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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. )
Filed by the Registrant [X]
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Check the appropriate box:
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] 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, 8TH FLOOR
BOSTON, MASSACHUSETTS 02116
(617) 425-0200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 2001
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 Ritz-Carlton Hotel, Boston,
Massachusetts 02116 on June 12, 2001 at 10:00 a.m. for the following purposes:
1. To consider and act upon a proposal to elect seven 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 to the Company's 1998 Omnibus Stock Option Plan
to increase to 2,300,000 the number of shares issuable upon the exercise of
options granted thereunder, an increase of 800,000 shares.
3. To approve an amendment to the Company's Amended and Restated 1990 Non-
Employee Directors' Non-Qualified Stock Option Plan to increase to 800,000 the
number of shares issuable upon the exercise of options granted thereunder, an
increase of 200,000 shares.
Shareholders of record at the close of business of April 16, 2001 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 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 2 and 3.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF NOMINEES
FOR DIRECTOR AND IN FAVOR OF PROPOSALS 2 AND 3.
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
April 30, 2001
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 12, 2001, at 10:00 a.m. at The Ritz-Carlton Hotel, 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 12,
2001. 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 seven 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 16,
2001 (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
20,726,638 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.
1
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
As of April 16, 2001, 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 defined in regulations issued by the Securities and
Exchange Commission (the ``SEC'')) the amounts of the Company's outstanding
Common Stock set forth below.
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP (1) CLASS (2)
Colin B. Bier, Ph.D. 122,827 *
Director (3)
Joseph P. Hernon, CPA 280,895 1.34%
Chief Financial Officer and Secretary (4)
S. David Hillson, Esq. 789,230 3.68%
Chairman of the Board, President and Chief Executive Officer (5)
Robert Langer, Sc.D. 53,373 *
Director (3)
Marc E. Lanser, M.D. 518,670 2.45%
Director, Executive Vice President and Chief Scientific Officer (6)
Ira W. Lieberman, Ph.D. 131,250 *
Director (7)
E. Christopher Palmer, CPA 138,150 *
Director (7)
Scott Weisman, Esq. 68,198 *
Director (8)
Brown Simpson Partners I, Ltd. (9) 2,176,500 9.99%
Pictet Global Fund-Biotech (10) 1,905,956 8.98%
All directors and executive officers as a group (8 persons) (12) 2,102,593 9.29%
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) 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 16, 2001 or
issuable upon the exercise of options which are exercisable or which will
become exercisable within 60 days of April 16, 2001.
(3) Consists of Common Stock issuable upon exercise of options.
(4) Includes 230,115 shares of Common Stock issuable upon exercise of options.
(5) Includes 712,230 shares of Common Stock issuable upon exercise of options.
(6) Includes 471,670 shares of Common Stock issuable upon exercise of options
(7) Includes 125,650 shares of Common Stock issuable upon exercise of options.
(8) Consists of Common Stock issuable upon exercise of options and warrants.
(9) Includes 1,003,704 shares of Common Stock, issuable upon the exercise of
warrants. Brown Simpson Asset Management, LLC is the general partner of
Brown Simpson Strategic Growth Fund, Ltd. Mitchell Kaye, James Simpson,
Evan Levine and Matthew Brown hold 25% interests in Brown Simpson Capital.
The principal address of Brown Simpson Strategic Growth Fund, Ltd. is 152
West 57th Street, 40th Floor, New York, NY 10019.
(10) Includes 500,000 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.
(11) Includes 1,909,713 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 seven 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:
NOMINEES FOR ADDITIONAL TERM Age FIRST YEAR ELECTED A DIRECTOR
Colin B. Bier, Ph.D. (1)(3)(4) 55 1996
S. David Hillson, Esq. (3)(4) 61 1994
Marc E. Lanser, M.D. 52 1994
Robert Langer, Sc.D. 52 2000
Ira W. Lieberman, Ph.D. (1)(2)(4) 58 1992
E. Christopher Palmer, CPA (2)(3)(4) 60 1992
Scott Weisman, Esq. (2) 46 2000
(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 Nymox Corporation, 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 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 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
3
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 is the Kenneth J. Germeshausen Professor of Chemical and
Biomedical Engineering at MIT. 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 670 articles, 400 abstracts, 370
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 500 invited
lectures (40 named lectureships), and has edited 12 books. Dr. Langer has
received over 80 major awards. He is the only engineer to receive the Gairdner
Foundation International Award (54 recipients of this award have subsequently
received a Nobel Prize), and he received the Lemelson-MIT Prize, the world's
largest prize for invention. 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. Dr. Langer is also a member of the Board of Directors of Focal Inc.
