UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Boston Life Sciences, Inc.
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(Name of Registrant as Specified In Its Charter)
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Notes:
BOSTON LIFE SCIENCES, INC.
137 Newbury Street, 8/th/ Floor
Boston, Massachusetts 02116
(617) 425-0200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 2002
To all Holders of Shares of Common Stock:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of BOSTON
LIFE SCIENCES, INC. (the "Company") will be held at The Fairmont Copley Plaza,
138 St. James Avenue, Boston, Massachusetts 02116 on June 11, 2002 at 10:00
a.m. for the following purposes:
1. To consider and act upon a proposal to elect eight (8) directors for a
term ending at the next annual meeting and until each such director's
successor is duly elected and qualified.
2. To approve an amendment (the "Certificate Amendment") to increase to
50,000,000 the number of shares of common stock authorized for issuance
under the Company's Amended and Restated Certificate of Incorporation, an
increase of 10,000,000 shares.
3. To approve an amendment to the Company's 1998 Omnibus Stock Option
Plan to increase to 3,200,000 the number of shares issuable upon the
exercise of options granted thereunder, an increase of 900,000 shares over
the number of shares approved for issuance thereunder at the last annual
meeting of stockholders.
4. To approve an amendment to the Company's Amended and Restated 1990
Non-Employee Directors' Non-Qualified Stock Option Plan to increase to
1,000,000 the number of shares issuable upon the exercise of options granted
thereunder, an increase of 200,000 shares over the number of shares approved
for issuance thereunder at the last annual meeting of stockholders.
Shareholders of record at the close of business of April 15, 2002 are
entitled to notice of and to vote at the meeting. Directors will be elected by
a plurality of the votes cast by holders of common stock. The favorable vote of
a majority of the outstanding shares of common stock is required to approve
Proposal 2. The affirmative vote of holders of a majority of the shares of
common stock present in person or by proxy and entitled to vote is required to
approve Proposals 3 and 4.
The Board of Directors recommends that you vote for the election of nominees
for director and in favor of Proposals 2, 3 and 4.
Your vote is important. Please complete, date and sign the enclosed proxy
and return it promptly in the enclosed envelope, whether or not you plan to
attend the annual meeting in person. A self-addressed, postage paid envelope is
enclosed for your convenience. You may also complete your proxy by telephone by
calling the toll free number listed on your Voter Instruction Form or via the
Internet at www.proxyvote.com.
By Order of the Board of Directors,
Joseph P. Hernon
Secretary
May 1, 2002
Boston, Massachusetts
BOSTON LIFE SCIENCES, INC.
137 Newbury Street, 8th Floor
Boston, Massachusetts 02116
Telephone: (617) 425-0200
Facsimile: (617) 425-0996
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Boston Life Sciences, Inc. (the "Company")
of proxies to be voted at its Annual Meeting of Stockholders and at any
adjournments thereof (the "Meeting"), which is scheduled to be held on June 11,
2002, at 10:00 a.m. at The Fairmont Copley Plaza, 138 St. James Avenue, Boston,
Massachusetts 02116, for the purposes set forth in the accompanying notice of
meeting. It is expected that this proxy statement, the foregoing notice and the
enclosed proxy card are first being mailed to stockholders entitled to vote on
or about May 13, 2002. A complete list of stockholders entitled to vote at the
meeting will be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, at least ten days prior
to the meeting at the principal executive offices of the Company listed above.
Sending a signed proxy, or completing the proxy telephonically or via the
Internet, will not affect a stockholder's right to attend the Meeting and vote
in person since the proxy is revocable. Any stockholder giving a proxy has the
power to revoke it by, among other methods, giving written notice to the
Secretary of the Company at any time before the proxy is exercised, delivering
a duly executed proxy bearing a later date, or attending the Meeting and voting
in person.
When your proxy card is returned properly signed, or you complete the proxy
telephonically or via the Internet, the shares represented will be voted in
accordance with your directions. The Board knows of no matters that are likely
to be brought before the Meeting, other than the matters specifically referred
to in the notice of the Meeting. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
appointed substitutes acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their judgment in such matters. In the
absence of instructions, the shares represented at the Meeting by the enclosed
proxy will be voted "FOR" the eight nominees of the Board in the election of
directors and in favor of each proposal.
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of the Company.
The expense of the proxy solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone or
telecopy by officers or other regular employees of the Company, without
additional compensation. The Company is required to pay the reasonable expenses
incurred by record holders of the Company's common stock, $.01 par value per
share (the "Common Stock") who are brokers, dealers, banks or voting trustees,
or other nominees, for mailing proxy material and annual stockholder reports to
any beneficial owners of Common Stock they hold of record, upon request of such
record holders.
VOTING SECURITIES
Holders of record of the Common Stock as of the close of business on April
15, 2002 (the "Record Date"), will be entitled to notice of and to vote at the
Meeting and at any adjournments thereof. As of the Record Date, there were
22,374,210 shares of Common Stock outstanding. The holders of the Company's
Common Stock may vote on all matters presented to the Meeting. Each outstanding
share of Common Stock entitles the holder to one vote.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
As of April 15, 2002, the following directors, named executive officers, and
directors and executive officers as a group, and each person, including any
"group" as that term is defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") that the Company knows to be the
beneficial owner of more than five percent of the Company's outstanding common
stock beneficially own (as deemed in regulations issued by the Securities and
Exchange Commission (the "SEC")) the amounts of the Company's outstanding
Common Stock set forth below.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership(1) of Class(2)
- ------------------------ ----------------------- -----------
Colin B. Bier, Ph.D................................................ 193,643 *
Director (3)
Joseph P. Hernon, CPA.............................................. 402,395 1.77%
Executive Vice President, Chief Financial Officer and Secretary (4)
S. David Hillson, Esq.............................................. 1,055,480 4.52%
Chairman of the Board, President and Chief Executive Officer (5)
Robert Langer, Sc.D................................................ 95,814 *
Director (9)
Marc E. Lanser, M.D................................................ 688,420 2.91%
Director, Executive Vice President and Chief Scientific Officer (6)
Ira W. Lieberman, Ph.D............................................. 185,316 *
Director (7)
E. Christopher Palmer, CPA......................................... 232,216 1.03%
Director (8)
Scott Weisman, Esq................................................. 99,264 *
Director (9)
Brown Simpson Partners I, Ltd. (10)................................ 2,044,250 8.50%
Pictet Global Fund-Biotech (11).................................... 2,015,956 8.75%
All directors and executive officers as a group (8 persons) (12)... 2,932,548 11.70%
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Unless otherwise indicated, the business address of each beneficial holder
named above is c/o Boston Life Sciences, Inc., 137 Newbury Street, 8th Floor,
Boston, MA 02116.
* Represents less than 1% of the outstanding shares.
(1) Except as otherwise specified in footnotes to this table, the persons named
in this table have sole voting and investment power with respect to all
shares of Common Stock owned. The information in the table was furnished by
the owners listed.
(2) Except as otherwise specified in footnotes to this table, the amounts of
shares owned and the percentages in this table are based on the number of
shares of Common Stock outstanding as of April 15, 2002 or issuable upon
the exercise of options which are exercisable or which will become
exercisable within 60 days of April 15, 2002.
(3) Includes 183,643 shares of Common Stock issuable upon exercise of options.
(4) Includes 347,615 shares of Common Stock issuable upon exercise of options.
(5) Includes 973,480 shares of Common Stock issuable upon exercise of options.
(6) Includes 616,670 shares of Common Stock issuable upon exercise of options
(7) Includes 179,716 shares of Common Stock issuable upon exercise of options.
(8) Includes 185,716 shares of Common Stock issuable upon exercise of options
and warrants.
(9) Consists of Common Stock issuable upon exercise of options and/or warrants.
(10) Includes 1,690,000 shares of Common Stock, issuable upon the exercise of
warrants. Brown Simpson Asset Management, LLC is the investment manager of
Brown Simpson Partners I, Ltd. Each of Matthew C. Brown, Peter D. Greene,
Mitchell D. Kaye and James R. Simpson holds an ownership interest in Brown
Simpson Asset Management, LLC. The principal address of Brown Simpson
Partners I, Ltd. is c/o Walkers Attorneys-at-Law, P.O. Box 265GT, Walker
House, Mary Street, George Town, Grand Cayman, Cayman Islands. Information
relating to the Brown Simpson Partners I, Ltd. is based on information
that was furnished by Brown Simpson Partners I, Ltd. in a Schedule 13G
dated December 31, 2001 and filed with the SEC on January 15, 2002
pursuant to Section 13(d) or 13(g) of the Exchange Act, and other
information available to the Company.
(11) Includes 660,000 shares of Common Stock issuable upon exercise of
warrants. The principal address of Pictet Global Fund-Biotech is c/o
Pictet, Bd Georges-Favon 29, CH-1204 Geneva, Switzerland.
(12) Includes 2,681,918 shares of Common Stock issuable upon the exercise of
options.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven directors. At
the Meeting, the stockholders will elect eight directors for a term ending at
the next annual meeting and until each such director's successor is duly
elected and qualified.
The table below sets forth the name of each person nominated by the
Nominating Committee to serve for a term expiring on the date of the next
annual meeting and until his respective successor is elected and qualified.
Each nominee has consented to be named as a nominee and, to the present
knowledge of the Company, is willing and able to serve as a director, if
elected. Should any of the nominees not remain a candidate at the end of the
Meeting (a situation which is not expected), proxies solicited hereunder will
be voted in favor of those who remain as candidates and may be voted for
substitute nominees, unless the Board determines to reduce the number of
directors. Unless contrary instructions are given on the proxy, the shares
represented by a properly executed proxy will be voted "FOR" the election of
the following persons:
First Year
Nominees for Additional Term Age Elected a Director
---------------------------- --- ------------------
Colin B. Bier, Ph.D. (1)(3)(4)...... 56 1996
S. David Hillson, Esq. (3)(4)....... 62 1994
Marc E. Lanser, M.D................. 53 1994
Robert Langer, Sc.D................. 53 2000
Ira W. Lieberman, Ph.D. (1)(2)(4)... 59 1992
E. Christopher Palmer, CPA (2)(3)(4) 61 1992
Stephen Peck........................ 67 Nominee
Scott Weisman, Esq. (2)............. 47 2000
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(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Press Release Review Committee
(4) Member of the Nominating Committee
The principal occupations and qualifications of each nominee for director
are as follows:
COLIN B. BIER, PH.D. Dr. Bier has been a member of the Board since February
1996. Since 1990, Dr. Bier has been the Managing and Scientific Director of ABA
BioResearch, Inc., an independent bioregulatory consulting firm, located in
Montreal, Canada, providing expertise for technology assessment, strategic
management and regulatory development of biopharmaceuticals. Dr. Bier is a
special advisor to the Mount Sinai Hospital in Montreal and Lecturer in
Pathology, Faculty of Medicine, McGill University, and an Associate in the
Department of Internal Medicine, Montreal General Hospital. Dr. Bier is also a
member of the Board of Directors of Neurochem, Inc. and DOR BioPharma, and is
also a member of the Board of Directors and on the Scientific Advisory Boards
of several private companies. Prior to his association with ABA BioResearch,
Inc., Dr. Bier was founder, President and Chief Executive Officer of ITR
Laboratories, Inc. Before founding ITR Laboratories, Inc., Dr. Bier spent over
ten years with Bio-Research Laboratories, Ltd., a contract research laboratory
where he was Vice President and Director of Experimental Toxicology and
Clinical Pathology. Dr. Bier is the chief executive officer of the Centre for
Translational Research in Cancer R&D of the Sir Mortimer B. Davis--Jewish
General Hospital in Montreal, Canada. Dr. Bier is also a Senior Clinical
Advisor to TVM TechnoVenture Management. Dr. Bier has published more than
twenty-five scientific articles in his field in peer-reviewed journals and
received his Ph.D. from Colorado State University.
S. DAVID HILLSON, ESQ. Mr. Hillson has served as President and Chief
Executive Officer (and member of the Board of Directors) of BLSI since June
1995. He has served as Chairman of the Board of
3
Directors since September 1996. Prior to his responsibilities at BLSI, Mr.
Hillson was Senior Vice President of Josephthal, Lyon & Ross in the research
and investment banking divisions in 1994, and was the Senior Managing Director,
investment banking, at The Stamford Company in New York City from November 1992
to January 1994. Mr. Hillson was an Executive Vice President of the asset
management division of Mabon Securities from October 1990 until October 1992.
Earlier in his 15-year career as an investment manager, Mr. Hillson was a
Senior Vice President with Shearson, Lehman, Hutton from 1983 to 1990, where he
managed three mutual funds, primarily in the emerging growth area, for the SLH
Asset Management division. Prior to his fund management responsibilities, he
was the Chairman of the Equity Committee for Hutton Investment Management
(1976-1982). He started his business career as an attorney in New York City,
having received his Juris Doctorate from New York University School of Law. He
also attended the Columbia University School of Business Administration and
received a Bachelor of Arts degree from Columbia College.
MARC E. LANSER, M.D. Dr. Lanser has been Executive Vice President, Chief
Scientific Officer and a member of the Board since November 1994. From October
1992 until November 1994, Dr. Lanser was President and Chief Executive Officer
and a member of the Board. Prior to founding the Company in October 1992, Dr.
Lanser was an Assistant Professor of Surgery at Harvard Medical School and
member of the full-time academic faculty, where he directed a NIH funded
research project in immunology and received a NIH Research Career Development
Award. Dr. Lanser has published more than 30 scientific articles in his field
in peer reviewed journals. Dr. Lanser received his M.D. from Albany Medical
College.
