BIOSPECIFICS TECHNOLOGIES CORP.
35 WILBUR STREET
LYNBROOK, NEW YORK 11563
July 2, 2001
TO THE STOCKHOLDERS:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of BioSpecifics Technologies Corp., which will be held at the
Holiday Inn Crowne Plaza, 104-04 Ditmars Boulevard, East Elmhurst, New York
11369 on August 7, 2001 at 11:30 A.M. local time.
The Notice of the 2001 Annual Meeting and Proxy Statement, which are
attached, provide information concerning the matters to be considered at the
meeting. In addition, the general operations of the Company will be discussed
and stockholders will be afforded the opportunity to ask questions.
We would appreciate your signing and returning your proxy in the
enclosed envelope as soon as possible, whether or not you plan to attend the
meeting. Please sign, date and return the enclosed proxy in the self-addressed,
postage prepaid envelope. If you do not return the signed proxy, your vote
cannot be counted. We value your opinion and encourage you to participate in
this year's annual meeting by voting your proxy.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO MARK, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING.
Very truly yours,
Edwin H. Wegman
CHAIRMAN OF THE BOARD
BIOSPECIFICS TECHNOLOGIES CORP.
35 WILBUR STREET
LYNBROOK, NEW YORK 11563
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 7, 2001
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
BioSpecifics Technologies Corp. (the "Company") will be held at the Holiday Inn
Crowne Plaza, 104-04 Ditmars Boulevard, East Elmhurst, New York 11369 on August
7, 2001 at 11:30 A.M. local time, for the following purposes:
1. To elect three directors of the Company for the ensuing three
years, and until their successors shall be duly elected and
qualified; and
2. To approve the BioSpecifics Technologies Corp. 2001 Stock
Option Plan; and
3. To transact such other business as may properly come before
the meeting, or any or all adjournments or postponements
thereof.
Only stockholders of record at the close of business on June 20, 2001
will be entitled to notice of, and to vote at, the meeting and any adjournments
or postponements thereof.
YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, WHICH CONTAINS
INFORMATION RELEVANT TO THE ACTION TO BE TAKEN AT THE MEETING. YOU ARE CORDIALLY
INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED ADDRESSED, POSTAGE PREPAID ENVELOPE (FOR USE IN
THE UNITED STATES).
By Order of the Board of Directors,
Albert Horcher
SECRETARY
Lynbrook, New York
July 2, 2001
BIOSPECIFICS TECHNOLOGIES CORP.
35 WILBUR STREET
LYNBROOK, NEW YORK 11563
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 7, 2001
This Proxy Statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by the Board of Directors of
BioSpecifics Technologies Corp. (the "Company") to be used at the Annual Meeting
of Stockholders of the Company to be held at the Holiday Inn Crowne Plaza,
104-04 Ditmars Boulevard, East Elmhurst, New York 11369 on August 7, 2001 and
any adjournments or postponements thereof ("Annual Meeting"). The matters to be
considered at the meeting are set forth in the attached Notice of Meeting.
The Company intends to send the proxy materials and the 2001 Annual
Report to Stockholders on or about July 11, 2001.
INFORMATION CONCERNING SOLICITATION AND VOTING
OUTSTANDING SHARES ENTITLED TO VOTE
On May 22, 2001, there were outstanding 4,529,766 shares of common
stock, $.001 par value per share, of the Company ("Common Stock"). Record
holders of shares of Common Stock on June 20, 2001, the record date, will be
entitled to one vote for each share of such stock.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of
the Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
direct communication using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the Common
Stock.
RECORD DATE; REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on June 20,
2001 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting.
The proxy will be voted (or withheld from voting) in accordance with
any specifications made. Unless otherwise specified in the proxy, shares
represented by proxy will be voted "FOR" election of the nominees listed herein
and "For" approval of the BioSpecifics Technologies Corp. 2001 Stock Option Plan
(the "2001 Plan"). A proxy may be revoked by giving notice to the Secretary of
the Company in person, or by written notification actually received by the
Secretary, at any time prior to its being exercised, by delivery of a later
dated proxy prior to the Annual Meeting or by attending the meeting and voting
in person.
QUORUM; VOTING
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of the Common Stock authorized
to vote constitutes a quorum for the transaction of business at the Annual
Meeting. If a quorum should not be present, the Annual Meeting may be adjourned
from time to time until a quorum is obtained.
Each unrevoked proxy card properly signed and received prior to the
close of the meeting will be voted as indicated. Unless otherwise specified on
the proxy, the shares represented by a signed proxy card will be voted "FOR"
Items 1 and 2 on the proxy card and will be voted at the discretion of the
persons named as proxies on other business that may properly come before the
meeting. The Board of Directors is not aware of any other matters to be
presented for action at the Annual Meeting. Concerning the election of
directors, by checking the appropriate box on your proxy card, you may: (a) vote
"FOR" each of the director nominees; or (b) withhold authority to vote for any
or all of the director nominees. Stockholders may vote by either completing and
returning a signed proxy card prior to the meeting, voting in person at the
meeting or submitting a signed proxy card at the meeting.
If a proxy card indicates an abstention or a broker non-vote on a
particular matter, the shares represented by such proxy will be counted as
present for quorum purposes.
The election of directors requires a plurality vote of those shares
voted at the meeting with respect to the election of directors. "Plurality"
means that the individuals who receive the largest number of votes cast "FOR"
are elected as directors. Consequently, any shares not voted "FOR" a particular
nominee (whether as a result of a direction to withhold authority or a broker
non-vote) will not be counted in such nominee's favor. All other matters to be
voted on will be decided by the affirmative vote of a majority of the shares
present or represented at the meeting and entitled to vote. On any such matter,
an abstention will have the same effect as a negative vote, but because shares
held by brokers will not be considered entitled to vote on matters as to which
the brokers withhold authority, a broker non-vote will have no effect on the
vote.
OWNERSHIP OF EQUITY SECURITIES
To the Company's knowledge, the table that follows sets forth the
beneficial ownership of shares of Common Stock as of May 22, 2001 of (i) those
persons or groups known to the Company to beneficially own more than 5% of the
Common Stock, (ii) each director and nominee of the Company, (iii) each
executive officer whose compensation exceeded $100,000 (each, a "named executive
officer") in fiscal 2001 (which ended January 31, 2001), and (iv) all directors
and executive officers of the Company as a group. The information is determined
in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), based on information furnished by the
persons listed or contained in filings made by them with the Securities and
Exchange Commission. Unless indicated below, the stockholders listed possess
sole voting and investment power with respect to their shares and the business
address of each stockholder is c/o BioSpecifics Technologies Corp., 35 Wilbur
St., Lynbrook, New York 11563.
2
NUMBER OF SHARES
NAME OF OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ---------------- ------------------ -----
Edwin H. Wegman (1) 2,413,142 46.6%
Thomas L. Wegman (2) 215,544 4.2%
Paul A. Gitman, MD. (3) 75,500 1.5%
Henry Morgan (4) 38,528 *
Rainer Friedel (5) 125,000 2.4%
Louis Lasagna 20,000 *
John T. Lane 128,100 2.5%
Albert Horcher (6) 61,000 1.2%
Directors and executive officers as a 3,076,814 59.4%
group (8 persons)
- ------------------------------------
(*) Less than 1%.
(1) Includes 1,843,327 shares of Common Stock owned by The S.J. Wegman
Company, a partnership of which Edwin H. Wegman is the sole general
partner. Includes 120,000 shares beneficially owned by The Isabel H.
Wegman Rev. Trust. The sole trustee of this trust is Mr. Wegman's
brother. Includes options to purchase 186,400 shares of Common Stock
that are currently exercisable. Does not include options to purchase
4,100 shares of Common Stock which are not currently exercisable. Edwin
H. Wegman is the father of Thomas L. Wegman.
(2) Includes 7,300 shares of Common Stock held by Thomas L. Wegman's wife
and child. Includes options to purchase 180,800 shares of Common Stock
that are currently exercisable. Thomas L. Wegman is a son of Edwin H.
