement and form of Proxy to be used in connection with such
meeting. If you wish to submit a proposal, the proposal must be
in accordance with the provisions of SEC Rule 14a-8 of the
Exchange Act. It is suggested that the proposal be submitted by
certified mail, return receipt requested, to IGENE Biotechnology,
Inc., 9110 Red Branch Road, Columbia, Maryland 21045, Attn:
Corporate Secretary.
Financial And Other Information
Financial information for the Company for the fiscal year ended
December 31, 2000, is included in the Company's Annual Report on
Form 10-KSB, a copy of which accompanies this Proxy Statement.
The Company is subject to the informational requirements of
the Exchange Act and, in accordance therewith, files reports,
proxy or information statements and other information with the
Commission. Such reports, proxy or information statements,
exhibits and other information filed by the Company with the
Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at the
Regional Offices of the Commission at 7 World Trade Center (13th
Floor), New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such materials can be obtained by mail from the
Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549,
and its public reference facilities in New York, New York and
Chicago, Illinois, at prescribed rates. The Commission maintains
an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file
electronically with the Commission.
Other Business
At the date of this Proxy Statement, the only business which
the Board of Directors intends to present or knows that others
will present at the Meeting is that herein set forth. If any
other matter or matters are properly brought before the meeting,
or any adjournment thereof, it is the intention of the persons
named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their judgment.
Stephen F. Hiu
President and Treasurer
APPENDIX 1 - FORM OF PROXY
Dated: May 4, 2001
IGENE BIOTECHNOLOGY, INC.
2001 Annual Meeting of Stockholders - June 12, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of IGENE BIOTECHNOLOGY, INC., a
Maryland corporation, hereby appoints Stephen F. Hiu, Michael G.
Kimelman and Thomas L. Kempner, and each of them the proxies of
the undersigned with full power of substitution to vote at the
Annual Meeting of Stockholders of the Company to be held at 10:30
a.m. on June 12, 2001, and at any adjournment or adjournments
thereof (the "Meeting"), with all the power which the undersigned
would have if personally present, hereby revoking any proxy
heretofore given. The undersigned hereby acknowledges receipt of
the proxy statement for the Meeting and instructs the proxies to
vote as directed on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL
PROPOSALS. CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE
MANNER DIRECTED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES LISTED BELOW, FOR THE
AMENDMENT TO THE ARTICLES OF INCORPORATION, FOR THE APPROVAL OF
THE 2001 STOCK INCENTIVE PLAN, FOR THE RATIFICATION OF THE
APPOINTMENT OF STEGMAN & COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2001 AND IN THE DISCRETION OF THE PROXY HOLDERS AS
TO ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
(To Be Signed on Reverse Side)
X Please mark your votes as in this example.
1. Election of Directors
Nominees: Joseph C. Abeles, John A. Cenerazzo, Stephen F.
Hiu, Thomas L. Kempner, Michael G. Kimelman, Sidney R.
Knafel, Patrick F. Monahan.
FOR WITHHOLD
__________ __________
(Instruction: To withhold authority to vote for any
individual nominee, write that nominee's name below)
_______________________________________
2. To authorize and approve an amendment to the Articles of
Incorporation of the Company to increase the number of
authorized shares of Common Stock to 750,000,000 shares.
FOR AGAINST ABSTAIN
__________ __________ __________
3. To authorize and approve the Company's 2001 Stock Incentive
Plan.
FOR AGAINST ABSTAIN
__________ __________ __________
4. To approve the appointment of Stegman & Company as
independent auditors of the Company for the fiscal year
ending December 31, 2001.
FOR AGAINST ABSTAIN
__________ __________ __________
5. To transact such other business as may properly come before
the meeting, or any adjournment thereof.
PLEASE RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature: __________________________ Date: _____________
Signature: __________________________ Date: _____________
(SIGNATURE IF HELD JOINTLY)
Note: Please sign exactly as name appears on stock certificate.
When share are held by joint tenants 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 partner, please sign in partnership
name by authorized person.
APPENDIX 2 - AUDIT COMMITTEE CHARTER
IGENE BIOTECHNOLOGY, INC.
AUDIT COMMITTEE CHARTER
1. PURPOSE. The primary function of the Audit Committee (the
"Committee") of Igene Biotechnology, Inc. (the "Company") is
to monitor management's and the independent auditor's
participation in the financial reporting process and to
otherwise review and evaluate the audit efforts and
independence of the independent accountants.
2. COMPOSITION.
A. The Committee shall be comprised of three or more
independent directors as determined by the Company's
Board of Directors (the "Board").