ROBERT LANGER, SC.D. Dr. Langer has been a member of the Board since June
2000. Dr. Langer has been the Kenneth J. Germeshausen Professor of Chemical and
Biomedical Engineering at MIT since 1989. He received a Bachelor's Degree from
Cornell University in 1970 and a Sc.D. from MIT in 1974, both in chemical
engineering. Dr. Langer has received honorary doctorates from the
ETH(Switzerland) and the Technion (Israel). Dr. Langer has written 700
articles, 400 abstracts, 400 patents (one of which was cited as the outstanding
patent in Massachusetts in 1988 and one of 20 outstanding patents in the U.S.),
has given 600 invited lectures (50 named lectureships), and has edited 13
books. Dr. Langer has received over 100 major awards. He is the only engineer
to receive the Gairdner Foundation International Award (56 recipients of this
award have subsequently received a Nobel Prize), and he received the
Lemelson-MIT Prize, the world's largest prize for invention. He is also the
recipient of the Charles Stark Draper Prize, the world's highest engineering
prize, from the National Academy of Engineering. In 1989, Dr. Langer was
elected to the Institute of Medicine and the National Academy of Sciences, and
in 1992 he was elected to both the National Academy of Engineering and to the
National Academy of Sciences.
IRA W. LIEBERMAN, PH.D. Dr. Lieberman has been a member of the Board since
the inception of the predecessor entity to the Company in 1992. Dr. Lieberman
is a Sector Manager in the ECA at the World Bank responsible for private and
sector operations in Russia, Central Asia and Yugoslavia. During the East Asia
crisis (1998-2000), Dr. Lieberman was responsible for working with the
Government of Korea on its corporate (chaebol) workout and restructuring
program, and from 1995-1999 he was also the Chief Executive Officer of the
Consultative Group to Assist the Poorest (CGAP) Secretariat, a micro-finance
program, serving the World Bank and some 26 other donor agencies. From
1993-1995, Dr. Lieberman was responsible for assisting the World Bank's client
countries in developing and implementing privatization programs and in this
capacity he has worked with a number of governments in Central and Eastern
Europe and the Former Soviet Union, Turkey, and Argentina. From 1987 to 1992,
Dr. Lieberman was President of LIPAM International, Inc. an international
consulting and investment firm. From 1985-1987 he was on the staff of the World
Bank and from 1975 to 1982, he was a senior executive with ICC Industries, Inc.
where he served as Chief Financial Officer, Executive Vice President and
President of ICC's Manufacturing Group including CEO of Primex Plastics, Inc.
one of ICC's subsidiary companies. He also served on the Board of Directors of
various ICC subsidiaries and affiliates. Dr. Lieberman received his B.A. from
Lehigh University, an M.B.A. from Columbia University and a Ph.D. (D. Phil.)
from Oxford University.
E. CHRISTOPHER PALMER, CPA Mr. Palmer has been a member of the Board since
the inception of the predecessor entity to the Company in 1992. Mr. Palmer is a
certified public accountant and founder of a firm
4
providing tax and financial advisory services to high net-worth family groups.
Prior to establishing his own firm in 1977, Mr. Palmer was a partner in the
accounting firm of Peat Marwick Mitchell & Co. Mr. Palmer is a Director and
Chairman of the Executive Committee of Boston Private Bank & Trust Company and
a trustee of two private foundations. Mr. Palmer received his M.B.A. from
Rutgers University and his A.B. from Dartmouth College.
SCOTT WEISMAN, ESQ. Mr. Weisman has been a member of the Board since June
2000. Mr. Weisman has twenty years of investment banking experience, and is
currently the President of H.C. Wainwright & Co. in New York. Prior to joining
H.C. Wainwright, Mr. Weisman served as Director of Investment Banking at
Josephthal & Co. for six years. Mr. Weisman began his career practicing law,
and was a Partner in the Corporate Securities practice of Kelley, Drye & Warren
LLP for eight years. Mr. Weisman received his Juris Doctorate from Albany Law
School and his Bachelor of Arts degree from Syracuse University.
STEPHEN PECK Mr. Peck has more than 45 years of experience in the
investment business. He founded the specialist firm S M Peck and Company in
1958. Mr. Peck has been general partner of Wilderness Partners LP since 1989.
He was a managing and special partner of Weiss, Peck and Greer, and
participated in its founding in 1970. He was elected a Governor of the New York
Stock Exchange in 1969, and served as Vice Chairman from 1971 to 1972. Mr. Peck
joined Torrey Associates, LLC in November 2001 as a partner. He is a member of
the Board of Directors of Advance Auto Parts, Inc., Banyan Strategic Realty,
Canarc Resource Corp., Fresenius Medical Care, Inc., and Offit Investment
Funds. Mr. Peck served as Chairman of the Board of The Jewish Theological
Seminary, Mount Sinai Hospital, Mount Sinai School of Medicine, and Mount
Sinai/ NYU Health. He continues to serve on those Boards. Mr. Peck is a
graduate of The Wharton School.
Meetings and Committees of the Board of Directors
The Board held 6 meetings during the Company's fiscal year. Each of the
Company's directors attended 100% of the aggregate of all meetings of the Board
and of all committees on which he was a member held during the year except for
Dr. Langer, who attended 4 of the 6 meetings of the Board. The standing
committees of the Board are the Audit Committee, the Compensation Committee,
the Nominating Committee and the Press Release Review Committee. The Company
did not have an executive committee during fiscal 2001. The Audit Committee,
consisting of Messrs. Palmer, Lieberman, and Weisman, met five times. The Audit
Committee reviews the audited financial statements, the system of internal
accounting controls, tax and other accounting related matters and reviews with
the Company's independent auditors the scope and results of their engagement.
The Compensation Committee, consisting of Drs. Lieberman and Bier, met one time
during the last fiscal year. The Compensation Committee reviews and evaluates
the compensation of the Company's executive officers and administers the
Company's stock option plans. The Nominating Committee, consisting of Messrs.
Hillson and Palmer and Drs. Bier and Lieberman, met one time during the last
fiscal year. The Nominating Committee evaluates the composition of the Board of
Directors and annually considers and nominates for election at the Annual
Meeting a slate of candidates to serve as directors for a term ending at the
next Annual Meeting. The Press Release Review Committee, consisting of Messrs.
Hillson, Palmer and Dr. Bier, reviewed fifteen press releases during the last
fiscal year. The Press Release Review Committee assists in the pre-release
review and approval of press releases from the Company, including those
involving the testing of new drugs, or the FDA new drug review and approval
process for investigational new drugs being developed by the Company.
Compensation of Directors
Annual Retainers
Directors who are not employees of the Company ("Non-Employee Directors")
receive cash compensation in the amount of $1,000 per meeting attended in
person and $500 per meeting attended telephonically, although all directors are
reimbursed for ordinary and reasonable expenses of attending any board or
committee meetings.
5
Non-Employee Directors will receive the same cash compensation amount per
meeting attended in 2002. In addition, Non-Employee Directors were compensated
in fiscal 2001 with an annual retainer with a value of $5,000 and will receive
the same amount in fiscal 2002. Currently, the annual retainer is not paid in
cash but is paid to the Non-Employee Directors through options to purchase
shares of the Company's Common Stock pursuant to the 1990 Plan, valued as
described below. Each Non-Employee Director elected at an annual meeting of
stockholders of the Company is automatically granted options on the thirteenth
trading day after the date of such annual meeting (the "Retainer Grant Date")
to purchase a number of shares of the Company equal to the lesser of (a) 2,500
shares and (b) the quotient of the value of the annual retainer for service as
a Non-Employee Director of the Company and 80% of the average of the fair
market value of a share of the Company's Common Stock on the ten trading days
following the third trading day after the date of such annual meeting of
stockholders. If the number of shares of the Company's Common Stock calculated
pursuant to clause (b) above exceeds 2,500 shares, each Non-Employee Director
will automatically receive on the Retainer Grant Date, in addition to options
to purchase 2,500 shares of the Company's common stock, a cash payment equal to
the remaining portion of the value of the annual retainer not provided for by
the grant of such options. Additionally, pursuant to the Company's Stock Option
plans, Dr. Bier, Dr. Langer, Dr. Lieberman, Mr. Palmer and Mr. Weisman received
discretionary grants of options to purchase 110,000, 68,000 95,000, 95,000, and
58,000 shares of the Company's Common Stock, respectively, in fiscal 2001. Each
director who serves as Chairman of a committee of the Board receives an annual
retainer of $1,000. The Chairmen of the Audit Committee, the Compensation
Committee and the Press Release Review Committee who received this annual
retainer in fiscal 2001 were Mr. Palmer, Dr. Lieberman, and Dr. Bier
respectively. There was not a Chairman of the Press Release Review Committee
during 2001. Dr. Langer is also a member of the Company's Scientific Advisory
Board pursuant to which the Company paid Dr. Langer consulting fees totaling
approximately $53,000 in 2001.
The options granted to Non-Employee Directors pursuant to the annual
retainer described above are exercisable at a per share price of 20% of the
average fair market value per share of the Company's Common Stock used to
calculate such grant. The options become exercisable as to 75% of the shares of
Common Stock of the Company issuable upon exercise of such options six months
after the date of grant and as to 100% of such shares, on the later of six
months after the date of grant and December 31 of the year in which the grant
is made. The options generally terminate ten years after the date of grant.
The options granted to the Non-Employee Directors pursuant to the
discretionary grant in 2001 are exercisable as follows: 50% exercisable upon
issuance; 75% exercisable as of the first anniversary date; 100% exercisable as
of the second anniversary date. These options terminate in 2011.
New Director Options
Each person who is elected or appointed a Non-Employee Director for the
first time automatically upon such election or appointment (the "Automatic
Grant Date") will be granted an option to purchase 7,500 shares of the
Company's Common Stock ("New Director Options"). The exercise price of any New
Director Options granted under the 1990 Plan may not be less than 100% of the
fair market value of shares of the Company's Common Stock subject thereto on
the Automatic Grant Date. Subject to provisions regarding expiration and
termination of options, New Director Options become exercisable as to 20% of
the shares of the Company's Common Stock subject thereto on the Automatic Grant
Date and become exercisable as to an additional 20% of the shares of the
Company's Common Stock issuable upon exercise thereof on each of the first,
second, third and fourth anniversaries of such Automatic Grant Date. New
Director Options terminate ten years after the date of grant.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES PRESENTED.
6
AUDIT COMMITTEE REPORT TO SHAREHOLDERS
The Board of Directors has established an Audit Committee, whose members
during fiscal 2001 were Ira Lieberman, Christopher Palmer and Scott Weisman.
The Board of Directors has determined that Messrs. Lieberman and Palmer are
"independent" under the rules of The Nasdaq Stock Market, Inc. Mr. Weisman does
not qualify as "independent" under such rules, because of his status as an
executive officer of Josepthal & Co. and H.C. Wainwright & Co., investment
banking firms which were paid in excess of $200,000 by the Company during
fiscal 1999. Nonetheless, the Board of Directors has determined that it is in
the best interests of the Company and its shareholders that Mr. Weisman serve
as a member of the Audit Committee because of his extensive financial expertise.
The Audit Committee assists the Board of Directors in overseeing the
financial reporting process. Management has the primary responsibility for the
financial statements and the reporting process, including the system of
internal controls.
With respect to fiscal 2001, the Audit Committee:
. reviewed and discussed the audited financial statements with the
Company's management;
. discussed with PricewaterhouseCoopers LLP, the Company's independent
auditors, the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees); and
. discussed with PricewaterhouseCoopers LLP its independence and received
from it the written disclosures and letter required by Independence
Standards Board Standard No. 1.
Based upon these reviews and discussions, the Audit Committee has
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 for filing with the SEC.
Principal Accounting Firm Fees
The following table sets forth the estimated aggregate fees billed to the
Company for the fiscal year ended December 31, 2001 by the Company's principal
accounting firm, PricewaterhouseCoopers LLP.
Audit Fees................................................. $47,000
Financial Information System Design And Implementation Fees $ --
All Other Fees............................................. $35,300
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Total...................................................... $82,300
PricewaterhouseCoopers did not provide any services related to financial
information systems design and implementation during 2001.
The Audit Committee has considered whether the provision of the non-audit
services above is compatible with maintaining the auditor's independence.
AUDIT COMMITTEE
Christopher Palmer
Ira Lieberman
Scott Weisman
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act") or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the Securities Act and the Exchange Act and
shall not be deemed soliciting material.
7
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for the year ended December 31, 2001 for services rendered in all
capacities to each of the most highly compensated executive officers whose
total annual salary and bonus for that period exceeded $100,000 (collectively,
the "Named Executive Officers").
Summary Compensation Table
Long Term
Compensation
Awards--
Annual Compensation Common Stock
---------------------- Underlying
Name and Principal Position Year Salary Bonus Options
--------------------------- ---- -------- -------- -------------
S. David Hillson, Esq................. 2001 $300,000 $ 95,000 465,000
Chairman of the Board, President and 2000 $285,000 $125,000 220,000
Chief Executive Officer 1999 $250,000 $ 70,000 224,000
Marc E. Lanser, M.D................... 2001 $245,000 $ 70,000 315,000
Director, Executive Vice President 2000 $230,000 $ 35,000 --
And Chief Scientific Officer 1999 $205,000 $ 40,000 127,000
Joseph P. Hernon, CPA................. 2001 $195,000 $ 50,000 225,000
Executive Vice President, 2000 $175,000 $ 40,000 75,000
Chief Financial Officer and Secretary 1999 $160,000 $ 40,000 120,000
Stock Option Information
The following table sets forth, for each of the Named Executive Officers,
information concerning the grant of options to such persons in fiscal 2001.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
Number of At Assumed Annual Rates
Securities % of Total Of Stock Appreciation For
Underlying Options Granted Exercise or Option Term
Options to Employees In Base Price Expiration --------------------------
Name Granted Fiscal Year Per Share(1) Date 5% 10%
- ---- ---------- --------------- ------------ ---------- -------- --------
S. David Hillson 190,000 10.50% $3.13 1/2/11 $373,406 $946,285
85,000 4.70% $2.61 7/31/11 $139,520 $353,572
190,000 10.50% $1.90 10/12/11 $227,031 $575,341
Marc E. Lanser.. 120,000 6.63% $3.13 1/2/11 $235,835 $597,653
70,000 3.87% $2.61 7/31/11 $114,899 $291,177
125,000 6.91% $1.90 10/12/11 $149,362 $378,514
Joseph P. Hernon 90,000 4.98% $3.13 1/2/11 $176,877 $448,210
35,000 1.94% $2.61 7/31/11 $ 57,450 $145,588
100,000 5.53% $1.90 10/12/11 $119,490 $302,811
- --------
(1) The exercise price for each option was equal to the fair market value of
the Company's Common Stock on the date of grant.
