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
Filed
by
the Registrant þ
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o |
Preliminary
Proxy Statement
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o |
Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ |
Definitive
Proxy Statement
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o |
Definitive
Additional Materials
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o |
Soliciting
Material Pursuant to §240.14a-12
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Bioanalytical
Systems, Inc.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1) |
Title
of each class of securities to which transaction
applies:
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2) |
Aggregate
number of securities to which transaction
applies:
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3) |
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
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4) |
Proposed
maximum aggregate value of
transaction:
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o |
Fee
paid previously with preliminary
materials.
|
o |
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1) |
Amount
Previously Paid:
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2) |
Form,
Schedule or Registration Statement
No.:
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January
29, 2008
Dear
BASi
Shareholders:
You
are
invited to attend the Annual Meeting of Shareholders of Bioanalytical Systems,
Inc. (“BASi”) to be held Thursday, March 20, 2008, at 10:00 a.m. (EST) at BASi
headquarters located at 2701 Kent Avenue, West Lafayette, Indiana,
47906.
At
the
meeting, we are asking the shareholders to:
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·
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Elect
five directors of BASi to serve for a one-year
term;
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·
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Approve
a grant of non-qualified stock options to Mr. Richard M. Shepperd
in
connection with his extended employment agreement, dated May,
2007;
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·
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Approve
a grant of non-qualified stock options to Mr. Michael R. Cox in
connection
with his new employment agreement, dated November,
2007;
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·
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Approve
a grant of non-qualified stock options to Mr. Edward M. Chait in
connection with his new employment agreement, dated November, 2007;
and,
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·
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Approve
the adoption of the Bioanalytical Systems, Inc. 2008 Stock Option
Plan as
a replacement for a previous stock option plan that expired in
2007.
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Details
can be found in the accompanying Notice of Annual Meeting and Proxy
Statement.
We
hope
you are able to attend the Annual Meeting personally, and we look forward to
meeting with you. Whether or not you currently plan to attend, please complete,
date and return the proxy card in the enclosed envelope. The vote of each
shareholder is very important. You may revoke your proxy at any time before
it
is voted by giving written notice to the Secretary of BASi, by filing a properly
executed proxy bearing a later date or by attending the Annual Meeting and
voting in person.
On
behalf
of the Board of Directors and management of BASi, I sincerely thank you for
your
continued support.
Sincerely,
Richard
M. Shepperd
President
and Chief Executive Officer
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
DATE:
March 20, 2008
TIME:
10:00 a.m.
PLACE:
Bioanalytical Systems, Inc. Headquarters
2701
Kent
Avenue
West
Lafayette, IN 47906
MATTERS
TO BE VOTED UPON:
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1.
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To
elect five directors of BASi to serve for a one-year term;
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2.
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To
approve the grant of non-qualified stock options to Mr. Richard
M.
Shepperd in connection with his extended employment agreement,
dated May
2007;
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3.
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To
approve the grant of non-qualified stock options to Mr. Michael
R. Cox in
connection with his new employment agreement, dated November
2007;
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4.
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To
approve the grant of non-qualified stock options to Mr. Edward
M. Chait in
connection with his new employment agreement, dated November
2007;
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5.
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To
approve and adopt the Bioanalytical Systems, Inc. 2008 Stock Option
Plan
as a replacement for a previous stock option plan that expired
in
2007.
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OUR
BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
EACH
OF
THE NOMINEES NAMED IN THE PROXY STATEMENT AND FOR
EACH
PROPOSAL.
Holders
of BASi common shares of record at the close of business on January 31, 2008
are
entitled to notice of, and to vote at, the Annual Meeting.
By
Order
of the Board of Directors,
President
and Chief Executive Officer
YOUR
VOTE
IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, OR IF YOU
DO
PLAN TO ATTEND BUT WISH TO VOTE BY PROXY, PLEASE DATE, SIGN AND PROMPTLY
MAIL
THE ENCLOSED PROXY. A POSTAGE-PAID RETURN ENVELOPE IS PROVIDED FOR THIS
PURPOSE.
TABLE
OF CONTENTS
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Page
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PROXY
STATEMENT
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1 |
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HOW
TO VOTE YOUR SHARES
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1 |
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COMMONLY
ASKED QUESTIONS AND ANSWERS
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1 |
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PROPOSAL
1 - ELECTION OF DIRECTORS
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4 |
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Required
Vote and Board of Directors’ Recommendation
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4 |
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Business
Experience of Nominated Directors
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4 |
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Committees
and Meetings of the Board of Directors
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5 |
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Family
Relationships
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6 |
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Certain
Relationships and Transactions
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7 |
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Communications
with the Board of Directors
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7 |
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Communications
with the Audit Committee
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7 |
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Non-employee
Director Compensation and Benefits
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7 |
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PROPOSAL
2 - APPROVAL OF THE GRANT OF NON-QUALIFIED STOCK OPTIONS TO
RICHARD
M. SHEPPERD
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8 |
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PROPOSAL
3 - APPROVAL OF THE GRANT OF NON-QUALIFIED STOCK OPTIONS TO
MICHAEL
R. COX
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9 |
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PROPOSAL
4 - APPROVAL OF THE GRANT OF NON-QUALIFIED STOCK OPTIONS TO
EDWARD
M. CHAIT
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9 |
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PROPOSAL
5 - APPROVAL AND ADOPTION OF THE 2008 STOCK OPTION PLAN
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SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM
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11 |
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REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
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12 |
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PRINCIPAL
SHAREHOLDERS
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14 |
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COMPENSATION
OF EXECUTIVE OFFICERS
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14 |
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Compensation
Discussion and Analysis
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14 |
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Compensation
Committee Report
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23 |
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Fiscal
2007 Summary Compensation Table
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24 |
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Fiscal
2007 Grants of Plan-Based Awards Table
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25 |
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Outstanding
Equity Awards at Fiscal Year-End Table
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25 |
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Fiscal
2007 Option Exercises
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26 |
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EQUITY
COMPENSATION PLAN INFORMATION
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26 |
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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26 |
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SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
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26 |
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OTHER
BUSINESS
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APPENDIX
A - 2008 STOCK OPTION PLAN
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APPENDIX
B - NOMINATING COMMITTEE CHARTER
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APPENDIX
C - COMPENSATION COMMITTEE CHARTER
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APPENDIX
D - AUDIT COMMITTEE CHARTER
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BIOANALYTICAL
SYSTEMS, INC., PROXY STATEMENT
ANNUAL
MEETING OF MARCH 20, 2008
PROXY
STATEMENT
This
proxy statement is furnished by Bioanalytical Systems, Inc. (“BASi” or the
“Company”) in connection with the solicitation by the Board of Directors of BASi
of proxies to be voted at the Annual Meeting of Shareholders to be held at
10:00
a.m. (EST) on Thursday, March 20, 2008, and at any adjournment thereof. The
meeting will be held at the principal executive offices of BASi, 2701 Kent
Avenue, West Lafayette, Indiana 47906. This proxy statement and the accompanying
form of proxy were first mailed to shareholders on or about February 1,
2008.
A
shareholder signing and returning the enclosed proxy may revoke it at any
time
before it is exercised by delivering written notice to the Secretary of BASi,
by
filing a properly executed proxy bearing a later date or by attending the
Annual
Meeting and voting in person. The signing of a proxy does not preclude a
shareholder from attending the Annual Meeting in person. All proxies returned
prior to the Annual Meeting, and not revoked, will be voted in accordance
with
the instructions contained therein. Any proxy not specifying to the contrary
will be voted FOR the election of each of the nominees for director named
below.
Abstentions and broker non-votes are not counted for purposes of determining
whether a proposal has been approved, but will be counted for purposes of
determining whether a quorum is present.
As
of the
close of business on January 31, 2008, the record date for the Annual Meeting,
there were outstanding and entitled to vote 4,912,568 common shares of BASi.
Each outstanding common share is entitled to one vote. BASi has no other
voting
securities outstanding. Shareholders do not have cumulative voting
rights.
A
quorum
will be present if a majority of the outstanding common shares are present,
in
person or by proxy, at the Annual Meeting. If a quorum is present, the proposals
will be decided by a plurality of the votes cast.
A
copy of
the BASi Annual Report and Form 10-K, including audited financial statements
and
a description of operations for the fiscal year ended September 30, 2007,
accompanies this proxy statement. The financial statements contained in the
Annual Report and Form 10-K are not incorporated by reference in this proxy
statement. The solicitation of proxies is being made by BASi, and all expenses
in connection with the solicitation of proxies will be borne by BASi. BASi
expects to solicit proxies primarily by mail, but directors, officers and
other
employees of BASi may also solicit proxies in person or by telephone. BASi
will
pay any costs so incurred, and the directors, officers and other employees
involved in such solicitations will not receive any additional compensation
for
such actions.
HOW
TO VOTE YOUR SHARES
We
are
pleased to offer you two options for designating the proxies and indicating
your
voting preferences:
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(1)
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You
can attend the Annual Meeting and cast your vote in person; or
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(2)
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You
may complete, sign, date and return by mail the proxy card.
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COMMONLY
ASKED QUESTIONS AND ANSWERS
Why
am I receiving this proxy statement and proxy card?
This
proxy statement describes proposals on which you, as a shareholder, are being
asked to vote. It also gives you information on these proposals, as well
as
other information so that you can make an informed decision. You are invited
to
attend the Annual Meeting to vote on the proposals, but you do not need to
attend in person in order to vote. You may, instead, follow the
instructions above to vote by mail using the enclosed proxy card. Even if
you currently plan to attend the meeting, it is a good idea to complete and
return your proxy card before the meeting date just in case your plans change.
Who
can vote at the Annual Meeting?
Shareholders
who owned common stock on January 31, 2008 may attend and vote at the
Annual Meeting. Each common share is entitled to one vote. There were
4,912,568 common shares outstanding on January 31, 2008.
What
am I voting on?
We
are
asking you to:
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1.
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Elect
five directors;
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2.
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Approve
a grant of non-qualified stock options to Mr. Richard M. Shepperd
in
connection with his extended employment agreement, dated May
2007;
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3.
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Approve
a grant of non-qualified stock options to Mr. Michael R. Cox in
connection
with his new employment agreement, dated November 2007;
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4.
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Approve
a grant of non-qualified stock options to Mr. Edward M. Chait in
connection with his new employment agreement, dated November
2007; and
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5.
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Approve
and adopt the Bioanalytical Systems, Inc. 2008 Stock Option Plan
as a
replacement for a previous stock option plan that expired in
2007.
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What
if I change my mind after I give my proxy?
You
may
revoke your proxy and change your vote at any time before the polls close
at the
meeting. You may do this by:
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•
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Sending
a signed statement to the Company that the proxy is revoked (you
may send
such a statement to the Company’s Secretary at our corporate headquarters
address listed on the Notice of Meeting);
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•
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Signing
another proxy with a later date; or
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•
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Voting
in person at the meeting.
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Your
proxy will not be revoked if you attend the meeting but do not vote.
How
many shares must be present to hold the meeting?
To
hold
the meeting and conduct business, a majority of BASi’s outstanding voting shares
as of January 31, 2008 must be present or represented by proxies at the meeting.
On this date, a total of 4,912,568 common shares were outstanding and
entitled to vote. Shares representing a majority number of these votes, or
2,456,285 shares, must be present. This is called a quorum.
Shares
are counted as present at the meeting if:
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•
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They
are voted in person at the meeting, or
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•
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The
shareholder has voted by properly submitting a proxy card via mail.
Abstentions
and broker non-votes are not counted for purposes of determining
whether a
proposal has been approved, but will be counted for purposes of
determining whether a quorum is
present.
|
Will
my shares be voted if I do not sign and return my proxy
card?
If
your
shares are registered in your name, they will not be voted unless you vote
by
submitting your proxy card via mail, or vote in person at the meeting.
How
will my shares be voted if they are held in “street
name”?
If
your
shares are held in “street name,” you should have received voting instructions
with these materials from your broker or other nominee. We urge you to instruct
your broker or other nominee how to vote your shares by following those
instructions. If you do not give your broker or nominee instructions as to
how
to vote your shares, they may be voted only on matters for which the broker
or
nominee has discretionary authority under applicable rules. These “broker
non-votes” will be counted for purposes of determining whether a quorum is
present but will not be counted for any other purpose with respect to
Proposals 1, 2, 3, 4 and 5.
How
many votes must the nominees have to be elected as
directors?
Directors
will be elected by a plurality of the votes cast, meaning that the persons
receiving the highest number of “for” votes, up to the total number of directors
to be elected at the Annual Meeting, will be elected. We expect that the
election to be held at the 2008 Annual Meeting will be an uncontested election.
Shares
represented by your proxy will be voted by BASi’s management “for” the election
of the five nominees recommended by BASi’s Board of Directors unless
you withhold authority for any or all of such nominees or you mark
your proxy to “abstain” from so voting.
How
many votes are required to pass the adoption of the 2008 Stock Option Plan,
the
approval of the grant of non-qualified stock options to Mr. Shepperd, and
the
approval of the grants of non-qualified stock options to Mr. Cox and Mr.
Chait?
The
adoption of the Stock Option Plan, the approval of Mr. Shepperd’s stock option
grant and the approval of both Mr. Cox’s and Mr. Chait’s non-qualified stock
option grants must receive a “for” vote of a majority of the voting shares
present at the meeting in person or by proxy and voting for or against these
proposals. Abstentions and broker non-votes will have no effect on the outcome
of these proposals.
Why
do the Shareholders have to approve the grant of non-qualified stock options
to
Mr. Shepperd and the grants of non-qualified stock options to both Mr. Cox
and
Mr. Chait?
It
is a
rule of NASDAQ that options granted to employees be approved by shareholders.
This is generally accomplished by granting options under a shareholder approved
option plan. The existing shareholder plan does not allow us to issue
non-qualified options; therefore, these non-qualified option grants must
be
approved by shareholders. In the case of Mr. Shepperd, his options represent
options on 6% of our outstanding common shares of the Company. These options
replace his original bonus plan, which provided for cash bonuses equal to
10% of
EBITDA. In addition to conserving our cash, the Board of Directors believes
the
option grant better aligns Mr. Shepperd’s economic interests with your interests
as a shareholder and is less economically dilutive than his cash bonus. Mr.
Chait and Mr. Cox have assumed positions of increased responsibility in the
Company, and were each tentatively awarded 75,000 additional options, of
which,
in each case, 30,000 were issued under our stock option plan, and 45,000
are
non-qualified and must be approved by shareholders.
Why
are you adopting a new Stock Option Plan?
The
purpose of the 2008 Stock Option Plan is to attract and to encourage the
continued employment and service of, and maximum efforts by, officers,
directors, key employees and other key individuals by offering those persons
an
opportunity to acquire or increase a direct proprietary interest in the
operations and future success of the Company. In the judgment of the Board
of
Directors, an initial or increased grant under the 2008 Stock Option Plan
will
be a valuable incentive and will ultimately benefit our shareholders by aligning
more closely the interest of 2008 Stock Option Plan participants with those
of
our shareholders. We are asking that the 2008 Stock Option Plan be approved
as
the replacement for our former stock option plans, 1997 Employee Stock Option
Plan and 1997 Director Stock Option Plan (which has expired).
Who
will pay for this proxy solicitation?
We
will
bear the costs of soliciting proxies from our shareholders. These costs include
preparing, assembling, printing, mailing and distributing the proxy statements,
proxy cards and annual reports. We will also reimburse brokerage houses and
other custodians for their reasonable out-of-pocket expenses for forwarding
proxy and solicitation materials to the beneficial owners of common shares.
PROPOSALS
TO BE VOTED UPON
PROPOSAL
1 - ELECTION OF DIRECTORS
Required
Vote and Board of Directors’ Recommendation
The
Bylaws of BASi provide for no fewer than seven and no more than nine directors.
Five directors will be elected at the Annual Meeting, leaving two vacancies.
Vacancies on the Board of Directors may be filled by the Board of Directors.
When the Board has fewer than the required minimum directors, there still
must
be a quorum of the required minimum present (i.e. four directors) in order
for
the Board to conduct business. Each director is elected for a one-year term.
The
terms of all incumbent directors will expire at the Annual Meeting. The
Nominating Committee of the Board of Directors has nominated the following
current directors for re-election at the Annual Meeting. The directors nominated
for election are: William E. Baitinger, David W. Crabb, Leslie B. Daniels,
Larry
S. Boulet and Richard M. Shepperd (collectively, the “Nominated Directors”). The
Board of Directors has determined that each of the Nominated Directors, other
than Richard M. Shepperd, is an “independent director” as defined in the
applicable rules of the NASDAQ Stock Market.
The
Board
of Directors recommends that shareholders vote FOR the election of all of
the
Nominated Directors and, unless authority to vote for any Nominated Director
is
withheld, the accompanying proxy will be voted FOR the election of all the
Nominated Directors. However, the persons designated as proxies reserve the
right to cast votes for another person designated by the Board of Directors
in
the event any Nominated Director becomes unable to serve or for good cause
will
not serve. Proxies will not be voted for more than five nominees. If a quorum
is
present, those nominees receiving a plurality of the votes cast will be elected
to the Board of Directors.
