SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
REGENERX BIOPHARMACEUTICALS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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3 Bethesda Metro Center
[REGENERX LOGO] Suite 700
Bethesda, MD 20814
Phone: 301.961.1992
Fax: 301.961.1991
E-mail:info@RegeneRx.com
May 20, 2002
Dear Fellow Stockholder:
You are cordially invited to attend the 2002 Annual Meeting (the
"Meeting") of Stockholders of RegeneRx Biopharmaceuticals, Inc. (the "Company"),
to be held at 10:00 a.m., Eastern time, on Wednesday, June 19, 2002, at the
Hyatt Regency Bethesda, located at 7400 Wisconsin Avenue, Bethesda, Maryland
20814.
An important aspect of the Meeting process is the stockholder vote on
corporate business items. I urge you to exercise your rights as a stockholder to
vote and participate in this process. Stockholders are being asked to consider
and vote upon: (i) the election of five (5) directors of the Company; (ii) the
approval of the Company's Amended and Restated 2000 Stock Option and Incentive
Plan; and (iii) the ratification of the appointment of Reznick Fedder &
Silverman, P.C. as the Company's independent auditors.
The Board of Directors has determined that the matters to be considered at
the Meeting are in the best interests of the Company and its stockholders. FOR
THE REASONS SET FORTH IN THE PROXY STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS
THAT YOUR VOTE "FOR" THE NOMINEES AS DIRECTORS SPECIFIED UNDER PROPOSAL 1; "FOR"
THE APPROVAL OF THE AMENDED AND RESTATED 2000 STOCK OPTION AND INCENTIVE PLAN AS
SPECIFIED UNDER PROPOSAL 2; AND "FOR" THE RATIFICATION OF THE INDEPENDENT
ACCOUNTANTS SPECIFIED UNDER PROPOSAL 3.
I encourage you to attend the Meeting in person. Whether or not you plan
to attend, however, PLEASE VOTE YOUR SHARES AND SIGN AND RETURN THE ENCLOSED
PROXY STATEMENT AS PROMPTLY AS POSSIBLE. This will save the Company additional
expense in soliciting proxies and will ensure that your shares are represented
at the meeting.
Your Board of Directors and management are committed to the success of the
Company and the enhancement of the value of your investment. I want to express
my appreciation for your confidence and support.
Very truly yours,
/s/ Allan L. Goldstein
Allan L. Goldstein
Chairman of the Board
REGENERX BIOPHARMACEUTICALS, INC.
3 Bethesda Metro Center, Suite 700
Bethesda, Maryland 20814
(301) 961-1992
NOTICE OF MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 2002
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting (the "Meeting") of
Stockholders of RegeneRx Biopharmaceuticals, Inc. (the "Company") will be held
as follows:
TIME.............................. 10:00 a.m. local time
DATE.............................. Wednesday, June 19, 2002
PLACE............................. Hyatt Regency Bethesda, 7400 Wisconsin Avenue, Bethesda, Maryland
20814
ITEMS OF BUSINESS................. (1) To elect five directors, each for a term expiring at
next year's Annual Meeting of stockholders.
(2) To approve the Amended and Restated 2000 Stock Option and
Incentive Plan.
(3) To ratify the Board of Directors' appointment of Reznick
Fedder & Silverman, P.C. as the Company's independent
auditors for the fiscal year ending December 31, 2002.
(4) To transact any other business that may properly come
before the Meeting and any adjournment or postponement
of the Meeting.
RECORD DATE....................... Holders of record of the Company's common stock at the close of
business on April 26, 2002 will be entitled to attend and vote at
the Meeting or any adjournment thereof. In the event that there are
not sufficient votes for a quorum, or to approve or ratify any of
the foregoing proposals at the time of the Meeting, the Meeting may
be adjourned in order to permit further solicitation of proxies by
the Company. A complete list of the stockholders entitled to vote
at the Meeting will be available at the executive offices of the
Company.
ANNUAL REPORT..................... The Company's Annual Report on Form 10-KSB for the year ended
December 31, 2001 is enclosed.
PROXY VOTING...................... It is important that your shares be represented and voted
at the Meeting. You can vote your shares by returning the
enclosed proxy card in the enclosed envelope. If your shares are
held in "street name" with a bank, broker or some other third
party, you also may be able to submit your proxy vote by
telephone or via the internet. Check your proxy card to see if
voting by telephone and/or the internet is available to you.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS VERY
IMPORTANT. PLEASE ACT TODAY.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ALLAN L. GOLDSTEIN
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ALLAN L. GOLDSTEIN
Chairman of the Board
Bethesda, Maryland
May 20, 2002
REGENERX BIOPHARMACEUTICALS, INC.
3 Bethesda Metro Center, Suite 700
Bethesda, Maryland 20814
(301) 961-1992
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PROXY STATEMENT
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MEETING OF STOCKHOLDERS
JUNE 19, 2002
TABLE OF CONTENTS
PAGE
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INTRODUCTION......................................................................................................1
INFORMATION ABOUT THE ANNUAL MEETING..............................................................................1
What is the purpose of the annual meeting?...............................................................2
Who is entitled to vote?.................................................................................3
What if my shares are held in "street name" by a broker?.................................................3
How many shares must be present to hold the annual meeting?..............................................3
What if a quorum is not present at the annual meeting?...................................................3
How do I vote?...........................................................................................3
Can I change my vote after I submit my proxy?............................................................4
How does the Board of Directors recommend I vote on the proposals?.......................................4
What if I do not specify how my shares are to be voted?..................................................4
Will any other business be conducted at the annual meeting?..............................................5
What happens if a nominee is unable to stand for election?...............................................5
STOCK OWNERSHIP...................................................................................................5
Stock Ownership of Significant Stockholders, Directors and Executive Officers............................5
Section 16(a) Beneficial Ownership Reporting Compliance..................................................7
PROPOSAL 1 - ELECTION OF DIRECTORS................................................................................9
Board of Directors' Meetings and Committees.............................................................11
Audit Committee Matters.................................................................................11
Directors' Compensation.................................................................................12
Summary Compensation Table..............................................................................13
Certain Transactions....................................................................................14
PROPOSAL 2 - AMENDMENT OF OPTION PLAN .................................................................19
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF AUDITORS.............................................................23
Vote Required For Approval..............................................................................23
OTHER MATTERS....................................................................................................24
ADDITIONAL INFORMATION...........................................................................................24
Proxy Solicitation Costs................................................................................24
Stockholder Proposals for 2003 Annual Meeting...........................................................24
REGENERX BIOPHARMACEUTICALS, INC.
3 Bethesda Metro Center, Suite 700
Bethesda, Maryland 20814
(301) 961-1992
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PROXY STATEMENT
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SOLICITATION AND VOTING PROXIES
The Board of Directors of RegeneRx Biopharmaceuticals, Inc. (the
"Company") is using this proxy statement to solicit proxies from the holders of
the Company's common stock for use at the Company's 2002 Annual Meeting of
Stockholders (the "Meeting"). The Meeting will be held on June 19, 2002 at 10:00
a.m., Eastern time, at the Hyatt Regency Bethesda, located at 7400 Wisconsin
Avenue, Bethesda, Maryland 20814, and any adjournment thereof.
At the Meeting, stockholders will be asked to vote on three proposals:
(1) the election of five directors of the Company, each to serve for a term
expiring at next year's Annual Meeting of stockholders; (2) the approval of the
Company's amended and restated 2000 Stock Option and Incentive Plan (the
"Amended and Restated Option Plan"); and (3) the ratification of the appointment
of Reznick Fedder & Silverman, P.C. as the Company's independent auditors for
the fiscal year ending December 31, 2002. These proposals are described in more
detail below. Stockholders also will consider any other matters that may
properly come before the Meeting, although the Board of Directors knows of no
other business to be presented.
Regardless of the number of shares of common stock owned, it is
important that record holders of a majority of the shares be represented by
proxy or present in person at the Meeting. Stockholders are required to vote by
completing the enclosed proxy card and returning it signed and dated in the
enclosed postage-paid envelope. Stockholders are urged to indicate their vote in
the spaces provided on the proxy card. By submitting your proxy, you authorize
the Company's Board of Directors (the "Board") to represent you and vote your
shares at the Meeting in accordance with your instructions. The Board also may
vote your shares to adjourn the Meeting from time to time and will be authorized
to vote your shares at any adjournments or postponements of the Meeting. Where
no instructions are indicated, signed proxy cards will be voted FOR the election
of the nominees for directors named in this proxy statement, FOR the approval of
the Amended and Restated Option Plan and FOR ratification of Reznick Fedder &
Silverman, P.C. as the Company's independent auditors for the fiscal year ending
December 31, 2002
Other than matters set forth on the attached Notice of 2002 Annual
Meeting of Stockholders, the Board knows of no additional matters that will be
presented for consideration at the Meeting. Execution of a proxy, however,
confers on the designated proxy holders' discretionary authority to vote the
shares in accordance with their best judgment on such other business, if any,
that may properly come before the Meeting and at any adjournment thereof,
including whether or not to adjoin the Meeting.