B. Each member of the Committee shall be, in the opinion
of the Board, financially literate, and at least one
member must have accounting or related financial
management expertise. No member of the Committee shall
have any relationship to the Company that might
interfere with such member's independence from the
Company and its management. In addition, the following
restrictions shall apply to every member of the
Committee:
(i) No individual who is either an employee or
executive officer of the Company or any of its
affiliates (or an immediate family member of an
employee or executive officer of the Company) may
serve on the Committee until at least three (3)
years following the termination of such person's
employment; and
(ii) No individual who either is a partner, controlling
shareholder, or executive officer of an
organization that has a business relationship with
the Company or who has a direct business
relationship with the Company may serve on the
Committee unless the Board determines that the
relationship does not interfere with the exercise
of such member's independent judgment; provided,
however, that the Board need not make such
determination if at least three (3) years have
elapsed since the termination of such
disqualifying relationship; and
(iii) No individual may serve on the Committee if
such person is employed as an executive of another
corporation whose compensation committee includes
any of the executive officers of the Company.
C. The members of the Committee shall be subject to such
further or different restrictions and requirements for
qualification as may be required from time to time by
the Securities and Exchange Commission and any stock
exchange which lists the Company's securities.
D. The members of the Committee shall be elected by the
Board at the annual meeting of the Board or until their
successors shall be duly elected and qualified. Term
of membership of the Committee is at the discretion of
the Board, but maintenance of continuity while bringing
a fresh perspective is to be considered. Unless a
Chair is elected by the full Board, the members of the
Committee may designate a Chair by majority vote of the
full membership.
3. MEETINGS. The Committee shall meet at least twice annually,
or more frequently as circumstances dictate.
4. RESPONSIBILITIES AND DUTIES. To fulfill its responsibilities
and duties the Committee shall:
A. Documents/Report Review
(i) Review and update this Charter periodically, at
least annually, as conditions dictate.
(ii) Cause the Company's independent accountants to
review, prior to filing, any interim financial
statements of the Company to be included in its
quarterly reports on Form 10-Q.
(iii) Discuss with management any significant
issues raised by the independent accountants with
respect to the quality of the Company's accounting
principles and financial reporting processes.
(iv) Prepare and submit an audit committee report
to be set forth in the Company's proxy statement
which sets forth whether:
(a) the Committee has reviewed and discussed the
Company's audited financial statements with
management;
(b) the Committee has discussed with its
independent accountants the matters required
to be discussed by SAS 61; and
(c) the Committee has received written
disclosures and a letter from its independent
accountants required by ISB Standard No. 1
and has discussed with its accountants the
accountants' independence; and
(d) the Committee's recommendation to the
Company's Board that the audited financial
statements be included in the Company's
annual report on Form 10-K.
(v) Cause the Company to disclose in its proxy
statement whether the Committee members are
independent, the standard used in making such
determination, and disclosure of information
regarding any member of the Committee who is not
independent.
B. Independent Accountants.
(i) Have the authority and responsibility with the
Board for the selection and evaluation of the
Company's independent accountants and the
selection and appointment of their successors.
The Company's independent accountants ultimately
shall be accountable to the Committee and the
Board.
(ii) Recommend to the Board the selection of the
independent accountants. The Committee shall
require the Company's independent accountants to
prepare and submit to the Committee on a periodic
basis a formal written statement delineating all
relationships or services between said independent
accountants and the Company. The Committee shall
review and discus all relationships disclosed by
the Company's independent accountants which may
impact upon their objectivity and independence and
shall be responsible for recommending to the
Company's Board any appropriate action to ensure
the independence of such accountants.
(iii) Review the performance of the independent
accountants and approve any proposed discharge of
the independent accountants when circumstances
warrant.
C. Ethical and Legal Compliance.
(i) Perform any other activities consistent with this
Charter, the Company's Bylaws and governing law as
the Committee or the Board deem necessary or
appropriate.
(ii) Cause the Company to provide each exchange on
which any of the Company's securities are listed,
if any, on at least an annual basis and with
respect to any changes to the composition of the
Committee, with written confirmation regarding:
(a) any determination made the Company's Board
concerning the independence of its auditors;
(b) the financial literacy of the Committee
members;
(c) the determination that at least one
member of the Committee has accounting or
related financial management expertise; and
(d) the annual review and reassessment of the
adequacy of this Charter;
(iii) Cause the Company to disclose in its proxy
statements whether the Committee has adopted and
the Board has approved a written charter for the
Committee and, if applicable, include a copy of
such charter a an appendix to the company's proxy
statement at least once every three years.
The foregoing Charter of the Audit Committee of the
Board of Directors of Igene Biotechnology, Inc., a Maryland
corporation, was adopted by the Audit Committee on the 1st day of
February, 2001, and approved by the Board of Directors of said
corporation on the 1st day of February, 2001.