Wegman.
(3) Includes 16,500 shares of Common Stock held by Dr. Gitman's wife and
children. Includes options to purchase 30,000 shares of Common Stock
that are currently exercisable. Dr. Gitman's business address is c/o
Long Island Jewish Medical Center, 270-05 76th Ave., New Hyde Park, New
York 11040.
(4) Includes 8,000 shares of Common Stock held by Garrubbo and Morgan, a
partnership of which Mr. Morgan is a general partner owning a 50%
equity position. Mr. Morgan disclaims beneficial ownership of 4,000 of
such shares. Includes options to purchase 30,000 shares of Common Stock
that are currently exercisable. Mr. Morgan's business address is c/o
Morgan, Melhuish, Monaghan, Arvidson, Abrutyn & Lisowski, 651 West Mt.
Pleasant Avenue, Livingston, New Jersey 07039-1873.
(5) Includes options to purchase 125,000 shares of Common Stock that are
currently exercisable.
(6) Includes options to purchase 56,000 shares of Common Stock which are
currently exercisable.
3
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each of which
is for a term of three years, with only one class of directors being elected in
each year. The term of the second class of directors, presently consisting of
Henry Morgan, John T. Lane, and Dr. Louis Lasagna, will expire on the date of
the Annual Meeting, the term of the third class of directors, consisting of
Edwin H. Wegman and Dr. Rainer Friedel, will expire at the Annual Meeting in
2002, and the term of office of the first class of directors, presently
consisting of Thomas L. Wegman and Dr. Paul A. Gitman will expire at the Annual
Meeting in 2003. In each case, barring death, resignation or removal, each
director serves from the date of his election until the end of his term and
until his successor is elected and qualified. On November 22, 1999, pursuant to
a resolution adopted by the Company's Board of Directors, the number of
directors which constitutes the whole board was increased from six to seven
directors and John T. Lane was appointed to fill the vacancy resulting from such
increase.
Three persons will be elected at the Annual Meeting to serve as
director for a term of three years. The Company has nominated Henry Morgan, John
T. Lane, and Dr. Louis Lasagna as candidates for election. Unless authority is
withheld, the proxies solicited by management will be voted "FOR" the election
of these nominees. In case a nominee becomes unavailable for election to the
Board of Directors, an event which is not expected, the persons named as
proxies, or their substitutes, shall have full discretion and authority to vote
or refrain from voting for any other candidate in accordance with their
judgment. The election of directors requires a plurality vote of those shares
voted at the meeting. Each nominee has informed the Company that he will serve
if elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
EACH NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR
The nominees for director have the positions with the Company and
principal occupations set forth in the table below.
AGE AT
JUNE 20 POSITION WITH THE COMPANY TERM
NAME 2001, AND PRINCIPAL OCCUPATION DIRECTOR SINCE EXPIRES
- ---- ------ ------------------------ -------------- -------
Henry Morgan 80 Director; Senior partner of the law firm 1990 2001
Morgan, Melhuish, Monaghan, Arvidson,
Abrutyn & Lisowski
Dr. Louis Lasagna 77 Dean, Sackler School of Graduate 1999 2001
Biomedical Sciences; Dean for Scientific
and Academic Affairs
Tufts University School of Medicine
John T. Lane 59 Retired managing director, J.P. Morgan & 1999 2001
Co.
Henry Morgan has had the principal occupation set forth in the table
above for the past five years.
Dr. Lasagna was appointed as a director of the Company effective June
28, 1999. He has been Dean of the Sackler School of Graduate Biomedical Sciences
since 1984, and Dean for Scientific and Academic Affairs since 1995, in each
case at Tufts University School of Medicine. Since 1998, he has served as
Chairman of the Board of the Tufts Center for the Study of Drug Development, an
independent, non-profit, multidisciplinary research organization affiliated with
Tufts University, committed to the exploration of scientific, economic, legal,
and public policy issues related to pharmaceutical and biopharmaceutical
research, development, and regulation throughout the world. Dr. Lasagna has been
a member of BioSpecifics' Scientific Advisory Board since 1997.
4
John T. Lane was appointed as a director effective November 22, 1999.
He has been an organizational consultant since 1994. He currently serves as a
director for Medix Resources, Inc., Vytra HealthCare, Toyo Trust Company of New
York, Acme Metals, and Winthrop South Nassau University Health Care System. Mr.
Lane retired from J.P. Morgan & Co. in 1994 as Managing Director, Head of U.S.
Private Clients.
INFORMATION CONCERNING CONTINUING DIRECTORS
Each of the directors named in the following table will continue in
office after the Annual Meeting and until his term expires in the year indicated
and his successor is elected and qualified.
AGE AT JUNE POSITION WITH THE COMPANY TERM
NAME 20, 2001 AND PRINCIPAL OCCUPATION DIRECTOR SINCE EXPIRES
- ---- -------- ------------------------ -------------- -------
Edwin H. Wegman 81 Chairman of the Board and President 1990 2002
Dr. Rainer Friedel 59 Director; Managing Director of 1995 2002
Biospecifics Pharma GmbH, the Company's
German subsidiary ("Pharma")
Thomas L. Wegman 46 Director, Executive Vice President 1994 2003
Dr. Paul A. Gitman 60 Director; Director, Quality and Resource 1990 2003
Management, Long Island Jewish Medical
Center
Edwin H. Wegman has had the positions with the Company, principal
occupation and certain directorships set forth in the table above for the past
five years, and has held similar positions with the Company's subsidiaries,
Advance Biofactures Corporation ("ABC-New York") and Advance Biofactures of
Curacao ("ABC-Curacao"), for the past five years.
Dr. Rainer Friedel has been a director of the Company since November
1995 and managing director of BioSpecifics Pharma since January 1, 1996. Since
January 1994 to January 1, 1996, Dr. Friedel served as Chief Executive Officer
of GBM Technology Transfer and Technology Risk Assessment, GmbH. The Company and
Dr. Friedel have entered into an employment agreement effective January 1, 1999
pursuant to which Dr. Friedel has agreed to devote all of his working capacity
to the Company and its subsidiaries in Germany and the United States. In fiscal
2001, Dr. Friedel received a salary of $192,500. Dr. Friedel is entitled to one
year's notice of the Company's termination of the employment agreement.
Thomas L. Wegman was Secretary and Treasurer of the Company from
inception to July 1997, at which time he assumed his current position. In
addition, he has held for the past five years similar positions with the
Company's subsidiaries, ABC-New York and ABC-Curacao.
Dr. Gitman has been Vice President, Clinical Care and Resource
Management at Long Island Jewish Medical Center since January 1, 1995 and prior
thereto was an independent physician engaged in the practice of internal
medicine with Spellman Mykoff & Gitman, MD., P.C.
EXECUTIVE OFFICERS
In addition to the executive officers named above, the Company
employs Albert Horcher as its Secretary, Treasurer, and Principal Financial and
Chief Accounting Officer. Mr. Horcher, a certified public accountant, has served
in these positions since July 1997 and is 42 years old. From February 1991 to
July 1997, he served as the Company's Controller and Principal Financial and
Chief Accounting Officer. In addition, he has held for the past five years
similar positions with the Company's subsidiaries, ABC-New York and ABC-Curacao.
Executive officers are elected annually by the Board of Directors and serve at
the discretion of the Board.
BOARD MEETINGS AND COMMITTEES
The Board held six meetings during the last fiscal year. The
directors attended in person or by telephone the following numbers of meetings
(number of meetings attended in parenthesis): Edwin H. Wegman (6); Thomas L.
Wegman (6); John Lane (6); Paul Gitman (6); Rainer Friedel (5); Henry Morgan
(4); and Louis Lasagna (3). The Board does not have nominating or compensation
5
committees. The Board has an Audit Committee consisting of Henry Morgan, Dr.