1
You may revoke your proxy at any time prior to its exercise by filing a
written notice of revocation with the Secretary of the Company, by delivery to
the Company a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person. However, if you are a stockholder whose shares are
not registered in your own name, you will need appropriate documentation from
your record holders to vote personally at the Meeting.
The cost of solicitation on behalf of the management will be borne by
the Company. Proxies may be solicited personally or by telephone by directors,
officers, and other employees of the Company, without additional compensation
therefore. The Company will also request persons, firms and corporations holding
shares in their names, or in the name of their nominees, which are beneficially
owned by others, to send proxy material to and obtain proxies from such
beneficial owners, and will reimburse such holders for their reasonable expenses
in doing so.
The Company's Annual Report on Form 10-KSB for the year ended December
31, 2001, filed by the Company with the Securities and Exchange Commission, is
enclosed. The Form 10-KSB does not constitute a part of the proxy solicitation
materials and the Form 10-KSB is not incorporated into this proxy statement by
reference.
This proxy statement and the accompanying materials are being mailed to
stockholders on or about May 20, 2002.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE VOTE PROMPTLY.
INFORMATION ABOUT THE MEETING AND VOTING SECURITIES
WHAT IS THE PURPOSE OF THE MEETING?
At the Meeting, stockholders will be asked to vote on the following
proposals:
Proposal 1. Election of three directors of the Company, each for a
term expiring at next year's Meeting of stockholders; and
Proposal 2. Approval of the Amended and Restated Option Plan.
Proposal 3. Ratification of the appointment of Reznick Fedder &
Silverman, P.C. as the Company's independent auditors for
the fiscal year ending December 31, 2002.
Stockholders also will act on any other business that may properly come before
the Meeting. Members of our management team will be present at the Meeting to
respond to your questions.
2
WHO IS ENTITLED TO VOTE?
The record date for the meeting is April 26, 2002. Only stockholders of
record at the close of business on that date are entitled to notice of and to
vote at the Meeting. The only class of stock entitled to be voted at the Meeting
is the Company's common stock. Each outstanding share of common stock is
entitled to one vote for all matters before the Meeting. There is no cumulative
voting . The close of business on April 26, 2002 has been fixed by the Board of
Directors as the record date (the "Record Date") for determination of
stockholders entitles to vote at the Meeting and at any adjournment thereof. The
total number of shares of common stock ("Common Stock") outstanding on the
Record Date was 26,783,812.
WHAT IF MY SHARES ARE HELD IN "STREET NAME" BY A BROKER?
If your shares are held in "street name" by a broker, your broker is
required to vote your shares in accordance with your instructions. If you do not
give instructions to your broker, your broker will nevertheless be entitled to
vote your shares with respect to "discretionary" items, but will not be
permitted to vote your shares with respect to "non-discretionary" items.
HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A quorum must be present at the Meeting for any business to be
conducted. The presence at the Meeting, in person or by proxy, of the holders of
a majority of the shares of common stock outstanding on the record date will
constitute a quorum.
WHAT IF A QUORUM IS NOT PRESENT AT THE MEETING?
If a quorum is not present or there are not sufficient votes to approve
or ratify any proposal at the time of the Meeting, the stockholders who are
represented may adjourn the Meeting until a quorum is present. The time and
place of the adjourned Meeting will be announced at the time the adjournment is
taken. An adjournment will have no effect on the business that may be conducted
at the Meeting.
HOW DO I VOTE?
1. YOU MAY VOTE BY PROXY. If you properly complete and sign the
accompanying proxy card and return it in the enclosed envelope, it will be voted
in accordance with your instructions. If your shares are held in "street name"
with a bank, broker or some other third party, you also may be able to submit
your proxy vote by telephone or via the internet. Check your proxy card to see
if voting by telephone and/or the internet is available to you.
2. YOU MAY VOTE IN PERSON AT THE MEETING. If you plan to attend the
Meeting and wish to vote in person, we will give you a ballot at the Meeting.
Note, however, that if your shares are held in "street name" with a bank, broker
or some other third party, you will need to obtain a proxy from the record
holder of your shares indicating that you were the beneficial owner of those
shares on April 26, 2002, the record date for voting at the Meeting. You are
encouraged to vote by proxy prior to the Meeting even if you plan to attend the
Meeting.
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CAN I CHANGE MY VOTE AFTER I SUBMIT MY PROXY?
Yes, you may revoke your proxy and change your vote at any time before
the polls close at the Meeting by:
o submitting another proxy with a later date;
o giving written notice of the revocation of your proxy to the
Company's Secretary prior to the Meeting; or
o voting in person at the Meeting. Your proxy will not be
automatically revoked by your mere attendance at the Meeting; you
must actually vote at the Meeting to revoke a prior proxy.
HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE PROPOSALS?
Your Board recommends that you vote:
o FOR election of the five nominees named in this proxy statement to
the Board of Directors;
o FOR the Amended and Restated Option Plan; and
o FOR ratification of the Board of Directors' appointment of Reznick
Fedder & Silverman, P.C. as the Company's independent auditors for
the fiscal year ending December 31, 2002.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
As for the election of Directors set forth in Proposal 1, the proxy card
being provided by the Board of Directors enables a stockholder to vote "FOR" the
election of the nominees proposed by the Board of Directors, or to "WITHHOLD"
authority to vote for one or more of the nominees being proposed. Under Delaware
law and the Company's bylaws, the elections of a director requires a plurality
of the votes cast, without regard to either (i) broker non-votes, or (iii)
proxies as to which authority to vote for one or more of the nominees being
proposed is withheld. Plurality of the votes means the five nominees receiving
the highest number of ("FOR") votes will be elected as directors.
As to the approval of the Amended and Restated Option Plan as set forth
in Proposal 2, ratification of the appointment of Reznick Fedder and Silverman,
P.C. as the Independent Accountants of the Company set forth in Proposal 3 and
all other matters that may properly come before the Meeting, by checking the
appropriate box, a stockholder may: (i) vote "FOR" the proposal, (ii) vote
"AGAINST" the proposal, or (iii) "ABSTAIN" from voting on such proposal.
Under Delaware law and the Company's bylaws, the affirmative vote of a
majority of the votes cast at the Meeting, in person or by proxy, is required to
constitute stockholder approval and ratification of Proposals 2 and 3.
Accordingly, shares as to which the "ABSTAIN" box has been selected on the proxy
card for such proposals will not be counted as votes cast for purposes of
4
Delaware law and the Company's bylaws. Shares underlying broker non-votes will
not be counted as present and entitled to vote or as votes cast and will have no
effect on such proposals.
If you are a stockholder of record and you submit an executed proxy but
do not indicate any voting instructions, your shares will be voted:
o FOR election of the three nominees named in this proxy statement to
the Board of Directors;
o FOR the Amended and Restated Option Plan; and
o FOR ratification of the appointment of Reznick Fedder & Silverman,
P.C. as the Company's independent auditors for the fiscal year
ending December 31, 2002.
If your shares are held in "street name" with a broker, your broker may
vote your shares in its discretion with respect to "discretionary" items. In the
case of "non-discretionary" items, your shares will not be voted. The election
of directors and the ratification of the appointment of Reznick Fedder &
Silverman, P.C. as the Company's independent auditors are expected to be
considered "discretionary items."
WILL ANY OTHER BUSINESS BE CONDUCTED AT THE MEETING?
The Board of Directors knows of no other business that will be
presented at the Meeting. If, however, any other proposal properly comes before
the stockholders for a vote at the Meeting, the Board of Directors, as holder of
your proxy, will vote your shares in accordance with its best judgment.
WHAT HAPPENS IF A NOMINEE IS UNABLE TO STAND FOR ELECTION?
If a nominee is unable to stand for election, the Board of Directors
may either reduce the number of directors to be elected (if the Board first
amends the Company's Bylaws to permit the reduction) or select a substitute
nominee. If a substitute nominee is selected, the Board of Directors, as holder
of your proxy, will vote your shares for the substitute nominee unless you have
withheld authority to vote for the nominee replaced.
STOCK OWNERSHIP
STOCK OWNERSHIP OF SIGNIFICANT STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of April 26, 2002, the beneficial
ownership of the Company's common stock by:
o any persons or entities known by management to beneficially own
more than five percent of the outstanding shares of Company common
stock as of the Record Date;
o each named executive officer and director of the Company; and
5
o all of the executive officers and directors of the Company as a
group.