IRA W. LIEBERMAN, PH.D. Dr. Lieberman has been a member of the Board since the
inception of Old BLSI 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 Old BLSI in 1992. Mr. Palmer is a certified public accountant and
founder of a firm 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, a Director of Coastal International Inc. 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 Managing Director of Investment Banking at 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.
4
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held 7 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 7 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 2000. The Audit Committee,
consisting of Messrs. Palmer, Lieberman, and Weisman, met four 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 twenty-two 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. Non-Employee Directors will receive the same cash
compensation amount per meeting attended in 2001. In addition, Non-Employee
Directors were compensated in fiscal 2000 with an annual retainer with a value
of $5,000 and will receive the same amount in fiscal 2001. 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 (as defined in Proposal 3 below), 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 1990 Plan, Dr. Bier, Dr. Langer, Dr. Lieberman and
Mr. Palmer received discretionary grants of options to purchase 40,000, 32,500,
40,000, and 40,000 shares of the Company's Common Stock, respectively, in fiscal
2000. 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 and the
Compensation Committee who received this annual retainer in fiscal 2000 were Mr.
Palmer and Dr. Lieberman, respectively. There was not a Chairman of the Press
Release Review Committee during 2000. 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 2000.
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.
5
The options granted to the Non-Employee Directors pursuant to the
discretionary grant in 2000 are exercisable as follows: 50% exercisable as of
January 3, 2000; 75% exercisable as of November 15, 2000; 100% exercisable as of
November 15, 2001. These options terminate in January 2010.
6
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.
AUDIT COMMITTEE REPORT TO SHAREHOLDERS
The Board of Directors has established an Audit Committee, whose members during
fiscal 2000 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 Board of Directors
has approved a written charter for fiscal 2000 which is included in this proxy
statement as Appendix C.
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 2000, 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, 2000 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, 2000 by the Company's principal
accounting firm, PricewaterhouseCoopers LLP.
Audit Fees.................................................................................. $47,000
Financial Information System Design And Implementation Fees................................. $ --
All Other Fees.............................................................................. $42,300
-------
$89,300
PricewaterhouseCoopers LLP did not provide any services related to financial
information systems design and implementation during 2000.
7
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.
Executive Compensation
The following table sets forth the aggregate compensation paid by the Company
for the year ended December 31, 2000 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
Annual Compensation LONG TERM
COMPENSATION
AWARDS--COMMON
STOCK UNDERLYING
OPTIONS
Name and Principal Position Year SALARY Bonus
S. David Hillson, Esq. 2000 $285,000 $125,000 220,000
Chairman of the Board, President and 1999 $250,000 $ 70,000 224,000
Chief Executive Officer 1998 $195,000 $ 0 125,000
Marc E. Lanser, M.D. 2000 $230,000 $ 35,000 --
Executive Vice President 1999 $205,000 $ 40,000 127,000
And Chief Scientific Officer 1998 $180,000 $ 0 95,000
Joseph P. Hernon, CPA 2000 $175,000 $ 40,000 75,000
Executive Vice President, 1999 $160,000 $ 40,000 120,000
Chief Financial Officer and Secretary 1998 $126,000 $ 0 35,000
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 2000.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL OPTIONS EXERCISE OR EXPIRATION POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES GRANTED TO BASE PRICE PER DATE ANNUAL RATES OF STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES IN FISCAL SHARE (1) OPTION TERM (2)
Name OPTIONS GRANTED YEAR 5% 10%
- ---------------- --------------- ------------------- -------------- ----------- ---------- ----------
S. David Hillson 220,000 42.59% $3.625 1/4/09 $1,299,043 $2,068,510
Joseph P. Hernon 75,000 14.52% $3.625 1/4/09 $ 442,856 $ 705,174
(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
8
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.