Paul A. Gitman, and, since June 6, 2000, John Lane. The Board has a Stock Option
Committee consisting of Dr. Paul A. Gitman and Henry Morgan, and an Executive
Committee consisting of Edwin H. Wegman and Thomas L. Wegman. The function of
the Audit Committee is to (i) recommend selection of the Company's independent
accountants, (ii) review with the independent accountants the results of their
audits, (iii) review with the independent accountants and management the
Company's financial reporting and operating controls and the scope of audits,
(iv) review all budgets of the Company and its subsidiaries and (v) make
recommendations concerning the Company's financial reporting, accounting
practices and policies and financial, accounting and operating controls and
safeguards and review matters relating to the relationship between the Company
and its auditors. The function of the Executive Committee is, except for certain
matters reserved to the full Board, to exercise all of the powers of the Board
in the management of the business of the Company during intervals between Board
meetings, if necessary. The function of the Stock Option Committee is to
administer the Company's 1991 Stock Option Plan (the "1991 Plan"), the Company's
1993 Stock Option Plan (the "1993 Plan"), and the Company's 1997 Stock Option
Plan (the "1997 Plan"). The Audit Committee met twice during the 2001 fiscal
year. The Stock Option and Executive Committees did not meet during the 2001
fiscal year.
EXECUTIVE COMPENSATION
OFFICERS
The following table sets forth information concerning compensation
for services rendered in all capacities awarded to, or earned by, certain of the
Company's executive officers for the fiscal years indicated. There are no other
officers who earned an aggregate salary and bonus in excess of $100,000 during
the fiscal year ended January 31, 2001. These executive officers also serve in
the same capacities in ABC-New York, and ABC-Curacao, except for Dr. Friedel.
Salaries of the executive officers are paid by the Company's subsidiary, ABC-New
York, including Dr. Friedel, who is paid approximately 50% of his salary by the
Company's subsidiary, BioSpecifics Pharma GmbH.
- ------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------
Annual Compensation Long-Term
Compensation
- ------------------------------------- ---------------- -------------------- --------------------
Securities
Name and Principal Underlying Options
Position Fiscal Year Salary ($) (#)
- ------------------------------------- ---------------- -------------------- --------------------
Edwin H. Wegman 2001 412,961 -
President 2000 405,169 -
1999 397,006 7,000
- ------------------------------------- ---------------- -------------------- --------------------
Thomas L. Wegman 2001 209,855 20,000
Executive 2000 188,502 70,000
Vice President 1999 175,092 4,300
- ------------------------------------- ---------------- -------------------- --------------------
Rainer Friedel 2001 192,500 -
Managing Director 2000 192,500 17,500
1999 176,458 15,000
- ------------------------------------- ---------------- -------------------- --------------------
Albert Horcher 2001 123,013 10,000
Secretary and 2000 118,772 8,000
Treasurer 1999 114,593 2,000
- ------------------------------------- ---------------- -------------------- --------------------
6
The following table contains information concerning the grants of
stock options to the named executive officers of the Company during the fiscal
year ended January 31, 2001.
- -----------------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage of Total
Number of Securities Options Granted to
Underlying Options Employees in Fiscal Exercise or Base Price
Name Granted (1),(2) Year ($ Per Share) (3) Expiration Date
- ---------------------------- ------------------------- -------------------------- ------------------------- -----------------------
Edwin H. Wegman - - - -
- ---------------------------- ------------------------- -------------------------- ------------------------- -----------------------
Thomas L. Wegman 20,000 12.1% $1.00 12/27/10
- ---------------------------- ------------------------- -------------------------- ------------------------- -----------------------
Rainer Friedel - - - -
- ---------------------------- ------------------------- -------------------------- ------------------------- -----------------------
Albert Horcher 10,000 6.1% $1.00 12/27/10
- ---------------------------- ------------------------- -------------------------- ------------------------- -----------------------
(1) All outstanding options set forth in this table are currently
exercisable.
(2) These options were granted pursuant to the 1997 Plan.
(3) The exercise price is equal to the fair market value of the
underlying common stock on the date of grant.
The following table sets forth information concerning each exercise
of stock options during the 2001 fiscal year by each of the named executive
officers, along with the fiscal year-end value of unexercised options.
- -----------------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Unexercised Options at Value of Unexercised In-the-Money
Fiscal Year-End (#) Options at Fiscal Year-End ($) (1)
- ---------------------------- ---------------- ------------- ----------------------------------- ------------------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ---------------- ------------- --------------- ------------------- ---------------- -------------------
Edwin H. Wegman - - 86,4000 4,100 - -
- ---------------------------- ---------------- ------------- --------------- ------------------- ---------------- -------------------
Thomas L. Wegman - - 130,800 - $10,000 -
- ---------------------------- ---------------- ------------- --------------- ------------------- ---------------- -------------------
Rainer Friedel - - 75,000 - - -
- ---------------------------- ---------------- ------------- --------------- ------------------- ---------------- -------------------
Albert Horcher - - 36,000 - $5,000 -
- ---------------------------- ---------------- ------------- --------------- ------------------- ---------------- -------------------
(1) The dollar values are calculated by determining the differences between
$1.50 per share, the fair market value of the Common Stock at January 31, 2001,
and the exercise price of the respective options and then multiplying this
amount by the number of shares underlying the options.
DIRECTOR COMPENSATION
Mr. John Lane and Dr. Paul Gitman each received $7,500 for attending
Board meetings in fiscal year 2001. Mr. Henry Morgan received $4,500 and Dr.
Louis Lasagna $3,000 for attending Board meetings in fiscal year 2001. The
Company has no specific policy for compensating directors. In general, directors
are compensated for meetings attended in person at the Company's headquarters,
at a rate of $1,500 per meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than ten percent of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. These reporting persons also are required to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on its review of the copies of such forms furnished to
it, the Company believes that all Section 16(a) reporting requirements were
complied with during the fiscal year ended January 31, 2001.
7
PROPOSAL 2
APPROVAL OF THE BIOSPECIFICS TECHNOLOGIES CORP.
2001 STOCK OPTION PLAN
In order to continue to attract and retain employees and consultants
of the highest caliber, provide increased incentive for directors, officers,
consultants and key employees and promote the well-being of the Company, the
Board has determined that it is in the best interest of the Company and its
stockholders to increase the number of shares with respect to which options may
be granted under the Company's 1997 Stock Option Plan. On April 6, 2001 the
Board adopted the Biospecifics Technologies Corp. 2001 Stock Option Plan (the
"2001 Plan") subject to approval by the Stockholders at this Annual Meeting to
provide directors, officers, key employees and consultants of the Company and
its subsidiaries, through the granting of stock options, the opportunity to
participate in the value and/or appreciation in value of the Company's Common
Stock. As OF April 3, 2001, there remained 55,000 shares of the Company's Common
Stock, par value $0.001 per share (the "Common Stock"), Available for future
grants pursuant to the Company 1997 Stock Option Plan. The following summary of
the 2001 Plan does not purport to be complete, and is subject to and qualified
in its entirety by reference to the text of the 2001 Plan, which is annexed
hereto as Annex A.
On April 19, 2001, the Stock Option Committee approved the grant of
432,500 options from the 2001 Plan, subject to shareholder approval. The
exercise price for the options granted, based on the fair market value of the
stock on that date, was $1.00 per share, except in the case of Edwin H. Wegman,
Chairman and President, whose exercise price is $1.10 per share. The number of
options granted from the 2001 Plan to current executive officers, as a group
total 220,000 options. The number of options granted from the 2001 Plan to
current directors who are not executive officers, as a group total 40,000
options. The number of options granted from the 2001 Plan to all employees,
including all current officers who are not executive officers, as a group total
172,500 options. The individual current executive officer grants and percentage
to total from the 2001 Plan are as follows: Edwin H. Wegman: 100,000 (23.1%);
Thomas L. Wegman: 50,000 (11.6%); Rainer Friedel: 50,000 (11.6%); and Albert
Horcher: 20,000 (4.6%). The individual current non-officer director grants and
percentage to total from the 2001 Plan are as follows: Paul Gitman: 10,000
(2.3%); and the three nominees for election as a director: John Lane: 10,000
(2.3%); Louis Lasagna: 10,000 (2.3%); and Henry Morgan: 10,000 (2.3%).