The persons named in the following table have sole voting and
dispositive powers for all shares of common stock shown as beneficially owned by
them, subject to community property laws where applicable and except as
indicated in the footnotes to the table.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of common stock subject to
outstanding options, warrants or other rights to acquire held by a person that
are currently exercisable or exercisable within 60 days after April 26, 2002 are
included in the number of shares beneficially owned by the person and deemed
outstanding shares for purposes of calculating the person's percentage
ownership. These shares are not, however, deemed outstanding for the purpose of
computing the percentage ownership of any other person. As of April 26, 2002,
there were 26,783,812 shares of Company common stock outstanding.
Percent of
Beneficial Common Stock
Name of Beneficial Owner Ownership Outstanding
- ---------------------------------------------------------------------- ----------------------- ------------------
Allan L. Goldstein
Chairman and Chief Scientific Officer 2,342,491(1) 8.75%
Richard J. Hindin 1,885,000(2) 7.04
J. J. Finkelstein
Director, President and Chief Executive Officer 1,875,000(3) 7.00
Sidney J. Silver 1,875,000(4) 7.00
Roger H. Samet 1,047,050(5) 3.87
Joseph C. McNay, Director 992,000(6) 3.67
Albert Rosenfeld, Director, Secretary and Treasurer 125,100(7) 0.47
Defiante Farmaceutica Unipessoal, L.d.a. 4,255,319(8) 15.89
All executive officers and directors as a group (4 persons) 5,334,591(9) 19.63
(Notes on following page)
6
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(1) As reported by Dr. Goldstein on a Schedule 13D filed with the SEC on
November 7, 2000. Consists of (i) 2,249,285 shares owned directly by Dr.
Goldstein over which he has sole voting and dispositive powers; and (ii)
93,206 shares held by Dr. Goldstein's wife with respect to which Dr.
Goldstein shares voting and dispositive powers. The address for Dr.
Goldstein is c/o RegeneRx Biopharmaceuticals, Inc., 3 Bethesda Metro
Center, Suite 700, Bethesda, Maryland 20814. Does not include 300,000
options to purchase Common Stock to be issued to Dr. Goldstein under the
Amended and Restated Option Plan, which is subject to stockholder approval.
(2) As reported by Mr. Hindin on a Schedule 13D filed with the SEC on November
7, 2000. The address for Mr. Hindin is 407 Chain Bridge Road, McLean,
Virginia 22101.
(3) As reported by Mr. Finkelstein on a Schedule 13D filed with the SEC on
November 7, 2000. The address for Mr. Finkelstein is c/o RegeneRx
Biopharmaceuticals, Inc., 3 Bethesda Metro Center, Suite 700, Bethesda,
Maryland 20814. Does not include 500,000 options to purchase Common Stock
to be issued to Mr. Finkelstein under the Amended and Restated Option Plan,
which is subject to stockholder approval.
(4) As reported by Mr. Silver on a Schedule 13D filed with the SEC on November
7, 2000. The address for Mr. Silver is c/o Silver, Freedman & Taff, L.L.P.,
1100 New York Avenue, N.W., Washington, D.C. 20005.
(5) As reported by Mr. Samet on Amendment No. One to a Schedule 13D filed with
the SEC on February 26, 1999. Mr. Samet reported sole voting and
dispositive powers as to all shares listed. Included among the shares
listed are 292,050 shares which Mr. Samet has the right to acquire pursuant
to Class D warrants issued to him by the Company. The address for Mr. Samet
is 254 East 68th Street, #29B, New York, NY 10021.
(6) Consists of (i) 712,000 shares owned directly by Mr. McNay over which he
has sole voting and dispositive powers; (ii) 115,000 shares which Mr. McNay
has the right to acquire through the exercise of stock options that are
currently exercisable; and (iii) 165,000 shares which Mr. McNay has the
right to acquire pursuant to the exercise of Class D warrants. The address
for Mr. McNay is c/o RegeneRx Biopharmaceuticals, Inc., 3 Bethesda Metro
Center, Suite 700, Bethesda, Maryland 20814.
(7) Consists of (i) 10,100 shares owned directly by Mr. Rosenfeld over which he
has sole voting and dispositive powers; and (ii) 115,000 shares which Mr.
Rosenfeld has the right to acquire through the exercise of stock options
that are currently exercisable. The address for Mr. Rosenfeld is c/o
RegeneRx Biopharmaceuticals, Inc., 3 Bethesda Metro Center, Suite 700,
Bethesda, Maryland 20814.
(8) As reported by Defiante Farmaceutica Unipessael, L.d.a. on a Schedule 13G
filed with the SEC on March 12, 2002. The address for Defiante Farmaceutica
Unipessoal, L.d.a. is Rua dos Ferreiros, 260, Funchal-Madeira (Portugal)
9000-082.
(9) Consists of (i) 4,846,385 shares owned directly by all directors and
executive officers of the Company as a group; (ii) 230,000 shares which all
directors and executive officers as a group have the right to acquire
through the exercise of stock options that are currently exercisable; (iii)
93,206 shares owned by family members of all directors and executive
officers as a group; and (iv) 165,000 shares which all directors and
executive officers as a group have the right to acquire pursuant to the
exercise of Class D warrants.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Company's common stock, to report to the SEC their initial
ownership of the Company's common stock and any subsequent changes in that
ownership. Specific due dates for these reports have been established by the SEC
and the Company is required to disclose any late filings or failures to file.
7
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no
reports were required during the fiscal year ended December 31, 2001, and that
all Section 16(a) filing requirements applicable to the Company's executive
officers and directors during 2001 were met.
8
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of four directors.
The Company's bylaws allow for not less than three and not more than seven
Directors. Directors are elected annually to serve one-year terms. In
conjunction with this meeting, the Board of Directors passed a resolution to
increase the size of the Board to five members as of the Meeting. Accordingly,
the five individuals listed below each have been nominated for election as a
director at the Meeting, to hold office until the next Meeting of stockholders
and until his successor is elected and qualified. Each nominee has consented to
being named in this proxy statement and has agreed to serve if elected. If a
nominee is unable to stand for election, the Board of Directors may either
reduce the number of directors to be elected or select a substitute nominee. If
a substitute nominee is selected, the Board of Directors, as holder of your
proxy, will vote your shares for the substitute nominee, unless you have
withheld authority to vote for the nominee replaced.
The affirmative vote of a plurality of the votes cast at the Meeting by
the holders of shares present in person or by proxy at the Meeting is required
to elect the nominees named below as directors. YOUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES.
The following table sets forth, with respect to each director and
executive officer, his name and age, the year in which he first became a
director of the Company, and his principal occupation and business experience
during the past five years.
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NAME, PRINCIPAL OCCUPATION AND
YEAR FIRST BECAME DIRECTOR OF AGE BUSINESS EXPERIENCE
COMPANY
- --------------------------------------------------------------------------------------------------------------------
Allan L. Goldstein, 1982 64 Chairman of the Board of the Company since 1982; Chief Executive
Officer of the Company from 1982 to 1986, and 1999 to 2002; Chief
Scientific Advisor of the Company from 1982 to present; Professor
and Chairman of Department of Biochemistry and Molecular Biology at
The George Washington University School of Medicine and Health
Sciences from 1978 to present.
- --------------------------------------------------------------------------------------------------------------------
Joseph C. McNay, 1987 67 Chairman and Director of Essex Investment Management Company, Inc.,
a registered investment advisor, from 1976 to present; Director of
Softech, Inc. and MPSI System, Inc.
- --------------------------------------------------------------------------------------------------------------------
Albert Rosenfeld, 1982 81 Secretary - Treasurer of the Company from 1999 to present;
Consultant on Future Programs for March of Dimes Birth Defect
Foundation from 1973 to present; Adjunct Assistant Professor,
Department of Human Biological Chemistry and Genetics at University
of Texas Medical Branch, from 1974 to 1998; author and lecturer on
scientific matters.
- --------------------------------------------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------------------------------------------
NAME, PRINCIPAL OCCUPATION AND
YEAR FIRST BECAME DIRECTOR OF AGE BUSINESS EXPERIENCE
COMPANY
- --------------------------------------------------------------------------------------------------------------------
J.J. Finkelstein, 2002 50 Mr. Finkelstein has been the President and CEO and a Director of
the Company since March 2002. Prior to such time, he served as a
consultant to the Company and was responsible for the creation,
implementation, and financing of its business strategy. Mr.
Finkelstein has been a chief executive officer and consultant in
the bioscience industry for the past twenty years, having served as
Chief Executive Officer of three biomedical companies since 1982,
including as CEO of the Company from 1984 to 1989 and as
Vice-Chairman from 1989 to 1991. He is experienced in a start-up
environment, has been responsible for the regulatory approval and
marketing of a number of medical products in the U.S. and abroad,
and has raised more than $35 million in capital to finance these
ventures. He currently serves on the Boards of several bioscience
firms, including MdBio, Inc. a not-for-profit Maryland organization
whose mission is to support bioscience development and education in
the State of Maryland. Mr. Finkelstein received a Bachelor's degree
in finance and accounting from the University of Texas in 1975.