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 2000 and the value of unexercised options at December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
Shares UNEXERCISED OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END (1)
Acquired on Value ------------------------------------------------------------------------------------
Name Exercise Realized (2) Exercisable UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- ----------- ------------ ------------------- --------------------- ----------------- ---------------------
S. David Hillson 198,105 $587,129 617,230 55,000 -- $--
Marc E. Lanser 411,670 -- $96,322 $--
Joseph P. Hernon 62,908 $135,007 185,115 18,750 -- $--
(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
$3.0625 on December 29, 2000, 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 Agreement was
amended as of January 1, 1997 to extend the term thereof to December 31, 1998
and to increase his annual base salary to $195,000. Upon signing the amendment,
Mr. Hillson received a renewal payment of $50,000. Mr. Hillson's Employment
Agreement was further amended as of January 1, 1999 to extend the term thereof
to December 31, 2000 and to increase his annual base salary 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. In maintaining this program, the Company's
overall recruitment and compensation philosophy is a very important
consideration. 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 continuous 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
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 and blends the interests of
stockholders with those of management. The Company's target from a personnel
perspective is for total compensation to be competitive with
9
that for other biotechnology companies, taking into account relative company
size, stage of development and geographic location.
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, profit 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, product sales 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
Company 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 vision and mission over the long
term. Determinations of appropriate base salary levels will generally be made
with the input of various industry and 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 whole biotechnology industry. The exact 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 with
assistance from senior management.
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.
10
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 fully
vest within four years after 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 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 2000, Mr. Hillson's salary and bonus were determined pursuant to the
terms of his amended Employment Agreement dated December 28, 1999. The
Compensation Committee believes that this compensation level was appropriate in
light of Mr. Hillson's contributions to the Company's success during 2000,
including the raising of approximately $10 million in equity capital, the
completion of a Phase II clinical trial for one of the Company's technologies
and the continued preclinical development of its other technologies.
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.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in cumulative total
stockholder return on the Common Stock from 1995 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 Company is the surviving
entity of the Merger between Old BLSI and Greenwich, which was effective as of
June 15, 1995. This Stock Performance Graph therefore reflects the performance
of the Company's stock as Greenwich stock prior to the Merger, as well as the
Company's stock after the Merger. The comparison assumes $100 was invested on
January 1, 1996 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.
11
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY, PEER GROUP AND BROAD MARKET
[CHART APPEARS HERE]
FISCAL YEAR ENDING
----------------------------------------------------------------------
COMPANY 1995 1996 1997 1998 1999 2000
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
BOSTON LIFE SCIENCES INC. ......................... 100.00 91.67 30.42 43.33 48.33 40.84
PEER GROUP BROAD MARKET
THE PEER GROUP CHOSEN WAS:
NASDAQ PHARMACEUTICAL INDEX ....................... 100.00 100.13 103.19 130.98 246.87 307.89
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX .............................. 100.00 124.27 152.00 214.39 378.12 237.66
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Langer, a Director of the Company, is a member of the Company's Scientific
Advisory Board pursuant to which the Company paid Dr. Langer consulting fees
totaling approximately $53,000 in 2000.
Boston Private Bank & Trust Company (the ``Bank'') is the Company's primary
banking institution. E. Christopher Palmer, CPA, a director of the Company, is a
Director and Chairman of the Executive Committee of the Bank. Fees paid to the
Bank during fiscal 2000, primarily for investment management advisory services,
totaled approximately $51,000.