SUMMARY OF THE 2001 PLAN
ADMINISTRATION. The 2001 Plan provides that the Plan shall be
administered by a committee (the "Committee") consisting of the entire Board or
at least two Directors of the Board who are "non-employee directors," within the
meaning of Rule 16b-3 promulgated under Section 16(b) of the Exchange Act.
Currently, the Committee consists of Henry Morgan and Paul A. Gitman, MD. The
Committee has full authority, subject to the provisions of the 2001 Plan, to
award stock options in the form of qualified incentive options ("Incentive
Options") which are intended TO qualify for favorable tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended, or non-qualified
options ("Non-Qualified Options"). Subject to the provisions of the 2001 Plan,
the Committee has full authority to determine the terms of each Stock Option
Agreement pursuant to which the Committee grants options including, among other
things, the persons to whom from time to time options may be granted ("Holders"
or "Participants"), the type of option to be granted, the number of shares
subject to each option, the exercise price for the shares subject to an option,
the date or dates when an option may be exercised, any restrictions or
limitations on an option and the effect of a change in control of the Company on
an option. The Committee will also construe and interpret the 2001 Plan.
SHARES SUBJECT TO THE PLAN. The 2001 Plan authorizes the granting of
options in respect of up to an aggregate of 750,000 shares of Common Stock;
provided, that during any calendar year, no participant may be granted options
on more than 350,000 shares of Common Stock. In the event of a Change in
Capitalization (as defined in the 2001 Plan), the Committee may appropriately
adjust the maximum number and class of shares with respect to which options may
be granted, the number and class of shares that are subject to outstanding
options and the purchase price therefor. If any option granted under the 2001
Plan ceases to be exercisable, the shares of Common Stock subject to such option
shall again be available for grant under the 2001 Plan.
8
ELIGIBILITY. Subject to the provisions of the 2001 Plan, options may
be granted to key employees, independent agents, directors, attorneys and
consultants of the Company or its Subsidiaries (as defined in the 2001 Plan).
Incentive Options may be awarded only to persons who, at the time of grant, are
employees of the Company or its Subsidiaries (approximately 45 employees).
TYPES OF OPTIONS AND TERMS. The 2001 Plan provides both for Incentive
Options and for Non-qualified Options. The exercise price per share of Common
Stock purchasable under an Incentive or Non-qualified Option may not be less
than 100% of the fair market value on the date of grant (or, in the case of an
Incentive Option granted to a person possessing more than 10% of the total
combined voting power of all classes of stock of the Company, not less than 110%
of such fair market value). Options may only be granted under the 2001 Plan on
or prior to April 6, 2011 and may only be exercisABLe within 10 years of the
date of the grant (or within 5 years in the case of an Incentive Option granted
to a person who, at the time of the grant, owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company).
Options granted under the 2001 Plan are exercisable only by the Holder or the
Holder's guardian or legal representative during his or her lifetime and, unless
otherwise provided by the Committee, vest in four equal annual installments
commencing one year after date of grant. In addition, the Committee may
accelerate the vesting of any or all options at any time. The options granted
under the 2001 Plan may not be transferred other than by will or by the laws of
descent and distribution.
The 2001 plan provides that in the event of a merger or the sale of
substantially all of the assets of the Company, each outstanding option shall be
assumed or an equivalent option substituted by the Successor Corporation (as
defined in the 2001 Plan). In the event that the Successor Corporation refuses
to or does not assume an option or substitute an equivalent option therefor, the
Participant shall have the right to exercise his or her option as to all of the
shares subject to the option for a period of 15 days as more fully set forth in
the 2001 plan, including shares of Common Stock as to which such option would
not otherwise be exercisable.
AMENDMENTS TO THE PLAN. The Board may at any time, and from time to
time, amend, alter or terminate the 2001 Plan, except that the 2001 Plan may not
be amended without shareholder approval (i) to change the exercise price of
options, (ii) to change the requirements that the exercise price per share not
be less than 100% of the fair market value of a share of Common Stock on the
date the option is granted (or less than 110% in the case of 10% stockholders
being issued Incentive Options) OR (iii) to increase the number of shares of
Common Stock available for grant under the 2001 Plan; provided, however, that no
alteration, amendment or termination of the Plan OR any option can, without the
Participant's consent adversely affect the terms of any outstanding option.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the 2001 Plan is only a summary of the general rules applicable
to the grant and exercise of oPtions and does not give specific details or
cover, among other things, state, local and foreign tax treatment of
participation in the 2001 Plan. The information contained in this section is
based on present law and regulations, which are subject to being changed
prospectively or retroactively.
INCENTIVE OPTIONS. In general, a Participant will recognize no
taxable income upon the grant or exercise of an Incentive Option, and the
Company and its Subsidiaries will not qualify for any deduction in connection
with the grant or exercise of Incentive Options. However, upon the exercise of
an Incentive Option, the excess of the fair market value on the date of exercise
of the shares received over the exercise price of the option will be treated as
an adjustment TO alternative minimum taxable income. In order for the exercise
of an Incentive Option to qualify as an Incentive Option, a Participant
generally must be an employee of the Company or a Subsidiary from the date the
Incentive Option is granted through the date three months before the date of
exercise (one year preceding the date of exercise in the case of a Participant
whose employment is terminated due to disability). The employment requirement
does not apply where a participant is terminated due to his or her death.
Upon a disposition of the shares after the later of two years from
the date of grant and one year after the transfer of the shares to the
Participant, the Participant will recognize the difference, if any, between the
amount realized and the exercise price as long-term capital gain or long-term
capital loss (as the case may be). If a participant disposes of the shares of
9
Common Stock prior to satisfying these holding period requirements, the optionee
will recognize ordinary income generally in an amount equal to the excess of the
fair market value of the shares of Common Stock at the time the option was
exercised (or such lower price at which the shares are sold) over the exercise
price of the Option. The balance of the gain realized, if any, will be
short-term or long-term capital gain, depending on whether the shares have been
held for at least 12 months after the date of exercise.
NON-QUALIFIED OPTIONS. In general, with respect to Non-qualified
Options (i) upon grant of the option, the Participant will recognize no income
and (ii) upon exercise of the option, the Participant will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares on the date of exercise over the exercise price, and the Company will
qualify for a deduction in the same amount, subject to the requirement that it
comply with applicable income reporting requirements. On a disposition of the
shares, the Participant will generally recognize gain or loss equal to the
appreciation or depreciation after the exercise date, provided that any gain
will be subject to reduced rates of tax if the shares were held for more than 12
months.
EXCISE TAXES. Under certain circumstances, the accelerated vesting or
exercise of options in connection with a change in control might be deemed to be
an "excess parachute payment" for purposes of the golden parachute provisions of
section 280G of the Code. To the extent so considered, a Holder may be subject
to a 20% excise tax and the Company and its Subsidiaries may be denied a tax
deduction.
Section 162(m) of the code generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any of the four
other most highly compensated executive officers who are employed by the company
on the last day of the taxable year, but does not allow a deduction for
qualified "performance-based compensation", the material terms of which are
disclosed to and approved by stockholders. The company has structured the 2001
Plan with the intention that compensation resulting from options granted
thereunder may qualify as "performance-based compensation" and, if so qualified,
would be deductible. Accordingly, the Company is seeking stockholder approval of
the 2001 Plan. The affirmative vote of the holders of a majority of the shares
entitled to vote thereon, present in person or by proxy at the Annual Meeting,
is required for approval of the 2001 Plan. Brokers not holding shares of record
will not be included in the count.