The
following table shows certain information about the Nominated
Directors:
Name
|
Age
|
Position
|
Served
as
Director
Since
|
|
|
|
|
William
E. Baitinger
|
72
|
Director,
Chairman of the Board
|
1979
|
David
W. Crabb
|
54
|
Director
|
2004
|
Leslie
B. Daniels
|
60
|
Director
|
2003
|
Larry
S. Boulet
|
61
|
Director
|
2007
|
Richard
M. Shepperd
|
67
|
Director,
President and Chief Executive Officer
|
2007
|
Business
Experience of Nominated Directors
William
E. Baitinger has served as a director of BASi since 1979. Mr. Baitinger was
Director of Technology Transfer for the Purdue Research Foundation from 1988
until 2000. In this capacity he was responsible for all licensing and
commercialization activities from Purdue University. He currently serves
as
Special Assistant to the Vice President for Research at Purdue University.
Mr.
Baitinger has a Bachelor of Science degree in Chemistry and Physics from
Marietta College and a Master of Science degree in Chemistry from Purdue
University.
David
W.
Crabb, M.D. has served as a director of the Company since February 2004.
He has
been Chairman of the Indiana University Department of Medicine since 2001.
Previously he had served as Chief Resident of Internal Medicine and on the
Medicine and Biochemistry faculty of Indiana University. He was appointed
Vice
Chairman for Research for the department and later Assistant Dean for Research.
Dr. Crabb serves on several editorial boards. He is Director of the Indiana
Alcohol Research Center funded by NIAAA. He was a recipient of an NIH Merit
Award and numerous other research and teaching awards. He currently serves
on
the Board of Directors of Polymer Technology Sciences, Inc., a privately
owned
corporation, and the Board of Trustees of Health and Hospital Corporation
of
Marion County, a public agency.
Leslie
B.
Daniels joined the BASi Board of Directors in July 2003. Mr. Daniels is a
founding partner of CAI, a private equity fund in New York City. He previously
was President of Burdge, Daniels & Co., Inc., a principal in venture capital
and buyout investments as well as trading of private placement securities,
and
before that, a Senior Vice President of Blyth, Eastman, Dillon & Co. where
he had responsibility for the corporate fixed income sales and trading
departments. Mr. Daniels is a former Director of Aster-Cephac SA, IVAX
Corporation, MIM Corporation, Mylan Laboratories, Inc., NBS Technologies
Inc.
and MIST Inc. He was also Chairman of Zenith Laboratories, Inc. and currently
serves as Chairman of Turbo Combustor Technology Inc. and as a Director of
SafeGuard Health Enterprises, Inc. and Aerosat, Inc.
Larry
S.
Boulet has
served as a director of the Company since May 2007. Mr. Boulet was a Senior
Audit Partner with PriceWaterhouseCoopers (PWC) and a National Financial
Services Industry Specialist. For the last five years of his career with
PWC,
Mr. Boulet served as Partner-in-charge of the Indianapolis office’s Private
Client Group. Prior to serving on our Board, he served on the Board of Directors
of Century Realty Trust, an Indiana based, real estate investment trust.
He also
served as Audit Committee Chairman until the Trust’s sale and liquidation in
2007. Currently, Mr. Boulet also serves on the Indiana State University
Foundation Board of Directors, where he is the immediate past Chairman of
the
Board. He holds a Bachelor of Science degree in Accounting from Indiana State
University.
Richard
M. Shepperd was
elected President and Chief Executive Officer of the Company in September
2006,
and in May, 2007 agreed to extend his term until December 2009. Mr. Shepperd
served for two years prior to joining the Company with Able Laboratories,
Inc.,
of Cranbury, New Jersey ("Able") as its Chief Restructuring Officer and Director
of Restructuring. Able was formerly a generic pharmaceutical manufacturing
company which filed a voluntary petition for bankruptcy on July 18, 2005
following the loss of FDA approval for its product line. Mr. Shepperd's duties
for Able included exercising executive authority over all operational and
restructuring activities of Able, which included advising its Board, creditors
committee and courts regarding strategies to maintain and realize the most
value
from the company's assets. Able was not affiliated with the Company. For
the two
years prior to serving with Able, Mr. Shepperd served as an independent
management consultant for various businesses. In that capacity, he advised
these
businesses on developing strategies to improve their financial health and
maximize the assets of those organizations.
Committees
and Meetings of the Board of Directors
The
Board
of Directors has established Compensation, Audit and Nominating Committees.
Scheduled meetings are supplemented by frequent informal exchange of information
and actions taken by unanimous votes without meetings.
No
member
of the Board of Directors attended fewer than 75% of the meetings of the
Board
of Directors and meetings of any committee of the Board of Directors of which
he
or she was a member. Three out of five members of the Board of Directors
attended the 2007 Annual Meeting of shareholders. All of the members of the
Board of Directors are encouraged, but not required, to attend BASi’s annual
meetings. The following chart shows the number of meetings of each of the
committees of the Board of Directors and meetings of the Board of Directors
at
which a quorum was present:
Committee
|
|
Members
|
|
Meetings
in 2007
|
|
|
|
|
|
Compensation
|
|
William
E. Baitinger
|
|
4
|
|
|
Leslie
B. Daniels
|
|
|
|
|
David
W. Crabb
|
|
|
|
|
|
|
|
Audit
|
|
Larry
S. Boulet
|
|
1
(a)
|
|
|
William
E. Baitinger
|
|
|
|
|
Leslie
B. Daniels
|
|
|
|
|
David
W. Crabb
|
|
|
|
|
|
|
|
Nominating
|
|
William
E. Baitinger
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1
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Leslie
B. Daniels
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David
W. Crabb
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Board
of Directors
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4
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(a)
Mr.
Baitinger, as Chairman of the Audit Committee, met either in person or by
phone
with the auditors prior to each quarterly earnings release.
The
Compensation Committee makes recommendations to the Board of Directors with
respect to:
|
• |
compensation
arrangements for the executive officers of
BASi,
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|
• |
policies
relating to salaries and job
descriptions,
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|
• |
benefit
programs, including retirement
plans,
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|
• |
administration
of the 1997 Employee Incentive Stock Option Plan, the 1997
Director
Stock
Option Plan and the 2008 Stock Option Plan if approved by
shareholders.
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The
Audit
Committee is responsible for:
|
• |
reviewing
with the auditors the scope of the audit work
performed,
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|
• |
establishing
audit practices,
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|
• |
overseeing
internal accounting controls,
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• |
reviewing
financial reporting, and
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|
• |
accounting
personnel staffing.
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The
Board
of Directors has adopted a written charter for the Audit Committee, a copy
of
which is included as Appendix D to this Proxy Statement. Audit Committee
members
are not employees of BASi and, in the opinion of the Board of Directors,
are
“independent” (as defined by Rule 4200(a)(15) of the NASD listing standards).
The Board of Directors has determined that Larry S. Boulet and Leslie B.
Daniels
are “audit committee financial experts” (as defined by Item 401(h) of Regulation
S-K) and “independent” (as defined by Item 7(d)(3)(iv) of Schedule 14A).
The
Nominating Committee is responsible for receiving and reviewing recommendations
for nominations to the Board of Directors and recommending individuals as
nominees for election to the Board of Directors. Nominating Committee members
are not employees of BASi and, in the opinion of the Board of Directors,
are
“independent” (as defined by rule 4200 (a)(15) of the NASD listing standards).
The Board of Directors adopted a written charter for the Nominating Committee
on
February 21, 2007, a copy of which is included as Appendix B to this Proxy
Statement.
The
Board
of Directors will consider for nomination as directors persons recommended
by
shareholders. Such recommendations must be made to the Board of Directors
or to
an individual director in writing and delivered to Bioanalytical Systems,
Inc.,
Attention: Corporate Secretary, 2701 Kent Avenue, West Lafayette, Indiana
47906.
The Secretary will forward all such communications to the
addressee.
There
is
no fixed process for identifying and evaluating potential candidates to be
nominees for directors, and there is no fixed set of qualifications that
must be
satisfied before a candidate will be considered. Rather, the Nominating
Committee has the flexibility to consider such factors as it deems appropriate.
These factors may include education, diversity, experience with business
and
other organizations comparable with BASi, the interplay of the candidate’s
experience with that of other members of the Board of Directors, and the
extent
to which the candidate would be a desirable addition to the Board of Directors
and to any of the committees of the Board of Directors. The Nominating Committee
will evaluate nominees for directors submitted by shareholders in the same
manner in which it evaluates other director nominees. No shareholder has
properly nominated anyone for election as a director at the Annual
Meeting.
Family
Relationships
There are
no family relationships among the directors and executive officers of
BASi.
Certain
Relationships and Transactions
As
part
of the acquisition of PharmaKinetics Laboratories, Inc. (“PKLB”) by the Company
in fiscal 2003, Leslie B. Daniels, a director of the Company nominated for
reelection, exchanged preferred stock of PKLB for 6% convertible subordinated
debt of the Company in the amount of $498,648. The total of $4,000,000 of
such
debt issued in the acquisition was repaid in December, 2007.
As
part
of their separation agreements, Peter T. Kissinger, Ph.D. and Candice B.
Kissinger received benefits and the grant of a license to certain technologies
described elsewhere herein.
The
Board
reviews transactions with related parties, but has no formal policies in
place
with
respect to such review or the approval of such transactions.
Communications
with the Board of Directors
Any
shareholder who desires to contact members of the Board of Directors, including
non-management members as a group, may do so by writing to:
Corporate
Secretary, Bioanalytical Systems, Inc.
2701
Kent
Avenue
West
Lafayette, IN 47906
corporatesecretary@bioanalytical.com
The
corporate secretary will collect all such communications and organize them
by
subject matter. Thereafter, each communication will be promptly forwarded
to the
appropriate board committee chairperson according to the subject matter of
the
communication. Communications addressed to the non-management members as
a group
will be forwarded to each non-management member of the board.
Communications
with the Audit Committee
Any
person who would like to contact the Company for the purpose of submitting
a
complaint regarding accounting, internal accounting controls, or auditing
matters may do so via email, by writing to:
Chairman
of the Audit Committee,
Larry
S.
Boulet
auditcommittee@bioanalytical.com
Upon
receipt of a complaint, the Chairman of the Audit Committee will follow a
review
process and actions dictated in the Company’s Code of Business Conduct and
Ethics.
Non-Employee
Director Compensation and Benefits
BASi's
compensation package for non-employee directors is generally comprised of
cash
(annual retainers and committee meeting fees) and stock option awards. The
annual pay package is designed to attract and retain highly-qualified,
independent professionals to represent BASi's shareholders and reflect BASi's
position in the industry. If the shareholders approve the 2008 Stock Option
Plan
at the March Annual Meeting, BASi will have the ability to align director
and
shareholder interests through the use of stock option awards to directors.
Actual annual pay varies among directors based on Board committee memberships,
committee chair responsibilities and meetings attended. BASi has not adopted
guidelines with respect to non-employee director ownership of common shares.
Directors who are employees receive no additional compensation for their
service
on the Board.
Compensation
for non-employee directors during the 2007 fiscal year consisted of the
following:
Type
of Compensation
|
|
Amount ($)
|
|
Annual
retainer for Board membership
|
|
|
2,500
|
|
Annual
retainer for director serving as Chair of the Audit
Committee
|
|
|
2,000
|
|
Annual
retainer for director serving as Chair of the Compensation
Committee
|
|
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1,000
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|
Annual
retainer for director serving as Chair of the Nominating
Committee
|
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|
500
|
|
Meeting
fee for Board meeting, in person
|
|
|
1,000
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|
Meeting
fee for Board meeting, by phone
|
|
|
500
|
|
Committee
meetings, non-Board meeting days, in person
|
|
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500
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|
Committee
meetings, non-Board meeting days, by phone
|
|
|
250
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|
Daily
fee for consultation with management
|
|
|
1,000
|
|
For
meetings of the standing Board committees held in conjunction with a meeting
of
the Board, no additional fees are paid.
Business
Expenses
The
directors are reimbursed for their business expenses related to their attendance
at BASi meetings, including room, meals and transportation to and from Board
and
committee meetings. Directors
are also encouraged to attend educational programs related to Board issues
and
corporate governance, which are reimbursed by the Company.
Non-Employee
Directors' Compensation Table
The
following table shows information regarding the compensation of BASi's
non-employee directors for the 2007 fiscal year.
DIRECTOR
COMPENSATION
|
Name
|
|
Total
fees paid, all paid in cash
($)
|
|
William
E. Baitinger
|
|
|
7,325
|
|
Larry
S. Boulet
|
|
|
3,825
|
|
Dr.
David W. Crabb
|
|
|
5,325
|
|
Leslie
B. Daniels
|
|
|
4,825
|
|
PROPOSAL
2 - APPROVAL OF GRANT OF NON-QUALIFIED STOCK OPTIONS TO RICHARD M. SHEPPERD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
On
May
18, 2007, as part of the negotiations to extend his employment contract,
Mr.
Shepperd was granted options, subject to shareholder approval, to purchase
275,000 shares at a purchase price of $7.15 per share, the closing price
of
BASi’s common shares on May 18, 2007. The options are intended to replace his
cash bonus provision under his interim employment contract. Under that contract,
Mr. Shepperd was to receive 10% of EBITDA of the Company, computed on a
quarterly basis. Prior to this revision, Mr. Shepperd had earned $295,000
in
bonus for the first six months of fiscal 2007. The replacement of his bonus
with
this amount of shares under option is intended to create the opportunity
for Mr.
Shepperd to earn similar gains, but are dependent on the Company creating
significant value for shareholders. This
better aligns Mr. Shepperd’s financial rewards with the creation of value for
shareholders and to conserve cash flow. If
the
shareholders do not approve this option grant, Mr. Shepperd will be entitled
to
receive a bonus, as described under Compensation of Executive
Officers.
Mr.
Shepperd's options vest and become exercisable in 3 installments: options
to
purchase 75,000 shares will vest at 5:00 p.m. on the day the options grant
is
approved by the Company's shareholders, followed by two installments of 100,000
shares each, on December 1, 2008 and 2009. The option grant expires as to
all un-exercised shares on May 18, 2017, but may be terminated in
connection with the termination of Mr. Shepperd's employment within 30 days
of
such termination. In the event of his death while employed by the Company,
Mr.
Shepperd's personal representative may also exercise the option within six
months of his death. The option may be terminated by BASi on 30 days' notice
from BASi in the event of a merger, consolidation or a sale of all or
substantially all of BASi's assets. In the event of a change in control,
as
defined in the agreement, these shares will vest immediately. As
of the
close of trading on January 25, 2008, the market value of the shares underlying
the
option grant was
$7.49
per share, or $2,059,750. This value does not take account of the exercise
price of $7.15 per share
required to be paid by Mr. Shepperd to exercise the option. Under
current tax law, the exercise of these
options will create a taxable gain to the recipient of the amount by which
the
then
current market price exceeds
the exercise price, when exercised, and a tax deduction to the Company
of
the
same amount.
The
number of shares covered by the option and the option price each will be
proportionally adjusted for any increase or decrease in the number of issued
common shares resulting from a subdivision or consolidation of shares of
BASi,
the payment of a share dividend, a share split or other increase or decrease
in
the outstanding common shares effected without receipt of consideration by
BASi
(including an increase or decrease effected as a part of the Recapitalization
of
BASi, as described below). If there is a recapitalization or reorganization
of
BASi or a reclassification of its outstanding shares, as a result of which
new
shares are issued in exchange for common shares, then new shares will be
substituted for the option shares then issuable. In that case, the number
of new
shares that will be issued will be the number into which those option shares
would have been converted had they been outstanding at the effective date
of the
recapitalization.
As
with
other grants of stock options, the primary purpose of stock options is to
provide executive officers and other team members with a personal and financial
interest in BASi's success through common share ownership, thereby aligning
the
interests of executive officers and other team members with those of BASi's
shareholders.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
GRANT
OF STOCK OPTIONS TO MR. SHEPPERD.
PROPOSALS
3 and 4 - APPROVAL OF GRANTS OF NON-QUALIFIED STOCK OPTIONS TO MICHAEL R.
COX,
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER, AND EDWARD M. CHAIT,
CHIEF
BUSINESS OFFICER
Subsequent
to fiscal 2007, on November 6, 2007, the Company granted options to purchase
45,000 common shares, at a purchase price of $8.60 per share, the closing
price
of BASi’s common shares on November 6, 2007, subject to shareholder approval, to
Mr. Chait and Mr. Cox. These grants were made simultaneously with new employment
contracts entered into with these executives, which reflect their expanded
responsibilities and the Compensation Committee’s desire to establish incentives
for these executives which are aligned with creation of shareholder
value.
The
non-qualified options granted to Mr. Chait and Mr. Cox on November 6, 2007
to
purchase 45,000 common shares each vest in three equal installments on November
30, 2008, 2009 and 2010. The options expire by their own terms on November
6,
2017, but may be terminated in connection with the termination of either
Mr.