- --------------------------------------------------------------------------------------------------------------------
Richard J. Hindin, 2002 59 Mr. Hindin is President and CEO of Adworks Inc., a Washington, D.C.
based advertising and marketing firm billing in excess of $80
million annually. He is also Chairman of the Board of Chicken Out
Rotisserie Inc., founded in 1991, which operates 29 restaurants in
four states and the District of Columbia, with annual sales in
excess of $35 million. In 1967, he co-founded Britches of
Georgetown, Inc., (Britches) a clothing retailer specializing in
the sale of upscale men's and women's apparel and accessories.
Under his stewardship as its President and CEO, Britches became a
chain of 77 units in seven states with annual sales exceeding $120
million. Currently, Mr. Hindin serves as Chairman of the Board of
The Institute of Advanced Studies in Immunology and Geriatric
Medicine, a non-profit 501(c)(3) corporation that specializes in
disseminating medical information to the public as well as
providing the pharmaceutical industry with an independent source
for testing vaccines and drugs for the elderly.
- --------------------------------------------------------------------------------------------------------------------
10
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Company's Board of Directors met four times in fiscal 2001. During
2001, no director of the Company attended fewer than 75% of the aggregate of the
total number of Board meetings and the total number of meetings held by the
committees of the Board of Directors on which he served. The Board of Directors
of the Company has standing Audit, Compensation and Stock Option committees.
The Audit Committee seeks to ensure that appropriate audits of the
Company are conducted, as well as the adequacy of the internal accounting
controls and the integrity of financial reporting. The members of the Audit
Committee are Directors McNay and Rosenfeld. The Audit Committee met once during
fiscal 2001. For additional information regarding the audit committee, see
"Audit Committee Matters" below.
The Compensation Committee is responsible for the determination of
compensation paid to executive officers. The members of the Compensation
Committee are Directors McNay and Rosenfeld. The Compensation Committee met once
in fiscal 2001.
The Stock Option Committee is responsible for administering the
Company's stock option plans and in this capacity approves stock option grants.
Each director is a member of the Stock Option Committee. The Stock Option
Committee met once in fiscal 2001.
The entire Board of Directors of the Company acts as the Nominating
Committee for selecting nominees for election to the Board. The Nominating
Committee generally meets once per year to make nominations. While the
Nominating Committee will consider nominees recommended by stockholders, the
Nominating Committee has not actively solicited such nominations. Pursuant to
the Company's bylaws, nominations for election as directors by stockholders at
an Meeting must be made in writing and delivered to the Company's Secretary not
less than 14 days nor more than 120 days prior to the date of the meeting. If,
however, notice of the meeting is given to stockholders less than 21 days prior
to the meeting, the nominations must be received by the close of business on the
seventh day following the day on which notice of the meeting was mailed to
stockholders.
AUDIT COMMITTEE MATTERS
Audit Committee Report. The Audit Committee has issued the following
report with respect to the audited financial statements of the Company for the
year ended December 31, 2001:
o The Audit Committee has reviewed and discussed with the
Company's management the Company's 2001 audited financial
statements;
o The Audit Committee has discussed with the Company's
independent auditors (Reznick Fedder & Silverman, P.C.) the
matters required to be discussed by Statement on Auditing
Standards No. 61;
11
o The Audit Committee has received the written disclosures and
letter from the independent auditors required by Independence
Standards Board No. 1 (which relates to the auditors'
independence from the Company) and has discussed with the
auditors their independence from the Company; and
o Based on the review and discussions referred to in the three
items above, the Audit Committee recommended to the Board of
Directors that the fiscal 2001 audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2001.
Submitted by the Audit Committee of the Company's Board of Directors:
Joseph C. McNay
Albert Rosenfeld
Independence and Other Matters. Under the definition of independence
contained in the National Association of Securities Dealers' listing standards
for the Nasdaq Stock Market, Director McNay is "independent." Because he is an
officer of the Company, Director Rosenfeld is not "independent" under this
definition. The Company's Board of Directors has not adopted a written charter
for the audit committee.
DIRECTORS' COMPENSATION
Prior to the Company's suspension of operations in 1998, non-employee
directors (Directors McNay and Rosenfeld) were each paid an annual fee of $5,000
and a fee of $1,250 for each meeting attended in person, and were reimbursed for
expenses incurred in attending Board meetings. Upon the suspension of
operations, the directors continued to serve while the Company discontinued
paying director fees. It is uncertain when the Company will reinstitute the
payment of director fees. At December 31, 2001, both of Directors McNay and
Rosenfeld are owed director fees earned prior to the suspension of operations
amounting to a total of $9,082. It is uncertain when these amounts will be paid
and whether these amounts will be paid with interest. During 2001 Directors
McNay and Rosenfeld were granted stock options to acquire 100,000 shares of
common stock each at an exercise price of $.28 which equals the market price at
the date of grant.
12
SUMMARY COMPENSATION TABLE
The following table summarizes for the years indicated the compensation
paid by the Company to the Company's Chief Executive Officer during 2001. No
executive officer of the Company earned a salary and bonus for 2001 in excess of
$100,000.
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
Other Restricted
Name and Annual Stock All Other
Principal Fiscal Compensation Award Options Compen-
Position Year Salary Bonus ($)(2) ($) (#) sation
- -------- ---- ------ ----- ------ --- --- ------
Allan L. 2001 $55,000 --- --- --- --- $ 5,000(3)
Goldstein, 2000 --- --- --- --- --- $ 26,875(4)
President and 1999 --- --- --- --- 1,875,000 ---
Chief Executive
Officer(1)
- -----------------
(1) Dr. Goldstein was appointed Chief Executive Officer in July 1999. On March
19, 2002, J.J. Finkelstein was appointed as the Company's President and
Chief Executive Officer, replacing Dr. Goldstein who will remain as
Chairman and Chief Scientific Advisor of the Company.
(2) Dr. Goldstein did not receive personal benefits or perquisites which
exceeded the lesser of $50,000 or 10% of his salary and bonus.
(3) Dr. Goldstein converted from his consulting agreement to employment by the
Company on February 1, 2001. The $5,000 represents his January 2002
consulting fee.
(4) Represents consulting fees of $20,000 and a bonus of $1,875 for services
rendered as a consultant. As explained below in "Item 12. Certain
Relationships and Related Transactions - Loan to Dr. Goldstein," Dr.
Goldstein began receiving in 2000 a $5,000 monthly consulting fee, $3,000
of which is paid in cash and the remaining $2,000 of which is retained by
the Company and applied toward repayment of a loan to Dr. Goldstein. As
discussed below in "Item 12. Certain Relationships and Related Transactions
- Consulting Agreement," the full amount of the $1,875 bonus was applied
toward payment of a portion of the exercise price of Dr. Goldstein's option
to purchase 1,875,000 shares of Company common stock, exercised by him in
2000.
13
CERTAIN TRANSACTIONS
Loan to Dr. Goldstein
In May 1994, the Company extended a loan in the amount of $149,000 to
Dr. Goldstein for the purpose of enabling Dr. Goldstein to meet a margin call on
a brokerage account collateralized by Company common stock at a time when the
Board of Directors concluded that it would be contrary to the best interests of
the Company for Dr. Goldstein to sell the shares. The loan was unsecured and had
an interest rate equal to the prime rate, with all principal and interest due on
the December 31, 1994 maturity date. The loan was repaid on January 1, 1995, in
part with the proceeds of a second loan to Dr. Goldstein from the Company in the
amount of $115,617 that was unsecured. The second loan has an interest rate of
11.5% and was to be repaid in 36 equal monthly installments.
In February 1996, the terms of the second loan were amended to provide
for the suspension of installment payments for 12 months, but with interest
continuing to accrue. In March 1997 and December 1997, the terms of the loan
were further amended to suspend installment payments an additional nine and
twelve months, respectively, with interest continuing to accrue. The Company
suspended operations in 1998 and principal and interest payments by Dr.
Goldstein ceased during and subsequent to the suspension of operations. As of
December 31, 1999, the balance owed by Dr. Goldstein was $69,674, which has been
fully reserved by the Company as a doubtful collection. In July 2000, the
Company agreed to waive all prior and subsequent interest during and after
suspension of the Company's operations and approved a payment plan for the
$69,674 owed by Dr. Goldstein to the Company in 36 equal monthly installments of
$1,935.38. In August 2000, the Company agreed to pay Dr. Goldstein a consulting
fee of $5,000 per month, $3,000 of which is paid in cash and the remaining
$2,000 of which is retained by the Company and applied toward repayment of the
loan. In February 2001, Dr. Goldstein was converted from a consultant to an
employee of the Company. His salary was $5,000 per month of which $2,000 was
retained by the Company and applied toward repayment of the loan.