The closing price of the Company's Common Stock on May 22, 2001, as
reported on Nasdaq, was $1.30 per share. Effective May 25, 2001, the Company's
Common Stock began trading on the Nasdaq SmallCap Market under the ticker symbol
"BSTC".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 2001
PLAN.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is providing this
report to enable stockholders to understand how it monitors and oversees the
Company's financial reporting process. The Audit Committee operates pursuant to
an Audit Committee Charter that is reviewed and approved annually by the Board
of Directors. A copy of the Audit Committee Charter, approved on June 6, 2000
has been included as Annex B to this Proxy Statement.
This report confirms that the Audit Committee has (i) reviewed and
discussed the audited financial statements for the year ended January 31, 2001
with management and the Company's independent public accountants, (ii) discussed
with the Company's independent public accountants the matters required to be
reviewed pursuant to the Statements on Auditing Standards No. 61 (Communications
with Audit Committees); (iii) reviewed the written disclosures letter from the
Company's independent public accountants as required by Independence standards
Board Standard No. 1 (Independence Discussions with Audit Committees); and (iv)
discussed with the Company's independent public accountants their independence
from the Company.
Based upon the above review and discussions, the Audit Committee recommended to
the Board of Directors that the audited financial statements for the year ended
January 31, 2001 be included in the Company's Annual Report on Form 10-KSB for
filing with the Securities and Exchange Commission.
10
Respectfully submitted,
Audit Committee
John T. Lane, Chairman
Paul Gitman
Henry Morgan
CERTAIN TRANSACTIONS
The S.J. Wegman Company owns Wilbur Street Corporation ("WSC"), which
has leased to ABC-New York a building serving as a manufacturing facility and
headquarters in Lynbrook, New York for over 30 years. The building also serves
as the Company's administrative headquarters. Edwin H. Wegman, the Company's
Chairman of the Board and President, is the President of WSC and the sole
general partner of The S.J. Wegman Company, a partnership. On January 30, 1998,
WSC and the Company entered into a triple net lease agreement that provides for
an annual rent starting at $125,000, which can increase annually by the amount
of annual increase in the Consumer Price Index for the greater New York
metropolitan region. The lease term is 7 years, expiring January 31, 2005. The
Company believes that the terms of this lease are reasonable and the rent
charged is no greater than that which would be charged by an unaffiliated
landlord for comparable facilities, based on appraisals of the property. At
January 31, 2001, the Company has advanced $45,674 to WSC, and has a 9%
non-amortizing mortgage, secured by the Company's headquarters building, from
WSC in the amount of $82,606.
At February 1, 1999, outstanding loans due from the Company's
chairman amounted to $131,820, comprised of a promissory note of $56,820 and a
loan of $75,000. During the year ended January 31, 2000, the chairman repaid the
loan of $75,000 outstanding at January 31, 1999 and the Company loaned an
additional $693,995 to the chairman. The loans made during the year ended
January 31, 2000, plus additional loans of $114,579 made to the chairman through
April 10, 2000, were converted into a recourse secured promissory note payable
January 31, 2001 in the amount of $865,394, with interest at 9% per annum.
During the year ended January 31, 2001, the Company loaned the chairman a total
of $404,227. The chairman did not repay the promissory note on its scheduled
maturity date of January 31, 2001. The unpaid balance of the notes, which
aggregate $1,155,042 at January 31, 2001 is collateralized with approximately
1,800,000 shares of the Company's stock and is presented as a component of
stockholders' equity in the accompanying balance sheet. On April 3, 2001, the
principal balance of the notes, plus additional loans in the amount of $21,045,
plus accrued interest of $159,940, were converted into a demand note in the
amount of $1,336,027 bearing interest at 9% per annum. Interest income accrued
but not recognized for financial statement purposes aggregated approximately
$72,000 and $20,000 for the years ended January 31, 2001 and 2000, respectively.
During the fiscal year ended January 31, 2001, the Company paid
$92,650 for the use of an entertainment facility formerly owned by an affiliate
of the Chairman and Chief Executive Officer.
ABC-New York has notes payable to a former director of the Company
and to a partner of the S.J. Wegman Company, an affiliate, amounting to $13,510
at January 31, 2001. The notes, which bear interest at 9% per annum, are payable
on demand.
During the fiscal years ended January 31, 2001 and January 31, 2000,
the Company incurred consulting fees in the amount of $35,000 and $60,000 for
services provided by a son of a former director.
INDEPENDENT ACCOUNTANTS
The Company intends to use Grant Thornton LLP as its independent
auditors for the 2002 fiscal year. A representative of Grant Thornton LLP is
expected to be present at the meeting, will have the opportunity to make a
statement if he or she chooses and is expected to be available to respond to
appropriate questions.
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AUDIT FEES
The aggregate fees for professional services rendered by Grant
Thornton LLP for the audit of the Company's annual financial statements on Form
10-KSB and reviews of the financial statements included in the Company's Forms
10-QSB for the year ended January 31, 2001 amounted to $69,000, of which an
aggregate amount of $39,000 had been billed through January 31, 2001.
OTHER FEES
The aggregate fees for professional services rendered by Grant
Thornton LLP for tax returns filed in the United States and related compliance
for the year ended January 31, 2000 amounted to $20,000, all of which had been
billed through January 31, 2001.
The Audit Committee of the Company's Board of Directors has
considered whether the provisions of non-audit professional services rendered by
Grant Thornton LLP is compatible with maintaining their independence, and
believes that the provision of such services is so compatible.
2002 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual
Meeting to be held following the end of the 2002 fiscal year for inclusion in
the proxy statement of the Company in accordance with Rule 14a-8 of the Exchange
Act must be received at the Company's offices by March 28, 2002. In addition, no
proposal by a stockholder submitted outside the process of Rule 14a-8 of the
Exchange Act shall be presented for vote at the Annual Meeting unless such
stockholder shall, not later than the close of business on the fifth day
following the date on which notice of the meeting is first given to
stockholders, provide the Board of Directors or the Secretary of the Corporation
with written notice of intention to present a proposal for action at the
forthcoming meeting of stockholders.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the meeting other than the matters referred to in this Proxy
Statement. Should any other matter properly come before the meeting, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their best judgment.
By Order of the Board of Directors,
Albert Horcher
SECRETARY
Lynbrook, New York
July 2, 2001
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ANNEX A
BIOSPECIFICS TECHNOLOGIES CORP.
2001 STOCK OPTION PLAN
1. Name and Purpose. The purpose of this Plan, which shall be known
as the "BioSpecifics Technologies Corp. 2001 Stock Option Plan" (the "Plan"), is
to advance the interests of BioSpecifics Technologies Corp. (the "Company") by
providing a material incentive for the continued services of those key
employees, independent agents, consultants, attorneys and directors of the
Company or its Subsidiaries who have made significant contributions toward the
Company's success and development, by encouraging those key employees,
independent agents, consultants, attorneys and directors to increase their
proprietary interest in the Company and by attracting new, able executives to
employment with the Company or its Subsidiaries. It is intended that this
purpose be achieved through the grant of Qualified Incentive Stock Options and
Non-Qualified Stock Options (as each term is hereinafter defined) to such
individuals.
2. Definitions. For purposes of this Plan, the following terms, when
capitalized, shall have the meanings designated herein unless a different
meaning is plainly required by the context.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Capitalization" means an increase or reduction in
the number of Common Shares, any change (including, but not limited to, a change
in value) in the Common Shares or exchange of Common Shares for a different
number or kind of shares or other securities of the Company or another entity,
in either case, by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or other similar transaction.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean a committee consisting of the entire
board of directors of the Company or at least two directors of the Company, each
of whom shall be a "non-employee" director within the meaning of Rule 16b-3
promulgated under the Exchange Act; provided, however that to the extent
necessary for any grant of an Option intended to qualify as Performance-Based
Compensation to so qualify, the Committee shall consist of at least two
directors of the Company each of whom shall be an "outside director" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
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(e) "Common Shares" shall mean the shares of the Company's common
stock, par value $.001 per share.