Igene Biotechnology, Inc.
By: /s/ Michael G. Kimelman
-------------------------------
Michael G. Kimelman
Secretary
APPENDIX 3 - 2001 STOCK INCENTIVE PAN
IGENE BIOTECHNOLOGY, INC.
2001 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the 2001 Stock Incentive Plan
(the "Plan") is to further the long term stability and financial
success of IGENE Biotechnology, Inc. and its subsidiaries
(collectively the "Company") by attracting and retaining
employees through the use of stock-based incentives, and to
provide employees with an additional incentive to promote the
success of the Company. It is believed that ownership of Company
Common Stock will stimulate the efforts of those employees upon
whose judgment and interests the Company is and will be largely
dependent for the successful conduct of its business. It is also
believed that Incentive Awards granted to employees under this
Plan will strengthen their desire to remain employed with the
Company and will further the identification of employees'
interests with those of the Company. The Plan is intended to
operate in compliance with the provisions of Securities and
Exchange Commission Rule 16b-3.
2. DEFINITIONS. As used in the Plan, the following terms
have the meanings indicated:
(a) "ACT" means the Securities Exchange Act of 1934, as
amended.
(b) "APPLICABLE WITHHOLDING TAXES" means the aggregate
amount of federal, state and local income and payroll
taxes that the Company is required by applicable law
to withhold in connection with any lapse of
restrictions on Restricted Stock or any exercise of
a Nonstatutory Stock Option or Stock Appreciation Right.
(c) "BOARD" means the Board of Directors of IGENE
Biotechnology, Inc.
(d) "CHANGE OF CONTROL" means the occurrence of any of the
following events:
(i) The acquisition by a Group of Beneficial
Ownership of 50% or more of the Common Stock or the
Voting Power of the Company, but excluding for this
purpose: (A) any acquisition by the Company (or a
Parent or Subsidiary of the Company), or an employee
benefit plan of the Company; (B) any acquisition of
Common Stock of the Company by management employees of
the Company; (C) any acquisition by a member or members
of the Board who own Common Stock as of the effective
date specified in Section 11 (the "Existing
Shareholders"); or (D) any trusts, partnerships or
corporations controlled by the Existing Shareholders.
(ii) Individuals who constitute the Board on the
date immediately after the effective date set forth in
Section 11 (the "Incumbent Board") cease to constitute
at least a majority of the Board, provided that any
director whose nomination was approved by a majority of
the Incumbent Board shall be considered a member of the
Incumbent Board unless such individual's initial
assumption of office is in connection with an actual or
threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the
Act).
(iii) Approval by the shareholders of the Company
of a reorganization, merger or consolidation, in each
case, in which the owners of more than 50% of the
Common Stock or Voting Power of the Company do not,
following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50%
of the Common Stock or Voting Power of the corporation
resulting from such reorganization, merger or
consolidation.
(iv) A complete liquidation or dissolution of the
Company or a sale or other disposition of all or
substantially all of the Company's assets.
(e) "CODE" means the Internal Revenue Code of 1986,
as amended.
(f) "COMMITTEE" means the Compensation Committee of the Board,
provided that each member of the Compensation Committee
qualifies as both an outside director for purposes of Code
section 162(m) and a non-employee director for purposes of
Rule 16b-3.
(g) "COMMON STOCK" means common stock of IGENE Biotechnology,
Inc., par value $.01 per share. In the event of a change in
the capital structure of IGENE Biotechnology, Inc. (as
provided in Section 13), the shares resulting from such a
change shall be deemed to be Common Stock within the meaning
of the Plan.
(h) "COMPANY" means IGENE Biotechnology, Inc. and, as the
context requires, its Subsidiaries.
(i) "DATE OF GRANT" means the date on which the Board grants an
Incentive Award.
(j) "DISABILITY" or "DISABLED" means, as to an Incentive Stock
Option, a disability within the meaning of Code section
22(e)(3). As to all other Incentive Awards, the Board shall
determine whether a Disability exists and such determination
shall be conclusive.
(k) "FAIR MARKET VALUE" means, as of any date, the value of a
share of Common Stock, determined as follows:
(i) if such Common Stock is then quoted on the
NASDAQ National Market, its closing price on the NASDAQ
National Market on the date of determination, as
reported in The Wall Street Journal;
(ii) if such Common Stock is then listed on a
national securities exchange, its closing price on the
date of determination on the principal national
securities exchange on which the Common Stock is listed
or admitted to trading, as reported in The Wall Street
Journal;
(iii) if such Common Stock is not quoted on the
NASDAQ National Market nor listed or admitted to
trading on a national securities exchange, the average
of the closing bid and asked prices on the date of
determination, as reported in The Wall Street Journal
or by such other source as the Board may determine to
be reliable;
(iv) if none of the foregoing is applicable, by
the Board in good faith.