As of December 31, 2001, the outstanding balance on the loan was $37,674, which
has been fully reserved as a doubtful collection. In April 2002 this balance was
forgiven by the Company in consideration for his efforts and contributions to
the Company over the past several years.
Consulting and Employment Agreements
On August 16, 1999, the Company entered into an agreement with Dr.
Goldstein, J.J. Finkelstein, Richard J. Hindin and Sidney J. Silver to serve as
financial and business consultants to the Company and manage the Company's
affairs on an interim basis. This agreement was executed following suspension of
the Company's operating activities due to insufficient funds. The agreement
provides for the consultants to prepare a business plan specifying a proposed
business strategy for the Company and evaluate financing and recapitalization
proposals. The agreement also provides for the consultants to, among other
things: work with the Company's creditors to eliminate or restructure its debts;
work with governmental agencies to ensure regulatory compliance and allow
continuation of
14
the Company's business; recruit necessary management for the Company; and
negotiate with companies interested in licensing or other business and financial
relationships with the Company.
In consideration for services provided to the Company, each of the
consultants was granted an option to purchase 1,875,000 shares of Company common
stock at an exercise price of $0.04 per share, the then-fair market value. In
February 2000, each consultant exercised his option in full. The Company
accepted from each consultant as payment of the exercise price, a note payable
to the Company in the amount of $75,000, accruing interest at 6.09% per annum
and payable quarterly for 36 months beginning June 1, 2000, as well as the
cancellation of an $1,875 bonus awarded to each consultant for services
rendered. Each note is secured by the shares of Company common stock issued upon
exercise of the consultant's option. Mr. Silver is a partner in the law firm of
Silver, Freedman & Taff, L.L.P. This firm has represented the Company in a
variety of legal matters, including the negotiation of settlements with certain
creditors and agreements with certain other parties. In 2001, the firm was paid
$41,616 for legal services performed during the year and was due $11,552 in
payables on December 31, 2001.
On January 1, 2002, Dr. Goldstein and J.J. Finkelstein entered into
employment contracts with the Company to serve as Chairman and Chief Scientific
Advisor and President and Chief Executive Officer, respectively.
Employment Contract of Dr. Goldstein
- ------------------------------------
Pursuant to the terms of his employment agreement, Dr. Goldstein is not
obligated to devote 100% of his time to the Company and continues to be employed
by the George Washington Universality in Washington, D.C. The initial term of
Dr. Goldstein's employment agreement is three years. The agreement will
automatically be extended for successive one year terms unless the Company or
Dr. Goldstein elects not to extend the agreement. The agreement provides for
annual compensation of $110,000.00 and eligibility to receive an annual bonus in
the discretion of the Board of Directors of the Company. In consideration for
his services, the Company also granted Dr. Goldstein an option to purchase
300,000 shares of the Company's common stock at a purchase price equal to fair
market value pursuant to the Amended and Restated Option Plan. Dr. Goldstein's
option will vest as to 34% of the option shares on the first anniversary of the
grant, and in twenty-four (24) equal monthly installments thereafter so long as
he remained employed by the Company. In the event of Dr. Goldstein's termination
without cause or upon the occurrence of certain change in control events, Dr.
Goldstein's stock shall immediately vest and be released from the Company's
repurchase option.
Pursuant to the agreement, Dr. Goldstein is entitled to participate in
and receive all standard employee benefits under applicable Company welfare
benefits plans and programs to the same extent as other senior executives of the
Company and to participate in all applicable incentive plans, including stock
option, stock, bonus, savings and retirement plans provided by the Company which
are offered to senior executive officers in the company. The agreement also
provides that Dr. Goldstein will receive such perquisites as the Company may
establish from time to time which are commensurate with his position and
comparable to those received by other senior executives of the Company
(including vacation of at least four (4) weeks per annum and holidays, leaves of
absence
15
and leaves for illness and temporary disability in accordance with the
policies of the Company and federal, state and local law).
Dr. Goldstein is prohibited under the agreement participating in or
taking any position, investment or interest known by him to be adverse or
antagonistic to the Company, its business or prospects, financial or otherwise.
In addition, Dr. Goldstein is bound by a proprietary information,
nonsolicitation, noncompetition and inventions assignment agreement as part of
his employment agreement.
If Dr. Goldstein's employment is terminated without cause (as defined
in the employment agreement) or he terminates his employment for any reason
within 12 months after a change of control event, the Company is obligated to
pay him a lump sum payment in an amount equal to his then annual base salary
(less federal and state tax withholding) as severance pay. Dr. Goldstein is
required to sign a release in favor of the Company as a condition to receiving
the severance payment.
Pursuant to the employment agreement, the Company may terminate Dr.
Goldstein in the event of his death, or any illness, disability or other
incapacity that renders him unable regularly to perform his duties generally for
more than either one hundred twenty (120) consecutive days or more than a total
of one hundred eighty (180) days in any consecutive twelve (12) month period.
Dr. Goldstein may resign his employment for good reason by giving notice to the
Company. Good reason generally is defined by the employment agreement as a
material change in his duties or responsibilities with the Company, which causes
his position to become one of lesser responsibility or importance, or a
relocation of his place of employment by more than 60 miles or a material
reduction in the benefits and perquisites provided to him or any material
failure by the Company to pay his the compensation and benefits under this
Agreement. If Dr. Goldstein resigns with good reason, the Company is obligated
to pay him the severance described above.
Employment Contract of Mr. Finkelstein
- --------------------------------------
Pursuant to the terms of his employment agreement, Mr. Finkelstein is
expected to devote 100% of his time and efforts to the Company. The initial term
of Mr. Finkelstein's employment agreement is three years. The agreement will
automatically be extended for successive one year terms unless the Company or
Mr. Finkelstein elects not to extend the agreement. The agreement provides for
annual compensation of $175,000.00 and eligibility to receive an annual bonus in
the discretion of the Board of Directors of the Company. In consideration for
his services, the Company also granted Mr. Finkelstein an option to purchase
500,000 shares of the Company's common stock at a purchase price equal to fair
market value pursuant to the Amended and Restated Option Plan. Mr. Finkelstein's
option will vest as to 34% of the option shares on the first anniversary of the
grant, and in twenty-four (24) equal monthly installments thereafter so long as
he remained employed by the Company. In the event of Mr. Finkelstein's
termination without cause or upon the occurrence of certain change in control
events, Mr. Finkelstein's stock shall immediately vest and be released from the
Company's repurchase option.
Pursuant to the agreement, Mr. Finkelstein is entitled to participate
in and receive all standard employee benefits under applicable Company welfare
benefits plans and programs to the same extent as other senior executives of the
Company and to participate in all applicable incentive plans,
16
including stock option, stock, bonus, savings and retirement plans provided by
the Company which are offered to senior executive officers in the company. The
agreement also provides that Mr. Finkelstein will receive such perquisites as
the Company may establish from time to time which are commensurate with his
position and comparable to those received by other senior executives of the
Company (including vacation of at least four (4) weeks per annum and holidays,
leaves of absence and leaves for illness and temporary disability in accordance
with the policies of the Company and federal, state and local law). Under the
employment agreement, the Company also is obligated to maintain a life insurance
policy covering the life of Mr. Finkelstein with coverage in the amount of not
less than $1,000,000 and a disability insurance policy with coverage in the
maximum amount allowable or appropriate as determined by his base salary,
provided that the Company is not obligated to pay more than $600 per month in
the aggregate, for life and disability coverage.
Mr. Finkelstein is prohibited under the agreement participating in or
taking any position, investment or interest known by him to be adverse or
antagonistic to the Company, its business or prospects, financial or otherwise.
In addition, Mr. Finkelstein is bound by a proprietary information,
nonsolicitation, noncompetition and inventions assignment agreement as part of
his employment agreement.
If Mr. Finkelstein's employment is terminated without cause (as defined
in the employment agreement) or he terminates his employment for any reason
within 12 months after a change of control event, the Company is obligated to
pay him a lump sum payment in an amount equal to his then annual base salary
(less federal and state tax withholding) as severance pay. In addition, the
Company will reimburse him for premiums he pays for life and disability
insurance for a 12 month period. Such reimbursement, in the aggregate, generally
will be capped at the $600 per month. Mr. Finkelstein is required to sign a
release in favor of the Company as a condition to receiving any severance
payment.
Pursuant to the employment agreement, the Company may terminate Mr.
Finkelstein in the event of his death, or any illness, disability or other
incapacity that renders him unable regularly to perform his duties generally for
more than either one hundred twenty (120) consecutive days or more than a total
of one hundred eighty (180) days in any consecutive twelve (12) month period.
Mr. Finkelstein may resign his employment for good reason by giving notice to
the Company. Good reason generally is defined by the employment agreement as a
material change in his duties or responsibilities with the Company, which causes
his position to become one of lesser responsibility or importance, or a
relocation of his place of employment by more than 60 miles or a material
reduction in the benefits and perquisites provided to him or any material
failure by the Company to pay his the compensation and benefits under this
Agreement. If Mr. Finkelstein resigns with good reason, the Company is obligated
to pay him the severance described above.
