SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
[AMENDMENT NO. ]
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14a-6(e)(2))
ORAGENICS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
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[LOGO]
ORAGENICS, INC.
12085 RESEARCH DRIVE
ALACHUA, FLORIDA 32615
April 22, 2004
Dear Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of
Shareholders of Oragenics, Inc. (the "Company") which will be held at the
offices of the Company, 12085 Research Drive, Alachua, Florida, on Tuesday, May
25, 2004, at 10:00 a.m. local time.
We look forward to your attendance at the Annual Meeting so that you can
learn more about your Company and become better acquainted with members of the
Board of Directors and the management team. The items of business which are
being presented for a vote by the holders of Common Stock at the Annual Meeting
are (i) to elect Directors of the Company; (ii) to approve an amendment to the
Company's 2002 Stock Option and Incentive Plan to increase the shares available
for issuance from 1,000,000 to 1,500,000; and (iii) to transact such other
business as may properly come before the Annual Meeting. Even if you are
planning to attend, please complete the enclosed proxy card and return it in the
enclosed envelope to cast your vote. You will still be able to revoke your proxy
and vote your shares in person at the Annual Meeting if you so desire.
If you have any questions about the Proxy Statement or the accompanying
2003 Annual Report on Form 10-KSB, please contact Mr. Paul A. Hassie at (386)
418-8079.
Sincerely,
/s/ Jeffrey D. Hillman
Chairman of the Board of Directors
ORAGENICS, INC.
12085 RESEARCH DRIVE
ALACHUA, FLORIDA 32615
NOTICE TO THE HOLDERS OF COMMON STOCK
OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 25, 2004
Notice is hereby given to the holders of the common stock, $.001 par value
per share (the "Common Stock"), of Oragenics, Inc. (the "Company") that the 2004
Annual Meeting of Shareholders of the Company (including any postponements or
adjournments thereof, the "Annual Meeting") will be held at the offices of the
Company, 12085 Research Drive, Alachua, Florida, on Tuesday, May 25, 2004, at
10:00 a.m., local time, for the following purposes:
(i) To elect Directors to serve until the next Annual Meeting of
Shareholders;
(ii) To approve an amendment to the 2002 Stock Option and Incentive Plan
to increase the number of shares available for issuance from 1,000,000 to
1,500,000; and
(iii) To transact such other business as may properly come before the
Annual Meeting.
Information relating to the Annual Meeting and matters to be considered
and voted upon at the Annual Meeting is set forth in the attached Proxy
Statement.
Only those shareholders of record at the close of business on April 6,
2004, are entitled to notice of and to vote at the Annual Meeting. A complete
list of shareholders entitled to vote at the Annual Meeting will be available
for examination by any shareholder at the Annual Meeting and for a period of ten
days prior thereto at the executive offices of the Company in Alachua, Florida.
By Order of the Board of Directors,
/s/ Paul A. Hassie
April 22, 2004 Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN,
DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY APPOINTMENT AND VOTE IN PERSON.
Proxy Statement
For Holders of Common Stock
For Annual Meeting of Shareholders
to be Held on May 25, 2004
INTRODUCTION
This Proxy Statement is furnished to holders of the common stock, $.001
par value per share ("Common Stock"), of Oragenics, Inc., a Florida corporation
(the "Company"), in connection with the solicitation of proxies by the Company's
Board of Directors from holders of the outstanding shares of Common Stock for
use at the 2004 Annual Meeting of Shareholders to be held at 10:00 a.m. local
time at the offices of the Company, 12085 Research Drive, Alachua, Florida, on
Tuesday, May 25, 2004 (including any postponements or adjournments thereof, the
"Annual Meeting").
The Annual Meeting will be held for the following purposes:
(i) To elect Directors to serve until the next Annual Meeting of
Shareholders;
(ii) To approve an amendment to the Company's 2002 Stock Option and
Incentive Plan to increase the number of shares available for issuance from
1,000,000 to 1,500,000; and
(iii) To transact such other business as may properly come before the
Annual Meeting.
This Proxy Statement and the accompanying Proxy are first being mailed to
shareholders of the Company on or about April 23, 2004.
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders of record of the Company at the close of business on
April 6, 2004 (the "Record Date") will be entitled to notice of, and to vote at,
the Annual Meeting. Each share of Common Stock is entitled to one vote. On the
Record Date, there were 14,318,380 shares of Common Stock issued and
outstanding.