(l) "INCENTIVE AWARD" means, collectively, an award of
Restricted Stock, an Option, or a Stock Appreciation Right
granted under the Plan.
(m) "INCENTIVE STOCK OPTION" means an Option intended to
meet the requirements of, and qualify for favorable federal
income tax treatment under, Code section 422.
(n) "MATURE SHARES" means shares of Common Stock for which
the holder thereof has good title, free and clear of all
liens and encumbrances and which such holder either (i) has
held for at least six months, or (ii) has purchased on the
open market.
(o) "NONSTATUTORY STOCK OPTION" means an Option that does
not meet the requirements of Code section 422, or, even if
meeting the requirements of Code section 422, is not
intended to be an Incentive Stock Option and is so
designated.
(p) "OPTION" means a right to purchase Common Stock granted
under the Plan, at a price determined in accordance with the
Plan.
(q) "Participant" means any employee of the Company who
receives an Incentive Award under the Plan.
(r) "RESTRICTED STOCK" means Common Stock awarded upon the
terms and subject to the restrictions set forth in Section 10.
(s) "RULE 16B-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under the Act. A reference
in the Plan to Rule 16b-3 shall include a reference to any
corresponding rule (or number redesignation) of any
amendments to Rule 16b-3 enacted after the effective date of
the Plan's adoption.
(t) "STOCK APPRECIATION RIGHT" means a right to receive
amounts from the Company granted under Section 7.
(u) "SUBSIDIARY" means any corporation of which the Company
owns at least 50 percent of the combined voting power of all
classes of stock or which is in a chain of corporations with
the Company in which stock possessing at least 50% of the
combined voting power of all classes of stock is owned by
one or more corporations in the chain.
(v) "TAXABLE YEAR" means the fiscal period used by the
Company for reporting taxes on income under the Code.
3. GENERAL. The following types of Incentive Awards may
be granted under the Plan: Options (Incentive Stock Options or
Nonstatutory Stock Options), Stock Appreciation Rights or
Restricted Stock.
4. STOCK. Subject to Section 13 of the Plan, there shall
be reserved for issuance under the Plan an aggregate of Fifty
Five Million (55,000,000) shares of Common Stock, which shall be
authorized, but unissued, shares. Shares allocable to Incentive
Awards or portions thereof granted under the Plan that expire,
are forfeited, or otherwise terminate unexercised may again be
subjected to an Incentive Award under the Plan. The Board is
expressly authorized to grant an Incentive Award to a Participant
conditioned upon the surrender for cancellation of Incentive
Awards previously granted to such Participant. No more than Five
Million Five Hundred Thousand (5,500,000) shares of Common Stock
may be allocated to the Options or Stock Appreciation Rights that
are granted to any individual Participant who is an employee
during any single Taxable Year. For purposes of determining the
number of shares that are available for Incentive Awards under
the Plan, such number shall include the number of shares under an
Incentive Award surrendered by a Participant or retained by the
Company in payment of Applicable Withholding Taxes.
5. ELIGIBILITY.
(a) All present and future employees of the Company whom
the Board determines to have contributed or who can
be expected to contribute significantly to the Company
shall be eligible to receive Incentive Awards under
the Plan. The Board shall have the power and complete
discretion, as provided in Section 14, to select
eligible employees to receive Incentive Awards, and
to determine for each employee the terms and conditions,
the nature of the award, and the number of shares to
be allocated to each employee as part of each Incentive
Award.
(b) The grant of an Incentive Award shall not obligate
the Board to pay an employee any particular amount of
remuneration, to continue the employment of the employee
after the grant or to make further grants to the
employee at any time thereafter.
6. OPTIONS.
(a) The Board may make grants of Options to eligible
employees hereunder. Whenever the Board deems it appropriate
to grant Options, written notice shall be given to the
Participate stating the number of shares for which Options
are granted, the Option price per share, whether the Options
are Incentive Stock Options or Nonstatutory Stock Options,
the extent to which Stock Appreciation Rights are granted
(as provided in Section 7), and the conditions to which the
grant and exercise of the Options are subject. This notice,
when duly accepted in writing by the Participant, shall
become a stock option agreement. The Board may delegate to
the Executive Committee of the Company's officers the
authority to select eligible employees to receive Options,
to determine the time or times at which Options will be
awarded to eligible employees and to determine the terms and
conditions of such Options, except to the extent that such a
delegation would prevent compliance with Rule 16b-3, Code
section 162(m) or any other section of the Code, or other
applicable law or regulation. Actions taken by the Executive
Committee of the Company's officers pursuant to
such a delegation of authority shall be subject to
ratification by the Board. In the event that the Executive
Committee ceases to exist, the delegation described above
may be made to the President of the Company.