Securities Authorized for Issuance Under Equity Compensation Plans
(1) The following table, provides the information as of the end of the
most recently completed fiscal year with respect to compensation plans
(including individual compensation arrangements) under which equity securities
of the small business issuer are authorized for issuance, aggregated as follows:
17
(i) All compensation plans previously approved by security
holders; and
(ii) All compensation plans not previously approved by security
holders.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS RIGHTS REFLECTED IN COLUMN (A))
(a) (b) (c)
Equity compensation plans 230,000 $1.14 800,000
approved by security holders
Equity compensation plans not - - -
approved by security holders
Total 230,000 $1.14 800,000
18
PROPOSAL 2 - AMENDED AND RESTATED OPTION PLAN
APPROVAL OF THE
AMENDED AND RESTATED 2000 STOCK OPTION AND INCENTIVE PLAN
The Board of Directors previously adopted the Alpha 1 Biomedicals, Inc.
(RegeneRx Biopharmaceuticals, Inc.) 2000 Stock Option and Incentive Plan (the
"Plan") as of the 15th day of December 2000 following the Plan's adoption by a
majority vote of the Company's stockholders. An aggregate of 1,000,000 shares of
Common Stock are currently reserved for issuance under the Plan. As of December
31, 2001, no option shares had been awarded under the Plan; however, the Board
of Directors believes that the availability of an adequate number of shares in
the share reserve of the Plan is an important factor in continuing to attract,
retain and motivate qualified employees and non-employee directors essential to
the success of the Company and the options also provide these persons with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company, promote the attention of management to other stockholders'
concerns and reward employees for outstanding performance. Accordingly, the
Board of Directors has adopted, subject to stockholder approval, an amended and
restated Plan that provides, in part, for an increase in the number of shares of
Common Stock underlying the Plan to 2,500,000 shares. In addition, on March 18,
2002, the Board of Directors approved employment agreements between the Company
and each of J. J. Finkelstein and Dr. Allan L. Goldstein. The executed
employment agreements for each of J. J. Finkelstein and Dr. Allan L. Goldstein
provided in part for compensation in the form of incentive stock options granted
pursuant to the Plan (the "option grants") that exceeded the annual limit of
Section 4(b) of the Plan. The principal terms of the option grants to each of J.
J. Finkelstein and Dr. Allan L. Goldstein include:
NAME NUMBER OF OPTIONS EXERCISE PRICE PER SHARE VESTING SCHEDULE
---- ----------------- ------------------------ ----------------
J.J. Finkelstein 500,000 $.33 34% on 3/18/03, 2.75% per
month thereafter
Dr. Allan L. Goldstein 300,000 $.33 34% on 3/18/03, 2.75% per
month thereafter
The option grants to each of J. J. Finkelstein and Dr. Allan L.
Goldstein which were approved by the Board of Directors were conditioned upon
and subject to the subsequent amendment of the Plan by the Board of Directors
and a majority vote of the Company's stockholders to increase Plan Section
4(b)'s 100,000 annual option limit. Accordingly, the Board of Directors has
adopted, subject to stockholder approval, the Amended and Restated Option Plan
that provides, in part, for an increase in Section 4(b)'s annual limit. The
Amended and Restated Option Plan increases Section 4(b)'s annual limit to
750,000 shares. The Board of Directors also adopted, subject to stockholder
approval, certain other technical and clarifying amendments to the amended and
restated Plan as described herein below in an effort to better clarify the
rights and obligations of the Company and Plan Participants.
19
OPTION PLAN
The 2000 Stock Option and Incentive Plan was adopted by the Board of
Directors on December 15, 2000. The purpose of the Plan is to promote the
long-term interests of the Corporation and its stockholders by providing a means
for attracting and retaining directors, officers, employees, consultants and
advisors of the Corporation and its Affiliates and to motivate such persons to
exert their best efforts on behalf of the Corporation and its Affiliates. The
principal features and terms of the Plan as amended and restated are summarized
below.
The Plan provides for grants of both Incentive Stock Options and
Non-Qualified Stock Options to participants. The Plan is administered by a
committee of the board of directors that consists either of the entire Board of
Directors or two or more members of the Board who are "outside," non-employee
directors. Unless otherwise restricted by the Board of Directors, the committee
has the authority and discretion to select participants in the Plan and to grant
options under the Plan. The committee is authorized under the Plan to fix the
terms and conditions of all option awards. The exercise price for options is
determined by the committee, however the exercise price cannot be less than the
fair market value of a share on the date of grant of the option. In the case of
an Incentive Stock Option granted to a ten percent owner, the exercise price
must be at least equal to 110% of the fair market value of a share on the date
of grant. The Committee may set the term of each option granted under the Plan,
however, the term cannot exceed ten years (five years in the case of a Incentive
Stock Option granted to ten percent owner). The Plan also gives to the committee
the authority to determine vesting and exercisability of options granted under
the Plan and to specify the method of payment of the exercise price. For
purposes of the Plan, fair market value is defined to mean the per share closing
price of the shares on the securities exchange on which the shares are listed
or, if not listed on a securities exchange, the average of the per share closing
bid prices of the shares as reported on the OTC Bulletin Board, or, if such bid
prices are not reported on the OTC Bulletin Board, as reported by any nationally
recognized quotation service selected by the Committee, in each such case
averaged over a period of the twenty (20) trading days preceding the date in
question, or, if no such price information is reported, the fair market value on
such date of a Share as the Committee shall determine.
The Plan generally provides that upon an option holder's termination of
service for any reason other than for cause or due to death or disability, the
option holder's vested and exercisable options can be exercised up until the
earlier to occur of (i) three months following the termination of service or
(ii) the expiration of the option by its terms. Unless otherwise determined by
the Committee, upon termination of service of an option holder due to death or
disability, the option holder's vested and exercisable options can be exercised
up until the earlier to occur of (i) one year following the termination of
service on account of death or disability or (ii) the expiration of the option
by its terms. Upon a termination of service of an option holder for cause (as
defined by the Plan), all of the option holder's unexercised options shall
immediately be forfeited.
20
The Plan provides that the maximum number of shares with respect to
which options may be granted under the Plan is two million five hundred thousand
(2,500,000) (subject to certain adjustments for changes in the capitalization of
the Corporation) plus any shares repurchased by the Corporation on the open
market and any shares surrendered to the Corporation in payment of the exercise
price of options granted under the Plan. The Plan also limits the total number
of options that can be granted to a participant in a calendar year to 750,000,
subject to certain adjustments.
The Plan provides that in the event of a certain corporate events
(including a merger or consolidation), option holders may have the right to
elect to receive cash upon exercise of any option equal to the fair market value
of the stock less the exercise price of such option times the number of options
exercised. The Committee in its discretion will determine whether such amounts
are to be paid in cash, property or some combination. The Plan also provides
that upon the occurrence of certain events that are treated as a "change in
control" all outstanding options generally will become fully vested and
exercisable (unless otherwise provided in an optionholder's option award
agreement).
Options granted under the Plan are restricted as to transferability.
Generally, options only may transferred by will or the laws of descent and
distribution, however, Non-Qualified Stock Options also may be transferred by
gift under certain circumstances and pursuant to certain domestic relations
orders. Option holders may be required under the Plan to make certain investment
representations in connection with the exercise of options to enable the
Corporation to comply with Federal and state securities laws. The Corporation
may refuse delivery of shares under the Plan if the requested representations
are not made by an option holder or if the shares have not been registered by
the Corporation on a stock exchange. At the time of delivery of shares under the
Plan, option holders may be required to pay any taxes associated with the
exercise of the option that the Corporation is required to withhold. The Plan
permits the Corporation to sell shares that an option holder otherwise would
receive upon exercise of the option to cover the tax amounts required to be
withheld.
No person has a right to be selected as a participant in the Plan or to
be granted an option under the Plan. Participation in the Plan or the grant of
an option under the Plan does not give any participant or option holder rights
as an employee, consultant or advisor of the Corporation or the right to be
retained in the employ of or as a Consultant or Advisor to the Corporation or
any Affiliate.
The Board of Directors of the Corporation generally has the authority
to amend, alter, suspend, discontinue, or terminate the Plan without the consent
of stockholders or Plan participants. However, to extent that an amendment to
the Plan requires shareholder approval under any applicable federal or state law
or regulation or the rules of any stock exchange, the Board of Directors will
seek stockholder approval. Unless otherwise terminated, the Plan will remain
effective for a term of ten years from its effective date.
A complete copy of the Amended and Restated Option Plan is attached as
Exhibit A.