(2) Potential realizable value is based on the assumed annual growth rates
listed, compounded annually for the ten-year option term. The dollar
amounts set forth under this heading are the results of calculations at the
5% and 10% assumed rates established by the SEC and are not intended to
forecast possible future appreciation, if any, of the value of the Common
Stock.
8
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the value realized upon the exercise of options
in fiscal 2001 and the value of unexercised options at December 31, 2001.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-end Fiscal Year-End(1)
Acquired Value -------------------------- -------------------------
Name on Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
S. David Hillson None -- 973,480 163,750 $ 76,975 $74,425
Marc E. Lanser.. None -- 616,670 110,000 $110,271 $49,175
Joseph P. Hernon None -- 347,615 81,250 $ 40,075 $39,025
- --------
(1) The fair market value of "in-the-money" options was calculated on the basis
of the difference between the exercise price of the options held and the
closing price per share for Common Stock on the NASDAQ Market of $2.67 on
December 31, 2001, multiplied by the number of shares subject to options
held.
(2) Calculated based on the difference between the exercise price of the option
and the closing quoted market price per share at the date of exercise.
Employment Contracts
S. David Hillson, Esq. has entered into an employment agreement with the
Company. Mr. Hillson's original Employment Agreement dated November 7, 1994,
includes confidentiality and non-competition provisions, and entitles him to an
annual base salary plus other incidental benefits, as well as additional cash
payments should certain events occur. Mr. Hillson's employment contract has
been reviewed periodically since the original contract expired. Under an
amendment dated January 1, 1999, the term was extended to December 31, 2000 and
his annual base salary was increased to $250,000. Mr. Hillson's Employment
Agreement was further amended as of December 1999 to extend the term hereof to
December 31, 2002 and to increase his annual base salary to $285,000. Mr.
Hillson's Employment Agreement was further amended as of January 23, 2001 to
increase his annual base salary to $300,000.
Report of Compensation Committee on Executive Compensation
Overview
The Boston Life Sciences, Inc. compensation program for its executive
officers consists of four parts: base salary, annual bonus and incentive
payments, stock options, and additional benefits. The Company's overall
recruitment and compensation philosophy is a very important consideration in
the maintenance of this program. This philosophy is to hire individuals
possessing excellent professional skills, coupled with demonstrated track
records, who can be expected to help achieve the Company's goal of moving from
a development-stage company to a broad-based, diversified, revenue-generating
biotechnology company.
The Company has a continuing commitment to recruit, motivate and retain
executive officers with demonstrated talent and leadership skills, typically
gained from successful experiences in positions of meaningful responsibility in
the biotechnology or other industry settings. This approach is designed to
enable the Company to acquire the requisite management leadership to fulfill
its stated mission.
An inherent part of this philosophy is the leveraging of the compensation
program by placing a major emphasis on equity participation. This is
accomplished by offering a significant capital accumulation opportunity to key
managers, which also conserves the Company's cash resources while blending the
interests of stockholders with those of management. The Company's goal is that
the total compensation for senior executives be competitive with that for other
biotechnology companies, taking into account relative company size, stage of
development and geographic location.
9
Performance Criteria--General
Because the Company is still in the process of developing its proprietary
products and because of the highly volatile nature of the stock price in
biotechnology companies in general, the use of traditional corporate
performance standards, such as sales, promotion levels and stock performance,
to measure the success of the Company and an individual's role in contributing
to that success, is not appropriate.
Accordingly, the compensation of executive officers is based, for the most
part, on realistically timely achievement of certain product research and
development goals by the Company and the positive contribution by the
individuals concerned. The Committee will evaluate the Company's progress and
performance using criteria such as the extent to which key research, clinical,
product manufacturing, and financial objectives of the Company have been met
during the preceding fiscal year, including the achievement by the Company of
certain milestones, whether specified in agreements with third party
collaborators or determined internally. In addition, the Committee may take
into account the Company's success in the development, acquisition and
licensing of key technologies. The Committee will also evaluate the individual
executive officer's performance, using criteria such as the executive officer's
involvement in and responsibility for the development and implementation of
strategic planning and the attainment of strategic objectives of the Company
including beneficial supervision of other management. An executive officer's
contribution in this regard may also involve both the participation by the
executive officer in the relationship between the Company and the investment
community, as well as the contribution by the executive officer to the ongoing
scientific development activities of the Company. In evaluating each facet of
performance and compensation, the Committee is likely to consider the necessity
of being competitive with other companies in the biotechnology industry, taking
into account relative company size, stage of development and geographic
location.
Base Salary
The Company's philosophy regarding base salary is to maintain it at a
competitive level, sufficient to recruit and retain individuals possessing the
skills and experience necessary to achieve the Company's goals and objectives
over the long term. Base salary levels are generally established with the input
of various industry-related surveys and special studies, such as the Leadership
and Biotechnology Survey, which is periodically published jointly by J. Robert
Scott and PricewaterhouseCoopers LLP, as well as by monitoring developments in
the biotechnology industry. This information is also used in evaluating other
compensation elements. Periodic adjustments in base salary will often relate to
competitive factors and to individual performance evaluated against criteria
such as those noted above. Other benefits are maintained at what the Committee
believes is an industry-competitive level.
Annual Bonus and Incentive Program
The Compensation Committee of the Board, in its discretion, may award
bonuses and/or incentive payments to executive officers, and the Company
expects to pay such amounts based on both an evaluation of the performance of
each executive officer for the year as a whole, as well as the establishment of
performance incentives for the following year dependent upon the realization of
specific corporate objectives. The intent of these payments is to motivate and
reward high level performance of executive officers as measured against
distinct and clearly articulated goals and in light of the competitive
compensation practices of the entire biotechnology industry. The specific goals
vary with each executive officer's responsibilities rather than being fixed by
reference to overall measures of the Company's performance. Annual bonus awards
and incentive payments are determined by the Compensation Committee of the
Board.
10
Stock Options
Stock options are viewed as a fundamental element in the total compensation
program and, in keeping with the Company's basic philosophy, emphasize
long-term Company performance, as measured by the creation and enhancement of
stockholder value. Additionally, stock options foster a community of interest
between stockholders and participants. The Company believes that because of
this community of interest, the use of stock options is preferable to other
forms of stock compensation such as restricted stock. Options under the plans
are granted to all executive officers as incentive to contribute significantly
to the growth and successful operation of the Company. The specific
determination of the number of options to be granted, however, is not based
upon any specific criteria, although the Compensation Committee does reference
industry data in assessing the reasonableness of all awards.
Although options may be granted at any price equal to or greater than 50% of
fair market value of the Common Stock, generally options have been granted to
executive officers, as a matter of Company policy, at 100% of the fair market
value on the date of grant. The Company has generally awarded options to
executive officers on employment and at regular intervals thereafter, but
awards may be made at other times as well. Vesting of stock options is
determined by the Compensation Committee. To date, options granted to executive
officers generally vest over the four years following the date of grant.
Qualifying Executive Compensation for Deductibility Under Applicable
Provisions of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code, adopted in 1993, provides that
a publicly held corporation generally may not deduct compensation for its chief
executive officer or for each of certain other executive officers to the extent
that such compensation exceeds $1,000,000 for the executive or does not qualify
as a "performance based" compensation arrangement. The Committee intends to
take such actions as may be appropriate to qualify compensation received by
such executives upon exercise of options granted under the Company's stock
option plans for deductibility under Section 162(m). The Company may, however,
pay compensation or grant options or other rights that do not meet the
performance-based exclusion, and are thus not deductible, when sound management
of the Company so requires. The Committee notes that base salary and bonus
levels are expected to remain well below the $1,000,000 limitation in the
foreseeable future.
Chief Executive Officer Compensation
In fiscal 2001, Mr. Hillson's salary and bonus were determined pursuant to
the terms of his amended Employment Agreement dated January 23, 2001. The
Compensation Committee believes that this compensation level was appropriate in
light of Mr. Hillson's contributions to the Company's success during 2001,
which included the successful completion of a Phase II clinical trial for one
of the Company's technologies, the continued preclinical development of two of
the Company's most promising technologies which are expected to enter clinical
trials in 2002, and the overall maturation and expansion of the Company's
scientific programs.
COMPENSATION COMMITTEE
Colin Bier
Ira Lieberman
This report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act") or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the Securities Act and the Exchange Act and
shall not be deemed soliciting material.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board during the last completed
fiscal year was composed of Ira Lieberman and Colin Bier.
11
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in cumulative
total stockholder return on the Common Stock from December 31, 1996 to the
present with the cumulative total return on the Nasdaq Total Return Index and
the Nasdaq Pharmaceutical Stock Index over the same period. The comparison
assumes $100 was invested on January 1, 1997 in the Common Stock and in each of
the indices and assumes reinvestment of dividends, if any, since that date. The
Company has not paid any cash dividends on the Common Stock to date. Historic
stock price is not indicative of future stock price performance.
[CHART]
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY,
PEER GROUP AND BROAD MARKET
1996 1997 1998 1999 2000 2001
Boston Life Sciences Inc. 100.00 33.18 47.27 52.73 44.55 38.84
Nasdaq Pharmaceuticals 100.00 103.06 130.81 246.55 307.49 261.22
Nasdaq Market Index 100.00 122.32 172.52 304.29 191.25 152.46
Fiscal Year Ending
-----------------------------------------
Company 1996 1997 1998 1999 2000 2001
------- ------ ------ ------ ------ ------ ------
BOSTON LIFE SCIENCES INC.......... 100.00 33.18 47.27 52.73 44.55 38.84
PEER GROUP BROAD MARKET
THE PEER GROUP CHOSEN WAS:
NASDAQ PHARMACEUTICAL INDEX....... 100.00 103.06 130.81 246.55 307.49 261.22
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX............... 100.00 122.32 172.52 304.29 191.25 152.46
This Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act or under the Exchange Act, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under the Securities Act and
the Exchange Act and shall not be deemed soliciting material.
12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A director of the Company is a member of the Company's Scientific Advisory
Board pursuant to which the Company paid the director consulting fees totaling
approximately $53,000 in 2001 and 2000, respectively.
A director of the Company is a director and Chairman of the Executive
Committee of the bank where the Company maintains its cash and cash equivalent
and investment accounts. The Company paid approximately $43,000 and $51,000 to
the bank during fiscal 2001 and 2000, respectively, primarily for investment
management services.
A director of the Company was a Managing Director of the placement agents
hired by the Company in connection with the Company's private placements of
Series C preferred stock in 1999 and 8% convertible debentures in 1999. In
connection with the Series C preferred stock financing, the Company paid
$372,725 to the placement agent and issued 162,307 warrants to purchase common
stock at $5.06 per share and 54,808 warrants to purchase common stock at $6.09
per share to the placement agent. In connection with the 8% convertible
debentures financing, the Company paid $480,000 and issued 290,000 warrants
exercisable at $5.75 per share to the placement agent.
During 2001, the Company received promissory notes from two officers of the
Company in the amount of $10,000 and $55,000, respectively. Both notes are
payable on demand and accrue interest at a rate of 6%. As of December 31, 2002,
the receivables related to these promissory notes total $66,095, and are
included in Other Current Assets in the Company's Consolidated Balance Sheet.
In March 2002, the Company completed a private placement of 1,599,568 shares
of common stock and 399,892 warrants to purchase common stock. The shares of
common stock were sold at a price of $2.15 per share. Each warrant grants the
right to purchase one share of Common Stock at the exercise price of $2.75 at
any time before March 12, 2007. Mr. Palmer, a member of the Board of Directors
of the Company, purchased 24,000 shares and 6,000 warrants in the private
placement.
PROPOSAL NO. 2
APPROVAL OF THE CERTIFICATE AMENDMENT
The Company's stockholders are being asked to consider and approve an
amendment (the "Certificate Amendment") to the Company's current Amended and
Restated Certificate of Incorporation, filed with the Secretary of State of
Delaware on June 29, 1999 as heretofore amended (the "Current Certificate").
The Current Certificate authorizes 40,000,000 shares of Common Stock, par
value $.01 per share, and 1,000,000 shares of Preferred Stock, par value $.01
per share, of which 25,000 shares have been designated Series A Preferred Stock
and of which 500,000 shares have been designated Series D Preferred Stock. The
Board of Directors believes this capital structure does not provide for
sufficient authorized shares of Common Stock for the future needs of the
Company. Therefore, the Board of Directors unanimously approved the Certificate
Amendment, which increases the authorized number of shares of Common Stock from
forty million (40,000,000) shares to fifty million (50,000,000) shares, an
increase of ten million (10,000,000) shares. The Certificate Amendment will be
formally implemented, assuming approval by the stockholders at the meeting, by
its filing with the Secretary of State of Delaware. The Form of the Certificate
Amendment is attached hereto as Appendix A.