In April 1997, the Bank loaned $150,000 to Dr. Lanser, the Company's Executive
Vice President and Chief Scientific Officer (the ``Loan''). The Loan accrued
interest at the prime rate. The Loan originally matured in September 1997 but
was subsequently extended to September 30, 2000. As a condition to and as
security for the
12
Loan, the Bank requested that the Company pledge to the Bank a certificate of
deposit in the amount of $155,000 (the ``Company Pledge''). In recognition of
Dr. Lanser's past and expected future contributions to the Company and as an
additional motivation and incentive to Dr. Lanser, which the Company's Board of
Directors determined would reasonably benefit the Company, the Company agreed to
provide the Company Pledge. As security for the Company, however, in the event
Dr. Lanser defaulted on the Loan and the Bank foreclosed on the Company Pledge,
Dr. Lanser executed and delivered to the Company his contingent note in the
amount of $150,000, bearing interest identical to the Loan (the ``Contingent
Note'') and a perfected pledge of 50,000 shares of Common Stock of the Company
which he beneficially owned. In February 2000, Dr. Lanser repaid the Loan. In
connection therewith, the Bank released the Company from its pledge obligation
and the Company released Dr. Lanser from his contingent note obligation and
returned the 50,000 shares of common stock that had been pledged to the Company.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE 1998 OMNIBUS STOCK OPTION PLAN
The Company's 1998 Omnibus Stock Option Plan currently authorizes the issuance
of options to purchase up to 1,500,000 shares of Common Stock. In March 2001,
the Board amended the 1998 Plan (the ``2001 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 2,300,000 (as so
amended, the "1998 Plan"). The 2001 Plan Amendment was 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 2001 Plan
Amendment will be required to approve the 2001 Plan Amendment.
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 A to this Proxy Statement and is incorporated herein by reference.
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 2,300,000 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
13
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 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.
14
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.
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 16, 2001, options to purchase 1,332,240 shares were outstanding
under the 1998 Plan, of which options to purchase 909,865 shares were
exercisable. No options have been exercised to date. The exercise prices for the
outstanding options ranged from $2.09 to $6.38 per share. At April 16, 2001,
options to purchase 210 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 2001 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
15
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.
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).
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
16
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 2001
PLAN AMENDMENT.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE ``FOR'' THE APPROVAL OF THE 2001
PLAN AMENDMENT
PROPOSAL NO. 3
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
600,000 shares of Common Stock. In March 2001, 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 800,000 (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 B to this Proxy Statement and is incorporated herein by reference.
17
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.
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
18
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.
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.
19
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 16, 2001, options to purchase 531,409 shares were outstanding
under the 1990 Plan, of which options to purchase 478,534 shares were
exercisable. No options have been exercised to date. The exercise prices for the
outstanding options ranged from $0.63 to $9.38 per share. At April 16, 2001,
options to purchase 91 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.
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.
20
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, 2000. 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 2000 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, AS AMENDED, FOR FISCAL 2000 (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.
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, 2002 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, 2002, 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
April 30, 2001
21
APPENDIX A
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.
(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.
A-1
(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 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 2,300,000.
A-2
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.
(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
A-3
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.
(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.
A-4
(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 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
A-5
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.
A-6
APPENDIX B
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 the 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 election or appointment as a Non-
Employee Director- until the date of the next annual meeting of stockholders and
the
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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 MidYear Retainer Amount minus the
product of 2,500 and 80% of the MidYear 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).
(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
-----------------
B-2
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.
(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
B-3
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) 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.
B-4
10 Common Stock Subject to 0ption
------------------------------
The Shares issuable upon exercise of options granted hereunder may be
unissued shares of treasury shares, 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 therefor.
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.
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
B-5
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.
B-6
APPENDIX C
BOSTON LIFE SCIENCES, INC.
AUDIT COMMITTEE CHARTER
The Board of Directors of Boston Life Sciences, Inc. created the Audit Committee
with its mission, composition, term of office, duties and responsibilities, as
follows:
I. MISSION
The primary mission of the Committee is to assist the Board of Directors in
fulfilling its fiduciary responsibility relating to the corporate accounting
and reporting practices of the Company. The primary responsibilities of the
Committee are to:
. Oversee the financial reporting process and internal control systems.
. Recommend to the Board the appointment of independent auditors. The
independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee and the Board of
Directors have the authority and responsibility to select, evaluate
and replace the independent auditors.