(f) "Consultant" shall mean any independent agent, consultant or
attorney to or for the Company or a Subsidiary who, in the opinion of the Board,
has demonstrated a capacity for contributing in a substantial measure to the
success of the Company and its Subsidiaries.
(g) "Effective Date" shall be the date that the Plan is approved
by the Board, subject only to the approval by the affirmative vote of the
holders of a majority of the securities of the Company present, or represented,
and entitled to vote at a meeting of stockholders duly held in accordance with
the applicable laws of the State of Delaware within twelve (12) months of the
adoption of the Plan by the Board.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(i) "Fair Market Value" on any date means the closing sales
prices of the Common Shares on such date on the principal national securities
exchange on which such Common Shares are listed or admitted to trading, or, if
such Common Shares are not so listed or admitted to trading, the average of the
per Common Share closing bid price and per Common Share closing asked price on
such date as quoted on the National Association of Securities Dealers Automated
Quotation System or such other market in which such prices are regularly quoted,
or, if there have been no published bid or asked quotations with respect to
Common Shares on such date, the Fair Market Value shall be the value established
by the Board in good faith and, in the case of a Qualified Incentive Stock
Option, in accordance with Section 422 of the Code.
(j) "Key Employee" shall mean any employee of the Company or a
Subsidiary who, in the opinion of the Board, has demonstrated a capacity for
contributing in a substantial measure to the success of the Company and its
Subsidiaries.
(k) "Non-Qualified Stock Options" shall mean those options
granted by the Company pursuant to this Plan which are not Qualified Incentive
Stock Options.
(l) "Option" means a Non-Qualified Stock Option, a Qualified
Incentive Stock Option or any or all of them.
(m) "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
(n) "Participant" shall mean a Key Employee, Participating
Director or Consultant selected by the Board to receive options, whether
Qualified Incentive Stock Options or Non-Qualified Stock Options, granted under
this Plan.
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(o) "Participating Director" shall mean any director of the
Company or any Subsidiary who, in the opinion of the Board, has demonstrated a
capacity for contributing in a substantial measure to the success of the Company
and its Subsidiaries.
(p) "Performance-Based Compensation" means any grant of a stock
option under the Plan that is intended to constitute "performance based
compensation" within the meaning of Section 162(m)(4)(C) of the Code and the
regulations promulgated thereunder.
(q) "Pooling Transaction" means an acquisition of the Company in
a transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
(r) "Qualified Incentive Stock Options" means those options
granted by the Company pursuant to this Plan which are intended to satisfy the
requirements of Section 422 of the Code and are designated Qualified Incentive
Stock Options by the Committee.
(s) "Retirement" shall mean retirement (i) on or after age 55
with 20 or more years of service, (ii) on or after age 60 or (iii) with the
consent of the Committee.
(t) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(u) "Subsidiary" shall mean a subsidiary corporation of the
Company within the meaning Section 424(f) of the Code.
(v) "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
(w) "Ten-Percent Stockholder" means a Participant, who, at the
time a Qualified Incentive Stock Option is to be granted to him or her, 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, or of a Parent or a Subsidiary.
3. Administration; Selection of Participants.
(a) This Plan shall be administered by the Committee, which shall
select the Participants and grant Options to the Participants. If the Committee
is administering the Plan, it shall report all action taken by it to the Board
which shall review and ratify or approve those actions which are required by law
to be so reviewed and ratified or approved by the Board. To the extent the
Committee administers this Plan, all references herein to the "Board" shall mean
the "Committee." The stock options granted under this Plan may be either
Qualified Incentive Stock Options or Non-Qualified Stock Options, within the
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discretion of the Board. Non-Qualified Stock Options may be granted to any
Participant, including Key Employees, Consultants and Participating Directors.
Qualified Incentive Stock Options may be awarded only to Key Employees
(including directors who are Key Employees).
(b) Subject to the express provisions of this Plan, the Board
shall have authority to (i) adopt regulations and procedures which are
consistent with the terms of this Plan; (ii) adopt and amend stock option
agreements between the Company and a Participant as they deem advisable and to
determine the terms and provisions of such stock option agreements, including
the number of shares with respect to which options are granted to a Participant,
the exercise price for such shares, the date or dates when the option or parts
of it may be exercised, the effect of a Change in Control and the restrictions
applicable thereto, which need not be identical and which shall comply with any
applicable requirements of Paragraph 5 below; and (iii) make all other
determinations necessary or advisable for administering this Plan. All decisions
and interpretations made by the Board shall be binding and conclusive on all
Participants, their legal representatives and beneficiaries.
4. Shares Subject to the Plan.
(a) The shares to be issued and delivered by the Company upon
exercise of Options granted under this Plan (whether Qualified Incentive Stock
Options or Non-Qualified Stock Options) are the Common Shares, which may be
either authorized but unissued shares, or treasury shares, in the discretion of
the Board.
(b) The aggregate number of the Common Shares which may be issued
under this Plan shall be 750,000; subject, however, to the adjustments provided
in Paragraph 10.
(c) Common Shares covered by an Option which is no longer
exercisable with respect to such shares shall again be available for issuance in
connection with other Options granted under this Plan.
(d) During any calendar year, no Participant may be granted
Options pursuant to this Plan on more than 350,000 Common Shares, subject to the
adjustments provided in Paragraph 10.
5. Terms of Options. Options granted under this Plan shall be
evidenced by stock option agreements authorized by the Board and executed by a
duly authorized officer of the Company. Such stock option agreements shall
contain such terms as the Board shall determine, subject to the following
limitations and requirements:
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(a) Exercise Price: The exercise price per Common Share of the
Option shall not be less than 100% of the Fair Market Value of a Common Share on
the date the Option is granted; provided, however, that the exercise price per
Common Share of any Qualified Incentive Stock Option granted to a Ten-Percent
Stockholder shall not be less than 110% of such Fair Market Value.
(b) Period within which Option may be exercised: In general,
Options granted under this Plan will become exercisable in four equal, annual
installments commencing one year after the date the Option is granted, although
the Board, in its discretion, may provide for different vesting schedules.
Options granted under this Plan shall be for such term as the Committee shall
determine; provided, that Options shall terminate (become non-exercisable) upon
the expiration of ten years from the date of grant of the Options or earlier as
set forth below; provided further, that Qualified Incentive Stock Options
granted to a Ten-Percent Stockholder shall terminate no later than the
expiration of five years from the date of grant of such Options.
Whether time spent on leave of absence granted by the Company or any
Subsidiary shall constitute continued employment for purposes of this Plan shall
be determined by the Board in its sole discretion. Notwithstanding the
foregoing, the Board may, in its sole discretion, impose more restrictive
conditions on the exercise of an Option granted under this Plan, including,
without limitation, restrictions relating to length of service, corporate
performance, attainment of individual or group performance objectives, resale
restrictions, federal or state securities laws and providing for no exercise of
any Option after termination of a Key Employee's employment. Any and all such
conditions shall be specified in the stock option agreement entered into
pursuant to the Plan limiting and defining such Option.
The Board may, in its sole discretion, impose similar conditions upon
the exercise of any Options granted to Consultants or to Participating Directors
(who are not Key Employees). The Board may accelerate the vesting of any or all
Options at any time.
(c) Termination of Option by reason of termination of employment,
consultancy or directorship: Upon termination of a Key Employee's employment
with the Company or a Subsidiary, all Options granted under this Plan to such
Participant which are not exercisable on the date of such termination shall
immediately terminate, and any remaining exercisable Options shall terminate if
not exercised before the expiration of the applicable period specified below, or
at such earlier time as may be applicable under subparagraph 5(b) above:
(i) No later than thirty (30) days following such termination
of employment if such termination was not a result of death or Retirement of the
Participant.