Reasons For and Effect of Amendment
On April 15, 2002 there were 22,374,210 shares of Common Stock outstanding.
In addition, warrants and options were outstanding to acquire an aggregate of
approximately 9.3 million shares of Common Stock. After
13
giving effect to the exercise of warrants and options presently outstanding, as
well as options available for grant under the Company's stock option plans, the
Company presently has approximately 7.6 million shares of authorized but
unissued and unreserved Common Stock.
If the stockholders approve the Certificate Amendment, then the Board of
Directors would generally have the authority, without further action of the
stockholders, to issue the proposed additional shares of Common Stock from time
to time as the Board of Directors deems necessary. The Board of Directors
believes it is desirable to have the ability to issue such additional
authorized shares of Common Stock for general corporate purposes. Potential
uses of the additional authorized shares may include acquisition of other
businesses, equity financings, stock dividends or distributions, and issuances
of options pursuant to the Company's Stock Option Plans. Any or all of these
issuances could take place without further action by the stockholders, unless
such stockholder action was required by applicable law or rules of any stock
exchange on which the Company's securities may then be listed. The Company's
Board of Directors has no current plan, understanding or arrangement to issue
any of the additional shares of Common Stock.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could deter takeovers, in that additional shares
could be issued (within the limits imposed by applicable law) in one or more
transactions that could make a change in control or takeover of the Company
more difficult. For example, additional shares could be issued by the Company
so as to dilute the stock ownership or voting rights of persons seeking to
obtain control of the Company. Similarly, the issuance of additional shares to
certain persons allied with the Company's management could have the effect of
making it more difficult to remove the Company's current management by diluting
the stock ownership or voting rights of persons seeking to cause such removal.
In addition, an issuance of additional shares by the Company could have an
effect on the potential realizable value of a stockholder's investment. If such
factors were reflected in the price per share of Common Stock, the potential
realizable value of a stockholder's investment could be adversely affected. The
Common Stock has no preemptive rights to purchase additional shares.
The favorable vote of a majority of the outstanding shares of Common Stock
is required for approval of the Certificate Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE CERTIFICATE AMENDMENT.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE 1998 OMNIBUS STOCK OPTION PLAN
The Company's 1998 Omnibus Stock Option Plan currently has shareholder
approval for the issuance of options to purchase up to 2,300,000 shares of
Common Stock. In October 2001, the Board amended the 1998 Plan (the "2001 Plan
Amendment"), to increase the aggregate number of shares authorized for issuance
upon exercise of options granted under the plan to 2,900,000 (as so amended,
the "1998 Plan"). In April 2002, the Board amended the 1998 Plan (the "2002
Plan Amendment"), subject to stockholder approval, to increase the aggregate
number of shares authorized for issuance upon exercise of options granted under
the plan to 3,200,000 (as so amended, the "Amended 1998 Plan"). The 2001 and
2002 Plan Amendments were designed to enhance the flexibility of the
Compensation Committee of the Board to grant stock options to the Company's
directors, employees, independent contractors, scientific advisors and
consultants, and to ensure that the Company can continue to grant stock options
to such persons at levels determined to be appropriate by the Board.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Meeting and entitled to vote on the 2002 Plan
Amendments will be required to obtain shareholder approval for the 2002 Plan
Amendments. Set forth below is a summary of the 1998 Plan which is qualified in
its entirety by the terms of the 1998 Plan. The 1998 Plan is set forth in full
as Appendix B to this Proxy Statement and is incorporated herein by reference.
14
Description of the 1998 Plan
The purpose of the 1998 Plan is to assist the Company in attracting and
retaining employees, advisors and consultants of outstanding ability, and to
foster a community of interest of such employees, advisors, and consultants
with those of the Company's stockholders. The 1998 Plan is administered by a
committee established by the Board of Directors (or the entire Board of
Directors which may constitute such committee). For such purposes of this
discussion of the 1998 Plan, such administrator shall be referred to as the
"Committee." The total number of options to be granted in any year under the
1998 Plan, the number and selection of persons to receive options, the number
of options granted to each and the other terms and provisions of such options
are wholly within the discretion of the Committee, subject to the limitations
set forth in the 1998 Plan. Under the terms of the 1998 Plan, "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Code and "non-
qualified stock options" ("NSOs") may be granted by the Committee to selected
employees, directors, consultants, independent contractors and members of the
Scientific Advisory Board, except that ISOs may be granted only to persons who
are employees of the Company or any of its subsidiaries at the time the ISOs
are granted. The 1998 Plan contains no limitation upon the number of shares
which may be issued upon exercise of options, whether ISOs or NSOs, that may be
granted to an individual employee, consultant, independent contractor or member
of the Scientific Advisory Board over the term of the 1998 Plan; provided,
however, that the aggregate fair market value (as of the date of grant) of
shares of Company Common Stock subject to ISOs under the 1998 Plan and all
other plans of the Company which become exercisable for the first time by any
optionee during any calendar year shall not exceed $100,000.
Option Grants and Exercise
Under the 1998 Plan, after giving effect to the 2001 Plan Amendment, up to
an aggregate of 2,900,000 shares of Company Common Stock may be issued (subject
to adjustments in the event of stock dividends, stock splits, reverse stock
splits, combinations, reclassifications or like changes in the capital
structure of the Company) and may be granted to employees, consultants,
directors, independent contractors and members of the Scientific Advisory Board
of the Company or any of its subsidiaries. Under the terms of the 1998 Plan,
the exercise price of an ISO may not be less than 100% of the fair market value
of shares of Company Common Stock subject thereto on the date of grant, except
that, in the case of an ISO granted to an individual who, at the time such ISO
is granted, owns shares of capital stock of the Company possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company (a "Ten-Percent Stockholder"), such exercise price may not be less than
110% of such fair market value. The exercise price of an NSO may not be less
than 50% of the fair market value of a share of Company Common Stock on the
date of grant, but in no event shall the exercise price be less than par value.
The exercise price of options granted under the 1998 Plan may be paid in
cash or, at the discretion of the Committee, in shares of Company Common Stock
previously owned by the optionee with a value equal to the total option
exercise price, or in any combination thereof. Not less than ten shares may be
purchased at any time upon the exercise of an option unless the number of
shares so purchased constitutes the total number of shares issuable upon
exercise of the option. During the lifetime of an optionee, an option may be
exercised only by the optionee or such optionee's guardian or legal
representative. Generally, an option may not be transferred or assigned, except
by will or the laws of descent and distribution.
Under the 1998 Plan, the option exercise price also may be paid in shares of
Company Common Stock issuable upon exercise of options then exercisable by the
optionee having a fair market value equal to the option exercise price on the
date of exercise. This provision permits an optionee not only to use then-held
shares of stock in a single exercise of stock options, but also to use the
stock received upon the exercise of stock options to exercise additional stock
options in a process known as "pyramiding." Such pyramiding permits an optionee
to effect a cashless exercise of all or a portion of his options then
exercisable (no matter what the number) without surrendering any shares of
stock or making any additional cash investment. An optionee who exercises
options
15
by pyramiding will own, after the exercise, a number of additional shares equal
in value to the spread between the fair market value of a share of Company
Common Stock on the date of exercise and the option exercise price multiplied
by the number of options exercised.
Each ISO will be exercisable over a period, determined by the Committee in
its discretion, not to exceed ten years from the date of grant, except that in
the case of an ISO granted to a Ten-Percent Stockholder, the exercise period
for an ISO may not exceed five years from the date of grant, as required by the
Code. In the case of an NSO, the exercise period shall not exceed ten years
from the date of grant. Subject to the terms of the 1998 Plan, stock options
may be exercisable during the exercise period at such times, in such amount, in
accordance with such terms and conditions of, and subject to such restrictions
as are set forth in, the option agreement evidencing the grant of such stock
options. The Committee may, in its discretion, accelerate the exercisability of
any options granted under the 1998 Plan which would otherwise be unexercisable.
Adjustments
In the event that the Committee determines that any dividend or other
distribution (whether in the form of cash, shares of Company Common Stock, or
other property), recapitalization, stock split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange, or
other similar corporate transaction or event, affects the Company Common Stock
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of optionees under the 1998 Plan, then the Committee
shall make such equitable changes or adjustments as it deems necessary or
appropriate to any or all of (i) the number and kind of shares of Company
Common Stock which may thereafter be issued in connection with options, (ii)
the number and kind of shares of Company Common Stock issued or issuable in
respect of outstanding options, and (iii) the exercise price relating to any
option; provided that, with respect to ISOs, such adjustment shall not
constitute a "modification" under Section 424(h) of the Code.
In addition, in the event that a "Change in Control" occurs while any option
remains outstanding under the 1998 Plan, all options granted that are
outstanding as of the time of such change of control will become immediately
exercisable in full, without regard to the time period that has elapsed from
the date of grant or to the vesting provisions. Generally, a Change in Control
will be deemed to occur upon the earlier of (i) any person or entity becoming
the beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding voting securities, (ii) a change in the composition of the Board of
Directors of the Company during any period of not more than two consecutive
years such that individuals who constitute the Board of Directors of the
Company at the beginning of such period cease for any reason to constitute at
least a majority, (iii) the approval by the stockholders of the Company of a
merger or consolidation of the Company with any other company whereby the
combined voting power of the Company's securities no longer represents at least
50% of the combined voting power of the surviving or parent entity outstanding
after such merger (other than the Merger) or consolidation or (iv) the
stockholders of the Company approve a plan of complete liquidation or an
agreement for the sale of all or substantially all of the assets of the Company.
Termination of Eligibility
If an individual to whom options have been granted under the 1998 Plan
ceases to be a director, employee, consultant, scientific advisor or
independent contractor of the Company as the result of a termination without
cause (other than due to death or disability), (A) any options held by such
person that were exercisable on the date of such termination may be exercised
by that person for the later of: i) a period of one year following the date of
such termination, or ii) a period of one year from the date any option vests in
the twelve month period following such termination, and (B) any options held by
such person that were not exercisable on the date of such termination will
continue to vest in accordance with their original vesting schedule for a
period of 12 months following the date of termination, and any options that
vest during such 12-month period may be exercised by that person for a period
of one year following the date of such vesting.
16
If an individual to whom options have been granted under the 1998 Plan
ceases to be a director, employee, consultant, scientific advisor or
independent contractor of the Company as the result of a voluntary resignation
(other than due to death or disability), (A) any options held by such person
that were exercisable on the date of such resignation may be exercised by that
person for the later of: i) a period of one year following the date of such
resignation, or ii) a period of one year from the date any option vests in the
twelve month period following such resignation, and (B) any options held by
such person that were not exercisable on the date of such resignation will
continue to vest in accordance with their original vesting schedule for a
period of 12 months following the date of resignation, and any options that
vest during such 12-month period may be exercised by that person for a period
of one year following the date of such vesting, provided that the individual
has been a director, employee, consultant, scientific advisor or independent
contractor of the Company for at least three years and has signed a non-compete
agreement with the Company (such agreement to include biotechnology companies,
academic and/or research organizations encompassing biotechnology, and venture
capital companies in the biotechnology sector).
If any recipient of an option under the 1998 Plan dies within the one year
period following termination of employment or other relationship, such
optionee's designated or legally determined beneficiary (the "Beneficiary") may
exercise such optionee's options, to the extent exercisable or vested at the
time of death, for a period not to exceed one year after such date, but in no
event later than expiration of such option's term. If any recipient of an
option ceases employment or other relationship with the Company and its
subsidiaries due to death or disability, such optionee's options (whether or
not otherwise exercisable at the time of such optionee's termination of
employment or other relationship due to death or disability) shall become fully
exercisable by such optionee, or by the Beneficiary, for a period not to exceed
one year after the optionee's death or termination of employment or other
relationship due to death or disability, but in no event later than the
expiration date of such option. Shares of Company Common Stock issuable upon
exercise of options granted under the 1998 Plan that have expired or been
surrendered or terminated will be returned to the 1998 Plan and become
available for issuance upon exercise of future options granted under the 1998
Plan.
Termination of Plan
The 1998 Plan will terminate by its terms on April 23, 2008, except with
respect to options outstanding on such date. The Company's Board of Directors
may sooner terminate or amend the 1998 Plan at any time, subject to its terms;
provided, that the Board of Directors may seek stockholder approval of an
amendment if determined to be required by or advisable under regulations of the
Securities and Exchange Commission or the Internal Revenue Service, the rules
of any stock exchange or system on which Company Common Stock is listed or
other applicable law or regulation.
Options Outstanding, Exercisable and Available for Future Grant Under the
1998 Plan
As of April 15, 2002, options to purchase 2,406,115 shares were outstanding
under the 1998 Plan, of which options to purchase 1,631,315 shares were
exercisable. The exercise prices for the outstanding options ranged from $1.90
to $6.38 per share. At April 15, 2002, options to purchase 326,335 shares (plus
any options that expire or are canceled in the future) were available for
future grant, exclusive of the additional shares covered by the 2002 Plan
Amendment.
Federal Income Tax Consequences of the 1998 Plan
The following summary is intended only as a general summary of the United
States Federal income tax consequences under current law with respect to
participation in the 1998 Plan, and does not attempt to describe all possible
Federal or other tax consequences of such participation. Furthermore, the tax
consequences of options are complex and subject to change, and a taxpayer's
particular situation may be such that some variation of the described rules is
applicable.
ISOs.--ISOs granted under the 1998 Plan are each intended to qualify for
taxation as an "incentive stock option" within the meaning of Section 422 of
the Code.
17
Grant--Upon the grant of an ISO, the optionee will not recognize any income
and the Company will not be entitled to a deduction with respect to such grant.