21
NEW PLAN BENEFITS
The Company cannot now determine the number of options to be received
in the future by the Named Executive Officers, non-employee directors, all
current officers as a group or all employees (including current officers who are
not executive officers) as a group, as a result of the proposed increase in the
number of shares reserved under the Amended and Restated Option Plan. The
following table reflects the number of options which have been granted subject
to stockholder approval of the Amended and Restated Option Plan in accordance
with this proposal.
AMENDED AND RESTATED OPTION PLAN
NAME AND POSITION DOLLAR VALUE NUMBER OF OPTIONS
($)
J.J. Finkelstein
President and Chief Executive Officer...................................... $80,000 500,000
Allan L. Goldstein
Chairman of the Board of Directors......................................... 48,000 300,000
All executive officers as a group.......................................... 128,000 800,000
All non-employee directors as a group...................................... 0 0
Company employees other than executive officers, as a group................ 0 0
STOCKHOLDER APPROVAL
Under Delaware law and the Company's bylaws, the affirmative vote of a
majority of the votes cast at the Meeting, in person or by proxy, and entitled
to vote is required to constitute stockholder approval and ratification of this
Proposal 2. Accordingly, shares as to which the "ABSTAIN" box has been selected
on the proxy card will not be counted as votes cast for purposes of Delaware law
and the Company's bylaws. Shares underlying broker non-votes will not be counted
as present and entitled to vote or as votes cast and will have no effect.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD WILL BE VOTED "FOR" APPROVAL OF THE AMENDMENT TO THE COMPANY'S 2000
STOCK OPTION AND INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE COMPANY'S AMENDED AND RESTATED
2000 STOCK OPTION AND INCENTIVE PLAN.
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PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF AUDITORS
Effective April 25, 2000, the Company engaged Reznick Fedder &
Silverman, P.C. as its principal accountant to audit the Company's financial
statements. During the Company's fiscal years ended December 31, 1998 and 1999
and subsequent interim periods prior to the engagement of Reznick Fedder &
Silverman, P.C., the Company did not, nor did anyone on the Company's behalf,
consult Reznick Fedder & Silverman, P.C. regarding either (A) the application of
accounting principles to a specified completed or proposed transaction, or the
type of audit opinion that might be rendered on the Company's financial
statements as to which a written report or oral advice was provided to the
Company that was an important factor considered by the Company in reaching a
decision as to an accounting, auditing or financial reporting issue, or (B) any
matter that was the subject of a disagreement between the Company and
PricewaterhouseCoopers LLP or an event described in paragraph 304(a)(1)(v) of
the SEC's Regulation S-K.
The Board of Directors has appointed Reznick Fedder & Silverman, P.C.
as principal accountant for the fiscal year ending December 31, 2002, subject to
the ratification of the appointment by stockholders at the Meeting. A
representative of Reznick Fedder & Silverman, P.C. is expected to attend the
Meeting to respond to appropriate questions and will have an opportunity to make
a statement if he or she so desires.
For the fiscal year ended December 31, 2001, Reznick Fedder &
Silverman, P.C. provided various audit and non-audit services to the Company.
Set forth below are the aggregate fees billed for these services:
(a) Audit Fees: Aggregate fees billed for professional services
rendered for the audit of the Company's fiscal 2001 annual
financial statements and review of financial statements included
in the Company's Quarterly Reports on Form 10-QSB for fiscal 2001:
$22,561.
(b) Financial Information Systems Design and Implementation Fees: $0.
(c) All other fees: $0.
The Audit Committee of the Company's Board of Directors has not
considered whether the provision of services covered by items (b) and (c) above
is compatible with maintaining the independence of Reznick Fedder & Silverman,
P.C.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the votes cast by the holders of
shares present in person or by proxy at the Meeting and entitled to vote is
required to approve the ratification of the appointment of Reznick Fedder &
Silverman, P.C. as the Company's independent auditors for the fiscal year ending
December 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
23
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented at the Meeting. If any other matter properly comes before the
stockholders for a vote at the Meeting, the Board of Directors, as holder of
your proxy, will vote your shares in accordance with its best judgment.
ADDITIONAL INFORMATION
PROXY SOLICITATION COSTS
The Company will pay the costs of soliciting proxies. The Company will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of the Company's common stock. In addition to solicitation by
mail, directors, officers and employees of the Company may solicit proxies
personally or by facsimile, telegraph or telephone, without additional
compensation.
STOCKHOLDER PROPOSALS FOR 2003 MEETING
If you intend to present a stockholder proposal at next year's Meeting,
your proposal must be received by the Company at its executive offices, located
at 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland 20814, by January 14,
2003 to be eligible for inclusion in the Company's proxy materials for that
meeting. Your proposal will be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended, and the Company's
certificate of incorporation and bylaws and Delaware law.
If you submit a proposal for presentation at next year's Meeting that
is not intended for inclusion in the Company's proxy materials, the persons
named in the form of proxy sent by the Company to stockholders will have the
discretion to vote on your proposal in accordance with their best judgment if
your proposal is not received at the main office of the Company by March 30,
2003.
24
EXHIBIT A
The following is a copy of the complete provisions of the Plan in
effect as of the date hereof. We have included the entire Plan for disclosure
purposes so that you can look at each of the provision that are being amended in
making your vote.
ALPHA 1 BIOMEDICALS, INC.
(REGENERX BIOPHARMACEUTICALS, INC.)
AMENDED AND RESTATED 2000 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, officers, employees, Consultants and
Advisors of the Corporation and its Affiliates and to motivate such persons to
exert their best efforts on behalf of the Corporation and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Advisor" -- means an advisor retained by the Corporation or an Affiliate
who: (i) is a natural person; and (ii) provides bona fide services to the
Corporation or an Affiliate, which services are not in connection with the offer
or sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the Corporation's securities.
"Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Sections 424(e) and (f),
respectively, of the Code.
"Board" -- means the board of directors of the Corporation.
"Cause" -- means Termination of Service by reason of personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or gross negligence.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee referred to in Section 3 hereof.
"Consultant" -- means a consultant retained by the Corporation or a
Affiliate who: (i) is a natural person; and (ii) provides bona fide services to
the Corporation or an Affiliate, which services are not in connection with the
offer or sale of securities in a capital-raising transaction, and do not
directly or indirectly promote or maintain a market for the Corporation's
securities.
"Corporation" -- means Alpha 1 Biomedicals, Inc., a Delaware corporation,
and any successor thereto.
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"Disability" -- has the meaning assigned to such term in Section 22(e)(3)
of the Code, or any successor provision.
"Incentive Stock Option" -- means an option to purchase Shares granted by
the Committee which is intended to qualify as an incentive stock option under
Section 422(b) of the Code. Unless otherwise set forth in the Option Agreement,
any Option which does not qualify as an Incentive Stock Option for any reason
shall be deemed ab initio to be a Non-Qualified Stock Option.
"Market Value" -- means, on the date in question (or, if the date in
question is not a trading day, on the last trading day preceding the date in
question), the per share closing price of the Shares on the principal securities
exchange on which the Shares are listed (if the Shares are so listed), or on the
Nasdaq Stock Market (if the Shares are listed on the Nasdaq Stock Market), or,
if not listed on a securities exchange or the Nasdaq Stock Market, the average
of the per share closing bid and ask prices of the Shares as reported on the OTC
Bulletin Board, or, if such bid and ask prices are not reported on the OTC
Bulletin Board, as reported by any nationally recognized quotation service
selected by the Committee, or, if no such price information is reported, the
fair market value on such date of a Share as the Committee shall determine.
"Non-Qualified Stock Option" -- means an option to purchase Shares
granted by the Committee which does not qualify, for any reason, as an Incentive
Stock Option.
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Option Agreement" -- means the agreement evidencing the grant of an
Option under the Plan.
"Participant" -- means any director, officer, employee, Consultant or
Advisor of the Corporation or any Affiliate who is selected to receive an Option
pursuant to Section 5.
"Plan" -- means this Alpha 1 Biomedicals, Inc. 2000 Stock Option and
Incentive Plan.
"Shares" -- means the shares of common stock of the Corporation.
"Termination of Service" -- means cessation of service, for any reason,
whether voluntary or involuntary, so that the affected individual is not either
(i) an employee of the Corporation or any Affiliate for purposes of an Incentive
Stock Option, or (ii) a director, officer, employee, Consultant or Advisor of
the Corporation or any Affiliate for purposes of a Non-Qualified Stock Option.
3. Administration. The Plan shall be administered by a Committee
consisting of either (i) each member of the Board, or (ii) two or more members
of the Board appointed by the Board, each of whom (A) shall be an "outside
director," as defined under Section 162(m) of the Code and the Treasury
regulations thereunder, and (B) shall be a "non-employee director," as defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any
similar or successor provision. Except as limited by the express provisions of
the Plan or by resolutions adopted by the Board, the Committee shall have sole
and complete authority and discretion to (i) select Participants and grant
Options; (ii) determine the number of Shares to be subject to types of Options
generally, as well as to
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individual Options granted under the Plan; (iii) determine the terms and
conditions upon which Options shall be granted under the Plan; (iv) prescribe
the forms and terms of Option Agreements; (v) establish from time to time
regulations for the administration of the Plan; and (vi) interpret the Plan and
make all determinations deemed necessary or advisable for the administration of
the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be acts of the Committee.