. Maintain open lines of communication with management and the Company's
independent auditors, each of whom shall have free and direct access
to the Committee.
. Oversee and appraise the performance of the independent auditors and
annually evaluate their independence consistent with Independent
Standards Board Standards No. 1.
. Oversee and supervise special investigations.
. Annually review and assess the adequacy of this charter, and seek and
receive Board approval of proposed changes.
II. COMPOSITION
The Board of Directors of the Company shall elect the members and Chair
of the Audit Committee. The Committee will be comprised of at least three
Directors, all of whom will be independent of senior management and
operating executives of the Company and free from any relationships which
might in the opinion of the Board of Directors be construed as a conflict
of interest.
A Director will not be considered independent if, among other things, he
or she has:
. been employed by the Company or its affiliates in the current or past
three years;
. accepted any compensation from the Company or its affiliates in excess
of $60,000 during the previous fiscal year (except for Board service
or non-discretionary compensation);
. an immediate family member who is, or has been in the past three
years, employed by the Company or its affiliates as an executive
officer;
. been a partner, controlling shareholder or an executive officer of any
for-profit business to which the Company made, or from which it
received, payments (other than those which arise solely from
investments in the Company's securities) that exceed five percent of
the organization's consolidated gross revenues for that year, or
$200,000, which ever is more, in any of the past three years; or
. been employed as an executive of another entity where any of the
Company's executives serve on that entity's compensation committee.
All members of the Committee must be able to read and understand
fundamental financial statements. At least one member must have past
employment experience in finance or accounting, professional certification
in accounting, or other comparable experience and background.
C-1
III. TERM OF OFFICE
At the first meeting of the Directors following the annual meeting of
stockholders, each member of the Committee shall be elected to serve for
one year.
IV. DUTIES AND RESPONSIBILITIES
The Committee will hold at least two regular meetings per year, and such
additional meetings as the Chair of the Committee shall require, in order
to perform the following duties:
. review the audit plan of the independent auditors.
. review and approve all significant accounting changes.
. review with management and the independent auditors the Company's
annual financial statements, including the quality of the Company's
accounting principles and matters required to be discussed by
Statements of Auditing Standards No. 61.
. obtain from the independent auditors a formal written statement
regarding relationships and services that may affect objectivity and
independence, and recommend that the full Board take appropriate
action to ensure the independence of the auditors.
. recommend to the full Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for filing with
the SEC.
. be available to discuss any relevant matters with management and/or
the independent auditors, including matters arising from the
independent auditors' review of interim information.
. evaluate the adequacy of the Company's internal accounting control
system by review of written reports from the auditors and monitor
management's response and actions to correct any noted deficiencies.
. review significant proposed regulatory, accounting or reporting issues
which might have a major impact upon the Company's financial reporting
process or financial statements.
. maintain minutes and other relevant records of the Committee's
meetings and decisions.
. deliver reports to the Board summarizing the work performed by the
Committee to fully discharge its duties during the year.
. provide for inclusion in the annual proxy statement a report of the
Audit Committee's findings that result from its financial reporting
responsibilities.
C-2
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 and 3.
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,
03) Marc E. Lanser, M.D., 04) Robert Langer, Sc.D.
05) Ira W. Lieberman, Ph.D., 06) E. Christopher Palmer, CPA,
07) Scott Weisman, Esq.
Vote On Proposals
2. To approve an amendment (the "2001 Plan Amendment") to the Company's 1998
Omnibus Stock Option Plan to increase to 2,300,000 the number of shares
issuable upon the exercise of options granted thereunder, an increase of
800,000 shares.
[_] For [_] Against [_] Abstain
(3) 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 800,000, the number of shares issuable
upon the exercise of options granted thereunder, an increase of 200,000
shares.
[_] 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 12, 2001,
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 16, 2001 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 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 2 and 3.
The Board of Directors recommends that you vote for the election of nominees for
director and in favor of Proposals 2 and 3.
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
April 20, 2001
Boston, Massachusetts