Exercise--Upon the timely exercise of an ISO, the optionee will not
recognize any income and the Company will not be entitled to a deduction with
respect to such exercise. (The timely exercise of an ISO may, however, affect
the optionee's liability under the alternative minimum tax.) The exercise of an
ISO by an optionee will be timely if made while the optionee is employed by the
Company or within three months after the cessation of such employment. If the
exercise of an ISO is not timely, the ISO will be taxed according to the rules
for NSOs. An optionee's aggregate basis for shares acquired upon exercise of an
ISO will be equal to the exercise price paid for such shares. The holding
period for the shares will begin on the day following the date of exercise and,
accordingly, will not include the period during which the ISO was held.
Sale--If an optionee makes a disposition of shares acquired pursuant to an
ISO, and such shares were held for more than two years from the date of the
grant of such ISO and one year from the date of exercise of such ISO then any
gain or loss realized upon such disposition will be treated as long-term
capital gain or loss, currently taxable at a maximum federal rate of 20%. Under
such circumstances, the Company will not be entitled to a deduction with
respect to such disposition.
If, however, the optionee makes a disposition of shares acquired pursuant to
an ISO within either two years from the date of the grant of such ISO or one
year from the date of exercise of such ISO (other than a mere pledge or
hypothecation of the shares or a transfer by reason of death, bequest or
inheritance) ("disqualifying disposition"), then the optionee will generally be
required to recognize (i) as ordinary income, an amount equal to the excess
over the exercise price of the option of the fair market value of the shares on
the exercise date and (ii) as capital gain, an amount equal to the excess, if
any, of the amount realized on the disqualifying disposition over the fair
market value of the shares on the exercise date. However, in the case where the
disqualifying disposition is a sale or exchange, the amount that the optionee
will be required to recognize as ordinary income may not exceed the excess of
the amount realized on such sale or exchange over the exercise price. In the
case of such a disqualifying disposition, the Company will be entitled to a
deduction equal to the amount recognized by the optionee as ordinary income.
Any loss recognized upon a disqualifying disposition will generally be a
capital loss, and will be long-term capital loss if the holding period for the
disposed shares is more than one year.
The option exercise price of options granted under the 1998 Plan may be paid
by the transfer to the Company of shares of Company Common Stock with a fair
market value equal to the aggregate exercise price of the option. If the
optionee transfers to the Company shares of Company Common Stock issued upon
exercise of an ISO before both the one and two-year holding periods have
expired, the transfer will be treated as a disqualifying disposition of such
shares with the tax consequences described above. If the shares so transferred
were not issued upon exercise of an ISO or, if they are such shares and both
the one and two-year periods have expired, such transfer to the Company will
not be a taxable event.
NSOs--Any other option granted under the 1998 Plan will qualify for taxation
as a NSO.
Grant--Upon the grant of a NSO, an optionee will not recognize any income
and the Company will not be entitled to a deduction with respect to such grant.
Exercise--Except as described below, upon the exercise of a NSO the optionee
will recognize ordinary income in an amount equal to the excess of the fair
market value of the shares acquired over the exercise price. The Company will
be entitled to a deduction corresponding to the amount recognized as ordinary
income by the optionee. If, however, the shares acquired are subject to a
"substantial risk of forfeiture" under Section 83 of the Code, the optionee
will not recognize ordinary income until the lapse of such risk (unless the
optionee makes an election under Section 83(b) of the Code to recognize
ordinary income at the time of exercise).
18
Under the short-swing profit rules of the Exchange Act, the purchase of
shares upon exercise of a NSO by an "insider" (e.g. an officer or director of
the Company) will not be deemed a purchase triggering a six-month period of
short-swing liability. The short-swing rules will not subject the acquired
shares to a substantial risk of forfeiture under Section 83 of the Code unless
the shares are disposed of during the six-month period following the date of
the grant of the NSO. If an insider exercises a NSO after such period, the
insider will recognize ordinary income as of the exercise date. If an insider
exercises a NSO during such period, taxation will ordinarily be deferred until
the date six months after the grant date, unless the insider makes an election
under Section 83(b) of the Code to recognize ordinary income at the time of
exercise.
The aggregate basis for shares acquired upon exercise of a NSO will be equal
to the fair market value of such shares on the date that governs the
determination of the optionee's ordinary income. The holding period for such
shares will commence on such date and, accordingly, will not include the period
during which the NSO was held.
Sale--In the event of a sale of shares received upon exercise of a NSO, any
gain or loss after the date on which taxable compensation is recognized by the
optionee in respect of the option exercise will generally be a capital gain or
loss, assuming the shares are held as capital assets. The capital gain or loss
will be a long-term capital gain (currently taxable at a maximum federal rate
of 20%) or loss if the shares were held for more than one year after the date
on which taxable compensation was recognized by the optionee in respect of the
option exercise.
THE FAVORABLE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON
STOCK PRESENT IN PERSON OR BY PROXY AT THE MEETING IS REQUIRED TO APPROVE THE
2002 PLAN AMENDMENT.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE
THE AMENDMENT TO THE AMENDED 1998 PLAN.
PROPOSAL NO. 4
APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED 1990 NON-EMPLOYEE
DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
The Company's Amended and Restated 1990 Non-Employee Directors'
Non-Qualified Stock Option Plan currently authorizes the issuance of options to
purchase up to 800,000 shares of Common Stock. In April 2002, the Board amended
the plan (the "Directors' Plan Amendment"), subject to stockholder approval, to
increase the aggregate number of shares authorized for issuance upon exercise
of options granted under the 1990 Plan to 1,000,000 (as so amended, the "1990
Plan"). The Directors' Plan Amendment was designed to enhance the flexibility
of the Compensation Committee of the Board to grant stock options to the
Company's directors and selected employees, independent contractors and
consultants to ensure that the Company can continue to grant stock options to
such persons at levels determined to be appropriate by the Board.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Meeting and entitled to vote on the Directors' Plan
Amendment will be required to approve the Directors' Plan Amendment.
Set forth below is a summary of the 1990 Plan which is qualified in its
entirety by the terms of the 1990 Plan. The 1990 Plan is set forth in full as
Appendix C to this Proxy Statement and is incorporated herein by reference.
19
Description of the 1990 Plan
Under the 1990 Plan, options may be granted to members of the Company's
Board of Directors who are not employees of the Company and who have not been
employees of the Company for a period of at least one year prior to the date of
grant of an option thereunder ("Non-Employee Directors"). Options also may be
granted under the 1990 Plan to selected employees, independent contractors and
consultants of the Company. The purpose of the options and other awards
issuable under the 1990 Plan is to assist the Company in attracting and
retaining experienced and knowledgeable Non-Employee Directors, selected
employees, independent contractors, and consultants and to foster a community
of interest of such Non-Employee Directors, selected employees, independent
contractors and consultants interests with those of the Company's stockholders.
Annual Retainer
All compensation to be paid to Non-Employee Directors for serving as such,
except for fees for attending any meeting of the Company Board of Directors or
committee thereof and reimbursements related thereto, will be paid pursuant to
the 1990 Plan. Each Non-Employee Director elected at an annual meeting of
stockholders of the Company will automatically be granted options on the
thirteenth trading day after the date of such annual meeting (the "Retainer
Grant Date") to purchase a number of shares of Company Common Stock equal to
the lesser of (a) 2,500 shares and (b) the annual retainer for service as an
Non-Employee Director of the Company multiplied by 80% of the average of the
fair market value of a share of Company Common Stock on the ten trading days
following the third trading day after the date of such annual meeting of
stockholders.
Pro-Rata Retainers for Non-Employee Directors not Elected at Annual Meeting
Each person who is newly elected or appointed an Non-Employee Director, but
not by election at an annual meeting of the Company's stockholders, shall
automatically on the thirteenth trading day after the date of such election or
appointment be granted options to purchase a fixed number of shares of Company
Common Stock equal to the lesser of (a) 2,500 shares and (b) an amount
determined by taking the pro-rated portion of the annual retainer based on the
number of months remaining for the newly elected Non-Employee Director to serve
until the next annual meeting of stockholders divided by 80% of the fair market
value of a share of the Company Common Stock on the ten trading days following
the third trading day after the date of such election or appointment.
Exercise and Vesting
The options granted pursuant to the foregoing terms shall be exercisable at
a per share price of 20% of the average fair market value per share of Company
Common Stock used to calculate such grant. Subject to the provisions regarding
expiration and termination of options, the foregoing options will become
exercisable as to 75% of the shares of Company Common Stock issuable upon
exercise of such options six months after the date of grant and as to 100% of
such shares on the later of six months after the date of grant and December 31
of the year in which the grant is made.
Options for New Non-Employee Directors Elected at Annual Meeting
Each person who is elected or appointed a Non-Employee Director for the
first time at an annual meeting will automatically upon such election or
appointment (the "Automatic Grant Date") be granted an option to purchase 7,500
shares of Company Common Stock ("New Director Options"). The exercise price of
any New Director Options granted under the 1990 Plan will be 100% of the fair
market value of shares of Company Common Stock subject thereto on the Automatic
Grant Date. Subject to the provisions regarding expiration and termination of
options, any New Director Options will become exercisable as to 20% of the
shares of Company Common Stock subject thereto on the Automatic Grant Date and
shall become exercisable as to an additional 20% of the shares of Company
Common Stock issuable upon exercise thereof on each of the first, second, third
and fourth anniversaries of such Automatic Grant Date.
20
Plan Administration
The 1990 Plan will be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). Subject to the express
provisions of the 1990 Plan, the Committee may make such rules and establish
such procedures as it deems appropriate for the administration of such plan. In
the event of any disagreement as to the interpretation of the 1990 Plan or any
rule or procedure thereunder, the decision of the Committee shall be final and
binding upon all persons in interest.
Payment Upon Option Exercise
Under the 1990 Plan, all options must be exercised, if at all, within ten
years from their respective dates of grant. The exercise price of options
granted under the 1990 Plan may be paid in cash, services rendered, personal
property (including shares of Company Common Stock having a fair market value
on the date of exercise equal to the option price), real property, leases of
real property or any combination thereof. This provision permits an optionee
not only to use then-held shares of Company Common Stock in a single exercise
of stock options, but also to use the shares of Company Common Stock received
upon the exercise of stock options to exercise additional stock options in a
process known as "pyramiding". Such pyramiding permits an optionee to effect a
cashless exercise of all of the optionee's options then exercisable (no matter
what the number) without surrendering any shares of Company Common Stock or
making any additional cash investment. An optionee who exercises options by
pyramiding will own, after the exercise, a number of additional shares equal in
value to the spread between the fair market value of a share of Company Common
Stock on the date of exercise and the option exercise price of the options
exercised. Not less than ten shares may be purchased at any time upon the
exercise of an option granted under the 1990 Plan unless the number of shares
so purchased constitutes the total number of shares then issuable upon exercise
of the option. During the lifetime of an optionee, an option may be exercised
only by the optionee or such optionee's legal representative. An option may not
be transferred or assigned, except by will or the laws of descent and
distribution.
Adjustments
The exercise price of, and the number of shares issuable upon exercise of,
options granted under the 1990 Plan will be adjusted to reflect stock
dividends, stock splits, reverse stock splits, combinations, other
recapitalizations, reorganizations or reclassifications or changes affecting
the number or kind of outstanding shares of Company Common Stock. The 1990 Plan
also provides for certain adjustments to be made to the aggregate number of
shares which may be issued upon exercise of options granted under the 1990 Plan
in the event of any stock dividends, stock splits, reverse stock splits,
combinations, other recapitalizations, reorganizations or reclassifications or
changes affecting the number or kind of outstanding shares of Company Common
Stock.
In addition, in the event that a "Change in Control" occurs while any option
remains outstanding under the 1990 Plan, all options granted under such plan
that are outstanding as of the time of such change of control will become
immediately exercisable in full, without regard to the time period that has
elapsed from the date of grant or to the vesting provisions. Generally, a
Change in Control will be deemed to occur upon the earlier of (i) any person or
entity becoming the beneficial owner, directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of the
Company's then outstanding voting securities, (ii) a change in the composition
of the Board of Directors of the Company during any period of not more than two
consecutive years such that individuals who constitute the Board of Directors
of the Company at the beginning of such period cease for any reason to
constitute at least a majority of such board, (iii) the approval by the
stockholders of the Company of a merger or consolidation of the Company with
any other company whereby the combined voting power of the Company's securities
no longer represents at least 50% of the combined voting power of the surviving
or parent entity outstanding after such merger or consolidation or (iv) the
stockholders of the Company approve a plan of complete liquidation or an
agreement for the sale of all or substantially all of the assets of the Company.
21
Termination of Eligibility
If an individual to whom options have been granted under the 1990 Plan
ceases to be a director, employee, consultant, or independent contractor of the
Company as the result of a termination without cause (other than due to death
or disability), (A) any options held by such person that were exercisable on
the date of such termination may be exercised by that person until the later
of: (i) a period of one year following the date of such termination, or (ii) a
period of one year from the date any option vests in the twelve month period
following such termination, and (B) any options held by such person that were
not exercisable on the date of such termination will continue to vest in
accordance with their original vesting schedule for a period of 12 months
following the date of termination, and any options that vest during such
12-month period may be exercised by that person for a period of one year
following the date of such vesting.
If an individual to whom options have been granted under the Plan ceases to
be a director, employee, consultant, or independent contractor of the Company
as the result of a voluntary resignation (other than due to death or
disability), (A) any options held by such person that were exercisable on the
date of such resignation may be exercised by that person until the later of:
(i) a period of one year following the date of such resignation, or (ii) a
period of one year from the date any option vests in the twelve month period
following such resignation, and (B) any options held by such person that were
not exercisable on the date of such resignation will continue to vest in
accordance with their original vesting schedule for a period of 12 months
following the date of resignation, and any options that vest during such
12-month period may be exercised by that person for a period of one year
following the date of such vesting, provided that the individual has been an
employee, consultant or director of the Company for at least three years and
has signed a non-compete agreement with the Company (such agreement to include
biotechnology companies, academic and/or research organizations encompassing
biotechnology, and venture capital companies in the biotechnology sector.