Chait's or Mr. Cox's employment respectively, within 30 days of such
termination. The options may also be terminated by BASi on 30 days' notice
from
BASi in the event of a merger, consolidation or sale of all or substantially
all
of BASi's assets. In the event of a change in control, as defined in the
agreement, these shares will vest immediately. As
of the
close of trading on January 25, 2008, the market value of the shares underlying
the
option grant was
$7.49
per share, or $337,050 each. This value does not take account of the exercise
price
of
$8.60 per share
required to be paid by Mr. Chait or Mr. Cox to exercise his respective option.
Under
current tax law, the
exercise of these options will create a taxable gain to the recipient of
the
amount by
which
the then current
market price exceeds the exercise price, when exercised, and a tax deduction
to
the
Company of the same
amount.
The
number of shares covered by the option and the option price each will be
proportionally adjusted for any increase or decrease in the number of issued
common shares resulting from a subdivision or consolidation of shares of
BASi,
the payment of a share dividend, a share split or other increase or decrease
in
the outstanding common shares effected without receipt of consideration by
BASi
(including an increase or decrease effected as a part of the Recapitalization
of
BASi, as described below). If there is a recapitalization or reorganization
of
BASi or a reclassification of its outstanding shares, as a result of which
new
shares are issued in exchange for common shares, then new shares will be
substituted for the option shares then issuable. In that case, the number
of new
shares that will be issued will be the number into which those option shares
would have been converted had they been outstanding at the effective date
of the
recapitalization.
As
with
other grants of stock options, the primary purpose of stock options is to
provide executive officers and other team members with a personal and financial
interest in BASi's success through common share ownership, thereby aligning
the
interests of executive officers and other team members with those of BASi's
shareholders.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
GRANTS
OF STOCK OPTIONS TO MR. COX AND MR. CHAIT.
PROPOSAL
5 - APPROVAL AND ADOPTION OF 2008 STOCK OPTION PLAN
This
section provides a summary of the terms of the BASi 2008 Stock Option Plan
and
the proposal to approve the plan.
The
Board
of Directors approved the 2008 Stock Option Plan on January 21, 2008, subject
to
approval from our shareholders. Shareholder approval of the plan is necessary
to
make sure that the plan meets the requirements of the Internal Revenue Code,
including the section 162(m) limitation on the deductibility of executive
compensation, as well as the NASDAQ shareholder approval requirements for
equity
compensation plans. The Company intends to grant awards under the 2008 Stock
Option Plan across a wide base of its employees and considers the ability
to
grant equity-based awards to be an important part of its strategy for recruiting
and retaining key employees.
The
purpose of the 2008 Stock Option Plan is to attract and to encourage the
continued employment and service of, and maximum efforts by, officers,
directors, key employees and other key individuals by offering those persons
an
opportunity to acquire or increase a direct proprietary interest in the
operations and future success of the Company. In the judgment of the Board
of
Directors, an initial or increased grant under the 2008 Stock Option Plan
will
be a valuable incentive and will ultimately benefit our shareholders by aligning
more closely the interest of 2008 Stock Option Plan participants with those
of
our shareholders.
Subject
to shareholder approval, the number of common shares reserved for issuance
under
the 2008 Stock Option Plan is equal to a maximum of 500,000 common shares.
These
shares had a market value of $7.49 per share as of the close of trading on
January 25,
2008,
for a total
of
$3,745,000. This value does not take account of the exercise price required
to
be paid by optionees to exercise any options granted under the 2008 Stock
Option
Plan, which exercise price will be equal to the closing
price of the common shares on the date of grant. As of January 31, 2008
there were no common shares available for grant under the 1997 Outside Director
Stock Option Plan because the plan has expired. There
were 287,000 Common Shares reserved for issuance for which options had not
been
granted under the 1997 Employee Stock Option Plan, which will not be issued
as
that plan will be replaced for future grants by the 2008 Stock Option
Plan. There
are currently no participants in the 2008 Stock Option Plan. Because
participation and the types of awards under the 2008 Stock Option Plan are
subject to the discretion of the Compensation Committee, the benefits or
amounts
that will be received by any participant or groups of participants if the
2008
Stock Option Plan is approved are not currently determinable.
The
affirmative vote of a majority of the common shares voted affirmatively or
negatively at the Annual Meeting is required to approve the Stock Option
Plan.
Unless otherwise indicated, properly executed proxies will be voted FOR approval
of Proposal 5 to approve the 2008 Stock Option Plan.
SUMMARY
DESCRIPTION OF THE PLAN
A
description of the provisions of the 2008 Stock Option Plan is set forth
below.
This summary is qualified in its entirety by the detailed provisions of the
2008
Stock Option Plan, a copy of which is attached as Exhibit A to this proxy
statement.
Purpose.
The
purpose of the Plan is to promote the long-term interests of the Company
and its
shareholders by providing a means for attracting and retaining officers,
directors and key employees of the Company and its affiliates.
Eligibility.
Only
those persons who are employees or directors of the Company shall be eligible
to
participate in the Plan. The Compensation Committee shall determine from
time to
time the particular employees or directors of the Company who shall be eligible
to participate in the Plan and the extent of their participation
therein.
Administration. The
2008
Stock Option Plan will be administered by our Compensation Committee (or
a
subcommittee thereof), which is comprised of at least three Directors. Subject
to the terms of the plan, the Committee may approve participants to receive
awards, determine the types of awards and terms and conditions of awards,
and
interpret the provisions of the plan. All determinations and decisions made
by
the Committee, the Board, and any delegate of the Committee shall be final,
conclusive, and binding on all persons, including the Company and
participants.
Amendment
or Termination of the Plan. The
Board
of Directors may terminate or amend the plan at any time and for any reason.
The
2008 Stock Option Plan shall terminate in any event ten years after its
effective date. Amendments will be submitted for shareholder approval to
the
extent required by the Internal Revenue Code or other applicable laws, rules
or
regulations.
Options.
The
2008
Stock Option Plan permits the granting of options to purchase common shares
intended to qualify as incentive stock options under the Internal Revenue
Code
and options that do not qualify as incentive stock options.
Federal
Income Tax Consequences. The
exercise of qualified incentive stock options does not create taxable
income to the grantee or a tax deduction for the Company if holding period
requirements
are met. The
exercise of non-qualified options creates taxable income to the grantee
and
a tax
deduction to the Company
equal to the amount by which the market price exceeds the exercise price
on
the
date of exercise.
The
exercise price of each stock option may not be less than 100% of the fair
market
value of our common shares on the date of grant. The fair market value is
generally determined as the closing price of the common shares on the grant
date. No participant may be granted incentive stock options under the Plan
that
would result in shares with an aggregate fair market value (determined as
of the
date the option is granted) of more than $100,000 first becoming exercisable
in
any one calendar year. To the extent that a purported incentive stock option
would violate any limitation specified in the preceding sentence, the portion
of
the option in excess of such limitation will be deemed a non-qualified stock
option.
The
term
of each stock option is fixed by the Committee and may not exceed 10 years
from
the date of grant. The Committee determines at what time or times each option
may be exercised and the period of time, if any, after retirement, death,
disability or termination of employment during which options may be
exercised. Typically,
incentive stock options vested evenly over a four year period commencing
one
year from date of grant. Options
may be made exercisable in installments. The Committee may accelerate the
exercisability of options.
In
general, an optionee may pay the exercise price of an option by cash, certified
check, by tendering common shares (which if acquired from the Company have
been
held by the optionee for at least six months), relinquishing options with
sufficient “in-the-money” value to settle the strike price of the options, or by
means of a broker-assisted cashless exercise. In the event that optionee
relinquishes options to acquire shares under option, such options relinquished
will not be available for future grant.
Stock
options granted under the 2008 Stock Option Plan may not be sold, transferred,
pledged or assigned other than by will or under applicable laws of descent
and
distribution.
There
are
500,000 shares to be reserved for issuance under this plan. No grants have
as
yet been made.
|
|
Non-Qualified
Option Awards for Shareholder
Approval
|
|
|
|
|
|
|
|
|
|
Name
and Position
|
|
|
Exercise
Price
|
|
|
Number
of Units
|
|
Richard
M. Shepperd, President & Chief Executive Officer,
Director
|
|
$
|
7.15
|
|
|
275,000
|
|
Michael
R. Cox, Chief Financial Officer
|
|
$
|
8.60
|
|
|
45,000
|
|
Edward
M. Chait, Ph.D., Chief Business Officer
|
|
$
|
8.60
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
There
were no other awards subject to shareholder approval.
|
|
|
|
|
|
|
|
Adjustments
upon Changes in Capitalization. The
Compensation Committee will make appropriate adjustments in outstanding awards
and the number of shares available for issuance under the 2008 Stock Option
Plan, including the individual limitations on awards, to reflect common share
dividends, stock splits and other similar events.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
2008
STOCK OPTION PLAN.
SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Company’s Audit Committee engaged Crowe Chizek and Company LLC (“Crowe”) as the
Company’s independent registered public accounting firm for the audit of the
consolidated financial statements for the fiscal years ended September 30,
2007
and 2006. As previously reported by the Company on a Form 8-K filed with
the
Securities and Exchange Commission (“SEC”) on September 14, 2006, the Company’s
prior independent accountants, KPMG LLP, resigned effective September 14,
2006.
As reported on a Form 8-K filed with the SEC on November 1, 2006, the Audit
Committee engaged Crowe on October 30, 2006.
The
reports of KPMG for the fiscal years ended September 30, 2005 and 2004,
contained no adverse opinion or disclaimer of opinion and were not qualified
or
modified as to uncertainty, audit scope, or accounting principles. In connection
with its audits for the fiscal years ended September 30, 2005 and 2004 and
through September 15, 2006, there were no disagreements with KPMG on any
matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused them to make reference to the subject
matter of the disagreement in connection with their report on the financial
statements for such period.
During
the fiscal years ended September 30, 2005 and 2004, and through September
15,
2006, there were no reportable events (as defined in Regulation S-K, Item
304(a)(1)(v)), except for a material weakness in the Company’s internal control
at June 30, 2006 which was identified by KPMG and disclosed in Item 9 in
the
Company’s Annual Report on Form 10-K for the year ended September 30, 2006. KPMG
noted certain conditions involving the Company’s internal control and its
operation that KPMG considered to be “material weaknesses.” “Material weakness”
was defined as “a control deficiency, or combination of control deficiencies,
that result in more than a remote likelihood that a material misstatement
of the
annual or interim financial statements will not be prevented or detected
by the
entity's internal control.” The material weaknesses noted by KPMG consisted of a
failure to set an appropriate "tone at the top" to instill a company-wide
attitude of control consciousness; failure to maintain adequate procedures
for
anticipating and identifying financial reporting risks and for reacting to
changes in its operating environment that could have a material effect on
financial reporting; failure to maintain adequately trained personnel to
perform
effective review of accounting procedures critical to financial reporting;
and a
lack of adequately trained finance and accounting personnel with the ability
to
apply U.S. generally accepted accounting principles associated with the
impairment of certain long-lived assets in accordance with Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Management concurred with the assessment of
KPMG.
KPMG discussed the matters described in this paragraph with the Audit Committee
of the Company. The Company authorized KPMG to respond fully to the inquiries
of
its successor accountant concerning these matters.
KPMG
also
communicated to the Audit Committee in the Letter that the Company had filed
its
Report on Form 10-Q for the three and nine month periods ended June 30, 2006,
prior to the completion of its interim review. KPMG subsequently completed
its
interim review and the Company filed an amended report on Form 10-Q/A for
the
three and nine month periods ended June 30, 2006.
The
Company engaged Crowe as its principal independent registered public accountants
effective as of October 30, 2006. At no time prior to October 30, 2006 had
the
Company consulted with Crowe regarding either: (i) the application of accounting
principles to a specified transaction, either completed or proposed; or the
type
of audit opinion that might be rendered on the Company’s financial statements;
or (ii) any matter that was either the subject of a disagreement (as that
term
is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions
to that Item) or a reportable event (as that term is defined in Item
304(a)(1)(v) of Regulation S-K).
Representatives
of Crowe are expected to be present at the Annual Meeting. They will have
the
opportunity to make a statement if they desire to do so and will be available
to
answer appropriate questions concerning the audit of the Company’s financial
statements.
Fees
of Independent Registered Public Accountants
The
aggregate fees billed for the last two fiscal years for each of the following
categories of services are set forth below:
|
|
2007
|
|
2006
|
|
Audit
Fees -
|
|
|
|
|
|
Aggregate
fees for annual audit, quarterly reviews
|
|
$
|
280,000
|
|
$
|
398,000
|
|
|
|
|
|
|
|
|
|
Tax
Fees -
|
|
|
|
|
|
|
|
Income
tax services related to compliance with tax laws
|
|
$
|
66,000
|
|
$
|
55,000
|
|
There
were no fees for services other than the above paid to the Company’s Independent
Registered Public Accountants.
BASi’s
policies require that the scope and cost of all work to be performed for
BASi by
its independent registered public accountants must be approved by the Audit
Committee. Prior to the commencement of any work by the independent registered
public accountants on behalf of BASi, the independent registered public
accountants provide an engagement letter describing the scope of the work
to be
performed and an estimate of the fees. The Audit Committee and the Chief
Financial Officer must review and approve the engagement letter and the estimate
before authorizing the engagement and all fees were reviewed and approved
during fiscal 2006 and 2007. Where fees charged by the independent registered
public accountants exceed the estimate, the Audit Committee must review and
approve the excess fees prior to their payment.
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The
following Report of the Audit Committee shall not be deemed to be ”soliciting
material” or to be “filed” with the Securities and Exchange Commission nor shall
this information be incorporated by reference into any future filing under
the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as
amended, except to the extent that BASi specifically incorporates it by
reference into a filing.
The
Audit
Committee of the Board operates under a written charter, which is reviewed
on an
annual basis and was most recently amended in February, 2004. The Audit
Committee is comprised of four non-employee directors, each of whom in the
opinion of the Board of Directors meets the current independence requirements
and financial literacy standards of the NASDAQ Marketplace Rules, as well
as the
independence requirements of the Securities and Exchange Commission (“SEC”).
From October 1, 2006 through August 21, 2007, the Audit Committee consisted
of
William E. Baitinger, Leslie B. Daniels and David W. Crabb. On August 21,
2007,
the Board elected Larry S. Boulet to be Chairman of the Audit Committee,
serving
with the other three members of the Committee through the remainder of our
fiscal year ended September 30, 2007. In the opinion of the Board of Directors,
Mr. Boulet and Mr. Daniels each meet the criteria for a “financial expert” as
set forth in applicable SEC rules.
BASi’s
management is primarily responsible for the preparation, presentation and
integrity of the Company’s financial statements. BASi’s independent registered
public accounting firm, Crowe Chizek and Company LLC (‘independent auditors’),
is responsible for performing an independent audit of the Company’s financial
statements and expressing an opinion as to the conformity of the financial
statements with generally accepted accounting principles.
The
function of the Audit Committee is to assist the Board of Directors in its
oversight responsibilities relating to the integrity of BASi’s accounting
policies, internal controls and financial reporting. The Audit Committee
reviews
BASi’s quarterly and annual financial statements prior to public earnings
releases and submission to the SEC; reviews and evaluates the performance
of our
independent auditors; consults with the independent auditors regarding internal
controls and the integrity of the Company’s financial statements; assesses the
independence of the independent auditors: and is responsible for the selection
of the independent auditors. In this context, the Audit Committee has met
and
held discussions with members of management and the independent auditors.
Management has represented to the Audit Committee that the Company’s
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States, and the Audit Committee
has
reviewed and discussed the consolidated financial statements with management
and
the independent auditors. Management has also represented to the Audit Committee
that the Company’s internal control over financial reporting was effective as of
the end of the Company’s most recently-completed fiscal year. The Audit
Committee also discussed with the independent auditors matters required to
be
discussed by Statement on Auditing Standards No. 61 (Communications with
Audit
Committees), as amended, including the quality and acceptability of the
Company’s financial reporting process and internal controls. The Audit Committee
has also discussed with the Company’s independent auditors the overall scope and
plans for their annual audit and reviewed the results of the audit with
management and the independent auditors.
In
addition, the Audit Committee has discussed the independent auditors’
independence from the Company and its management, including the matters in
the
written disclosures required by Independence Standards Board Standard No.
1
(Independence Discussions with Audit Committees). The Audit Committee has
also
considered whether the provision of any non-audit services (as discussed
under
“Fees of Independent Auditors”) would impact the independence of the
auditors.
The
members of the Audit Committee are not engaged in the practice of auditing
or
accounting. In performing its functions, the Audit Committee necessarily
relies
on the work and assurances of the Company’s management and independent
auditors.
In
reliance on the reviews and discussions referred to in this report and in
light
of it role and responsibilities, the Audit Committee recommended to the Board
of
Directors that the audited financial statements of the Company included in
the
Company’s Annual Report on Form 10-K for the year ended September 30, 2007 be
filed with the SEC.
AUDIT
COMMITTEE
Larry
S.
Boulet (Chairman)
William
E. Baitinger
David
W.
Crabb
Leslie
B.