(b) The exercise price of shares of Common Stock covered by
an Option shall be not less than 85% of the Fair Market Value
of such shares on the Date of Grant, provided, however, that
the exercise price of any Incentive Stock Option granted
under the Plan shall not be less than 100% of the Fair
Market Value of such Common Stock on the Date of Grant (or
110% of Fair Market Value in the case of a grant to a 10%
shareholder (as that term is defined in Code section 422)).
(c) Options may be exercised in whole or in part at such times
as may be specified by the Board in the Participant's stock
option agreement; provided that, the exercise provisions for
Incentive Stock Options shall in all events not be more
liberal than the following provisions:
(i) No Incentive Stock Option may be exercised
after the first to occur of (x) ten years from the Date
of Grant, (y) three months following the date of the
Participant's retirement or termination of employment
with all Employers for reasons other than Disability or
death, or (z) one year following the date of the
Participant's termination of employment on account of
Disability or death.
(ii) An Incentive Stock Option by its terms, shall
be exercisable in any calendar year only to the extent
that the aggregate Fair Market Value (determined at the
Date of Grant) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the
first time during the calendar year does not exceed
$100,000 (the "Limitation Amount"). Incentive Stock
Options granted under the Plan and all other plans of
the Company shall be aggregated for purposes of
determining whether the Limitation Amount has been
exceeded. The Board may impose such conditions as it
deems appropriate on an Incentive Stock Option to
ensure that the foregoing requirement is met. If
Incentive Stock Options that first become exercisable
in a calendar year exceed the Limitation Amount, the
excess Options will be treated as Nonstatutory Stock
Options to the extent permitted by law.
(d) The Board may impose such vesting conditions and other
requirements as the Board deems appropriate, and the Board
may include such provisions regarding Change of Control as
the Board deems appropriate.
7. STOCK APPRECIATION RIGHTS.
(a) Whenever the Board deems it appropriate, Stock
Appreciation Rights may be granted to an eligible employee.
Stock Appreciation Rights may be granted in connection with
all or any part of an Option or in a separate Incentive
Award.
(b) The following provisions apply to all Stock Appreciation
Rights that are granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the
Participant, upon exercise of all or any part of the
Stock Appreciation Rights, to surrender to the Company
unexercised that portion of the underlying Option
relating to the same number of shares of Common Stock
as is covered by the Stock Appreciation Rights (or the
portion of the Stock Appreciation Rights so exercised)
and to receive in exchange from the Company an amount
equal to the excess of (x) the Fair Market Value on the
date of exercise of the Common Stock covered by the
surrendered portion of the underlying Option, over (y)
the exercise price of the Common Stock covered by the
surrendered portion of the underlying Option. The
Board may limit the amount that the Participant will be
entitled to receive upon exercise of Stock Appreciation
Rights
(ii) Upon the exercise of a Stock Appreciation
Right and surrender of the related portion of the
underlying Option, the Option, to the extent
surrendered, shall not thereafter be exercisable.
(iii) Subject to any further conditions upon
exercise imposed by the Board, a Stock Appreciation
Right shall be exercisable only to the extent that the
related Option is exercisable and a Stock Appreciation
Right shall expire no later than the date on which the
related Option expires.
(iv) A Stock Appreciation Right may only be
exercised at a time when the Fair Market Value of the
Common Stock covered by the Stock Appreciation Right
exceeds the exercise price of the Common Stock covered
by the underlying Option.
(c) The following provisions apply to all Stock Appreciation
Rights that are not granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the
Participant, upon exercise of all or any part of the
Stock Appreciation Rights, to receive in exchange from
the Company an amount equal to the excess of (x) the
Fair Market Value on the date of exercise of the Common
Stock covered by the surrendered Stock Appreciation
Right, over (y) the price of the Common Stock on the
Date of Grant of the Stock Appreciation Right. The
Board may limit the amount that the Participant will be
entitled to receive upon exercise of Stock Appreciation
Rights.
(ii) A Stock Appreciation Right may only be
exercised at a time when the Fair Market Value of the
Common Stock covered by the Stock Appreciation Right
exceeds the Fair Market Value of the Common Stock on
the Date of Grant of the Stock Appreciation Right.
(d) The manner in which the Company's obligation arising upon
the exercise of a Stock Appreciation Right shall be paid
shall be determined by the Board and shall be set forth in
the Incentive Award. The Incentive Award may provide for
payment in Common Stock or cash, or a fixed combination of
Common Stock or cash, or the Board may reserve the right to
determine the manner of payment at the time the Stock
Appreciation Right is exercised. Shares of Common Stock
issued upon the exercise of a Stock Appreciation Right shall
be valued at their Fair Market Value on the date of
exercise.