If any recipient of an option under the 1990 Plan dies within the one year
period following termination of employment or other relationship, such
optionee's Beneficiary (as defined) may exercise such optionee's options, to
the extent exercisable or vested at the time of death, for a period not to
exceed one year after such date, but in no event later than expiration of such
option's term. If any recipient of an option ceases employment or other
relationship with the Company and its subsidiaries due to death or disability,
such optionee's options may be exercised at any time within 12 months following
the optionee's death or termination of employment or other relationship due to
death or disability, by the optionee, the optionee's legal representative or
the person or persons to whom the optionee's rights under the 1990 Plan shall
pass by will or by the laws of descent or distribution but in no event later
than the expiration date of such option. Shares of Company Common Stock
issuable upon exercise of options granted under the 1990 Plan that have expired
or been surrendered or terminated will be returned to the plan and become
available for issuance upon exercise of future options granted under the plan.
Termination of Plan
The 1990 Plan will terminate on April 23, 2005, except with respect to
options outstanding on such date. The Company's Board of Directors may sooner
terminate or amend the 1990 Plan at any time, subject to its terms; provided,
however, that the Board may seek stockholder approval of an amendment if
determined to be required by or advisable under regulations of the Securities
and Exchange Commission or the Internal Revenue Service, the rules of any stock
exchange or system on which the Company Common Stock is listed or other
applicable law or regulation.
Options Outstanding, Exercisable and Available for Future Grant Under the
1990 Plan
As of April 15, 2002, options to purchase 557,403 shares were outstanding
under the 1990 Plan, of which options to purchase 528,778 shares were
exercisable. No options have been exercised in 2002 to date. The exercise
prices for the outstanding options ranged from $0.63 to $9.38 per share. At
April 15, 2002, options to purchase 168,377 shares (plus any options that
expire or are canceled in the future) were available for future grant,
exclusive of the additional shares covered by the Directors' Plan Amendment.
22
Federal Income Tax Consequences
The Federal income tax consequences of a NSO granted under the 1990 Plan are
the same as the Federal income tax consequences described for NSOs granted
under the 1998 Omnibus Plan, set forth above under "Description of the 1998
Plan." With respect to any cash payments received under the 1990 Plan, the
recipient will recognize ordinary income and the Company will be entitled to a
deduction for such cash payment.
THE FAVORABLE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON
STOCK PRESENT IN PERSON OR BY PROXY AT THE MEETING IS REQUIRED TO APPROVE THE
DIRECTORS' PLAN AMENDMENT.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE
THE AMENDMENT TO THE 1990 PLAN.
GENERAL AND OTHER MATTERS
The Board knows of no matter, other than as referred to in this proxy
statement, which will be presented at the Meeting. However, if other matters
properly come before the Meeting, or any of its adjournments, the person or
persons voting the proxies will vote them in accordance with their judgment in
such matters.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, independent auditors, audited the financial
statements of the Company for the year ended December 31, 2001. Representatives
of PricewaterhouseCoopers LLP are expected to attend the Annual Meeting, will
have the opportunity to make a statement if they desire to do so, and are
expected to be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers (including a person performing a principal policy-making
function) and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Holders") to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Directors, officers and 10% Holders are
required by SEC regulations to furnish the Company with copies of all of the
Section 16(a) reports they file. Based solely upon a review of the copies of
the forms furnished to the Company and the representations made by the
reporting persons to the Company, the Company believes that during fiscal 2001
its directors, officers and 10% Holders complied with all substantive filing
requirements under Section 16(a) of the Exchange Act.
AVAILABLE INFORMATION
THE COMPANY WILL PROVIDE, WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 2001 (INCLUDING THE FINANCIAL
STATEMENTS, BUT EXCLUDING EXHIBITS), AS FILED WITH THE SEC. SUCH WRITTEN
REQUEST SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT THE ADDRESS OF THE
COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
23
STOCKHOLDER PROPOSALS--2002 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders in 2002 must be received by January 15, 2003 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that Meeting. If any shareholder wishes to present a proposal to
the 2002 annual meeting of stockholders that is not included in the Company's
proxy statement for that meeting and fails to submit such proposal to the
Secretary of the Company on or before March 30, 2003, then the Company will be
allowed to use its discretionary voting authority when the proposal is raised
at the annual meeting, without any discussion of the matter in its proxy
statement. Stockholder proposals should be directed to the Corporate Secretary,
at the address of the Company set forth on the first page of this proxy
statement.
By Order of the Board of Directors,
Joseph P. Hernon
Secretary
May 1, 2002
24
APPENDIX A
FORM OF
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BOSTON LIFE SCIENCES, INC.
Pursuant to Section 242 of the
Delaware General Corporation Law
BOSTON LIFE SCIENCES, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
1. The Amended and Restated Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of State of Delaware on
June 29, 1999 and amendments thereto were subsequently duly filed and
recorded (the Amended and Restated Certificate of Incorporation together
with such amendments shall be hereinafter referred to as the "Certificate").
2. That the Board of Directors of the Corporation duly adopted
resolutions proposing and declaring advisable the following amendment (the
"Amendment") to the Certificate:
RESOLVED, that the Board of Directors hereby approves and recommends to the
Company's stockholders that the first sentence of Article FOURTH of the
Certificate be, and it hereby is, subject to stockholder approval at the
2002 Annual Meeting of Stockholders of the Corporation, amended and restated
in its entirety to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 51,000,000 to be divided into (a) 50,000,000 shares of
Common Stock, par value $.01 per share, (b) 1,000,000 shares of Preferred
Stock, par value $.01 per share, of which 25,000 shares have been designated
Series A Preferred Stock, with the powers, preferences and other rights as
set forth in the Certificate of Designation, Preferences and Rights of
Series A Preferred Stock filed on March 19, 2001, and of which 500,000
shares have been designated Series D Preferred Stock, with the powers,
preferences and other rights as set forth in the Certificate of Designation,
Preferences and Rights of Series D Preferred Stock filed on September 13,
2001."
FURTHER RESOLVED, that all other provisions of the Certificate, as
heretofore amended, and all exhibits, attachments and certificates to the
Certificate shall remain unchanged and in full force and effect.
3. That thereafter a majority of the holders of the stock of the
Corporation entitled to vote thereon voted in favor of the Amendment at a
meeting of the stockholders duly held on June 11, 2002.
4. That the foregoing amendment to the Certificate on Incorporation was
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law.
IN WITNESS WHEREOF, said Boston Life Sciences, Inc. has caused this
Certificate to be executed by its duly authorized officers this 11/th day of
June, 2002. /
BOSTON LIFE SCIENCES, INC.
By: /s/ S. David Hillson
Name: S. David Hillson
Title: Chief Executive Officer
A-1
APPENDIX B
BOSTON LIFE SCIENCES, INC. 1998
OMNIBUS STOCK OPTION PLAN
1. Purpose; Types of Options; Construction.
The purpose of the Boston Life Sciences, Inc. 1998 Omnibus Stock Option Plan
is to afford an incentive to selected employees, consultants, independent
contractors, directors and Scientific Advisors of Boston Life Sciences, Inc.
(the "Company"), or any Subsidiary which now exists or hereafter is organized
or acquired, to acquire a proprietary interest in the Company, to continue as
employees, independent contractors, consultants, directors or Scientific
Advisors, as the case may be, to increase their efforts on behalf of the
Company and to promote the success of the Company's business. The Plan provides
for grants of stock options (including "incentive stock options" and
"nonqualified stock options").
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Beneficiary" means the person, persons, trust or trusts which have
been designated by an Optionee in his or her most recent written beneficiary
designation filed with the Company to receive the benefits specified under
the Plan upon his or her death, or, if there is no designated Beneficiary or
surviving designated Beneficiary, then the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive such
benefits.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Committee" means the committee established by the Board to
administer the Plan, the
composition of which shall at all times satisfy the provisions of Rule
16b-3.
(e) "Company" means Boston Life Sciences, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(g) "Fair Market Value" per share of Stock as of a particular date shall
mean (i) the closing price per share of Stock on the national securities
exchange or National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on which the Stock is
principally traded, for the last preceding date on which there was a sale of
such Stock on such exchange or system, or (ii) if the shares of Stock are
not then traded on any such exchange or system, the average of the closing
bid and asked prices for the shares of Stock quoted on NASDAQ for the last
preceding date on which a sale of Stock was reported, or (iii) if the shares
of Stock are not then traded on an exchange or system or quoted on NASDAQ,
such value as the Committee, in its sole discretion, shall determine.
(h) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(i) "NSO" means any Option that is designated as a nonqualified stock
option or that does not meet the requirements to be an ISO.
(j) "Option" means a right, granted to a Optionee under Section 6(b), to
purchase shares of Stock. An Option may be either an ISO or an NSO, provided
that ISO's may not be granted to independent contractors or Scientific
Advisors.
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(k) "Option Agreement" means any written agreement, contract, or other
instrument or document evidencing the grant of an Option.
(l) "Optionee" means a person who, as an employee, Scientific Advisor,
director, consultant or independent contractor of the Company or a
Subsidiary has been granted an Option under the Plan.
(m) "Plan" means this Boston Life Sciences, Inc. 1998 Omnibus Stock
Option Plan, as amended from time to time.
(n) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.
(o) "Scientific Advisor" means any member of the Scientific Advisory
Board who neither (i) is an employee of the Company, nor (ii) receives
compensation from the Company pursuant to a research, sponsored research or
similar agreement with the Company (other than a Scientific Advisory and
Consulting Agreement entered into generally by the Company and members of
the Scientific Advisory Board which may provide for compensation for each
meeting of the Scientific Advisory Board which the Scientific Advisor
attends and for the reimbursement of certain expenses), nor (iii) is the
discoverer of, or a principal investigator or researcher with respect to,
any technology subject to the Company's research and development programs as
determined by the Committee in its sole discretion.
(p) "Scientific Advisory Board" means the Board of Scientific Advisors of
the Company.
(q) "Stock" means shares of the common stock, par value $.01 per share,
of the Company.
(r) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an
Option, each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
(s) "Ten Percent Stockholder" shall mean a prospective optionee of the
Company who, at the time an ISO is to be granted to such optionee, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company.
3. Administration.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine the persons to whom
and the time or times at which Options shall be granted; to determine the type
and number of Options to be granted, the number of shares of Stock to which an
Option may relate and the terms and conditions relating to any Option; and to
determine whether, to what extent, and under what circumstances an Option may
be settled, cancelled, forfeited, exchanged, or surrendered; to make
adjustments in the terms and conditions of Options in recognition of unusual or
nonrecurring events affecting the Company or any Subsidiary or the financial
statements of the Company or any Subsidiary, or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Option Agreement; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the Option Agreements (which need not be identical for each
Optionee); and to make all other determinations deemed necessary or advisable
for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations
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of the Committee shall be made by a majority of its members either present in
person or participating by conference telephone at a meeting or by written
consent. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary or Optionee (or any person claiming
any rights under the Plan from or through any Optionee) and any stockholder.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option granted
hereunder.
4. Eligibility.
Options may be granted to selected employees, Scientific Advisors,
directors, consultants and independent contractors of the Company and its
present or future Subsidiaries, in the discretion of the Committee.
5. Stock Subject to the Plan.
The maximum number of shares of Stock that may be issued under the Plan
shall be 2,900,000.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Optionees under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of Stock which may thereafter be
issued in connection with Options, (ii) the number and kind of shares of Stock
issuable in respect of outstanding Options, and (iii) the exercise price
relating to any Option; provided that, with respect to ISOs, such adjustment
shall be made in accordance with Section 424(h) of the Code.
6. Specific Terms of Options.
(a) General. The Committee may impose on any Option or the exercise
thereof, at the date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine.
(b) Options. The Committee is authorized to grant Options to Optionees on
the following terms and conditions:
(i) Type of Option. The Option Agreement evidencing the grant of an
Option under the Plan shall designate the Option as an ISO or an NSO.
(ii) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee; provided that, in the
case of an ISO, except as set forth in Section 6(c)(ii), such exercise price
shall be not less than the Fair Market Value of a share on the date of grant
of such Option, and, in the case of an NSO, such exercise price shall be not
less than 50% of the Fair Market Value of a share on the date of grant of
such Option, but in no event shall the exercise price for the purchase of
shares be less than par value. The exercise price for Stock subject to an
Option may be paid in cash or, at the discretion of the Committee, by an
exchange of Stock previously owned by the Optionee, or a combination of
both, in an amount having a combined value equal to such exercise price. An
Optionee may also elect to pay all or a portion of the aggregate exercise
price by having shares of Stock with a Fair Market Value on the date of
exercise equal to the aggregate exercise price withheld by the Company or
sold by a broker-dealer under circumstances meeting the requirements of 12
C.F.R. (S)220 or any successor thereof.
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(iii) Term and Exercisability of Options. Except as set forth in
Section 6(c)(ii) hereof, the term of each Option shall be up to ten (10)
years from the date of grant of such Option. The date on which the Committee
adopts a resolution expressly granting an Option, or such other date as is
set forth in such resolution, shall be considered the day on which such
Option is granted. Options shall be exercisable over the exercise period, at
such times and upon such conditions as the Committee may determine, as
reflected in the Option Agreement; provided that, the Committee shall have
the authority to accelerate the exercisability of any outstanding Option at
such time and under such circumstances as it, in its sole discretion, deems
appropriate. An Option may be exercised to the extent of any or all full
shares of Stock as to which the Option has become exercisable, by giving
written notice of such exercise to the Committee or its designated agent;
provided that, no Option may be exercised for fewer than 10 shares of Stock
unless the number of shares with respect to which the Option is exercised
constitutes the total number of shares as to which the Option is then
exercisable.