Notwithstanding the Record Date specified above, the Company's stock
transfer books will not be closed and shares may be transferred subsequent to
the Record Date. However, all votes must be cast in the names of shareholders of
record on the Record Date.
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the votes of Common Stock entitled
to be vote at the Annual Meeting, present in person or by proxy, are required to
establish a quorum for the Annual Meeting and for voting on each matter. For the
purpose of determining the presence of a quorum, abstentions and votes withheld
from any nominee will be considered to be "votes entitled to be cast" and
therefore will be counted as present for purposes of determining the presence or
absence of a quorum. Broker non-votes will not be considered to be "votes
entitled to be cast" and will not be counted as present for quorum purposes.
Broker non-votes are votes that brokerage firms and banks holding shares of
record for their customers are not permitted to cast under applicable stock
exchange rules because the brokerage firms and banks have not received specific
instructions from their customers as to certain proposals as to which the
brokerage firm and banks advised the Company that they lack voting authority.
Although there are no controlling precedents under Florida law regarding the
treatment of broker non-votes, the Company intends to apply the principles set
forth herein. The Company believes that under applicable stock exchange rules,
brokerage firms and banks will be able to vote their customers' unvoted shares
with regard to the proposal to elect directors and the proposal to amend the
Company's 2002 Stock Option and Incentive Plan to increase the number of shares
available for issuance from 1,000,000 to 1,500,000. With regard to these
proposals, broker non-votes will be considered as votes not entitled to be cast.
Therefore, broker non-votes will not affect the outcome on these two proposals.
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PROPOSAL I: Election of Directors. The election of five Directors by the
holders of Common Stock will require a plurality of the votes cast by the shares
of Common Stock represented and entitled to vote in the election at the Annual
Meeting. With respect to the election of Directors, shareholders may (i) vote
"for" each of the nominees, (ii) withhold authority for each of such nominees,
or (iii) withhold authority for specific nominees but vote for the other
nominees. Because the Directors are elected by a plurality of the votes cast by
the shares represented and entitled to vote, an abstention from voting or a
broker non-vote will have no effect on the outcome of the election of Directors.
PROPOSAL II: Approval of the Company's amendment to its 2002 Stock Option
and Incentive Plan. Approval of the amendment requires the affirmative vote of a
majority of the shares of Common Stock of the Company present in person or
represented by proxy and entitled to vote at the Annual Meeting for approval of
the plan amendment. With respect to this proposal, shareholders may (i) vote
"for" the proposal, (ii) vote "against" the proposal, or (iii) abstain from
voting. Broker non-votes will have no effect on the outcome of the proposal.
Abstentions have the same effect as votes against the proposal.
VOTING
A shareholder of record who does not hold his shares through a brokerage
firm, bank or other nominee (in "street name"), may vote his shares in person at
the Annual Meeting. If a shareholder holds shares in street name, he must obtain
a proxy or evidence of stock ownership from his street name nominee and bring it
with him in order to be able to vote his shares at the Annual Meeting.
If the enclosed Proxy is executed, returned in time and not revoked, the
shares represented thereby will be voted in accordance with the instructions
indicated in such PROXY. IF A SIGNED VALID PROXY IS RETURNED AND NO INSTRUCTIONS
ARE INDICATED, PROXIES WILL BE VOTED FOR (I) THE ELECTION OF ALL DIRECTOR
NOMINEES AND (II) APPROVAL OF THE COMPANY'S AMENDMENT TO ITS 2002 STOCK OPTION
AND INCENTIVE PLAN.
The Board of Directors is not presently aware of any other business to be
presented to a vote of the shareholders at the Annual Meeting. As permitted by
Rule 14a-4(c) of the Securities and Exchange Commission (the "Commission"), the
persons named as proxies on the proxy cards will have discretionary authority to
vote in their judgment on any proposals properly presented by shareholders for
consideration at the Annual Meeting that were not submitted to the Company
within a reasonable time prior to the mailing of these proxy materials. Such
proxies also will have discretionary authority to vote in their judgment upon
the election of any person as a Director if a Director nominee named in Proposal
I is unable to serve for good cause or will not serve, and on matters incident
to the conduct of the Annual Meeting.