(e) Stock Appreciation Rights shall be evidenced by a written
agreement in such form as the Board shall from time to time
approve and as shall be consistent with the terms of the
Plan.
8. METHOD OF EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) Options and Stock Appreciation Rights may be exercised by
the Participant giving written notice of the exercise to the
Company, stating the number of shares the Participant has
elected to purchase under the Option or the number of Stock
Appreciation Rights the Participant has elected to exercise.
In the case of the purchase of shares under an Option, such
notice shall be effective only if accompanied by the
exercise price in full in cash; provided, however, that if
the terms of an Option so permit, the Participant may (i)
deliver Mature Shares (valued at their Fair Market Value) in
satisfaction of all or any part of the exercise price, or
(ii) deliver a properly executed exercise notice together
with irrevocable instructions to a broker to deliver
promptly to the Company, from the sale or loan proceeds with
respect to the sale of Common Stock or a loan secured by
Common Stock, the amount necessary to pay the exercise price
and, if required by the terms of the Option, Applicable
Withholding Taxes.
(b) The Company may place on any certificate representing
Common Stock issued upon the exercise of an Option or a Stock
Appreciation Right any legend deemed desirable by the
Company's counsel to comply with federal or state securities
laws, and the Company may require a customary written
indication of the Participant's investment intent. Until
the Participant has made any required payment, including any
Applicable Withholding Taxes, and has had issued a
certificate for the shares of Common Stock acquired, he or
she shall possess no shareholder rights with respect to the
shares.
(c) Each Participant shall agree as a condition of the
exercise of an Option or a Stock Appreciation Right to pay
to the Company, or make arrangements satisfactory to the
Company regarding the payment to the Company of, Applicable
Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no
stock certificate shall be issued upon the exercise of an
Option or cash paid upon the exercise of a Stock
Appreciation Right.
(d) As an alternative to making a cash payment to the
Company to satisfy Applicable Withholding Taxes, if the
Participant's Option agreement so provides, the Participant
may elect to (i) deliver Mature Shares (valued at their
Fair Market Value) or (ii) to have the Company retain
that number of shares of Common Stock (valued at their
Fair Market Value) that would satisfy all or a specified
portion of the Applicable Withholding Taxes.
9. TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS.
Nonstatutory Stock Options and Stock Appreciation Rights
may be transferable by a Participant and exercisable by a person
other than the Participant, but only to the extent specifically
provided in the Incentive Award agreement. Incentive Stock
Options, by their terms, shall not be transferable except by will
or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the
Participant.
10. RESTRICTED STOCK AWARDS.
(a) The Board may make grants of Restricted Stock to eligible
employees. Whenever the Board deems it appropriate to grant
Restricted Stock, written notice shall be given to the
Participant stating the number of shares of Restricted Stock
granted and the terms and conditions to which the Restricted
Stock is subject. This notice, when accepted in writing by
the Participant shall become a grant agreement between the
Company and the Participant. Restricted Stock may be awarded
by the Board in its discretion without cash consideration.
(b) No shares of Restricted Stock may be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered
or disposed of until the restrictions on such shares as set
forth in the Participant's grant agreement have lapsed or
been removed pursuant to paragraph (d) or (e) below.
(c) Upon the acceptance by a Participant of an award of
Restricted Stock, such Participant shall, subject to the
restrictions set forth in paragraph (b) above, have all the
rights of a shareholder with respect to such shares of
Restricted Stock, including, but not limited to, the right
to vote such shares of Restricted Stock and the right to
receive all dividends and other distributions paid thereon.
Certificates representing Restricted Stock shall be issued
to the Participant but shall bear a legend referring to the
restrictions set forth in the Plan and the Participant's
award agreement.
(d) The Board shall establish as to each award of Restricted
Stock the terms and conditions upon which the restrictions
set forth in paragraph (b) above shall lapse. The terms and
conditions may include, without limitation, the lapsing of
such restrictions as a result of the Disability, death or
retirement of the Participant or the occurrence of a Change
of Control.
(e) Notwithstanding the provisions of paragraph (b) above, the
Board may at any time, in its sole discretion, accelerate
the time at which any or all restrictions will lapse or
remove any and all such restrictions.
(f) Each Participant shall agree at the time the Restricted
Stock is granted, and as a condition thereof, to pay to the
Company, or make arrangements satisfactory to the Company
regarding the payment to the Company of, Applicable
Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no
stock certificate free of a legend reflecting the
restrictions set forth in paragraph (b) above shall be
issued to such Participant. As an alternative to making a
cash payment to the Company to satisfy Applicable
Withholding Taxes, if the grant so provides, the Participant
may elect to (i) to deliver Mature Shares (valued at their
Fair Market Value) or (ii) to have the Company retain that
number of shares of Common Stock (valued at their Fair
Market Value) that would satisfy all or a specified portion
of the Applicable Withholding Taxes.