(iv) Termination of Employment or Other Relationship.
(a) If an Optionee ceases to be an employee, independent contractor,
consultant, Scientific Advisor or director of the Company as the result of a
termination without cause (other than due to death or disability), his
options will continue to vest for a period of one year pursuant to the
vesting schedule established at the time the Option was granted and (A) any
Options held by such Optionee that were exercisable on the date of such
termination may be exercised by the Optionee until the later of: i) one year
following the date of such termination, or, ii) one year from the date any
Option vests in the twelve month period following such termination and (B)
any Options held by such Optionee that vested during the 12 months following
the date of termination may be exercised by the Optionee for a period of one
year following the date of such vesting.
(b) If an Optionee ceases to be an employee, consultant, independent
contractor, Scientific Advisor or director of the Company as the result of a
voluntary resignation (other than due to death or disability), his options
will continue to vest for a period of one year pursuant to the vesting
schedule established at the time the Option was granted and provided that
the Optionee has been an employee, consultant, independent contractor,
Scientific Advisor or director of the Company for at least three years and
has signed a non-compete agreement with the Company (such agreement to
include biotechnology companies, academic and/or research organizations
encompassing biotechnology, and venture capital companies in the
biotechnology sector), and (A) any Options held by such Optionee that were
exercisable on the date of such resignation may be exercised by the Optionee
until the later of: i) one year following the date of such resignation, or,
ii) one year from the date any Option vests in the twelve month period
following such resignation and (B) any Options held by such Optionee that
vested during the 12 months following the date of resignation may be
exercised by the Optionee for a period of one year following the date of
such vesting provided, that, if the Optionee dies within such one-year
period following termination of employment or other relationship, the Option
(to the extent exercisable at the time of death) shall be exercisable by the
Optionee's Beneficiary for a period of one (1) year following the Optionee's
death (but in no event after the expiration date of the Option), and shall
thereafter terminate.
(v) Death or Disability. If the Optionee's employment or other
relationship with the Company is terminated because of death or disability,
the Optionee (or, where applicable, the Beneficiary) will be entitled to
exercise the Option with respect to the total number of shares of Stock
subject to such Option and without regard to the extent to which such Option
was exercisable at the time of the termination of employment or other
relationship due to death or disability for a period of one (1) year
following the Optionee's death or termination of employment or other
relationship due to death or disability (but in no event after the
expiration date of the Option), and the Option shall thereafter terminate.
(vi) Other Provisions. Options may be subject to such other conditions
including, but not limited to, restrictions on transferability of the shares
acquired upon exercise of such Options, as the Committee may prescribe in
its discretion.
(vii) Incentive Stock Options. Options granted as ISOs shall be subject
to the following special terms and conditions, in addition to the general
terms and conditions specified in this Section 6.
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(i) Value of Shares. The aggregate Fair Market Value (determined as
of the date the ISO is granted) of the shares of Stock with respect to
which ISOs granted under this Plan and all other plans of the Company
become exercisable for the first time by each Optionee during any
calendar year shall not exceed $100,000.
(ii) Ten Percent Stockholder. In the case of an ISO granted to a Ten
Percent Stockholder, (x) the exercise price shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the shares of
Stock on the date of grant of such ISO, and (y) the exercise period
shall not exceed five (5) years from the date of grant of such ISO.
7. General Provisions.
(a) Compliance with Local and Exchange Requirements. The Plan, the granting
and exercising of Options thereunder, and the other obligations of the Company
under the Plan and any Option Agreement or other agreement shall be subject to
all applicable federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Stock
under any Option until completion of such stock exchange listing or
registration or qualification of such Stock or other required action under any
state, federal or foreign law, rule or regulation as the Company may consider
appropriate, and may require any Optionee to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of Stock in compliance with applicable laws, rules and
regulations.
(b) Nontransferability. Options shall not be transferable by an Optionee
except by will or the laws of descent and distribution or, if then permitted
under Rule 16b-3, pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder, and shall be exercisable during the
lifetime of an Optionee only by such Optionee or his guardian or legal
representative.
(c) No Right to Continued Employment, etc. Nothing in the Plan or in any
Option granted or any Option Agreement or other agreement entered into pursuant
hereto shall confer upon any Optionee the right to continue in the employ of or
to continue as an independent contractor or Scientific Advisor of the Company
or any Subsidiary or to be entitled to any remuneration or benefits not set
forth in the Plan or such Option Agreement or other agreement or to interfere
with or limit in any way the right of the Company or any such Subsidiary to
terminate such Optionee's employment, independent contractor or Scientific
Advisor relationship.
(d) Taxes. The Company or any Subsidiary is authorized to withhold from any
distribution of Stock, or any other payment to a Optionee, amounts of
withholding and other taxes due in connection with any transaction involving an
Option, and to take such other action as the Committee may deem advisable to
enable the Company and Optionees to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Option. This
authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Optionee's tax obligations.
(e) Amendment and Termination of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part; provided that, the Company will seek stockholder approval if the Board of
Directors determines that it is necessary or desirable in order to comply with
the Code, federal or state securities law or any other applicable rules or
regulations in which case such amendment shall not be effective unless the same
shall be approved by the requisite vote of the stockholders of the Company
entitled to vote thereon. Notwithstanding the foregoing, no amendment shall
affect adversely any of the rights of any Optionee, without such Optionee's
consent, under any Option theretofore granted under the Plan.
(f) Change in Control. Notwithstanding any other provision of the Plan to
the contrary, if, while any Options remain outstanding under the Plan, a
"Change in Control" of the Company (as defined in this Section 7(f)) shall
occur, all Options granted under the Plan that are outstanding at the time of
such Change in Control shall become immediately exercisable in full, without
regard to the years that have elapsed from the date of grant.
For purposes of this Section 7(f), a Change in Control of the Company shall
occur upon the happening of the earliest to occur of the following:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other
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than (1) the Company, (2) any trustee or other fiduciary holding securities
under an employee benefit plan of Company, or (3) any corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Stock (each an "excluded person"), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such person any securities acquired
directly from the Company or its affiliates) representing 30% or more of the
combined voting power of the Company's then outstanding voting securities;
(ii) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this paragraph (f)) whose election by the
Board or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds ( 2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (other than
approval given in connection with an actual or threatened proxy or election
contest), cease for any reason to constitute at least a majority of the
Board;
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) 50% or more of the combined voting power of the
voting securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation, or (B) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquired
0% or more of the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
(g) No Rights to Options; No Stockholder Rights. No Optionee shall have
any claim to be granted any Option under the Plan, and there is no obligation
for uniformity of treatment of Optionees. Except as provided specifically in
the applicable Option Agreement, an Optionee or Beneficiary shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of exercise of the Option.
(h) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Option. The Committee shall determine
whether cash, other Options, or other property shall be issued or paid in lieu
of such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(i) Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware without
giving effect to the conflict of laws principles thereof.
(j) Term of the Plan. The Plan shall terminate on April 23, 2008, except
with respect to Options outstanding on such date and no Option may be granted
thereafter.
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APPENDIX C
BOSTON LIFE SCIENCES, INC. AMENDED AND RESTATED
1990 NON-EMPLOYEE DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
1. Objectives.
The objectives of the Boston Life Sciences, Inc. Amended and Restated 1990
Non-Employee Directors' Non-Qualified Stock Option Plan (as amended from time
to time, the "Plan") are to assist Boston Life Sciences, Inc. (the "Company")
in attracting and retaining experienced and knowledgeable independent
Directors, to further promote the identification of such Directors' interests
with those of the Company's stockholders, and to attract and retain experienced
and knowledgeable employees, independent contractors and consultants. The
Boston Life Sciences, Inc. Amended and Restated 1990 Non-Employee Directors'
Non-Qualified Stock Option Plan is hereby amended and restated for a second
time.
2. Maximum Number of Shares to be Optioned and Adjustments in Optioned Shares.
The maximum number of shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company which may be issued hereunder is 800,000 (the
"Shares"). Notwithstanding any other provisions of the Plan to the contrary,
the number of Shares subject to option, the number of Shares previously
optioned and not theretofore delivered and the option price per Share shall be
adjusted if the number of outstanding Shares of the Company is increased or
reduced by split-up, reclassification, stock dividend or the like.
3. Administration and Interpretation.
The Plan shall be administered by a committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board"). Subject to the express
provisions of the Plan, the Committee may make such rules and establish such
procedures as it deems appropriate for the administration of the Plan. In the
event of any disagreement as to the interpretation of the Plan or any rule or
procedure thereunder, the decision of the Committee shall be final and binding
upon all persons in interest.
4. Annual Grant of Options.
Each member (a "Director") of the Board who is not an employee of the
Company and who has not been an employee of the Company for a period of at
least one year prior to the date of grant of an option under the Plan (a
"Non-Employee Director") shall automatically be granted an option on the
thirteenth trading day after the date of the annual meeting of stockholders of
the Company ("Retainer Grant Date") to purchase such number of Shares equal to
the lesser of (a) 2,500 Shares and (b) the quotient of the annual retainer for
service as a Non-Employee Director of the Company and 80% of the average of the
fair market value of a Share Of Common Stock on he ten trading days following
the third trading day after the date of such annual meeting of stockholders of
the Company (such average a "Ten Day Average-Value"). If the number of Shares
calculated pursuant to clause (b) of the immediately preceding sentence exceeds
2,500, each Non-Employee Director entitled to receive Shares under this
paragraph of Section 4 will automatically receive on the Retainer Grant Date a
cash payment equal to the annual retainer minus the product of 2,500 and 80% of
the Ten Day Average Value. The "fair market value" of Shares shall be
determined to be the closing price per Share on the principal national
securities exchange on which the Share is listed or admitted to trading, or, if
not listed or traded on any such exchange, on the Nasdaq National Market, or if
not listed or traded on any such exchange or system, the average of the bid and
asked price per Share on Nasdaq or, if such quotations are not available, the
fair market value of a Share as determined in good faith by the Committee,
which determination shall be conclusive.
Each person who is newly elected or appointed a Non-Employee Director after
the Company's annual meeting of stockholders held in 1995, but not by election
at a subsequent Company annual meeting of stockholders, shall automatically, on
the thirteenth trading day after the date of such election or appointment (the
"Mid-Year Grant Date"), be granted options to purchase such number of Shares
equal to the lesser of (a) 2,500 Shares and (b) the quotient of (i) the product
of (x) the annual retainer for service as a Director of the Company and (y) a
fraction (the "Fraction"), the numerator of which is the number of whole months
from the date of such
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election or appointment as a Non-Employee Director until the date of the next
annual meeting of stockholders and the denominator of which is 12 (such product
hereinafter known as the "Mid-Year Retainer Amount") and (ii) 80% of the
average of the fair market value of a Share on the ten trading days following
the third trading day after the date of such election or appointment (such
average a "Mid-Year Ten Day Average Value"). If the number of Shares calculated
pursuant to clause (b) of the immediately preceding sentence exceeds 2,500,
each Non-Employee Director entitled to receive Shares under this paragraph of
Section 4 will automatically receive on the Mid-Year Grant Date a cash payment
equal to the Mid Year Retainer Amount minus the product of 2,500 and 80% of the
Mid Year Ten Day Average Value.
5. Grants to New Non-Employee Directors.
Each Non-Employee Director who, after the Company's annual meeting of
stockholders held in 1994, is elected or appointed to the Board for the first
time, and who was not immediately prior to such date serving on the Board of
Directors of Boston Life Sciences, Inc., will, at the time such director is
elected or appointed and duly qualified, be granted automatically (the
"Automatic Grant Date") an option to purchase 7,500 Shares.
6. Grants to Employees, Consultants, and Independent Contractors.
The Board may, in its discretion grant stock options under the Director Plan
to any employee, independent contractor or consultant of the Company (each, an
"Employee") or to any Non-Employee Director, and such options will have the
terms and conditions set by the Board at the time the option is granted.
7. Option Terms.
Subject to the limitations prescribed in Sections 4 and 5 above, the options
granted under the Plan shall be on the terms stated in subsections 7(a) through
(g) below.
(a) The option exercise price per-share for options granted pursuant to
Section 4 of this Plan shall be 20% of the Ten Day Average Value or Mid-Year
Ten Day Average Value per Share, as appropriate. The option exercise price
per share for options granted pursuant to Section 5 of this Plan shall be
100% of the fair market value of a share of Common Stock on the Automatic
Grant Date.
(b) Subject to the provisions herein regarding expiration or termination
of options, an option granted pursuant to Section 4 of the Plan shall become
exercisable as to 75% of the Shares subject thereto six months after the
Retainer Grant Date or Mid-Year Grant Date of the option, as appropriate,
and shall become exercisable as to 100% of the Shares subject thereto on the
later of six months after the Retainer Grant Date or Mid-Year Grant Date, as
appropriate, and December 31 of the year in which the option is granted.
Subject to the provisions herein regarding expiration or termination of
options, an option granted pursuant to Section 5 of the Plan shall be
exercisable as to 20% of the Shares subject thereto on the Automatic Grant
Date of the option, and shall become exercisable as to an additional 20% of
the Shares subject thereto each of the first, second, third and fourth
anniversaries of such Automatic Grant Date. No partial exercise of the
option may be for less than 10 full Shares, unless the number of shares so
purchased constitutes the total number of shares then purchasable under such
option. In no event shall the Company be required to issue fractional Shares.
(c) Notwithstanding any other provisions of the Plan to the contrary, no
option shall be granted later than ten years after the date the Plan is
adopted by the Board.