A shareholder of record who has given a Proxy may revoke it at any time
prior to its exercise at the Annual Meeting by either (i) giving written notice
of revocation to the Secretary of the Company, (ii) properly submitting to the
Company a duly executed Proxy bearing a later date, or (iii) appearing at the
Annual Meeting and voting in person. All written notices of revocation of
Proxies should be addressed as follows: Computershare Trust Company of Canada,
Proxy Department, 100 University Ave - 9th Floor, Toronto, ON, M5J 2Y1, Canada.
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PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors currently consists of six board seats, of which six
positions are currently filled. Four directors are nominated for re-election at
the Annual Meeting and one current director, who was appointed by the Board
during the fiscal year, is nominated for election by the shareholders for the
first time. If elected, each of the directors will hold office until the next
Annual Meeting of Shareholders and until his/her successor is elected and
qualified, or as otherwise provided by the Company's Bylaws or by Florida law.
The directors who have been nominated for election at the Annual Meeting
are Messrs. Anderson, Gury, Hillman, Soponis and Zahradnik.
Mr. McAlister is not seeking re-election as a Director and, therefore, as
of May 25, 2004 the Board will decrease its size from six members to five.
If any of the nominees should be unavailable to serve for any reason, the
Board of Directors may:
o designate a substitute nominee, in which case the persons named as
proxies will vote the shares represented by all valid Proxies for
the election of such substitute nominee;
o allow the vacancy to remain open until a suitable candidate is
located and nominated; or
o adopt a resolution to decrease the authorized number of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH
DIRECTOR NOMINEE. If a choice is specified on the Proxy by the shareholder, the
shares will be voted as specified. If no specification is made, the shares will
be voted FOR the Director nominees. Election of each Director nominee will
require the affirmative vote of a plurality of the votes cast by shares of
Common Stock represented and entitled to vote at the Annual Meeting.
The following paragraphs set forth the names of the Director nominees of
the Company, their ages, their positions with the Company, and their principal
occupations and employers for at least the last five years. For information
concerning Directors' ownership of Common Stock, see "Security Ownership of
Certain Beneficial Owners and Management."
The Board of Directors has nominated the following individuals for
election by the holders of Common Stock as Directors of the Company:
NOMINEES FOR DIRECTOR- TERM TO EXPIRE AT THE NEXT ANNUAL MEETING
JEFFREY D. HILLMAN. Dr. Hillman, age 55, has been our chief scientific
officer and chairman of our board of directors since November 1996. From
November 1991, Dr. Hillman has been Professor in the College of Dentistry at the
University of Florida in Gainesville, Florida. He teaches classes, trains
doctoral candidates and conducts research. However, Dr. Hillman has been on
leave from the University of Florida, since February 2001, in order to develop
our technologies and technologies for IviGene Corporation, Alachua, Florida.
IviGene is engaged in the business of developing vaccines and therapeutics,
focusing on genes and gene products that are critical factors in the infection
state. IviGene does not compete with us and is no longer an active company. Dr.
Hillman received undergraduate training at the University of Chicago (Phi Beta
Kappa), and his D.M.D. degree (cum laude) and Ph.D. from Harvard Medical School.
He has authored or co-authored more than 100 publications and textbook chapters
on subjects related to the etiology and cure of tooth decay and dental disease.
He has been conducting research on our licensed, patented replacement therapy
technology for more than 25 years. Dr. Hillman's employment contract with us
contains non-competition and non-disclosure provisions. Dr. Hillman has also
entered into an Employee and Proprietary Information and Invention Agreement
with us dated January 2, 2002 under which he has assigned to us all of his
interest in any inventions he may make which are based on any of our proprietary
rights or any of our other intellectual property during his employment by us.
Dr. Hillman devotes 100% of his time to our company.
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MENTO A. SOPONIS. Mr. Soponis, age 59, has been our president, chief
executive officer and a member of the board of directors since August 2000. From
December 2000 to June 2002, Mr. Soponis was president and chief executive
officer of IviGene Corporation, Alachua, Florida. IviGene is engaged in the
business of developing vaccines and therapeutics. Mr. Soponis remains as
Chairman of the Board of Directors of IviGene Corporation. From January 2000 to
May 2000, Mr. Soponis was a consultant for the office of technology licensing at
the University of Florida, Gainesville, Florida where he reviewed agreements and
negotiated the terms of technology licenses. From December 1995 to December
1999, Mr. Soponis was president and chief executive officer of USBiomaterials
Corporation, Alachua, Florida. US Biomaterials developed healthcare products for
bone regeneration and for dental care. Mr. Soponis is a graduate of Princeton
University and the George Washington University law school with honors. He has
served as CEO for a number of early stage biotechnology companies. He has broad
experience in strategic positioning and negotiation of corporate partnerships.