11. EFFECTIVE DATE OF THE PLAN. The effective date of the
Plan is April 30, 2001. The Plan shall be submitted to the
shareholders of the Company for approval. Until (i) the Plan has
been approved by Company's shareholders, and (ii) the
requirements of any applicable Federal or State securities laws
have been met, no Option or Stock Appreciation Right granted
under the Plan shall be exercisable.
12. TERMINATION, MODIFICATION, CHANGE
(a) If not sooner terminated by the Board, this Plan shall
terminate at the close of business on April 30, 2011. No
Options shall be granted under the Plan after its
termination. The Board may amend or terminate the Plan in
such respects as it shall deem advisable; provided that, if
and to the extent required by the Code, no change shall be
made that increases the total number of shares of Common
Stock reserved for issuance pursuant to Incentive Awards
granted under the Plan (except pursuant to Section 13),
materially modifies the requirements as to eligibility for
participation in the Plan, or materially increases the
benefits accruing to Participants under the Plan, unless
such change is authorized by the shareholders of the
Company. Notwithstanding the foregoing, the Board may amend
the Plan and unilaterally amend Incentive Awards as it deems
appropriate to ensure compliance with applicable federal or
state securities laws or regulations thereunder, or any
applicable NASDAQ or securities exchange listing
requirement, and to cause Incentive Stock Options to meet
the requirements of the Code and regulations thereunder.
Except as provided in the preceding sentence, a termination
or amendment of the Plan shall not, without the consent of
the Participant, detrimentally affect a Participant's rights
under an Incentive Award previously granted to the
Participant.
(b) Notwithstanding the provisions of subsection (a) above,
this subsection (b) will apply if the Company is involved in
any merger or similar transaction that the Company intends to
treat as a "pooling of interest" for financial reporting
purposes. In such a case, the Board may amend the terms of
any Incentive Award or of the Plan to the extent that the
Company's independent accountants determine that such terms
would preclude the use of "pooling of interest" accounting.
The authority of the Board to amend the terms of any
Incentive Award or of the Plan includes, without limitation,
the right (i) to rescind or suspend any terms that are
contingent on a Change in Control, such as the acceleration
of vesting or provisions for special payments to an optionee
or participant; (ii) to modify Incentive Awards to comply
with prior practices of the Company as to terms of Incentive
Awards; (iii) to provide for payment to the Participant of
Common Stock or stock of the other party to the transaction
equal to the fair value of the Incentive Award; and (iv) to
suspend any provisions for payment of an Incentive Award in
cash. The authority of the Board under this section may be
exercised in the Board's sole and complete discretion.
13. CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or merger in which
the Company is the surviving corporation or other change in
the Company's capital stock (including, but not limited to,
the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or
preferred stock of the Company), the number and kind of
shares of stock or securities of the Company to be subject
to the Plan and to Incentive Awards then outstanding or to
be granted thereunder, the maximum number of shares or
securities which may be delivered under the Plan, the
maximum number of shares or securities that can be granted
to an individual Participant under Section 4, the exercise
price, the terms of Incentive Awards and other relevant
provisions shall be appropriately adjusted by the Board,
whose determination shall be binding on all persons. If the
adjustment would produce fractional shares with respect to
any unexercised Option, the Board may adjust appropriately
the number of shares covered by the Option so as to
eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger
in which the Company is not the surviving corporation, a
transaction that results in the acquisition of substantially
all of the Company's outstanding stock by a single person or
entity, or a sale or transfer of substantially all of the
Company's assets, the Board may take such actions with
respect to outstanding Incentive Awards as the Board deems
appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Board may take the foregoing actions without the consent of
any Participant, and the Board's determination shall be
conclusive and binding on all persons for all purposes.