(d) The option price shall be payable in cash, services rendered,
personal property (including Shares having a fair market value equal to the
option price), real property, leases of real property or any combination
thereof.
(e) The option shall not be transferable otherwise than by will or the
laws of descent and distribution and shall be exercisable, during the
optionee's lifetime, only by such optionee or the optionees Representative
(as hereinafter defined).
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(f) The option shall expire ten years after the date of grant, unless an
earlier date is fixed by operation of Section 7 hereof.
(g) Change in Control
Notwithstanding any other provision of the Plan to the contrary, if, while
any options remain outstanding under the Plan, a "Change in Control" of the
Company (as defined in this Section 7(g)) shall occur, all options granted
under the Plan that are outstanding at the time of such Change in Control shall
become immediately exercisable in full, without regard to the years that have
elapsed from the date of grant.
For purposes of this Section 7(g), a Change in Control of the Company shall
occur upon the happening of the earliest to occur of the following:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than (1) the Company, (2) any trustee or other fiduciary
holding securities under an employee benefit plan of Company, or (3) any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Stock
(each an "excluded person"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such person any securities acquired directly from the Company or
its affiliates) representing 30% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this paragraph (g)) whose election by the
Board or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds ( 2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (other than
approval given in connection with an actual or threatened proxy or election
contest), cease for any reason to constitute at least a majority of the
Board;
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) 50% or more of the combined voting power of the
voting securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation, (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquired
30% or more of the combined voting power of the Company's then outstanding
securities or (C) the transaction contemplated by the Merger Agreement (as
defined below); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
8. Exercise Rights upon Ceasing to be a Director, Employee, Independent
Contractor or Consultant.
(a) In the event that a Director, employee, independent contractor or
consultant ceases to serve as a Director, employee, independent contractor or
consultant of the Company and its subsidiaries due to death or Disability (as
hereinafter defined), such optionee's options may be exercised at any time
within 12 months following such optionee's death or Disability (subject to the
limitations prescribed in Sections 4 or 5, as appropriate, and subsection 7(f)
above) by the optionee, the optionee's legal representative or the person or
persons to whom the optionee's rights under the options shall pass by will or
by the laws of descent or distribution (each a "Representative"), but only to
the extent that the optionee's options were exercisable on the date of such
optionee's death or Disability.
C-3
(b) If an optionee ceases to be a Director, employee, independent contractor
or consultant of the Company as the result of a termination without cause
(other than due to death or Disability), his options will continue to vest for
a period of one year pursuant to the vesting schedule established at the time
the option was granted, and (A) any options held by such optionee that were
exercisable on the date of such termination may be exercised by the optionee
until the later of: i) one year following the date of such termination, or ii)
one year from the date any option vests in the twelve month period following
such termination, and (B) any options held by such optionee that vested during
the 12-month period following the date of termination may be exercised by the
optionee for a period of one year following the date of such vesting (subject
to the limitations prescribed in Sections 4 or 5, as appropriate, and
subsection 7(f) above).
(c) If an optionee ceases to be an employee, independent contractor,
consultant or director of the Company as the result of a voluntary resignation
(other than due to death or disability), his options will continue to vest for
a period of one year pursuant to the vesting schedule established at the time
the option was granted, provided that the optionee has been an employee,
independent contractor, consultant or director of the Company for at least
three years and has signed a non-compete agreement with the Company (such
agreement to include biotechnology companies, academic and/or research
organizations encompassing biotechnology, and venture capital companies in the
biotechnology sector), and (A) any options held by such optionee that were
exercisable on the date of such resignation may be exercised by the optionee
until the later of: i) one year following the date of such resignation, or ii)
one year from the date any option vests in the twelve month period following
such resignation, and (B) any options held by such optionee that vested during
the 12-month period following the date of resignation may be exercised by the
optionee for a period of one year following the date of such vesting (subject
to the limitations prescribed in Sections 4 or 5, as appropriate, and
subsection 7(f) above).
provided, that, if the optionee dies within such one-year period following
termination of employment or other relationship, the option (to the extent
exercisable at the time of death) shall be exercisable by the optionee's
Beneficiary for a period of one (1) year following the optionee's death (but in
no event after the expiration date of the option), and shall thereafter
terminate.
The provisions of this paragraph 8 shall not apply to options held by any
person who was a Non-Employee Director of the Company prior to the Effective
Date of the Merger (as those terms are defined in the Agreement of Merger by
and between Greenwich Pharmaceuticals Incorporated and Boston Life Sciences,
Inc., dated August 8, 1994 (the "Merger Agreement") and who resigns as such
director of the Company immediately after such Effective Date. Any options
issued to the persons identified in the immediately preceding sentence and that
remain outstanding as of the Effective Date will remain outstanding for the
remainder of their respective terms not to exceed ten years from the date of
grant. The term "Disability" shall mean the inability, due to illness or
injury, to engage in any gainful occupation for which the individual is suited
by education, training or experience, which condition continues for at least
six months.
9. Exercise and Additional Requirements.
Any optionee or Representative exercising an option may exercise the option
(to the extent exercisable as of such date) by delivery to the Company of (a)
written notice of exercise of the option as to a specified number of Shares;
and (b) payment of the option exercise price for such Shares.
Upon the exercise of an option granted hereunder the Board may require the
optionee or Representative, as the case may be, exercising the option to
deliver the following:
(a) A written statement that the optionee or Representative, as the case
may be, is purchasing the Shares for investment and not with a view toward
their distribution or sale and will not sell or transfer any Shares received
upon the exercise of the option except in accordance with the Securities Act
of 1933, as amended, and applicable state securities laws;
(b) Evidence reasonably satisfactory to the Company that, at the time of
exercise, the optionee or Representative, as the case may be, meets such
other requirements as the Board of Directors may determine;
C-4
(c) Evidence reasonably satisfactory to the Company that, at the time of
exercise, the exercise of the option by the optionee or Representative, as
the case may be, and the delivery of Shares by the Company comply with all
applicable federal and state securities laws; and
(d) Evidence reasonably satisfactory to the Company that, at the time of
exercise of the option by the optionee, such optionee has complied with the
requirements of all applicable federal, state and local income tax
withholding laws.
10. Common Stock Subject to Option.
The Shares issuable upon exercise of options granted hereunder may be
unissued shares of treasshares, including shares bought on the open market. The
Company at all times during the term of the Plan shall reserve for issuance the
number of Shares issuable upon exercise of options granted hereunder.
11. Compliance with Governmental and Other Regulations.
The Company will not be obligated to issue and sell the Shares issued
pursuant to options granted hereunder if, in the opinion of its counsel, such
issuance and sale would violate any applicable federal or state securities
laws. The Company will seek to obtain from each regulatory commission or agency
having jurisdiction such authority as may be required to issue and sell Shares
issuable upon exercise of any option granted hereunder. Inability of the
Company to obtain from any such regulatory commission or agency authority which
counsel to the Company deems necessary for the lawful issuance and sale of
Shares upon exercise of an option granted hereunder shall relieve the Company
from any liability for failure to issue and sell such Shares until the time
when such authority is obtained or is obtainable.
12. Nonassignment of Options.
Except as otherwise provided in subsection 6(e) hereof, any option granted
hereunder and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of such option, right or privilege contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon the rights
and privileges conferred hereby, such option and the rights and privilege
conferred hereby shall immediately terminate.
13. Rights of Optionee in Stock.
Neither any optionee nor the Representative, heirs, legatees or distributees
of any optionee, shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to any Shares issuable upon exercise of an
option granted hereunder unless and until such Shares are issued to such
optionee or Representative, as the case may be, and a certificate has been
issued therefore.
14. Delivery of Shares Issued Pursuant to Option.
Subject to the other terms and conditions of the Plan, upon the exercise of
an option granted hereunder, the Company shall sell and deliver to the optionee
or Representative, as the case may be, the Shares with respect to which the
option has been exercised.
15. Withholding of Applicable Taxes.
The Company shall have the right to reduce the number of Shares otherwise
required to be issued upon exercise of an option granted hereunder by an amount
equal to all federal, state, city or other taxes as shall be required to be
withheld by the Company pursuant to any statute or other governmental
regulation or ruling divided by the fair market value per Share on the date of
such exercise (or such other date as may be required under applicable law). In
connection with such withholding, the Company may make any such arrangements as
are consistent with the Plan as it may deem appropriate.
C-5
16. Plan and Options Not to Affect Directorship.
Neither the Plan nor any option granted hereunder shall confer upon any
individual any right to continue as a Director of the Company.
17. Amendment of Plan.
The Board may make any amendments to the Plan which it deems necessary or
advisable, provided that the Board may seek stockholder approval of an
amendment if it is determined to be required by or advisable under regulations
of the Securities and Exchange Commission or the Internal Revenue Service, the
rules of any stock exchange or system on which the Company's capital stock is
listed or other applicable law or regulation.
18. Notices.
Any notice required or permitted hereunder shall be in writing and shall be
sufficiently given only (i) if personally delivered, (ii) if sent by telex or
facsimile, provided that "answer back" confirmation is received by sender or
(iii) upon receipt, if sent by registered or certified mail, postage prepaid,
addressed to the Company, c/o Boston Life Sciences, Inc., 137 Newbury Street,
8th Floor, Boston, Massachusetts 02116 and to the optionee at the address on
file with the Company at the time of grant hereunder, or to such other address
as either party may hereafter designate in writing by notice similarly given by
one party to the other.
19. Successors.
The Plan shall be binding upon and inure to the benefit of any successor or
successors of the Company.
20. Severability.
If any part of the Plan shall be determined to be invalid or void in any
respect, such determination shall not affect, impair, invalidate or nullify the
remaining provisions of the Plan which shall continue in full force and effect.
21. Governing Law.
The Plan and all determinations made and actions taken pursuant hereto shall
be governed by the laws of the State of Delaware without giving effect to the
conflict of laws principles thereof.
22. Termination of the Plan.
The Board may terminate the Plan at any time; otherwise the Plan shall
terminate on April 23, 2005. Termination of the Plan shall not deprive
optionees of their rights under previously granted options.
C-6
BOSTON LIFE SCIENCES, INC.
This Proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1, 2, 3 and 4.
For Withhold For All
All All Except
[ ] [ ] [ ]
To withhold authority to vote, mark "For All Except" and write the nominee's
number on the line below.
______________________________________________________
Election of Directors, (except as specified below)
1. 01) Colin B. Bier, Ph.D., 02) S. David Hillson, Esq.,
03) Marc E. Lanser, M.D., 04) Robert Langer, Sc.D.
05) Ira W. Lieberman, Ph.D., 06) E. Christopher Palmer, CPA,
07) Stephen Peck, 08) Scott Weisman, Esq.
Vote On Proposals
2. To approve an amendment (the "Certificate Amendment") to increase to
50,000,000 the number of shares of common stock authorized for issuance under
the Company's Amended and Restated Certificate of Incorporation, an increase
of 10,000,000 shares.
[_] For [_] Against [_] Abstain
3. To approve an amendment (the "Plan Amendment") to the Company's 1998
Omnibus Stock Option Plan to increase to 3,200,000 the number of shares
issuable upon the exercise of options granted thereunder, an increase of
900,000 shares over the number of shares approved for issuance thereunder
at the last annual meeting of stockholders.
[_] For [_] Against [_] Abstain
4. To approve an amendment (the "Directors' Plan Amendment") to the Company's
Amended and Restated 1990 Non-Employee Directors' Non-Qualified Stock Option
Plan (the "1990 Plan") to increase to 1,000,000 the number of shares
issuable upon the exercise of options granted thereunder, an increase of
200,000 shares over the number of shares approved for issuance thereunder
at the last annual meeting of stockholders.
[_] For [_] Against [_] Abstain
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF BOSTON LIFE SCIENCES, INC.
Please sign your name exactly as it appears hereon. When signing as
attorney-in-fact, executor, administrator, trustee or guardian, please add your
title as such. When signing as joint tenants, all parties in the joint tenancy
must sign. If a signer is a corporation, please sign in full corporate name by
duly authorized officer or officer(s) and affix the corporate seal.
Signature(PLEASE SIGN WITHIN BOX) Date
Signature (Joint Owners) Date
PROXY
BOSTON LIFE SCIENCES, INC.
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints S. David Hillson, Esq. and Joseph P. Hernon,
and each of them, with power of substitution in each, proxies to appear and vote
all common stock of the undersigned in Boston Life Sciences, Inc. (the
"Company") at the Annual Meeting of Stockholders to be held on June 11, 2002,
and at all postponements and adjournments thereof, upon the matters described on
the reverse side, hereby revoking any proxy heretofore executed by the
undersigned to vote (i) as specified by the undersigned on the reverse side and
(ii) in the discretion of any proxy upon such other business as may properly
come before the meeting.
Shareholders of record at the close of business on April 15, 2002 are entitled
to notice of and to vote at the meeting. Directors will be elected by a
plurality of the votes cast by holders of common stock. The favorable vote of a
majority of the outstanding shares of common stock is required to approve
Proposal 2. The affirmative vote of holders of a majority of the shares of
common stock present in person or by proxy and entitled-to vote is required to
approve Proposals 3 and 4.
The Board of Directors recommends that you vote for the election of nominees for
director and in favor of Proposals 2, 3 and 4.
Your vote is important. Please complete, date and sign the enclosed proxy and
return it promptly in the enclosed envelope, whether or not you plan to attend
the annual meeting in person. A self-addressed, postage paid envelope is
enclosed for your convenience. You may also complete your proxy by telephone by
calling the toll free number listed on your Voter Instruction form or via the
Internet at www.proxyvote.com.
By Order of the Board of Directors,
Joseph P. Hernon
Secretary
May 1, 2002
Boston, Massachusetts