Mr. Soponis' employment contract with us contains non-competition and
non-disclosure provisions. Mr. Soponis devotes 100% of his time to our company.
ROBERT T. ZAHRADNIK. Mr. Zahradnik, age 59, has been a member of our board
of directors since November 1996. Since July 2000 Dr. Zahradnik has been a
director of IviGene Corporation, Alachua, Florida. IviGene is engaged in the
business of developing vaccines and therapeutics. Since September 1999, Dr.
Zahradnik has been general manager of ProHealth, Inc., Batesville, Arkansas.
ProHealth, Inc. is a manufacturer of nutritional supplements and household and
skin care products. Since February 1993, Dr. Zahradnik has been a partner and
general manager of Professional Dental Technologies and Therapeutics,
Batesville, Arkansas, an oral pharmaceutical manufacturer. Since February 1986,
Dr. Zahradnik has been the chief executive officer and chairman of the board of
directors of Advanced Clinical Technologies, Inc., Medfield, Massachusetts, a
medical diagnostic manufacturer and technical consulting firm. Dr. Zahradnik has
signed a Proprietary Information Agreement with us dated September 12, 2002
under which he has agreed not to disclose confidential or secret information
related to our business which we disclose to him. He has not signed a
non-competition agreement with us. Dr. Zahradnik will devote such portion of his
time to our company as is necessary to fulfill his responsibilities.
BRIAN ANDERSON. Mr. Anderson, age 57, has been a member of our board of
directors since August 2002. Mr. Anderson was a principal and partner of
Montridge, LLC, Ridgefield CT, an investor relations firm, from August 16, 2002.
to January 1, 2004. From 1998 to June of 2002, Mr. Anderson was the President
and Chief Executive Officer of Cognetix, Inc., Salt Lake City, Utah, a research
and therapeutics development company. From 1995 to 1998, Mr. Anderson was Senior
Vice President, Marketing and Commercial Development of Interneuron
Pharmaceuticals, Inc., Lexington, Massachusetts (now called Indevus
Pharmaceuticals Inc.), a biopharmaceutical company whose shares are listed on
the NASDAQ National Market. From 1987 to 1995 Mr. Anderson held a number of
executive positions at Bristol-Myers Squibb, including responsibilities in
business development, strategic planning and marketing. Mr. Anderson has signed
a Proprietary Information Agreement with us dated September 11, 2002 under which
he has agreed not to disclose confidential or secret information related to our
business that we disclose to him. He has not signed a non-competition agreement.
Mr. Anderson will devote such portion of his time to our company as is necessary
to fulfill his responsibilities.
DAVID J. GURY. Mr. Gury, age 65, has been a director since October 2003.
Mr. Gury is Chairman of the Board of NABI Biopharmaceuticals, retiring in June
2003 as CEO after 19 years with the Company. In May 1984, Mr. Gury joined NABI
Biopharmaceuticals as President and Chief Operating Officer. He was elected
Chairman of the Board, Chief Executive Officer and President in April 1992.
During his tenure, the Company successfully transitioned from a plasma supplier
into a fully integrated biopharmaceutical company. Prior to joining NABI
Biopharmaceuticals, Mr. Gury spent his career with Abbott Laboratories in
various administrative and executive positions and with Alpha Therapeutics
Corporation, a spin out from Abbott. Mr. Gury completed his A.B. in economics at
Kenyon College, Gambier, Ohio, in 1960 and received his MBA at the University of
Chicago in 1962, specializing in accounting and finance. Mr. Gury is a member of
the Florida Emerging Technology Commission; Chairman of the Florida Research
Consortium; and past Chairman and a member of BioFlorida. Mr. Gury will devote
such portion of his time to our company as is necessary to fulfill his
responsibilities.