Daniels
PRINCIPAL
SHAREHOLDERS
Common
Stock
The
following table shows, as of January 31, 2008, the number of common shares
owned
by our directors, executive officers named in the Summary Compensation Table
below, our current directors and executive officers as a group, and beneficial
owners known to us holding more than 5% of our outstanding common shares.
As of
January 31, 2008, there were 4,912,568 common shares outstanding.
NAME(4)
|
|
Shares
Owned
|
|
Shares
Owned
Jointly
|
|
Shares
/
Options
Owned
Beneficially
|
|
Options
Exercisable
within
60 days of January 31, 2008
|
|
Total
|
|
% |
|
Peter
T. Kissinger (1)
|
|
|
430,947
|
|
|
595,910
|
|
|
252,310
|
|
|
—
|
|
|
1,279,167
|
|
|
16.2
|
|
Candice
B. Kissinger (1)
|
|
|
250,956
|
|
|
595,910
|
|
|
432,301
|
|
|
—
|
|
|
1,279,167
|
|
|
16.2
|
|
William
B. Baitinger(2)
|
|
|
|
|
|
146,512
|
|
|
|
|
|
9,000
|
|
|
155,412
|
|
|
3.2
|
|
Ronald
E. Shoup(2)
|
|
|
361
|
|
|
89,760
|
|
|
|
|
|
30,000
|
|
|
120,121
|
|
|
2.4
|
|
Leslie
B. Daniels
|
|
|
38,042
|
|
|
|
|
|
|
|
|
—
|
|
|
38,042
|
|
|
0.8
|
|
Michael
R. Cox
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
50,000
|
|
|
1.0
|
|
Edward
M. Chait
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
37,500
|
|
|
0.7
|
|
Richard
M. Shepperd
|
|
|
10,750
|
|
|
|
|
|
—
|
|
|
(3
|
)
|
|
10,750
|
|
|
0.2
|
|
Larry
S. Boulet
|
|
|
3,500
|
|
|
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
0.1
|
|
9
Executive Officers and Directors as a group
|
|
|
110,135
|
|
|
236,955
|
|
|
|
|
|
381,772
|
|
|
728,862
|
|
|
14.8
|
|
(1)
Dr.
and Mrs. Kissinger’s shares owned beneficially include the shares owned
individually by the other spouse
and 1,354 shares jointly owned with their children.
(2)
Shares owned jointly by Mr. Baitinger and Dr. Shoup, with their wives,
respectively.
(3)
Does
not included options to purchase 75,000 shares that will vest upon approval
of
shareholders which is a proposal of this proxy.
(4)
All
addresses are in care of BASi at 2701 Kent Avenue, West Lafayette, Indiana
47906.
Compensation
Interlocks and Insider Participation
During
the most recent fiscal year, no Company insiders were on the Compensation
Committee. Also, during the same period, no officers served as directors
of any
companies of which our directors are affiliated.
COMPENSATION
OF EXECUTIVE OFFICERS
Compensation
Discussion and Analysis
This
section includes information regarding, among other things, the overall
objectives of BASi's compensation program and each element of compensation
that
BASi provides. The goal of this section is to provide a summary of BASi's
executive compensation practices and the decisions that BASi made during
the
2007 fiscal year concerning the compensation package payable to its executive
officers, including the six executives in the Summary Compensation Table.
Each
of the six executives listed in the Summary Compensation Table is referred
to
herein as a "named executive officer" or "NEO." This "Compensation Discussion
and Analysis" should be read in conjunction with the detailed tables and
narrative descriptions under "Executive Compensation Tables" below.
Compensation
Committee and Compensation Methodology
During
the 2007 fiscal year, the Compensation Committee of the Board was responsible
for administering the compensation and benefit programs for BASi's team members,
including the executive officers. Historically, the Compensation Committee
annually reviewed and evaluated cash compensation and stock option award
recommendations along with the rationale for such recommendations, as well
as
summary information regarding the aggregate compensation, provided to BASi's
executive officers. The Compensation Committee examined these recommendations
in
relation to BASi's overall objectives and made compensation recommendations
to
the Board for final approval. The Compensation Committee also historically
sent
to the Board for approval its recommendations on compensation for the Chairman
of the Board and the President and Chief Executive Officer, who do not
participate in the decisions of the Board as to their compensation packages.
Neither the Chairman of the Board nor the President and Chief Executive Officer
was a member of the Compensation Committee during the 2007 fiscal
year.
BASi
has
not hired a compensation consultant to review its compensation practices.
The
compensation of BASi's executives who were employees as of September 30,
2006
(the end of our last fiscal year) was frozen by the Compensation Committee
at
the last fiscal year’s compensation level through fiscal 2007 as part of the
effort to return the Company to profitability. The compensation of the CEO
was
determined by the Compensation Committee through arms' length negotiation
during
the recruitment process, and was subsequently modified when the CEO was retained
on a long-term basis to provide equity participation rather than cash bonuses
in
order to conserve the Company’s cash and better align the interests of the CEO
with those of the shareholders.
BASi's
executive compensation practices are also affected by the highly competitive
nature of the biotechnology industry and the location of BASi's executive
offices in West Lafayette, Indiana. The fact that West Lafayette, Indiana
is a
small city in a predominantly rural area can present challenges to attracting
executive talent from other industries and parts of the country; however,
the
favorable cost of living in this area and the small number of competitive
employers in this market, enable the Company to pay generally lower salaries
for
comparable positions to others in its industry. The Company has also recruited
a
number of key employees from Purdue University, particularly for scientific
and
technical responsibilities.
The
Compensation Committee, in collaboration with management, is in the process
of
reviewing the compensation structure of the Company in order to provide the
proper incentives and necessary retention of key employees, including the
named
executive officers, to achieve financial success and an appropriate return
to
shareholders. These efforts will be ongoing in the current fiscal
year.
The
Company intends to develop compensation packages for BASi's executive officers
that meet each of the following three criteria: (1) market
competitive - levels competitive with companies of similar size and
performance to BASi; (2) performance-based "at risk" pay that is based on
both short- and long-term goals; and (3) shareholder-aligned incentives
that are structured to create alignment between the shareholders and executives
with respect to short- and long-term objectives.
The
Elements of BASi's Compensation Program
As
a
result of BASi's compensation objectives, it is intended that the compensation
package of BASi's executive officers will consist of five primary elements:
(1) base salary; (2) stock options; (3) discretionary annual cash
bonuses; (4) participation in employee benefit plans; and
(5) severance and change-in-control arrangements. BASi's executive
compensation program has been designed to implement the objectives described
above and is comprised of the following fundamental elements:
|
–
|
A
base salary that will be determined by individual contributions
and
sustained performance in the Company's competitive marketplace
|
|
–
|
Grants
of options under BASi's option plans that will reward executives
when
shareholder value is created through increase in the market value
of
BASi's common shares. Stock option grants focus executives on managing
BASi from the perspective of an owner with an equity position in
the
business.
|
|
–
|
Bonus
payments determined and awarded in the Board of Directors' and
Compensation Committee's discretion, based on individual contributions
and
profitability of the Company.
|
|
–
|
Competitive
benefits available on substantially the same terms to all
employees.
|
|
–
|
Severance
and change-in-control benefits payable to key executive officers,
determined in amount and availability by the Compensation Committee
for
executive officers that the Company has the most essential need
to retain
in connection with a change in
control.
|
Base
Salary. Generally,
the base salary, and any periodic increase thereof, of the Named Executive
Officers were and are determined by the Board of Directors of BASi, with
input
from the Chief Executive Officer. The level of base salary compensation for
officers and key executives is determined by both the scope of their
responsibility and the salary ranges for officers and key executives of BASi
established by the Board of Directors and the Compensation Committee. There
has
been one increase for a Named Executive Officer (“NEO”) in the past three fiscal
years, which was intended to more closely align that salary with salaries
paid
to executives recruited from outside the Company. As a result of losses
sustained by the Company, no other increases were granted to NEO’s in that
period.
Mr.
Shepperd's annual base salary for the period of September
25, 2006 to May 17, 2007, when he served as Interim President and Chief
Executive Officer, was $420,000, which rate was continued in his Employment
Agreement, dated May 18, 2007. No additional increases occurred in the
fiscal year ended September 30, 2007. Mr. Shepperd's interim contract was
weighted toward cash and short-term, EBITDA- based bonus compensation to
reflect
what BASi then understood to be a short-term engagement. EBITDA, as used
in Mr.
Shepperd's interim arrangements, can be calculated from BASi's audited financial
statements by adding to Net Income the interest, income taxes, depreciation
and
amortization recorded for that period. This approach aligned Mr. Shepperd's
short-term interests with the Company's short-term interests. When the Company
retained Mr. Shepperd on a long-term basis, the Company adopted compensation
composed of a cash base salary and a grant of stock options to reflect the
Company's desire, consistent with its other employees and officers, to align
Mr.
Shepperd's interests with the Company's long-term interests and to conserve
cash
flow by compensation through a stock option agreement, which requires
shareholder approval to implement. Moreover, it selected a compensation level
that was consistent with the compensation agreed between the Company and
Mr.
Shepperd for his short-term engagement. Mr. Shepperd and the Compensation
Committee negotiated the cash/stock mix and the nature of the option
arrangement.
The
Compensation Committee determined its recommended base salary for Mr. Shepperd
under his employment agreement through negotiations with him initially to
obtain
his services on an interim basis and through subsequent revision of the terms
of
his agreement to reflect his retention on a long-term basis as President
and
Chief Executive Officer. The Compensation Committee then recommended to the
Board that this Employment Agreement be approved, and the Board accepted
this
recommendation. The Compensation Committee did not act with reference to
any
specific corporate or individual financial performance measure in recommending
Mr. Shepperd's 2006 and continuing base salary. The Compensation Committee
approved the negotiated compensation in order to expeditiously obtain the
services of Mr. Shepperd as an expert in turn-around situations to improve
the
operations of the Company and increase cash flow in order to repay significant
debt maturing in December, 2007.
The
Company also negotiated new employment agreements with Mr. Chait and Mr.
Cox in
November of 2007. This was done as a result of the expiration of their
employment contracts earlier in the fiscal year, the significant expansion
of
their responsibilities and to recognize their contribution to the Company’s
return to profitability in fiscal 2007. The new contracts contain provisions
to
maintain their salaries for a two-year period after a change of control in
order
to secure their services, should such an event occur, through the period
of
change. Both Mr. Chait and Mr. Cox were granted additional stock options,
a
significant portion of which are dependent on shareholder approval, in order
to
align their interests more closely with those of the stockholders
Stock
Options.
Stock
options have always been an element of BASi's long-term incentive program.
The
primary purpose of stock options is to provide executive officers and other
team
members with a personal and financial interest in BASi's success through
common
share ownership, thereby aligning the interests of executive officers and
other
team members with those of BASi's shareholders. BASi's broad-based stock
option
program was intended to further BASi's goal of motivating outstanding long-term
contributions by team members within all levels of BASi. BASi's compensation
methodology was based upon the belief that stock options help to create an
entrepreneurial environment within BASi and instill the spirit of ownership
participation. The Company is evaluating the mix of cash compensation, incentive
cash bonuses and equity participation that it will utilize in determining
its
future compensation methodologies. Stock option awards have been based on
an
individual’s level of responsibility, contribution, length of service or equity
participation required to recruit new employees. Management and employees
in key
positions participate in the stock option plans. The Compensation Committee
of
the Board of Directors must approve all option grants.
Under
the
stock option plans, options may also be granted to key employees and
non-employee directors, at the discretion of the Compensation Committee,
and
generally become exercisable in annual increments beginning two years after
the
date of grant. The term of each option granted expires within the period
prescribed by the Compensation Committee, but shall not be more than five
years
from the date the option is granted if the optionee is a 10% or more
shareholder, and not more than ten years for all other optionees, in the
case of
employee plan options, or no more than ten years for Outside Directors. All
rights under the options automatically terminate upon the optionee's separation
from service with BASi, unless such separation results from retirement,
disability or death.
We
have
maintained two option plans: the 1997 Employee Stock Option Plan and the
1997
Outside Director Stock Option Plan. Additionally, we have made individual
non-qualifying stock option grants to Messrs. Shepperd, Chait and Cox, as
well
as employees of our United Kingdom subsidiary who are not eligible for our
qualified option plans. All options granted under the 1997 Employee Stock
Option
Plan and the 1997 Outside Director Stock Option Plan are valued at or above
fair
market value at the date of grant. Options granted vest and become exercisable
in four equal installments, beginning two years after the date of grant,
and
expire upon the earlier of the employee's or director's termination of service
with the Company or ten years from the date of grant. The Outside Director
Plan
terminates in fiscal 2008. The Company is proposing in this Proxy Statement
the
adoption of a new stock option plan to enable grants to both employees and
outside directors, which would replace both existing plans.
In
May
2007, as part of the negotiations to extend his employment contract, Mr.
Shepperd was granted options, subject to shareholder approval, to purchase
275,000 shares at a purchase price of $7.10 per share, the closing price
of
BASi’s common shares on May 18, 2007. These options are intended to replace his
cash bonus provision under his interim contract. Under that contract, Mr.
Shepperd was to receive 10% of EBITDA of the Company, computed on a quarterly
basis. Prior to this revision, Mr. Shepperd had earned $295,000 in bonus
for the
first six months of fiscal 2007. The replacement of his bonus with this option
is intended to provide economic rewards for Mr. Shepperd that are dependent
on
the Company creating value for shareholders. Whereas previously Mr. Shepperd
would have received, based on fiscal 2007 results, approximately 60% of net
earnings as a bonus, through his option grant, he will now earn approximately
6%
of the increase in shareholder value over the value on the date of his grant.
If
the shareholders do not approve this option grant, Mr. Shepperd will be entitled
to receive a bonus, as described below.
Mr.
Shepperd's options vest and become exercisable in 3 installments: options
to
purchase 75,000 shares will vest at 5:00 p.m. on the day the options grant
is
approved by the Company's shareholders, followed by two installments of 100,000
shares each, on December 1, 2008 and 2009. The option grant expires as to
all un-exercised shares on May 18, 2017, but may be terminated in
connection with the termination of Mr. Shepperd's employment within 30 days
of
such termination. In the event of his death while employed by the Company,
Mr.
Shepperd's personal representative may also exercise the option within six
months of his death. The option may be terminated by BASi on 30 days' notice
from BASi in the event of a merger, consolidation or a sale of all or
substantially all of BASi's assets. In the event of a change in control,
as
defined in the agreement, these shares will vest immediately.
The
number of shares covered by the option and the option price each will be
proportionally adjusted for any increase or decrease in the number of issued
common shares resulting from a subdivision or consolidation of shares of
BASi,
the payment of a share dividend, a share split or other increase or decrease
in
the outstanding common shares effected without receipt of consideration by
BASi
(including an increase or decrease effected as a part of the Recapitalization
of
BASi, as described below). If there is a recapitalization or reorganization
of
BASi or a reclassification of its outstanding shares, as a result of which
new
shares are issued in exchange for common shares, then new shares will be
substituted for the option shares then issuable. In that case, the number
of new
shares that will be issued will be the number into which those option shares
would have been converted had they been outstanding at the effective date
of the
recapitalization.
Subsequent
to fiscal 2007, on November 6, 2007, the Company granted options to purchase
30,000 common shares at a purchase price of $8.60 per share, the closing
price
of BASi’s common shares on November 6, 2007, under its employee stock plan and,
subject to shareholder approval, non-qualified options to purchase 45,000
shares
of common stock to each of Mr. Chait and Mr. Cox. These grants were made
simultaneously with new employment contracts entered into with these executives,
which reflect their expanded responsibilities and the Compensation Committee’s
desire to establish incentives for these executives which are aligned with
creation of shareholder value.
The
non-qualified options granted to Mr. Chait and Mr. Cox on November 6, 2007
to
purchase 45,000 common shares each vest in three equal installments on November
30, 2008, 2009 and 2010. The options expire by their own terms on November
6,
2017, but may be terminated in connection with the termination of either
Mr.
Chait's or Mr. Cox's employment respectively, within 30 days of such
termination. The options may also be terminated by BASi on 30 days' notice
from
BASi in the event of a merger, consolidation or sale of all or substantially
all
of BASi's assets. In the event of a change in control, as defined in the
agreement, these shares will vest immediately.
The
number of shares covered by the option and the option price each will be
proportionally adjusted for any increase or decrease in the number of issued
common shares resulting from a subdivision or consolidation of shares of
BASi,
the payment of a share dividend, a share split or other increase or decrease
in
the outstanding common shares effected without receipt of consideration by
BASi
(including an increase or decrease effected as a part of the Recapitalization
of
BASi, as described below). If there is a recapitalization or reorganization
of
BASi or a reclassification of its outstanding shares, as a result of which
new
shares are issued in exchange for common shares, then new shares will be
substituted for the option shares then issuable. In that case, the number
of new
shares that will be issued will be the number into which those option shares
would have been converted had they been outstanding at the effective date
of the
recapitalization.