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(ii) No later than six (6) months following such termination
of employment if such termination was because of death, because of Retirement,
because of retirement under the provisions of any retirement plan of the Company
or any Subsidiary, or with the consent of the Company.
(d) Non-transferability: No Option under this Plan shall be
assignable or transferable except, in the event of the death of a Participant,
by his or her will or by the laws of descent and distribution. In the event of
the death of a Participant, the representative or representatives of his or her
estate, or the person or persons who acquired (by bequest or inheritance) the
rights to exercise his or her Options granted under this Plan, may exercise any
of the unexercised Options or part thereof prior to the expiration of the
applicable exercise period, as specified in sub-paragraphs 5(b) and 5(c) above,
or in the stock option agreement relating to such Options. No transfer of an
Option by a participant by will or by laws of descent and distribution shall be
effective to bind the Company unless the Company shall have been furnished with
written notice thereof and a copy of the will and such other evidence as the
Company may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of such
Option. The Option shall be exercisable only by the Participant or the
Participant's guardian or legal representative during the lifetime of the
Participant.
(e) More than one Option granted to a Participant: More than one
Option, and more than one form of Option, may be granted to a Participant under
this Plan.
(f) Partial exercise: Unless otherwise provided in the stock
option agreement entered into pursuant to the Plan, any exercise of an Option
granted under this Plan may be made in whole or in part.
(g) Limitations on Qualified Incentive Stock Options: To the
extent that the aggregate Fair Market Value (determined as of the date of the
grant) of Common Shares with respect to which Qualified Incentive Stock Options
granted under the Plan and "incentive stock options" (within the meaning of
Section 422 of the Code) granted under all other plans of the Company or its
Subsidiaries (in either case determined without regard to this Section 5(g)) are
exercisable by a Participant for the first time during any calendar year exceeds
$100,000, such Qualified Incentive Stock Options shall be treated as
Non-Qualified Stock Options. In applying the limitation in the preceding
sentence in the case of multiple Option grants, Options which were intended to
be Qualified Incentive Stock Options shall be treated as Non-Qualified Stock
Options according to the order in which they were granted such that the most
recently granted Options are first treated as Non-Qualified Stock Options.
6. Period of Granting Options. No Option shall be granted under
this Plan subsequent to ten years after the Effective Date.
A-6
7. No Effect Upon Employment Status. The fact that an employee,
independent agent, consultant, attorney or director has been selected as a
Participant shall not limit or otherwise qualify the right of his or her
employer to terminate his or her employment, engagement or directorship at any
time.
8. Method of Exercise. Any Option granted under this Plan may be
exercised by written notice to the Secretary of the Company, signed by the
Participant, or by such other person as is entitled to exercise such Option. The
notice of exercise shall state the number of shares in respect of which the
Option is being exercised, and shall be accompanied by the payment, in cash,
and/or, as provided below, in the Common Shares, of the full exercise price for
such shares. At the written request of the Participant and upon approval by the
Board, shares acquired pursuant to the exercise of any Option may be paid for at
the time of exercise by the surrender of Common Shares held by or for the
account of the Participant at the time of exercise for at least six months (for
Qualified Incentive Stock Options only to the extent permitted by subsection (c)
(4) of Section 422 of the Code, without liability to the Company). In such case,
the Fair Market Value of the surrendered shares shall be determined by the Board
as of the date of exercise in the same manner as such value is determined upon
the grant of an Option. A certificate or certificates for the Common Shares
purchased through the exercise of an Option shall be issued in the regular
course after the exercise of the Option and payment therefor. The Company shall
be afforded reasonable opportunity after exercise of any Option to comply with
any requirements for stock exchange listing, for registration under applicable
securities or other laws and for compliance with other laws and regulations, if
any, before issuance of the shares being purchased on such exercise. During the
option period, no person entitled to exercise any Option granted under this Plan
shall have any of the rights or privileges of a shareholder with respect to any
shares issuable upon exercise of such Option until certificates representing
such shares shall have been issued and delivered.
9. Implied Consent of Participants. Every Participant, by his or her
acceptance of an Option under this Plan, shall be deemed to have consented to be
bound, on his or her own behalf and on behalf of his or her heirs, assigns, and
legal representatives, by all of the terms and conditions of this Plan.
10. Adjustment Upon Changes in Capitalization
(a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Common Shares or other stock or securities with
respect to which Options may be granted under the Plan in the aggregate and to
any Participant during any calendar year and (ii) the number and class of Common
Shares or other stock or securities which are subject to outstanding Options
granted under the Plan and the exercise price therefor; it being understood that
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the Plan does not provide any Participant anti-dilution or similar protection
and that the adjustments referred to above may be made in the sole and absolute
discretion of the Committee.
(b) Any such adjustment in the shares or other stock or
securities subject to outstanding Qualified Incentive Stock Options (including
any adjustments in the exercise price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Participant
shall be entitled to exercise an Option with respect to new, additional or
different shares of stock or securities, such new, additional or different
shares shall thereupon be subject to all of the conditions and restrictions
which were applicable to the Common Shares subject to the Option prior to such
Change in Capitalization.
11. Effect of Certain Transactions.
(a) In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent option substituted by the
Successor Corporation; provided, however, that, unless otherwise determined by
the Committee, such Options shall remain subject to all of the conditions,
restrictions and performance criteria which were applicable to such Options
prior to such assumption or substitution. In the event that the Successor
Corporation refuses to or does not assume the Option or substitute an equivalent
option therefor, the Participant shall have the right to exercise the Option as
to all of the Common Shares subject to the Option as described below, including
Common Shares as to which it would not otherwise be exercisable (a "Transaction
Acceleration").
(b) Notwithstanding anything to the contrary contained in Section
11(a), in the event of a Transaction Acceleration, or in the event that the
Committee determines to accelerate the exercisability of any Options in
connection with any transaction involving the Company or its capital stock
pursuant to Section 5(b), the Committee may, in its sole discretion, authorize
the redemption of the unexercised portion of the Option for a consideration per
Common Share equal to the excess of (i) the consideration payable per Common
Share in connection with such transaction, over (ii) the purchase price per
Common Share subject to the Option.
(c) If an Option is exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Secretary of the
Company shall notify the Participant that the Option shall be fully exercisable
for a period of fifteen (15) days (or such other period as shall be determined
by the Committee) from the date of such notice, and the Option shall terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger or sale of assets,
the option confers the right to purchase or receive upon exercise, for each
Common Share subject to the Option immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets for each Common Share held on the
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effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Common Shares).
12. Pooling Transactions. Notwithstanding anything contained in the
Plan or any stock option agreement to the contrary, in the event of a
transaction involving the Company which is also intended to constitute a Pooling
Transaction, the Committee shall take such actions, if any, as are specifically
recommended by an independent accounting firm retained by the Company to the
extent reasonably necessary in order to assure that the Pooling Transaction will
qualify as such, including but not limited to (a) deferring the vesting,
exercise, payment, settlement or lapsing of restrictions with respect to any
Option, (b) providing that the payment or settlement in respect of any Option be
made in the form of cash, Common Shares (or any other securities into which such
shares are changed or for which such shares are e xchanged) or securities of a
successor or acquirer of the Company, or a combination of the foregoing, and (c)
providing for the extension of the term of any Option to the extent necessary to
accommodate the foregoing, but not beyond the maximum term permitted for any
Option.
13. Conflicting Provisions. In case of any conflict between the
provisions of this Plan and the provisions of a stock option agreement entered
into pursuant to this Plan, the provisions of this Plan shall control.
14. Company Responsibility. All expenses of this Plan, including
the cost of maintaining records, shall be borne by the Company. The Company and
members of the Board shall have no responsibility or liability for any act or
thing done or left undone with respect to the price, time, quality, or other
conditions and circumstances of the purchase of shares under the terms of this
Plan, or otherwise in connection with administration of the Plan, so long as the
Company acts in good faith.