4. Shares Subject to Plan.
----------------------
(a) Subject to adjustment by the operation of Section 6, the
maximum number of Shares with respect to which Options may be granted under the
Plan is 1,000,000, plus (i) the number of Shares repurchased by the Corporation
in the open market or otherwise with an aggregate price no greater than the cash
proceeds received by the Corporation from the exercise of Options granted under
the Plan; plus (ii) any Shares surrendered to the Corporation in payment of the
exercise price of Options granted under the Plan. The Shares with respect to
which Options may be granted under the Plan may be either authorized and
unissued Shares or previously issued Shares reacquired and held as treasury
Shares. An Option which terminates shall not be considered to have been granted
under the Plan, and new Options may be granted under the Plan with respect to
the number of Shares as to which such termination has occurred.
(b) During any calendar year, no Participant may be granted
Options under the Plan with respect to more than 100,000 Shares, subject to
adjustment as provided in Section 6.
5. Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan and the
requirements of applicable law as the Committee shall determine:
(i) Exercise Price. The exercise price per Share for an
Option shall be determined by the Committee; provided, however, that such
exercise price shall not be less than 100% of the Market Value of a Share on the
date of grant of such Option; provided, further, that in the case of an
Incentive Stock Option granted to an individual who, at the time of grant, is
the beneficial owner of stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Corporation or any
Affiliate (a "Ten Percent Owner"), such exercise price shall not be less than
110% of the Market Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by
the Committee, but shall be no greater than ten years in the case of a
Non-Qualified Stock Option, ten years in the case of an Incentive Stock Option
granted to a Participant who is not a Ten Percent Owner, and five years in the
case of a Incentive Stock Option granted to a Participant who is a Ten Percent
Owner.
(iii) Number of Shares and Time and Method of Exercise. The
Committee shall determine the number of Shares underlying each Option and the
time or times at which an Option may be exercised in whole or in part and the
method or methods by which, and the form or forms
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(including, without limitation, cash, Shares, or any combination thereof, having
a fair market value on the exercise date equal to the relevant exercise price)
in which, payment of the exercise price with respect thereto may be made or
deemed to have been made.
(iv) Incentive Stock Options. Incentive Stock Options may be
granted by the Committee only to employees of the Corporation or its Affiliates.
No Incentive Stock Option may be granted more than ten years after the effective
date of the Plan, as set forth in Section 14. The aggregate Market Value
(determined as of the time any Incentive Stock Option is granted) of the Shares
with respect to which Incentive Stock Options are exercisable for the first time
by a Participant in any calendar year shall not exceed $100,000.
(v) Termination of Service. Unless otherwise determined by
the Committee and set forth in the Option Agreement evidencing the grant of the
Option, upon Termination of Service of a Participant for any reason other than
for Cause or due to death or Disability, each Option granted to the Participant,
to the extent then exercisable, shall remain exercisable for the lesser of (A)
three months following such Termination of Service and (B) the period of time
until the expiration of the Option by its terms. Unless otherwise determined by
the Committee and set forth in the Option Agreement evidencing the grant of the
Option, upon Termination of Service of a Participant due to death or Disability,
each Option granted to the Participant, to the extent then exercisable, shall
remain exercisable for the lesser of (A) one year following such Termination of
Service and (B) the period of time until the expiration of the Option by its
terms. Upon Termination of Service of a Participant for Cause, each Option
granted to the Participant, to the extent not previously exercised, shall
immediately be forfeited.
6. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Options may be granted under the Plan and the
number and class of shares underlying outstanding Options granted under the Plan
(as well as the exercise price of each such outstanding Option) shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive. Except as otherwise provided herein, any Option which is adjusted as
a result of this Section 6 shall be subject to the same terms and conditions as
the original Option.
7. Effect of Merger on Options. In the case of any merger, consolidation
or combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing corporation and which
does not result in the outstanding Shares being converted into or exchanged for
different securities, cash or other property, or any combination thereof), any
Participant to whom an Option has been granted shall have the additional right
(subject to the provisions of the Plan and any limitation applicable to such
Option), thereafter and during the term of each such Option, to receive upon
exercise of any such Option an amount equal to the excess of the fair market
value on the date of such exercise of the securities, cash or other property, or
combination thereof, receivable upon such merger, consolidation or combination
in respect of a Share over the exercise price of such Option, multiplied by the
number of Shares with respect to
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which such Option shall have been exercised. Such amount may be payable fully in
cash, fully in one or more of the kind or kinds of property payable in such
merger, consolidation or combination, or partly in cash and partly in one or
more of such kind or kinds of property, all in the discretion of the Committee.
8. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 8 shall be deemed a "change
in control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, shall become the
beneficial owner of shares of the Corporation with respect to which 50% or more
of the total number of votes for the election of the Board may be cast, (ii) as
a result of, or in connection with, any cash tender offer, merger or other
business combination, sale of assets or contested election, or combination of
the foregoing, the persons who were directors of the Corporation shall cease to
constitute a majority of the Board, or (iii) the stockholders of the Corporation
shall approve an agreement providing either for a transaction in which the
Corporation will cease to be an independent publicly-owned corporation or for a
sale or other disposition of all or substantially all the assets of the
Corporation. If a tender offer or exchange offer for Shares (other than such an
offer by the Corporation) is commenced, or if a change in control shall occur,
unless the Committee shall have otherwise provided in the Option Agreement, all
Options granted and not fully exercisable shall become exercisable in full upon
the happening of such event; provided, however, that no Option which has
previously been exercised or otherwise terminated shall become exercisable.
9. Assignments and Transfers. No Incentive Stock Option granted under the
Plan shall be transferable other than by will or the laws of descent and
distribution. A Non-Qualified Stock Option shall be transferable by will, the
laws of descent and distribution, a "domestic relations order," as defined in
Section 414(p)(1)(B) of the Code, or a gift to any member of the Participant's
immediate family or to a trust for the benefit of one or more of such immediate
family members. During the lifetime of an Option recipient, an Option shall be
exercisable only by the Option recipient unless it has been transferred as
permitted hereby, in which case it shall be exercisable only by such transferee.
For the purpose of this Section 9, a Participant's "immediate family" shall mean
the Participant's spouse, children and grandchildren.
10. Certain Rights Under the Plan. No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again as
a Participant, and no director, officer, employee, Consultant, Advisor or other
person shall have any claim or right to be granted an Option under the Plan or
under any other incentive or similar plan of the Corporation or any Affiliate.
Neither the Plan nor any action taken hereunder shall be construed as giving any
employee, Consultant or Advisor any right to be retained in the employ of or as
a Consultant or Advisor to the Corporation or any Affiliate.
11. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Option shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933, as amended, or any other federal,
state or local securities legislation. It may be provided that any
representation requirement shall become
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inoperative upon a registration of the Shares or other action eliminating the
necessity of such representation under such Securities Act or other securities
legislation. The Corporation shall not be required to deliver any Shares under
the Plan prior to (i) the admission of such Shares to listing on any stock
exchange on which Shares may then be listed and (ii) the completion of such
registration or other qualification of such Shares under any state or federal
law, rule or regulation, as the Committee shall determine to be necessary or
advisable.
12. Withholding Tax. Where a Participant or other person is entitled to
receive Shares pursuant to the exercise of an Option pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other person
to pay the Corporation the amount of any taxes which the Corporation is required
to withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld. All withholding decisions pursuant to this Section 12 shall be
at the sole discretion of the Committee or the Corporation.
13. Amendment or Termination.
------------------------
(a) The Board may amend, alter, suspend, discontinue, or terminate
the Plan without the consent of shareholders or Participants, except that any
such action will be subject to the approval of the Corporation's shareholders
if, when and to the extent such shareholder approval is necessary or required
for purposes of any applicable federal or state law or regulation or the rules
of any stock exchange or automated quotation system on which the Shares may then
be listed or quoted, or if the Board, in its discretion, determines to seek such
shareholder approval.
(b) The Committee may waive any conditions of or rights of the
Corporation or modify or amend the terms of any outstanding Option. The
Committee may not, however, amend, alter, suspend, discontinue or terminate any
outstanding Option without the consent of the Participant or holder thereof,
except as otherwise provided herein.
14. Effective Date and Term of Plan. The Plan shall become effective upon
the later of its adoption by the Board or its approval by the shareholders of
the Corporation. It shall continue in effect for a term of ten years thereafter
unless sooner terminated under Section 13 hereof.
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