The
grant
of options to Mr. Shepperd, and the grant in fiscal 2008 of non-qualified
option
grants to Mr. Chait and Mr. Cox, are each contingent upon shareholder approval
to ensure compliance with NASDAQ rules. BASi has undertaken to seek shareholder
approval for the option grants to Messrs. Shepperd, Chait and Cox at the
annual
shareholder meeting to be held in March 2008 in connection with this proxy
statement.
In
the
event that the shareholders do not approve the grant of options to Mr. Shepperd,
BASi has agreed to pay Mr. Shepperd a cash bonus in three installments, on
the
day the shareholders fail to approve the grant of options to Mr. Shepperd,
on
December 1, 2008 and December 1, 2009. The amount of each bonus
installment is determined by subtracting $7.10 from the closing price of
BASi
common shares on the date before each bonus payment date. If the difference
is
positive, the difference is then multiplied by (i) 75,000, for the bonus
paid on
the date the shareholders fail to approve the option grant, or (ii) 100,000,
on
each of December 31, 2008 and 2009. If the difference is negative, no bonus
is paid. The bonus is designed to be approximately economically equivalent
to
the stock option. For further information on the terms of the contingent
bonus
to Mr. Shepperd, refer to "Bonus" below. Mr. Chait and Mr. Cox did not receive
the additional bonus element to their November 2007 non-qualified options.
No
options were granted to NEO’s during the fiscal year ended September 30,
2007 except to Mr. Shepperd. Options were granted to Mr. Chait and Mr. Cox
in
November of 2007, as described above.
Bonus. Prior
to
fiscal 2007, the Company had not paid any significant bonuses since fiscal
2001.
Bonuses to key management and other key employees were recommended by the
CEO
and approved by the Compensation Committee. The bonuses for fiscal 2007 were
decided by a subjective evaluation by the Company of the appropriate level
of
bonus for the efforts made by the key people in returning the Company to
profitability. The Company is considering a plan for the current and future
years whereby bonus opportunities as a percentage of base compensation will
be
defined by levels of responsibility, then adjusted by factors which include
personal performance, profit center performance and overall Company performance.
It is the Company’s intention to develop a plan providing substantial incentive
for positive performance that will place a meaningful portion of the
compensation of key employees “at risk.” Mr.
Shepperd received cash bonuses of $295,000 representing 10% of defined EBITDA
for the period prior to the extension of his employment
agreement.
Perquisites.
BASi does
not
provide perquisites to NEOs.
Health
and Welfare Benefits.
The
NEOs receive the same opportunity for benefits as those provided to all other
salaried U.S. employees, such as medical, dental, vision, life insurance
and
disability coverage. Certain of these benefits are funded by and at the election
of the employee, and therefore vary from individual to individual.
Post-Termination
Compensation and Change in Control Agreements.
As
described in further detail below, four of our NEOs, Messrs. Chait, Cox,
Shepperd and Shoup, have arrangements which provide for payments in the event
the executive's employment is terminated under certain circumstances. Only
Mr.
Shepperd's arrangement was entered into during the fiscal year ended September
30, 2007. The type and amount of payments vary by the NEO and the nature
of the
termination. These severance benefits are payable if and only if the executive's
employment terminates as specified in the applicable employment or severance
agreement. Change-in-control provisions are intended to provide for continuity
of management in the context of a prospective change in control of BASi.
These
provisions are necessary to reinforce and encourage the continued attention
and
dedication of management to their assigned duties without distraction in
the
face of potentially disturbing circumstances arising from the possibility
of a
change in control.
Role
of Management in Compensation Decisions. The
Compensation Committee has historically annually reviewed and adjusted
compensation recommendations made by the President and Chief Executive Officer
for the executive officers other than himself, along with the rationale for
such
recommendations. Neither the Chairman of the Board nor the President and
Chief
Executive Officer was a member of the Compensation Committee during the fiscal
year ended September 30, 2007. In November, 2007 the Board of Directors
elected William E. Baitinger as non-executive Chairman of the Board to replace
the Company’s founder and prior Chairman of the Board, who resigned in
September, 2007. Mr. Baitinger is a member of the Compensation Committee,
and is
receiving no additional compensation for serving as the Chairman of the Board.
The Board will consider whether Mr. Baitinger should receive additional
compensation for this service at its next regular meeting.
Common
Share Ownership Guidelines. BASi
has
not adopted guidelines with respect to its directors or senior management
team's
ownership of its common shares.
Accounting
for Stock-Based Compensation.
Since
October 1, 2005, the Company has expensed a cost associated with the vesting
of
stock options in accordance with Statement of Financial Accounting Standard
No.
123R. See the Notes to the Consolidated Financial Statements included in
the
Company’s annual report for fiscal 2007 for details underlying the computation
of the amounts expensed.
Changes
in Senior Management During the 2007 Fiscal Year
During
the 2007 fiscal year, there were significant changes in BASi's executive
management team. Among other changes, the following events
occurred:
|
–
|
on
May 18, 2007, Mr. Shepperd began his service as President and Chief
Executive Officer, after serving as Interim President and Chief
Executive
Officer from October 1, 2006 through May 17, 2007;
|
|
–
|
on
October 1, 2006, Dr. Kissinger became Chief Science Officer, after
serving as President and Chief Executive Officer since the Company's
formation; and
|
|
–
|
On
September 28, 2007, Dr. and Mrs. Kissinger resigned from the Board
of
Directors and from their positions as executive officers and employees
of
the Company.
|
On
September 28, 2007, Dr. and Mrs. Kissinger each entered into a Severance
Agreement and Release of All Claims with respect to the termination of their
employment with BASi and service as officers and directors of BASi. As part
of
the negotiated separation of the Kissingers from the Company, BASi also entered
into a License Agreement with Phlebotics, Inc., a corporation owned
by Dr. and Mrs. Kissinger, with respect to a license of technology from
BASi to the Kissingers. The Severance Agreements require that BASi pay $175,000,
less taxes and deductions required by law, to each of Dr. and Mrs. Kissinger.
The amount is payable in a lump sum of $87,500 to each of Dr. and Mrs. Kissinger
on October 15, 2007, with the remainder payable in twelve equal semi-monthly
installments of $7,292 beginning November 15, 2007 and ending April 30, 2008.
Dr. and Mrs. Kissinger are also entitled to receive payment equal to the
monthly
cost of maintaining their health insurance for themselves and their dependents
for 12 months, which BASi estimates to be a total cost of $13,592. The Severance
Agreements release all claims Dr. and Mrs. Kissinger may have against the
Company. Under the Severance Agreements, Dr. and Mrs. Kissinger may also
convert
Company paid life insurance policies on their lives to individual policies,
with
Company assistance, but not at Company expense. All of Mrs. Kissinger's stock
options were terminated in the Severance Agreements. The License Agreement
grants licenses to two of BASi's patent applications and their related know-how
for technology designed for use in portable sampling and drug delivery devices.
The License Agreement applies only to uses in human applications. No amounts
are
payable to Dr. or Mrs. Kissinger under the License Agreement. The License
Agreement grants use of the technology in human applications which may require
approval as either a medical device or a diagnostic methodology. These approvals
require extensive testing and other procedures in the approval process, which
in
turn is likely to require extensive funding for completion. The Board of
Directors of the Company did not believe that pursuit of these applications,
with their potentially substantial costs, was appropriate for the Company
to pursue directly. The total amount payable under the Severance Agreements
together during the fiscal year ended September 30, 2008 will be $363,592,
not
including the Company’s portion of payroll taxes. BASi reached these payment
terms during the course of their negotiation between the President of BASi
(with
the assistance of the Company’s Board of Directors) and Dr. and Mrs. Kissinger.
The Severance Agreements contain non-disclosure and non-disparagement
provisions. The non-disparagement provisions and the confidentiality provisions
do not have stated end dates. Dr. Kissinger has been named Chairman Emeritus
of
the Board of Directors, a non-voting, uncompensated position that provides
for
his continued input into matters coming before the Board.
Employment
Agreements and Potential Post-Termination Payments
BASi
has
Employment Agreements with Messrs. Shepperd, Chait, Cox and Shoup.
Employment
Agreement with Richard M. Shepperd
On
May 18, 2007, BASi entered into an Employment Agreement with
Mr. Shepperd to become President and Chief Executive Officer of BASi.
Pursuant to the terms of the agreement between BASi and Mr. Shepperd, the
agreement has an initial twenty-nine month term that provides for automatic
three-month extensions, beginning on January 1, 2010, unless either BASi or
Mr. Shepperd gives prior notice of termination. Mr. Shepperd will
receive a base salary at a rate not less than $420,000 per year.
Mr. Shepperd will also have the opportunity to earn an annual cash bonus at
the discretion of the Board of Directors.
The
agreement provides that Mr. Shepperd could be entitled to certain severance
benefits following termination of employment. If he is terminated by BASi
without "cause," or if Mr. Shepperd terminates his employment for "good
reason," he would be entitled to the following:
|
–
|
Mr. Shepperd's
base salary through December 31, 2009, to be paid
monthly;
|
|
–
|
All
vacation accrued as of the date of
termination;
|
|
–
|
All
bonus amounts earned but not paid as of the date of termination;
and
|
|
–
|
All
salary earned but not paid through the date of
termination.
|
In
addition, the non-solicitation provisions of Mr. Shepperd's employment
contract will not apply in the event of termination without cause or resignation
with good reason.
The
agreement further provides that if Mr. Shepperd's employment ends for any
reason other than termination without cause or resignation with “good reason,”
Mr. Shepperd shall receive his earned but unpaid salary through the date of
termination, all bonus amounts earned but not paid as of the date of termination
and all vacation accrued through the date of such termination or
resignation.
Employment
Agreement with Edward M. Chait
On
November 6, 2007, BASi entered into an Employment Agreement with Mr. Chait
to
serve as Chief Business Officer of BASi. Pursuant to the terms of the agreement
between BASi and Mr. Chait, the agreement has an initial term that ends on
December 30, 2010, but this employment term can be extended for successive
one
year periods unless either BASi or Mr. Chait gives the other party written
notice at least 90 days before the end of the term. Mr. Chait will receive
a
base salary of $165,000 per year in the first year, which may be increased
by
the Company in the future. Mr. Chait will also be eligible for any bonus
plans
adopted by the Company at the discretion of the Compensation Committee of
the
Board of Directors.
The
Agreement provides that Mr. Chait could be entitled to severance benefits
following the termination of his employment, as is further described above.
If
he is terminated by BASi without "cause," or if Mr. Chait terminates his
employment for "good reason" he would be entitled to the following:
|
·
|
Mr.
Chait's base salary payable monthly for 12 months following
termination;
|
|
·
|
all
vacation accrued as of the date of termination;
|
|
·
|
all
bonus amounts earned but not paid as of the date of termination;
and
|
|
·
|
all
salary earned but not paid through the date of
termination.
|
In
addition, the non-solicitation provision of Mr. Chait's employment contract
will
not apply in the event of termination without cause or resignation with good
reason.
Employment
Agreement with Michael R. Cox
On
November 6, 2007 BASi entered into an Employment Agreement with Mr. Cox to
serve
as Vice President, Finance and Administration and Chief Financial Officer
of
BASi. Pursuant to the terms of the agreement between BASi and Mr. Cox, the
agreement has an initial term that ends on December 30, 2010, but this
employment term can be extended for successive one year periods unless either
BASi or Mr. Cox gives the other party written notice at least 90 days before
the
end of the term. Mr. Cox will receive a base salary of $165,000 per year
in the
first year, which may be increased by the Company in the future. Mr. Cox
will
also be eligible for any bonus plans adopted by the Company at the discretion
of
the Compensation Committee of the Board of Directors.
The
Agreement provides that Mr. Cox could be entitled to severance benefits
following the termination of his employment, as is further described above.
If
he is terminated by BASi without "cause", or if Mr. Cox terminates his
employment for "good reason" he would be entitled to the following:
|
·
|
Mr.
Cox's base salary, payable monthly for 12 months following
termination;
|
|
·
|
all
vacation accrued as of the date of termination;
|
|
·
|
all
bonus amounts earned but not paid as of the date of termination;
and
|
|
·
|
all
salary earned but not paid through the date of
termination.
|
In
addition, the non-solicitation provision of Mr. Cox's employment contract
will
not apply in the event of termination without cause or resignation with good
reason.
Change-in-Control
Agreements
Mr.
Shepperd's Employment Agreement contains a change-in-control feature. Under
Mr.
Shepperd's Employment Agreement, if Mr. Shepperd is "involuntary terminated"
within one year following a "change in control," Mr. Shepperd will receive
$8,333.34 per month for each month remaining in his employment term. Mr.
Shepperd's ordinary severance compensation under the Employment Agreement
will
not apply, and he will be eligible for any special bonus program. A "change
in
control" is defined in the Employment Agreement as (1) approval by shareholders
of the Company of (a) any consolidation or merger of the Company in which
the
Company is not the continuing or surviving corporation or pursuant to which
shares of stock of the Company would be converted into cash, securities or
other
property, other than a consolidation or merger of the Company in which holders
of its common shares immediately prior to the consolidation or merger have
substantially the same proportionate ownership of voting common stock of
the
surviving corporation immediately after the consolidation or merger as
immediately before, or (b) a sale, lease, exchange or other transfer (in
one
transaction or a series of related transactions) of all or substantially
all the
assets of the Company; (2) a change in the majority of members of the Board
of
Directors of the Company within a twenty-four (24) month period unless the
election, or nomination for election by the Company shareholders, of each
new
director was approved by a vote of two-thirds (2/3) of the directors then
still
in office who were in office at the beginning of the twenty-four (24) month
period; or (3) the Company combines with another company and is the surviving
corporation but, immediately after the combination, the shareholders of the
Company immediately prior to the combination do not hold, directly or
indirectly, more than fifty percent (50%) of the share of voting common stock
of
the combined company (there being excluded from the number of shares held
by
such shareholders, but not from the shares of voting common stock of the
combined company, any shares received by affiliates (as defined in the rules
of
the SEC) of such other company in exchange for stock of such other
company).
Mr.
Chait’s and Mr. Cox's Employment Agreements contain a change in control feature.
Under these Employment Agreements, if Mr. Chait or Mr. Cox has their employment
terminated for any reason following a change in control, Mr. Chait or Mr.
Cox
would receive their monthly base salary for the 12 months prior to termination
payable for at least 2 years. Each would also be eligible for any special
bonus
program. A "change in control" is defined in the Employment Agreement in
the
same manner as in Mr. Shepperd's Employment Agreement.
On
June 19, 2003, Ronald E. Shoup entered into a Severance Agreement with
BASi. Under the terms of this Severance Agreement, Mr. Shoup is entitled
to
receive a continuation of his base salary for one month per year of service
with
BASi if he is terminated other than for "just cause" following a "significant
transaction" or a "change of board composition." "Just Cause" is defined
as a
good faith determination by the Company's Board of personal dishonesty, breach
of fiduciary duty involving personal profit, willful failure to perform stated
duties, or willful violation of any law, rule or regulation (other than traffic
violation or similar offenses). "Significant Transaction" is defined as any
of:
(a) the sale of a block of stock representing greater than 50% or more of
the
combined voting power of the Company's then outstanding securities; (b) upon
the
first purchase of the Company's common stock pursuant to a tender or exchange
offer; and (c) upon the approval by the Company's shareholders of (i) a merger
with or into another corporation; (ii) a sale or disposition of all or
substantially all of the Company's assets; or (iii) a plan of liquidation
or
dissolution of the Company. "Change of Board Composition" means any change
in
the composition of the Board of Directors of the Company in connection with
any
transaction in which stock of the Company is sold by the Company, such that
a
majority of the non-employee directors of the Company at the time of the
stock
sale transaction no longer constitute a majority of the Board. If this Agreement
had been triggered on September 30, 2007, Mr. Shoup would have been entitled
to
monthly payments by BASi of $11,204, payable for 28 months.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed and discussed with management the above
"Compensation Discussion and Analysis," and, based on such review and
discussion, the Compensation Committee recommended to the Board that the
"Compensation Discussion and Analysis" be included in this Proxy
Statement.
Leslie
B.
Daniels, Chairman
Dr.
David
Crabb
William
Baitinger
Executive
Compensation Tables
Fiscal
2007 Summary Compensation Table
The
following narrative, tables and footnotes describe the "total compensation"
earned during BASi's 2007 fiscal year by BASi's NEOs. The total compensation
presented below does not reflect the actual compensation received by BASi's NEOs
or the target compensation of BASi's NEOs during its 2007 fiscal year. There
was
no value realized by BASi's NEOs during its 2007 fiscal year from long-term
incentives (exercise of options).
The
individual components of the total compensation calculation reflected in
the
Summary Compensation Table are broken out below:
Salary.
Base
salary earned during BASi's 2007 fiscal year. The terms of his Employment
Agreement governs the base salary for Mr. Shepperd.
Bonus.
The
amounts presented as bonuses for NEO’s below represent amounts both paid and
accrued in regards to fiscal 2007. Annual bonuses were paid in January, 2008
for
fiscal 2007.