15. Use of Proceeds. The proceeds received by the Company from the
sale of stock under this Plan shall be added to the general funds of the Company
and shall be used for such corporate purposes as the Board shall direct.
16. Tax Treatment. With respect to Qualified Incentive Stock Options,
this Plan is intended to comply with the provisions of Section 422 of the Code.
Any provisions of this Plan which conflict with the provisions of Section 422
shall be deemed to be hereby amended so as to comply therewith.
17. Interpretation.
(a) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Board shall interpret and administer the
provisions of the Plan or any stock option agreement entered into pursuant to
the Plan in a manner consistent therewith. Any provisions inconsistent with such
Rule shall be inoperative and shall not affect the validity of the Plan.
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(b) Unless otherwise expressly stated in a stock option agreement
entered into pursuant to the Plan, each Option granted under the Plan is
intended to be Performance-Based Compensation. The Committee shall not be
entitled to exercise any discretion otherwise authorized hereunder with respect
to such Options if the ability to exercise such discretion or the exercise of
such discretion itself would cause the compensation attributable to such Options
to fail to qualify as Performance-Based Compensation.
18. Regulations and Other Approvals; Governing Law.
(a) Except as to matters of federal law, the Plan and the rights
of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to
conflicts of laws principles thereof.
(b) The obligation of the Company to sell or deliver Common
Shares with respect to Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(c) The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Participants granted Qualified Incentive Stock
Options the tax benefits under the applicable provisions of the Code and
regulations promulgated thereunder.
(d) Each Option is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Common Shares issuable pursuant to the Plan is required by
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Common Shares, no Options shall be granted or payment made or Common Shares
issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
(e) Notwithstanding anything contained in the Plan or any stock
option agreement entered into the pursuant to the Plan to the contrary, in the
event that the disposition of Common Shares acquired pursuant to the Plan is not
covered by a then current registration statement under the Securities Act of
1933, as amended (the "Securities Act"), and is not otherwise exempt from such
registration, such Common Shares shall be restricted against transfer to the
extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Common Shares
pursuant to an Option granted under the Plan, as a condition precedent to
receipt of such Common Shares, to represent and warrant to the Company in
writing that the Common Shares acquired by such individual are acquired without
a view to any distribution thereof and will not be sold or transferred other
than pursuant to an effective registration thereof under said Act or pursuant to
an exemption applicable under the Securities Act or the rules and regulations
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promulgated thereunder. The certificates evidencing any of such Common Shares
shall be appropriately amended or have an appropriate legend placed thereon to
reflect their status as restricted securities as aforesaid.
19. Withholding of Taxes
(a) At such times as a Participant recognizes taxable income in
connection with the receipt of Common Shares hereunder (a "Taxable Event"), the
Participant shall pay to the Company an amount equal to the federal, state and
local income taxes and other amounts as may be required by law to be withheld by
the Company in connection with the Taxable Event (the "Withholding Taxes") prior
to the issuance of such Common Shares. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Participant may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Common Shares then issuable to him
or her having an aggregate Fair Market Value equal to the Withholding Taxes.
(b) If a Participant makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Common
Share or Common Shares issued to such Participant pursuant to the exercise of a
Qualified Incentive Stock Option within the two-year period commencing on the
day after the date of the grant or within the one-year period commencing on the
day after the date of transfer of such Common Share or Common Shares to the
Participant pursuant to such exercise, the Participant shall, within ten (10)
days of such disposition, notify the Company thereof, by delivery of written
notice to the Company at its principal executive office.
20. Performance-Based Compensation. Any Option granted under the Plan
which is intended to be Performance-Based Compensation, shall be subject to the
approval of the material terms of the Plan by a majority of the shareholders of
the Company in accordance with Section 162(m) of the Code and the regulations
promulgated thereunder.
21. Amendment and Termination. The Board may alter, amend or
terminate this Plan at any time, or from time to time, without obtaining any
approval of the Company's shareholders; except that this Plan may not be amended
without shareholder approval to (a) change the exercise price of Options
(excepting proportionate adjustments made under Paragraph 10); (b) change the
requirement that the exercise price per Common Share not be less than 100% of
the Fair Market Value of the Common Shares on the date the Option is granted (or
less than 110% in the case of Ten-Percent Stockholders being issued Qualified
Incentive Stock Options); or (c) increase the number of Common Shares available
for grant under the Plan. No alteration, amendment or termination of the Plan or
any Option can, without the Optionee's consent adversely affect the terms of any
outstading Option. If this Plan is terminated, any unexercised Option shall
continue to be exercisable in accordance with its terms, except as provided in
Paragraph 11 above.
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22. Variations in Pronouns. Whenever used in this Plan, unless the
context otherwise requires, words used in the singular shall also include the
plural, and words used in the masculine gender shall also include the feminine
or neuter gender.
23. Captions and Headings. The Paragraph and subparagraph headings
and captions are for reference purposes only and shall not in any way affect the
meaning or interpretation of any such Paragraph or subparagraph of this Plan.
A-12
ANNEX B
BIOSPECIFICS TECHNOLOGIES CORP.
AUDIT COMMITTEE CHARTER
The Board of Directors of BioSpecifics Technologies Corp. (the "Company") has
established an Audit Committee (the "Committee") with general responsibility and
specific duties as described below.
Composition:
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The Committee shall be comprised of the requisite number of members as required
by Nasdaq rules. The Board of Directors shall approve committee membership.
Responsibility:
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The Committee's responsibility is to assist the Board of Directors in fulfilling
its fiduciary responsibilities as to accounting policies and reporting practices
and procedures of the Company. The Committee is empowered to retain persons
having special competence as necessary to assist the Committee in fulfilling its
responsibility. While the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of Management and the Independent Accountant. The
Independent Accountant is ultimately accountable to the Board of Directors and
the Committee.
Attendance:
- ----------
Members of the Committee should endeavor to be present, in person or by
telephone, at all meetings; however, two Committee members shall constitute a
quorum. As necessary, the Chairperson may request members of Management and
representatives of the Independent Accountant to be present at meetings.
Minutes of Meetings:
- -------------------
Minutes of each meeting shall be prepared and sent to Committee members and
presented to Company Directors who are not members of the Committee.
Specific duties:
- ---------------
The Committee is to:
1. Review with the Company's Management and the Independent Accountant
the Company's policies and procedures, as appropriate, to reasonably assess
the adequacy of internal accounting and financial reporting controls and
compliance practices and procedures.
2. Review the Committee's Charter annually, and update as appropriate.
3. Recommend to the Board of Directors the Independent Accountant to be
selected, evaluate the Independent Accountant, approve the compensation of
the Independent Accountant, and review and approve any discharge of the
Independent Accountant.
4. Receive periodic written statements from the Independent Accountant
regarding its independence and delineating all relationships between it and
the Company, discuss such reports with the Independent Accountant, and if
so determined by the Committee, recommend that the Board take appropriate
action.
5. Become familiar with the accounting and reporting principles and practices
applied by the Company in preparing its financial statements.
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6. Review with Management any need for any internal audit plan.
7. Review, prior to the annual audit, the scope and general extent of the
Independent Accountant's audit examinations.
8. Review with Management and the Independent Accountant, upon completion of
their audit, financial results for the year prior to their release to the
public. Discuss with the Independent Accountant the matters required to be
discussed by the Statement on Auditing Standards No. 61 relating to the
conduct of the year-end audit.
9. Discuss with the Independent Accountant the quality of the Company's
financial accounting personnel, and any relevant recommendations that the
Independent Accountant may have.
10. Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
11. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement,
commencing with the proxy statement for the 2001 annual meeting.
12. Perform such other functions as may be required by law, the Company's
Restated Certificate of Incorporation or By-Laws, or the Board.
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