14. ADMINISTRATION OF THE PLAN.
(a) Subject to the provisions of Section 16(b) of the Act and
Rule 16b-3, the Plan shall be administered by the Board. The
Board shall have general authority to impose any limitation
or condition upon an Incentive Award that the Board deems
appropriate to achieve the objectives of the Incentive Award
and the Plan and, without limitation and in addition to
powers set forth elsewhere in the Plan, shall have the power
and complete discretion to determine: (i) which eligible
employees shall receive Incentive Awards and the nature of
each Incentive Award, (ii) whether all or any part of an
Incentive Award shall be accelerated upon a Change of
Control, (iii) the number of shares of Common Stock to be
covered by each Incentive Award, (iv) whether Options shall
be Incentive Stock Options or Nonstatutory Stock Options,
(v) when, whether and to what extent Stock Appreciation
Rights shall be granted, (vi) the time or times when an
Incentive Award shall be granted, (vii) whether an Incentive
Award shall become vested over a period of time and when it
shall be fully vested, (viii) when Options and Stock
Appreciation Rights may be exercised, (ix) whether a
Disability exists and whether a Participant that cannot be
located shall be treated as having died, (x) the manner in
which payment will be made upon the exercise of Options or
Stock Appreciation Rights, (xi) conditions relating to the
length of time before disposition of Common Stock received
upon the exercise of Options or Stock Appreciation Rights is
permitted, (xii) whether to authorize a Participant (A) to
deliver Mature Shares to satisfy Applicable Withholding
Taxes or (B) to have the Company withhold from the shares to
be issued upon the exercise of a Nonstatutory Stock Option
or Stock Appreciation Right the number of shares necessary
to satisfy Applicable Withholding Taxes, (xiii) the terms
and conditions applicable to Restricted Stock awards, (xiv)
the terms and conditions on which restrictions upon
Restricted Stock shall lapse, (xv) whether to accelerate the
time at which any or all restrictions with respect to
Restricted Stock will lapse or be removed, (xvi) notice
provisions relating to the sale of Common Stock acquired
under the Plan, (xvii) the extent to which information shall
be provided to Participants about available tax elections,
(xviii) when Incentive Awards may be forfeited or expire,
and (xix) any additional requirements relating to Incentive
Awards that the Board deems appropriate. Notwithstanding
the foregoing, no "tandem stock options" (where two stock
options are issued together and the exercise of one option
affects the right to exercise the other option) may be
issued in connection with Incentive Stock Options. The Board
shall have the power to amend the terms of previously
granted Incentive Awards that were granted by the Board so
long as the terms as amended are consistent with the terms
of the Plan and provided that the consent of the Participant
is obtained with respect to any amendment that would be
detrimental to him or her, except that such consent will not
be required if such amendment is for the purpose of
complying with Rule 16b-3 or any requirement of the Code
applicable to the Incentive Award.
(b) The Board may adopt rules and regulations for carrying
out the Plan with respect to Participants. The interpretation
and construction of any provision of the Plan by the Board
shall be final and conclusive as to any Participant. The
Board may consult with counsel, who may be counsel to the
Company, and shall not incur any liability for any action
taken in good faith in reliance upon the advice of counsel.
(c) A majority of the members of the Board shall constitute
a quorum, and all actions of the Board shall be taken by a
majority of the members present. Any action may be taken by
a written instrument signed by all of the members, and any
action so taken shall be fully effective as if it had been
taken at a meeting.
(d) Subject to the provisions of Section 16(b) of the Act
and Rule 16b-3 and the Maryland General Corporation Law,
the Board may delegate its rights, duties and other
responsibilities hereunder to the Committee, in which case a
majority of the members of the Committee shall constitute a
quorum, and all actions of the Committee shall be taken by a
majority of the members present. Any action by the
Committee may be taken by a written instrument signed by all
of the members, and any action so taken shall be fully
effective as if it had been taken at a meeting. The Board
from time to time may appoint members previously appointed
and may fill vacancies, however caused, in the Committee.
The Committee shall have, in connection with the
administration of the Plan, the powers possessed by the
Board, including the power to delegate to a subcommittee any
of the administrative powers the Committee is authorized to
exercise, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board.
15. NOTICE. All notices and other communications required
or permitted to be given under this Plan shall be in writing and
shall be deemed to have been duly given if delivered personally
or mailed first class, postage prepaid, as follows (a) if to the
Company - at the principal business address of the Company to the
attention of the President of the Company; and (b) if to any
Participant - at the last address of the Participant known to the
sender at the time the notice or other communication is sent.
16. SHAREHOLDER RIGHTS. No Participant shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to an Incentive
Award unless and until such Participant has satisfied all
requirements under the terms of the Incentive Award.
17. NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the
Plan or any instrument executed or Incentive Award granted under
the Plan shall confer upon any Participant any right to continue
to serve the Company in the capacity in effect at the time the
Incentive Award was granted or shall affect the right of the
Company to terminate the employment of an employee with or
without notice and with or without cause.
18. INTERPRETATION. The terms of this Plan shall be
governed by the laws of the State of Maryland, without regard to
the conflict of law provisions of any jurisdiction. The terms of
this Plan are subject to all present and future regulations and
rulings of the Secretary of the Treasury or his delegate relating
to the qualification of Incentive Stock Options under the Code.
If any provision of the Plan conflicts with any such regulation
or ruling, then that provision of the Plan shall be void and of
no effect.