Option
Awards. The
awards
disclosed under the heading "Option Awards" consist of the expense recognized
in
fiscal 2007 for grants of stock options awarded under the 1997 Employee Stock
Option Plan and the non-qualifying option agreement of Mr. Shepperd, which
is
subject to shareholder approval. Details about Mr. Shepperd’s option award made
during BASi's 2007 fiscal year are included in the Grant of Plan-Based Awards
Table below. The recognized compensation expense of the option awards for
financial reporting purposes will likely vary from the actual amount ultimately
realized by the NEO based on a number of factors. The factors include BASi's
actual operating performance, Common Share price fluctuations, differences
from
the valuation assumptions used, the restricted nature of shares acquired
under
non-qualified stock option grants, the limited liquidity in the trading of
the
Company’s shares and the timing of exercise or applicable vesting.
All
Other Compensation. The
amounts included under the All Other Compensation are described in the footnotes
to the table.
SUMMARY
COMPENSATION TABLE
|
|
Name
and principal position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards (1) ($)
|
|
Company
Contributions to 401(k)
($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
Peter
T. Kissinger, Ph.D, Chairman of the Board and Chief Scientific
Officer
(2)
|
|
|
2007
|
|
|
117,330
|
|
|
--
|
|
|
--
|
|
|
2,581
|
|
|
210,207(3
|
)
|
|
330,118
|
|
Richard
M. Shepperd, President & Chief Executive Officer;
Director
|
|
|
2007
|
|
|
420,000
|
|
|
295,000(4
|
)
|
|
141,282(5
|
)
|
|
--
|
|
|
8,774(6
|
)
|
|
865,056
|
|
Michael
R. Cox, Vice President, Finance and Chief Financial Officer
(7)
|
|
|
2007
|
|
|
153,000
|
|
|
40,000
|
|
|
6,241
|
|
|
1,530
|
|
|
--
|
|
|
200,771
|
|
Ronald
E. Shoup, Ph.D., Chief Operating Officer, BASi Contract Research
Services
(8)
|
|
|
2007
|
|
|
135,408
|
|
|
--
|
|
|
25,558
|
|
|
3,902
|
|
|
--
|
|
|
164,868
|
|
Edward
M. Chait, Ph.D., Vice President (9)
|
|
|
2007
|
|
|
150,000
|
|
|
35,000
|
|
|
15,493
|
|
|
3,480
|
|
|
--
|
|
|
203,973
|
|
Candice
B. Kissinger, Senior Vice President, Research; Secretary and Director
(2)
|
|
|
2007
|
|
|
120,358
|
|
|
--
|
|
|
(10
|
)
|
|
2,240
|
|
|
(11
|
)
|
|
122,598
|
|
(1)
Amount expensed in financial statements for fiscal 2007.
(2)
Dr.
and Mrs. Kissinger resigned as officers and directors of the Company on
September 28, 2007.
(3)
Includes $175,000 of severance and $13,592 of employee benefits programs
accrued
at September 30, 2007; and $21,615 of premiums on life insurance payable
to a
trust created by the Kissingers, which amount is added to Dr. Kissinger’s
taxable income.
(4)
Includes $150,000 paid in fiscal 2007 and $145,000 accrued in regards to
2007
before renegotiation of Mr. Shepperd’s employment agreement.
(5)
Mr.
Shepperd’s stock option award is contingent on shareholder approval; however,
since the Company must pay cash compensation in the event the award is not
approved, the Company has accrued the stock option expense.
(6)
Housing allowance and travel expenses during period as interim CEO.
(7)
Effective October 4, 2007, Mr. Cox also assumed the responsibilities of Chief
Administrative Officer. In November, 2007, as discussed above, Mr. Cox entered
into a new employment agreement and was awarded additional stock option
grants.
(8)
Effective October, 2007, Dr. Shoup became Chief Scientific Officer and
relinquished his title of Chief Operating Officer.
(9)
Effective October 4, 2007, Dr. Chait assumed the responsibilities of Chief
Business Officer. In November, 2007, as discussed above, Dr. Chait entered
into
a new employment agreement and was awarded additional stock option
grants.
(10)
As
part of the Severance Agreement with the Company, Mrs. Kissinger relinquished
all rights to unexercised options on September 28, 2007. All expenses for
non-vested options for the year were accordingly reversed, and the value
of
vested options surrendered, calculated as $38,718, was used to reduce severance
expense.
(11)
Mrs.
Kissinger was also insured under the life insurance policy included in Dr.
Kissinger’s other compensation as detailed in note 3.
Fiscal
2007 Grant of Plan-Based Awards Table
During
fiscal 2007, BASi granted stock options only to Mr. Shepperd. Information
with
respect to this award, which is subject to shareholder approval at the Annual
Meeting, is set forth in the table below.
Name
|
|
Grant
Date
|
|
Number
of Securities Underlying Options
|
|
Exercise
Price of Option Awards (1)
|
|
Grant
Date Fair Value of Option Awards (2)
|
|
Richard
M. Shepperd
|
|
|
May
18, 2007
|
|
|
275,000
|
|
$
|
7.10
|
|
$
|
985,628
|
|
(1)
The
exercise price of the options is 100% of the fair market value on the date
of
grant (based on the closing price on the day prior to the grant).
(2)
Represents the value estimated for reporting purposes in accordance with
SFAS
No. 123R.
Outstanding
Equity Awards at Fiscal Year-End Table
BASi
has
awarded stock options to members of its senior management and other BASi
team
members. The terms of these awards typically provide for vesting over a defined
period of time. Option awards generally have a four-part vesting schedule
in
which the first of the four installments vests on the second anniversary
of the
grant date. Each subsequent one-fourth installment thereafter vests on the
anniversary of the grant date for the next three years: however, the
Compensation Committee and the Board has to ability to alter, and occasionally
does alter, the vesting schedule to meet specific objectives, such as the
matching of the period of Mr. Shepperd’s option grant in the current fiscal year
to match the period of his employment contract. The options expire if not
exercised within ten years from the date of grant.
The
following table shows the equity awards granted to BASi's NEOs that were
outstanding as of the end of BASi's 2007 fiscal year.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
OPTION
AWARDS
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
Option
Exercise Price
($)
|
|
Option
Expiration Date
|
|
Richard
M. Shepperd
|
|
|
--
|
|
|
275,000
|
(1)
|
|
7.10
|
|
|
May
17, 2017
|
|
Michael
R. Cox
|
|
|
50,000
|
|
|
--
|
|
|
4.58
|
|
|
March
31, 2014
|
|
Ronald
E. Shoup, Ph.D.
|
|
|
4,000
3,000
20,000
|
|
|
--
--
20,000
|
(2)
|
|
8.00
4.25
4.51
|
|
|
November
24, 2007
December
10, 2008
February
26, 2014
|
|
Edward
M. Chait, Ph.D
|
|
|
37,500
|
|
|
12,500
|
(3)
|
|
5.69
|
|
|
September
29, 2015
|
|
|
(1)
|
If
approved by shareholders, the options vest as to 75,000 shares
upon
shareholder approval, an additional 100,000 shares on December
1, 2008 and
100,000 shares on December 1, 2009.
|
|
(2)
|
Options
on 10,000 shares vest on February 27, 2008 and 10,000 shares vest
on
February 27, 2009.
|
|
(3)
|
All
options vest on September 29, 2008.
|
Fiscal
2007 Option Exercises
There
were no options exercised by NEO’s in fiscal 2007.
EQUITY
COMPENSATION PLAN INFORMATION
BASi
maintains stock option plans that allow for the granting of options to certain
key employees and directors of BASi. The following table gives information
about
equity awards under the stock option plans of BASi:
Plan
Category
|
|
Weighted
Average Exercise Number of Securities to be Issued upon
Exercise
of
Outstanding Options
|
|
Exercise
Price of
Outstanding
Options
|
|
Number
of Securities Remaining Available for Future Issuance under the
Equity
Compensation Plan (excluding Securities Reflected
in First Column)
|
|
Equity
compensation plans approved by security holders
|
|
|
240,870
|
|
$
|
5.08
|
|
|
347,373
|
|
Non-qualified
options granted in conjunction with employment offers
|
|
|
50,000
|
|
$
|
5.14
|
|
|
—
|
|
Options
issuable to officer upon approval by shareholders
|
|
|
275,000
|
|
$
|
7.10
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
615,870
|
|
$
|
6.00
|
|
|
347,373
|
|
For
additional information regarding BASi’s stock option plans, please see Note 9 in
the Notes to Consolidated Financial Statements in BASi’s Annual Report on Form
10-K for the fiscal year ended September 30, 2007.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires the Corporation’s
directors and executive officers and persons who beneficially own more than
ten
percent of the Corporation’s Common Shares to file with the Securities and
Exchange Commission reports showing ownership of and changes in ownership
of the
Corporation’s Common Shares and other equity securities. On the basis of
information submitted by the Corporation’s directors and executive officers, the
Corporation believes that its directors and executive officers timely filed
all
required Section 16(a) filings for fiscal 2007, except for one Form 4 filed
late
by director Larry S. Boulet.
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Shareholder
proposals to be considered for presentation and inclusion in the proxy statement
for the 2009 Annual Meeting of Shareholders must be submitted in writing
and
received by BASi on or before September 30, 2008. If notice of any other
shareholder proposal intended to be presented at the 2009 Annual Meeting
of
Shareholders is not received by BASi on or before December 14, 2008, the
proxy
solicited by the Board of Directors of BASi for use in connection with that
meeting may confer authority on the proxies to vote in their discretion on
such
proposal, without any discussion in the BASi proxy statement for that meeting
of
either the proposal or how such proxies intend to exercise their voting
discretion. The mailing address of the principal offices of BASi is 2701
Kent
Avenue, West Lafayette, Indiana 47906.
OTHER
BUSINESS
As
of the
date of this proxy statement, the Board of Directors of BASi has no knowledge
of
any matters to be presented for consideration at the Annual Meeting other
than
those referred to above. If (a) any matters not within the knowledge of the
Board of Directors as of the date of this proxy statement should properly
come
before the meeting; (b) a person not named herein is nominated at the meeting
for election as a director because a nominee named herein is unable to serve
or
for good cause will not serve; (c) any proposals properly omitted from this
proxy statement and the form of proxy should come before the meeting; or
(d) any
matters should arise incident to the conduct of the meeting, then the proxies
will be voted in accordance with the recommendations of the Board of Directors
of BASi.
By
Order
of the Board of Directors,
Richard
M. Shepperd
President
and Chief Executive Officer
January
29, 2008
APPENDIX
A
BIOANALYTICAL
SYSTEMS, INC.
2008
DIRECTOR AND EMPLOYEE STOCK OPTION PLAN
Adopted
by the Board of Directors January 21, 2008
BIOANALYTICAL
SYSTEMS, INC.
2008
STOCK OPTION PLAN
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1.
|
Establishment/Plan
Purpose.
Bioanalytical Systems, Inc., an Indiana corporation, hereby establishes
an
equity-based incentive compensation plan to be known as the Bioanalytical
Systems, Inc. 2008 Stock Option Plan ("Plan") and to be effective
as of
the Effective Date provided for herein. The purpose of the Plan
is to
promote the long-term interests of the Company and its shareholders
by
providing a means for attracting and retaining officers, directors
and key
employees of the Company and its Affiliates.
|
|
2.
|
Definitions/Rules
of Construction.
|
a. The
following definitions are applicable to the Plan:
"Affiliate"
means
any "parent corporation" or "subsidiary corporation" of the Company as such
terms are defined in Code Sections 424(e) and (f),
respectively.
"Award"
means
the grant by the Committee of Incentive Stock Options or Non-Qualified Stock
Options or any combination thereof, as provided in the Plan.
"Award
Agreement"
means
the written agreement setting forth the terms and provisions applicable to
each
Award granted under the Plan.
"Beneficial
Owner"
shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
"Board"
means
the Board of Directors of the Company.
"Cause"
means
(a) a Participant’s dishonesty, fraud or misconduct with respect to the business
or affairs of the Company or any Affiliate which materially and adversely
affects the operations or reputation of the Company or any Affiliate (monetarily
or otherwise); (b) a Participant’s conviction of a felony crime or a crime
involving moral turpitude or entry of a plea of nolo contendre thereof; or
(c) a
Participant’s violation of the Company’s Code of Conduct.
"Change
in Control"
means
the occurrence of any one of the following events:
i. any
Person, other than an Existing Substantial Shareholder, becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing
a
majority of the combined voting power of the Company's then outstanding
securities (assuming conversion of all outstanding non-voting securities
into
voting securities and the exercise of all outstanding options or other
convertible securities);
ii. the
following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the Effective Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to, a consent solicitation, relating to
the
election of directors of the Company) whose appointment or election by the
Board
or nomination for election by the Company's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then
still
in office who either were directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or
recommended;
iii. the
consummation of a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation (other than
with
an Existing Substantial Shareholder or any of its affiliates), other than
(x) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent, either by remaining outstanding or by being converted into
voting
securities of the surviving entity or any parent thereof, a majority of the
combined voting power of the securities of the Company or such surviving
entity
or any parent thereof outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
is
or becomes the Beneficial Owner, directly or indirectly, of securities of
the
Company representing a majority of the combined voting power of the Company's
then outstanding securities; or
iv. the
shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale
or
disposition by the Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or substantially all
of
the Company's assets to an entity controlled by an Existing Substantial
Shareholder or any of its affiliates, or to an entity a majority of the combined
voting power of the voting securities of which is owned by substantially
all of
the shareholders of the Company immediately prior to such sale in substantially
the same proportions as their ownership of the Company immediately prior
to such
sale.
"Code"
means
the Internal Revenue Code of 1986, as amended, and its implementing
regulations.
"Committee"
means
the Compensation Committee of the Board of Directors.
"Company"
means
Bioanalytical Systems, Inc., an Indiana corporation.
"Director"
means
any individual who is a member of the Board.
"Disability"
means
that a Participant meets one of the following requirements: (i) the Participant
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected
to
result in death or can be expected to last for a continuous period of not
less
than 12 months, or (ii) the Participant is, by reason of medically determinable
physical or mental impairment that can be expected to result in death or
can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than 3 months under
an
accident and health plan covering employees of the Company.
"Effective
Date"
means
the date that the Plan becomes effective as provided in
Section 18.
"Employee"
means
any person, including an officer or Director, who is employed by the Company
or
any Affiliate.
"Exchange
Act"
means
the Securities Exchange Act of 1934, as amended.
"Exercise
Price"
means
the price per Share at which the Shares subject to an Option may be purchased
upon exercise of the Option.
"Existing
Substantial Shareholder"
means
any Person that alone or together with its affiliates is the Beneficial Owner
of
more than 15% of the Outstanding Common Stock as of the Effective Date.
"Fair
Market Value"
means,
with respect to a Share as of a particular date, the per share closing price
for
the Shares on the trading day immediately before such date, as reported by
the
principal exchange or market over which the Shares are then listed or regularly
traded. If the price of a Share is not so reported, Fair Market Value shall
be
determined, in good faith, by the Committee in accordance with such procedures
as the Committee shall from time to time prescribe.
"Incentive
Stock Option"
means
an option to purchase Shares granted by the Committee pursuant to the terms
of
the Plan, which option is intended to qualify under Code
Section 422.
"Non-Qualified
Stock Option"
means
an option to purchase Shares granted by the Committee pursuant to the terms
of
the Plan, which option is not intended to qualify under Code
Section 422.
"Option"
means
an Incentive Stock Option or a Non-Qualified Stock Option.
"Participant"
means
any individual selected by the Committee to receive an Award.
"Person"
shall
have the meaning given in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include
(i)
the Company or any subsidiary of the Company, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its
affiliates, (iii) an underwriter temporarily holding securities pursuant
to an
offering of such securities or (iv) a corporation or other business entity
owned, directly or indirectly, by substantially all of the shareholders of
the
Company in substantially the same proportions as their ownership of stock
of the
Company.
"Plan"
means
this Bioanalytical Systems, Inc. 2008 Stock Option Plan.
"Retirement"
means,
in the case of an Employee, a Separation from Service for reasons other than
Cause on or after the date on which the Employee attains age 60.
"Rule
16b-3"
means
Rule 16b-3 under the Exchange Act and any future rule or regulation amending,
supplementing, or superseding such rule.
"Section
16 Person"
means a
person subject to potential liability under Section 16(b) of the Exchange
Act
with respect to transactions that involve equity securities of the
Company.
"Securities
Act"
means
the Securities Act of 1933, as amended.
"Separation
from Service"
or
"Separates
from Service"
shall
mean death, Disability, Retirement, or other termination of employment with
the
Company.
"Shares"
means
the common shares of the Company.
"10%
Shareholder"
has the
meaning set forth in Section 9.
b. The
following rules shall govern in the interpretation of the Plan:
i. Except
to
the extent preempted by United States federal law or as otherwise expressly
provided herein, the Plan and all Award Agreements shall be interpreted in
accordance with and governed by the internal laws of the State of Indiana
without giving effect to any choice or conflict of law provisions,
principles, or rules.
ii. The
Plan
and all Awards are intended to comply with an exemption from the requirements
of
Code Section 409A.
iii. Any
reference herein to a provision of law, regulation, or rule shall be deemed
to
include a reference to the successor of such law, regulation, or
rule.
iv. To
the
extent consistent with the context, any masculine term shall include the
feminine, and vice
versa, and
the
singular shall include the plural, and vice
versa.
v. If
any
provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity of that provision shall not affect the remaining
parts
of the Plan, and the Plan shall be interpreted and enforced as if the illegal
or
invalid provision had never been included herein.
vi. The
grant
of Awards and issuance of Shares hereunder shall
be
subject to all applicable statutes, laws, rules, and regulations and to such
approvals and requirements
as may be required from time to time by any governmental authority or
securities
exchange
or market on which the Shares are then listed or traded.
vii. The
descriptive headings and sections of the Plan are provided for convenience
of reference only and shall not serve as a basis for interpretation of
the
Plan.
3. Administration.
a. The
Committee.
The
Committee shall administer the Plan and, subject to the provisions of the
Plan
and applicable law, may exercise its discretion in performing its administrative
duties. The Committee shall consist of not fewer than three (3) Directors,
and
Committee action shall require the affirmative vote of a majority of its
members. The members
of the Committee shall be appointed by, and shall serve at the
pleasure of,
the
Board. It is intended that the Committee be composed solely of Directors
who
both are
non-employee directors under Rule 16b-3 and "independent" as defined by the
requirements of any stock exchange or quotation system on which the Company's
common stock is listed or quoted.
Failure
of the Committee to be so composed shall not result
in the
cancellation, termination, expiration, or lapse of any Award.
b. Authority
of the Committee.
Except
as limited by law or by the Articles of Incorporation or By-Laws of the Company,
and subject to the provisions of the Plan, the Committee shall
have full power and discretion to: select the Employees who shall participate
in
the Plan; determine the
sizes
and types of Awards; determine the terms and conditions of Awards in a manner
consistent with
the
Plan; construe and interpret the Plan, all Award Agreements, and any other
agreements or
instruments entered into under the Plan; establish, amend, or waive rules
and
regulations for the Plan's
administration; and amend the terms and conditions of any outstanding Award
and
applicable
Award
Agreement to the extent that such terms and conditions are within the discretion
of the Committee.
Further, the Committee shall make all other determinations that may
be
necessary or advisable for the administration of the Plan. Each Award shall
be
evidenced by a written
Award Agreement between the Company and the Participant and shall contain
such
terms and
conditions as may be established by the Committee consistent with the provisions
of the Plan. Notwithstanding
the preceding provisions, the Committee shall not have any authority to take
any
action that would cause an Option to become subject to Code Section 409A.
Except
as limited by applicable law or the Plan, the Committee may use its discretion
to the maximum extent that it deems appropriate in administering the
Plan.
c. Delegation
by the Committee.
The
Committee may
delegate all or any part of its authority and powers under
this
Plan to one or more Directors or officers of the Company; provided, however,
the
Committee may not delegate its authority and powers (i) with respect to grants
to Section 16 Persons,
or (ii) in a way that would jeopardize the Plan' s satisfaction of Rule 16b-3.
d. Decisions
Binding.
All
determinations and decisions made by the Committee, the Board, and any delegate
of the Committee pursuant to this Section shall be final, conclusive, and
binding on all persons, including the Company and Participants.
4. Participants.
Only
those persons who are Employees or Directors of the Company shall be eligible
to
participate in the Plan. The Committee shall determine from time to time
the
particular Employees or Directors of the Company who shall be eligible to
participate in the Plan and the extent of their participation
therein.
5. Shares
Subject to Plan, Limitations on Grants and Exercise
Price.
Subject
to adjustment by the operation of Section 11 hereof:
a. The
maximum number of Shares that may be issued with respect to Awards made under
the Plan is 500,000 Shares. In the event any outstanding Option under the
Plan
expires or is terminated for any reason prior to the end of the period during
which Options may be granted, the shares allocable to the unexercised portion
of
such Option may again be subject to an Option under the Plan.
b. The
Shares with respect to which Awards may be made under the Plan may either
be
authorized and unissued shares or issued shares heretofore or hereafter
reacquired and held as treasury shares. Any Award that expires, terminates
or is
surrendered for cancellation may be subject to new Awards under the Plan
with
respect to the number of Shares as to which a termination or forfeiture has
occurred. Any option issued under the Plan surrendered in order to effect
exercise of another option in accordance with Paragraph 7 (c) below shall
be
deemed to be an exercised option and will not be available for future option
grants under this Plan.
c. The
Exercise Price for any Award made under the Plan may not be less than the
Fair
Market Value of the Shares as of the date of the award.
d. No
Participant may be granted Incentive Stock Options under this Plan that would
result in Shares with an aggregate Fair Market Value (determined as of the
date
the Option is granted) of more than One Hundred Thousand Dollars ($100,000)
first becoming exercisable in any one calendar year. To the extent that a
purported Incentive Stock Option would violate the limitation specified in
the
preceding sentence, the portion of the Option in excess of such limitation
shall
be deemed a Non-Qualified Stock Option.
e. Notwithstanding
the preceding provisions, if the Company or an Affiliate consummates a
transaction described in Code Section 424(a) (e.g., the acquisition of property
or stock from an unrelated corporation), individuals who become Employees
or
Directors on account of such transaction may be granted Options in substitution
for options granted by such former employer or recipient of services. If
such
substitute Options are granted, the Committee, in its sole discretion and
consistent with Code Section 424(a) and the requirements of Code Section
409A,
may determine that such substitute Options shall have an Exercise Price less
than one hundred (100%) of the Fair Market Value of the Shares to which the
Options relate determined as of the dates of grant. In carrying out the
provisions of this Section, the Committee shall apply the principles contained
in Section 11.
6. General
Terms and Conditions of Options.
The
Committee will have full and complete authority and discretion, except as
expressly limited by the Plan, to grant Options and to prescribe the terms
and
conditions (which need not be identical among Participants) of the Options.
Each
Option will be evidenced by an Award Agreement that will specify: (a) the
Exercise Price, (b) the number of Shares subject to the Option,
(c) the expiration date of the Option, (d) the manner, time and rate
(cumulative or otherwise) of exercise of the Option, (e) the restrictions,
if any, to be placed upon the Option or upon Shares that may be issued upon
exercise of the Option, (f) the conditions, if any, under which a
Participant may transfer or assign Options, and (g) any other terms and
conditions as the Committee, in its sole discretion, may determine. The
Committee may, as a condition of granting any Option, require that a Participant
agree to surrender for cancellation one or more Options previously granted
to
such Participant.
7. Exercise
of Options.
Subject
to the provisions of the Plan and the applicable Award Agreement, a Participant
may exercise an Option, in whole or in part, at any time prior to the
termination of the Option,
by
giving written notice to the Company of exercise on a
form
provided by the Committee (if available). Such notice shall specify the number
of Shares subject to the Option to be purchased and shall be accompanied
by
payment in full of the total Exercise Price by cash or check or such other
form
of payment as the Company may accept. If permitted
by the Committee or the applicable the Award Agreement, payment in full or
in
part may
also be
made by:
a. Delivering
Shares already owned by the Participant for more than six (6) months and
having
a total Fair Market Value on the date of such delivery equal to the total
Exercise Price;
b. The
certification of ownership of Shares owned by the Participant to the
satisfaction
of the Committee for later delivery to the Company as specified
by the
Committee;
c. Delivering,
if the Participant may do so without violating Section 16(b) of the Exchange
Act, by surrendering sufficient vested options based on the difference between
the exercise price and the Fair Market Value at the time of exercise of the
Shares to equal the exercise price of the Shares to which the Option is being
exercised;
d. Any
other
method permitted by the Committee in the Award Agreement; or
e. Any
combination of the foregoing.
No
Shares
shall be issued until full payment therefore has been made. A Participant
shall
have all of the rights of a shareholder of the Company holding the class
of
Shares subject to such Option (including, if applicable, the right to vote
the
shares and the right to receive dividends) when the Participant has given
written notice of exercise, has paid the total Exercise Price, and such Shares
have been recorded on the Company's official shareholder records (or the
records
of its transfer agents or registrars) as having been issued and transferred
to
the Participant.
8. Termination
of Options.
Unless
otherwise specifically provided by the Committee in the Award Agreement or
any
amendment thereto, Options will terminate as provided in this Section.
a. Unless
sooner terminated under the provisions of this Section and notwithstanding
the
provisions of Subsection (b) or (d) below of this Section 8, Options will
expire
not more than five (5) years from the date of grant if the Participant is
a 10%
Shareholder, and not more than ten (10) years from the date of grant if the
Participant is not a 10% Shareholder.
b. If
the
Participant's Separation from Service (without Cause) occurs by reason of
Retirement or Disability, the Participant may exercise all outstanding Options
with respect to Shares for which it could have been exercised on the effective
date of the Participant's Retirement within the period of three months
immediately succeeding the Participant's Retirement, or if by reason of
Disability, within twelve (12) months after termination of employment due
to
Disability.
c. If
the
Participant's Separation from Service (with or without Cause) is due to any
reason other than Retirement or Disability, all rights under any Options
granted
to the Participant will terminate immediately upon the Participant's Separation
from Service.
d. In
the
event the Participant's Separation from Service is due to death, the
Participant's beneficiary or estate, if no beneficiary, may exercise outstanding
Options to the extent that the Participant was entitled to exercise the Options
at the date of his death, but only within the period of twelve (12) months
from
the date of the Participant's death.
9. Special
Rules Applicable to Incentive Stock Options.
a. Incentive
Stock Options may be granted only to Participants who are Employees. Any
provisions of the Plan to the contrary notwithstanding, (a) no
Incentive Stock Option will be granted more than ten (10) years from the
earlier
of the date the Plan is adopted by the Board or approved by the Company's
Shareholders, (b) no Incentive Stock Option will be exercisable more than
ten (10) years from the date the Incentive Stock Option is granted, (c) the
Exercise Price of any Incentive Stock Option will not be less than the Fair
Market Value per Share on the date such Incentive Stock Option is granted,
(d) any Incentive Stock Option will not be transferable by the Participant
to whom such Incentive Stock Option is granted other than by will or the
laws of
descent and distribution and will be exercisable during the Participant's
lifetime only by such Participant, (e) no Incentive Stock Option will be
granted that would permit a Participant to acquire, through the exercise
of
Incentive Stock Options in any calendar year, under all plans of the Company
and
its Affiliates, Shares having an aggregate Fair Market Value (determined
as of
the time any Incentive Stock Option is granted) in excess of $100,000
(determined by assuming that the Participant will exercise each Incentive
Stock
Option on the date that such Option first becomes exercisable), and (f) no
Incentive Stock Option may be exercised more than three (3) months after
the
Participant's Separation from Service for reasons due to Retirement, or more
than one (1) year after the Participant's Separation from Service due to
the
Disability or the death of the Participant. Notwithstanding the
foregoing, no
Incentive Stock Option shall be granted under the Plan to any Employee of
the
Company who, at the time such Incentive Stock Option is granted, owns shares
possessing more than ten percent (10%) of the total combined voting power
of all
classes of shares of the Company or of any parent or subsidiary corporation
of
the Company or any parent or subsidiary corporation of any of the foregoing
(such employee being hereinafter referred to as a "10% Shareholder"), except
as
provided below. For purposes of this Section 9, shares owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust shall
be
considered as being owned proportionately by or for its shareholders, partners,
or beneficiaries. The percentage limitations of this Section 9 shall not
apply,
however, if, at the time such Incentive Stock Option is granted, the Exercise
Price is at least one hundred ten percent (110%) of the Fair Market Value
of the
Shares subject to the Incentive Stock Option and such Option by its terms
is not
exercisable after the expiration of five (5) years from the date such Option
is
granted.
b. Notwithstanding
any other provisions of the Plan, if for any reason an Option granted under
the
Plan that is intended to be an Incentive Stock Option fails to qualify as
an
Incentive Stock Option, such Option will be deemed to be a Non-Qualified
Stock
Option, and such Option will be deemed to be fully authorized and validly
issued
under the Plan.
10. Restrictive
Covenants.
In its
discretion, the Committee may condition the grant of any Award under the
Plan
upon the Participant agreeing to covenants in favor of the Company and/or
any
Affiliate (including, without limitation, covenants not to compete, not to
solicit employees and customers, and not to disclose confidential information)
that may have effect following the termination of employment with the Company
or
any Affiliate, and after the Award has been exercised, including, without
limitation, the requirement to disgorge any profit, gain or other benefit
received upon exercise of the Award prior to any breach of any covenant.
11. Adjustments
Upon Changes in Capitalization.
In the
event of any change in the outstanding Shares subsequent to the effective
date
of the Plan by reason of any reorganization, recapitalization, stock split,
reverse stock split, spin-off, stock dividend, combination or exchange of
Shares
or other securities of the Company, any change in the corporate structure
or
Shares of the Company or other similar corporate transaction or event, the
maximum aggregate number and class of Shares as to which Awards may be granted
under the Plan and the number and class of Shares and the Exercise Price
of any
outstanding Options will be appropriately adjusted by the Committee to prevent
the dilution or diminution of Awards. The Committee's determination with
respect
to any adjustments will be conclusive. Any fractional shares so determined
will
be rounded to the nearest whole number of shares.
12. Assignments
and Transfers.
Except
as otherwise expressly authorized by the Committee in the Award Agreement
or any
amendment thereto during the lifetime of a Participant, no Award nor any
right
or interest of a Participant in any Award under the Plan may be assigned,
encumbered or transferred otherwise than by will or the laws of descent and
distribution.
13. Rights
Under the Plan.
No
officer, Employee, Director or other person will have a right to be selected
as
a Participant nor, having been so selected, to be selected again as a
Participant, and no officer, Employee, Director or other person will have
any
claim or right to be granted an Award under the Plan or under any other
incentive or similar plan of the Company or any Affiliate. Neither the Plan
nor
any action taken under the Plan will be construed as giving any Employee
any
right to be retained in the employ of the Company or any Affiliate.
14. Delivery
and Registration of Shares.
The
Company's obligation to deliver Shares with respect to an Award will, if
the
Committee requests, be conditioned upon the receipt of a representation as
to
the investment intention of the Participant to whom such Shares are to be
delivered, in such form as the Committee will determine to be necessary or
advisable to comply with the provisions of the Securities Act or any other
applicable federal or state securities laws. It may be provided that any
representation requirement will become inoperative upon a registration of
the
Shares or other action eliminating the necessity of the representation under
the
Securities Act or other state securities laws. The Company will not be required
to deliver any Shares under the Plan prior to (a) the admission of such Shares
to listing on any stock exchange or system on which Shares may then be listed,
and (b) the completion of any registration or other qualification of the
Shares
under any state or federal law, rule or regulation, as the Company determines
to
be necessary or advisable.
15. Withholding
Tax.
To the
extent required by law in effect at the time any Options are exercised, the
Company has the right and power to deduct or withhold, or require the
Participant to remit to the Company, an amount sufficient to satisfy all
applicable tax withholding requirements. The Committee, in its sole discretion
and pursuant to such procedures as it may specify from time to time, may
permit
or require a Participant to satisfy all or part of the tax withholding
obligations in connection with an Award by (a) having the Company withhold
otherwise deliverable Shares, or (b) delivering to the Company Shares already
owned for a period of at least six months and, in each case, having a value
equal to the amount required to be withheld. The amount of the withholding
requirement will be deemed to include any amount that the Committee determines,
not to exceed the amount determined by using the maximum federal, state or
local
marginal income tax rates applicable to the Participant with respect to the
Award on the date that the amount of tax to be withheld is to be determined
for
these purposes. For these purposes, the value of the Shares to be withheld
or
delivered will be equal to the Fair Market Value as of the date that the
taxes
are required to be withheld.
16. Termination,
Amendment and Modification of Plan.
The
Board may at any time terminate, and may at any time and from time to time
and
in any respect amend or modify the Plan; provided, however, that to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act or
Code Section 422 (or any other applicable law or regulation, including
requirements of any stock exchange or quotation system on which the Company's
common stock is listed or quoted), shareholder approval of any Plan amendment
will be obtained in the manner and to the degree as is required by the
applicable law or regulation; and provided further, that no termination,
amendment or modification of the Plan will in any manner affect any Award
theretofore granted pursuant to the Plan without the consent of the Participant
to whom the Award was granted or the transferee of the Award. The Plan shall
be
binding upon any successor to substantially all the assets of the Company.
However, no Options shall be granted hereunder upon termination of the
Plan.
17. Repricing.
Notwithstanding any provision in the Plan to the contrary and except for
adjustments made pursuant to Section 11 of the Plan (relating to the adjustment
of Shares and related Awards upon certain changes in capitalization), the
Exercise Price of any outstanding Option granted under the Plan may not be
decreased after the date of grant nor may any outstanding Option granted
under
the Plan be surrendered to the Company as consideration for the grant of
a new
Option with a lower Exercise Price.
18. Effective
Date and Term of Plan.
The
Plan will become effective upon approval by the holders of a majority of
the
issued and outstanding Shares of each class of the voting Shares of the Company
voting in person or by proxy at the duly held shareholder's meeting, provided
that the Plan shall become effective only if approved within twelve (12)
months
before or after the Plan is adopted. The Plan shall terminate on the ten
(10)
year anniversary of the Effective Date.
19. Securities
Law.
No
Option shall be granted, and no shares issued in connection with any Award
unless the grant of the Option and the issuance and delivery of shares or
cash
pursuant to the Award, complies with all relevant provisions of state and
federal law, including without limitation, the Securities Act, the Exchange
Act,
the rules and regulations promulgated thereunder, and the requirements of
any
market system or stock exchange upon which the shares may then be listed
or
traded. Participant shall not offer, sell or otherwise dispose of any Option
in
any manner that would: (a) require the Company to file any registration
statement with the Securities and Exchange Commission (or any similar filing
under state law), or to amend or supplement such filing or (b) violate or
cause
the Company to violate the Securities Act, or any other state or federal
law.
20. Mistake
of Fact.
Any
mistake of fact or misstatement of facts shall be corrected when it becomes
known by a proper adjustment to an Award or Award Agreement.
21. Evidence.
Evidence required of anyone under the Plan may be by certificate, affidavit,
document, or other information which the person relying thereon considers
pertinent and reliable, and signed, made, or presented by the proper party
or
parties.
22. Notices.
Any
notice
or
document required to be given to or filed with the Committee will be properly
given or filed if hand delivered (and a delivery receipt is received) or
mailed
by certified mail, return receipt requested, postage paid, to the
Committee.
23. No
Company Obligation.
Unless
required by applicable law, the Company, an Affiliate, the Board, and the
Committee shall not have any duty or obligation to affirmatively disclose
material information to a record or beneficial holder of Shares or an Award,
and
such
holder shall have no right to be advised of any material information regarding
the Company or
any
Affiliate at any time prior to, upon, or in connection with the receipt,
exercise, or distribution of
an
Award. In addition, the Company, an Affiliate, the Board, the Committee,
and
any
attorneys, accountants, advisors, or agents for any of the foregoing shall
not
provide any advice, counsel, or recommendation to any Participant with respect
to, without limitation, any Award, any exercise of an Option, or any tax
consequences relating to an Award.
24. Liability
and Indemnification.
No
member of the Board, the Committee, or any officer
or employee of the Company or any Affiliate shall be personally liable for
any
action, failure
to act,
decision, or determination made in good faith in connection with this Plan.
By
participating in
the
Plan, each Participant agrees to release and hold harmless the Company and
its
Affiliates (and
their
respective directors, officers, and employees) and the Committee from and
against any tax liability,
including, but not limited to, interest and penalties, incurred by the
Participant in connection
with his
receipt of Awards under the Plan and the payment, and exercise thereof. Each
person
who is or shall have been a member of the Committee, or of the Board, shall
be
indemnified
and held
harmless by the Company against and from (i) any loss, cost, liability, or
expense (including, but not limited to, attorneys fees) that may be imposed
upon
or reasonably incurred by him
or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she
may
be a party or in which he or she may be involved by reason of any action
taken
or failure to
act
under the Plan or any Award Agreement, and (ii) any and all amounts paid
by him
or her in settlement thereof, with the Company's prior written approval,
or paid
by him or her in satisfaction of
any
judgment in any such claim, action, suit, or proceeding against him or her;
provided, however,
that he
or she shall give the Company an opportunity, at the Company's expense, to
handle and defend such claim, action, suit, or proceeding before he or she
undertakes to handle and defend the same on his or her own behalf. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or By-Laws, by contract, as a matter of law or
otherwise, or under any power that the Company may have to indemnify them
or
hold them harmless.
25. Mitigation
of Excise Tax.
Subject
to any other agreement providing for the Company's indemnification of the
tax
liability described herein, if any payment or right accruing to a Participant
under this Plan (without the application of this Section), either alone or
together with
other payments or rights accruing to the Participant from the Company or
an
Affiliate,
would
constitute a "parachute payment," as defined in Section 280G of the Code
and
regulations thereunder, such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable
or
right accruing under this Plan being subject to an
excise
tax under Section 4999 of the Code or being disallowed as a deduction under
Section 280G
of the
Code. The determination of whether any reduction in the rights or payments
under
this Plan is to
apply
shall be made by the Committee in good faith after consultation with the
Participant, and
such
determination shall be conclusive and binding on the Participant. The
Participant shall cooperate in good faith with the Committee in making such
determination and providing the necessary information for this purpose.
26. Proceeds.
The
proceeds received by the Company from the sale of Shares pursuant to the
Plan
will be used for general corporate purposes.
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Adopted
by the Board of Directors of Bioanalytical Systems,
Inc.
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William
E. Baitinger
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Larry
S. Boulet
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David
W. Crabb
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Leslie
B. Daniels
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Richard
M. Shepperd
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APPENDIX
B - NOMINATING COMMITTEE CHARTER
BIOANALYTICAL
SYSTEMS, INC.
NOMINATING/CORPORATE
GOVERNANCE COMMITTEE
OF
THE BOARD OF DIRECTORS
CHARTER
This
Charter shall govern the operations of the Nominating/Corporate Governance
Committee ("Committee") of the Board of Directors of Bioanalytical Systems,
Inc.
(the "Company"). The primary purpose of the Committee is to identify and
recommend the nomination of qualified directors to the Board of Directors
of the
Company.
The
membership of the Committee shall consist of at least three directors who
shall
be free of any relationship that, in the opinion of the board, would interfere
with his or her individual exercise of independent judgment, and shall be
"independent" as defined in NASDAQ Market Place Rule 4200. The Board of
Directors may, at any time and in its complete discretion, replace a Committee
member.
The
Board
of Directors shall appoint one member of the Committee as chairperson. He
or she
shall be responsible for leadership of the Committee, including preparing
the
agenda, presiding over the meetings, making Committee assignments and reporting
to the Board of Directors.
The
Committee shall meet at least annually, or more frequently as circumstances
dictate.
The
Committee shall:
a. Oversee
the search for qualified individuals to serve on the Board of Directors.
Qualified individuals will complement the Company's mission of advancing
health
care through innovative science. The Company's policy is that a majority
of the
members of the Board of Directors be independent as defined by the listing
standards of NASDAQ and the rules of the Securities and Exchange Commission.
To
assist in the search for qualified directors, the Committee will consider
shareholder suggestions for nominations that are submitted as required by
the
Bylaws and, as it deems necessary, employ outside search firms to assist
in
identifying qualified candidates.
b. Recommend
to the Board of Directors those director nominees who, in the Committee's
opinion, the full Board should recommend for shareholder approval at the
annual
meeting. The Committee will base its recommendation for nomination on criteria
that it believes will provide a board perspective and depth of experience
in the
Board of Directors. In general, when considering independent directors, the
Committee will consider the candidate's experience in areas central to the
Company, such as science, business, finance, legal and regulatory compliance,
as
well as considering the candidate's personal qualities and
accomplishments.
c. Oversee
the administration of the Board of Directors, including, at least annually,
review and recommend the appointment of directors to committees of the Board,
monitor and review the functions of the committees, and review and advise
the
Board concerning the directors' compensation and benefits.
d. Draft
such policies as it deems necessary to carry out its functions, and annually
review and evaluate this charter and any related policies.
e. Be
authorized to delegate any duties of the Committee to subcommittees, and
hire
counsel and other experts as the Committee, in its sole discretion, deems
appropriate.
f. Report,
at least annually, to the Board of Directors.
g. Perform
any other duties assigned to it by the Board of Directors.
APPENDIX
C - COMPENSATION COMMITTEE CHARTER
BIOANALYTICAL
SYSTEMS, INC.
COMPENSATION
COMMITTEE
OF
THE BOARD OF DIRECTORS
CHARTER
This
Charter shall govern the operations of the Compensation Committee ("Committee")
of the Board of Directors of Bioanalytical Systems, Inc. (the "Company").
The
primary purpose of the Committee is to exercise the power and authority of
the
Board of Directors relating to the compensation of officers of the Company.
The
membership of the Committee shall consist of at least three directors who
shall
(1) be free of any relationship that, in the opinion of the Board of Directors
("Board"), would interfere with the member's exercise of independent judgment,
(2) be "independent," as defined in NASDAQ Market Place Rule 4200, (3) be
an
"outside director," as that term is used and defined in Section 162(m) of
the
Internal Revenue Code, as amended ("Code"), and the relevant Treasury
Regulations promulgated thereunder, or any successor rule or regulation,
and (4)
be a "Non-Employee Director" as that term is defined by Rule 16b-3 of the
Securities Exchange Act of 1934. The Board may, at any time and in its complete
discretion, appoint, dismiss, or replace a Committee member.
The
Board
shall appoint one member of the Committee as chairperson, who shall be
responsible for leadership of the Committee, including preparing agenda,
presiding over meetings, making Committee assignments, and reporting to the
Board of Directors.
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Authority
and Responsibilities
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The
Committee shall have the authority and responsibility of the Board to:
1.
At
least annually, the Committee shall:
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a)
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review
and approve corporate goals and objectives relevant to compensation
and
benefits for the officers of the Company. The Committee shall evaluate
the
performance of each officer, including the Chief Executive Officer,
in
light of those goals and
objectives;
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b)
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review
and approve all elements of each officer's compensation, including
but not
limited to (i) annual base salary, (ii) annual incentive compensation
opportunity, whether in the form of cash or equity, (iii) long-term
incentive compensation opportunity, whether in the form of cash
or equity,
(iv) special benefits, and (v) employment agreements, severance
agreements, and change in control agreements, if appropriate;
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c)
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review
the compensation systems in place for officers to make sure that
they are
appropriate in light of the Company's objectives and performance
and the
compensation provided by comparable companies;
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d)
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review
this Charter and any policies adopted by the Committee; and
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e)
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evaluate
its own performance and the performance of any compensation consultant
retained by the Committee and provide a report of such evaluation
to the
Board.
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2. The
Committee shall draft such policies as it deems necessary or appropriate
to
carry out its functions.
3. The
Committee may hire counsel and other experts, including compensation
consultants, as the Committee, in its sole discretion, deems
appropriate.
4. The
Committee shall review the proposed Compensation Discussion & Analysis
(CD&A) section of the Company's proxy statement, discuss that section with
management, and based on that review and discussion, make a recommendation
to
the Board regarding the inclusion of the CD&A in the Company's filings with
the Securities and Exchange Commission, as required.
5. The
Committee shall make regular reports to the Board.
6. The
Committee shall have the authority to approve all transactions between the
Company and any director or officer, other than certain transactions pursuant
to
an "employee benefit plan," as described by Rule 16b-3 of the Securities
Exchange Act of 1934 or any successor rule.
7. The
Committee shall establish "performance goals," as that term is used in Code
Section 162(m) and the Treasury Regulations promulgated thereunder, or any
successor rule or regulation, to determine the payment of any performance-based
compensation, disclose the material terms under which such compensation will
be
paid to the Company's shareholders for approval, and certify in writing prior
to
the payment of such compensation that the performance goals and any other
material terms have been satisfied.
8. The
Committee shall perform any other duties assigned to it by the Board of
Directors.
APPENDIX
D—AUDIT COMMITTEE CHARTER
BIOANALYTICAL
SYSTEMS, INC.
AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS CHARTER
ADOPTED
FEBRUARY 19, 2004
PURPOSE
This
Charter shall govern the operations of the Audit Committee ("Committee")
of the
Board of Directors of Bioanalytical Systems, Inc. (the "Company"). The
purpose
of the Committee is to oversee the Company's accounting and financial reporting
processes and the audits of the Company's financial statements. It is not,
however, the Committee's responsibility to prepare and certify the Company's
financial statements, to guaranty the independent auditor's report, or
to
guaranty other disclosures by the Company. Committee members are not employees
of the Company and are not performing the functions of auditors or
accountants.
COMPOSITION
The
Committee assists the Board of Directors in fulfilling its responsibilities
for
oversight of the quality and integrity of the accounting, auditing and
reporting
practices of the Company and other such duties as directed by the Board.
The
membership of the Committee shall consist of at least three directors who
are
generally knowledgeable in financial management. In addition, at least
one
member of the Committee must have experience or background which results
in such
member's "financial sophistication" within the meaning of the NASDAQ Audit
Committee Rule, taking into account the non-exclusive list of specific
factors
and criteria that the NASDAQ Audit Committee Rule specifies with respect
to the
determination of "financial sophistication." The Board of Directors may,
at any
time and in its complete discretion, replace a Committee member. Each member
shall be free of any relationship that, in the opinion of the Board, would
interfere with his or her individual exercise of independent judgment,
and shall
meet the director independence requirements for serving on audit committees
as
set forth in the corporate governance standards of NASDAQ.
The
Board
of Directors shall appoint one member of the Committee as chairperson.
He or she
shall be responsible for leadership of the Committee, including preparing
the
agenda, presiding over the meetings, making Committee assignments and reporting
to the Board of Directors. The chairperson will also maintain regular liaison
with the CEO, CFO and the lead independent audit partner.
MEETINGS
The
Committee shall meet at least semi-annually, or more frequently as circumstances
dictate. At least twice each year, the Committee shall have a regularly
scheduled meeting at which only members of the Committee are present (which
may
be held in conjunction with other meetings of the Committee), and the Committee
shall meet at least annually, and more often as warranted, with the Chief
Financial Officer and Chief Accounting Officer, and the independent auditors
in
separate executive sessions to discuss any matters that the Committee or
each of
these groups believes should be discussed privately. The Committee may
require
any officer or employee of the Company or its subsidiaries, or the Company's
outside counsel or independent auditor, to attend a Committee meeting or
to meet
with any members of, or representatives of, the Committee, and to provide
pertinent information as necessary. The Committee shall maintain minutes
and
other relevant documentation of all its meetings.
RESPONSIBILITIES
The
Committee's primary responsibilities include:
• Directing
the appointment, compensation, retention and oversight of the work of any
registered public accounting firm engaged (including resolution of disagreements
between management and the auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Company or its subsidiaries, and each
such
registered public accounting firm must report directly to the
Committee.
• Approving
in advance, as required by applicable laws and regulations, all auditing
services and permitted non-audit services proposed to be performed for
the
Company or its subsidiaries by any such registered public accounting firm.
The
Committee may establish pre-approved policies and procedures pursuant to
which
the Company and its subsidiaries may engage a registered public accounting
firm
to perform services, provided that the policies
and procedures are reasonably detailed as to the nature and scope of the
particular services that are to be performed and the maximum amount of
fees that
may be paid for each particular service, and the Committee is informed
of each
service that is actually approved pursuant to such policies and procedures
not
later than the next scheduled meeting of the Committee. The Committee may
delegate authority to one or more members of the Committee to grant such
pre-approvals, provided that the decisions of such member(s) to grant
pre-approvals shall be presented to the full Committee at its next scheduled
meeting.
• Engaging
independent counsel and other advisers, as the Committee determines necessary
to
carry out its duties.
• Overseeing
the independent auditor relationship by discussing with the auditor the
nature
and rigor of the audit process, receiving and reviewing audit reports,
and
providing the auditor full access to the Committee (and the board) to report
on
any and all appropriate matters.
• Ensuring
receipt, from each registered public accounting firm engaged for the purpose
of
preparing or issuing an audit report or performing other audit, review
or attest
services for the Company, of a formal written statement delineating all
relationships between such firm and the Company, consistent with Independence
Standards Board Standard 1, and the Committee shall actively engage in
a
dialogue with such firm with respect to any disclosed relationships or
services
that may impact the objectivity and independence of such firm, and shall
take,
or recommend that the Board of Directors take, appropriate action to oversee
the
independence of such firm.
• Reviewing
the audited financial statements and discussing them with management and
the
independent auditor. These discussions shall include consideration of the
quality of the Company's accounting principles as applied in its financial
reporting, including review of estimates, reserves and accruals, review
of
judgmental areas, review of audit adjustments whether or not recorded and
such
other inquiries as may be appropriate. Based on the review, the Committee
shall
make its recommendation to the Board as to the inclusion of the Company's
audited financial statements in the Company's annual report on Form
10-K.
• Reviewing
with management and the independent auditor the quarterly financial information
prior to the Company's filing of Form 10-Q. This review may be performed
by the
Committee or its chairperson.
• Approving
all transactions with related parties, if and to the extent required by
Rule
4350(h) (or any successor rule) of the Marketplace Rules of the NASDAQ
Stock
Market, Inc., as such requirement may from time to time be amended.
• Discussing
with management and the external auditors the quality and adequacy of the
Company's internal controls.
• Discussing
with management the status of pending litigation, taxation matters and
other
areas or oversight to the legal and compliance area as may be
appropriate.
• Reporting
Committee activities to the full Board and issuing annually a report to
be
included in the proxy statement (including appropriate oversight conclusions)
for submission to the shareholders.
If
and to
the extent that, by reason of any change or amendment to applicable law
or
regulation or the NASDAQ Audit Committee Rule or other rules applicable
to
NASDAQ issuers, the Company is required to maintain an audit committee
that has
composition, structure, duties, authority or responsibility that is different
than provided by this Charter, then (and to that extent) this Charter shall
be
deemed amended in such a manner as to cause the Committee to comply with
such
changed or amended laws, rules or regulations.