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EXECUTIVE MANAGEMENT
PAUL A. HASSIE. Mr. Hassie, age 53, has been our chief financial officer,
Secretary and Treasurer since July 2002. From February 2000 to December 2003,
Mr. Hassie was president of BioFlorida, a trade organization located in
Gainesville, Florida that supports biosciences in Florida. From November 1999 to
December 2003, Mr. Hassie was also engaged in the business of financial
consulting to bioscience companies in the Gainesville, Florida area. From June
1997 to November 1999, Mr. Hassie was chief financial officer of USBiomaterials
Corporation located in Alachua, Florida. USBiomaterials developed healthcare
products for bone regeneration and for dental care. From January 1992 to May
1997, Mr. Hassie was controller for Transkaryotic Therapies, Inc. located in
Cambridge, Massachusetts. Transkaryotic Therapies is engaged in the business of
research and development of gene therapy products. From January 1984, to
September 1991, Mr. Hassie was senior manager in the Boston office of Ernst &
Young LLP, Certified Public Accountants. Mr. Hassie received a Bachelor of
Science degree in accounting from Bryant College, Smithfield, Rhode Island in
1977; an MBA from Bryant College in 1981; and, a Masters of Science in Taxation
from Bryant College in 1996. Mr. Hassie is a member of the American Institute of
Certified Public Accountants and is a licensed Certified Public Accountant in
the Commonwealth of Massachusetts. Mr. Hassie's employment contract with us
contains non-competition and non-disclosure provisions. Mr. Hassie devotes 100%
of his time to our company.
SCIENTIFIC ADVISORY BOARD
We use scientists and physicians with expertise related to our
technologies to advise us on scientific and medical matters. Currently, our
scientific advisory board members are:
HOWARD K. KURAMITSU, PH.D. Dr. Kuramitsu is a UB Distinguished Professor
at the State University of New York at Buffalo. He is a leading expert in the
area of the biology of the oral cavity and studies diseases associated with the
oral cavity. Dr. Kuramitsu serves on the Editorial Boards of the International
Journal of Oral Biology, Oral Microbiology and Immunology and Infection and
Immunity. He also serves on the NIH-NIDCR Advisory Council. Dr. Kuramitsu's work
includes more than 170 publications. Dr. Kuramitsu has signed a Proprietary
Information Agreement with us dated September 16, 2002 under which he has agreed
not to disclose confidential or secret information related to our business which
we disclose to him.
STEVEN J. PROJAN, PH.D. Dr. Projan is Director, Antibacterial Research of
Wyeth Research. He is an expert in the regulation of virulence in pathogenic
bacteria. Dr. Projan serves on the editorial boards of Antimicrobial Agents and
Chemistry, Microbial Drug Resistance, Infection and Immunity, and the Journal of
Bacteriology. He also serves on the ASM Colloquium Committee of the American
Society for Microbiology. Dr. Projan's work includes 64 articles and 45
abstracts. Dr. Projan has signed a Proprietary Information Agreement with us
dated November 12, 2002 under which he has agreed not to disclose confidential
or secret information related to our business which we disclose to him.
PER-ERIK J. SARIS, PH.D. Dr. Saris is a professor in food microbiology at
the University of Helsinki in Finland. He is an expert in antibacterial peptides
produced by bacteria. His team is part of the Centre of Excellence "Microbial
Resources" appointed by the Academy of Finland. He was the first to amplify DNA
directly from bacteria in 1990 and has since been active in different fields of
molecular biology of bacteria including vaccine development, protein production,
metabolic engineering and targeting of bacteria.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Board of Directors. The property, affairs and business of the Company are
under the general management of its Board of Directors as provided by the laws
of the State of Florida and the Bylaws of the Company. The Board of Directors
conducts its business through meetings of the full Board and through committees
of the Board, and the Board of Directors has appointed standing Audit and
Compensation Committees of the Board of Directors. The Board has no formal
policy regarding board member attendance at the annual meeting.
5
The Board consists of six members. The Board has adopted the definition of
"independence" as described under the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley") Section 301, Rule10A-3 under the Securities Exchange Act of
1934 (the "Exchange Act"). The Board periodically reviews the size of the Board
and recommends any changes it determines to be appropriate given the needs of
the Company. Under the Company's Bylaws, the number of members on the Board may
be increased or decreased by resolution of the Board.
The Board of Directors met or unanimously consented to resolutions eight
times during the year ending December 31, 2003 ("Fiscal 2003"). Each director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and Committees during Fiscal 2003 during his tenure as a director. In
conjunction with its regularly scheduled meetings, "independent" directors have
met in Executive Session.
In March 2004, the Board adopted a Corporate Governance Policy. The Board
shall review this policy at least annually to ensure the Company's policies and
practices meet the standards suggested by various groups or authorities active
in corporate governance and practices of other public companies. Based upon this
review, the Company expects to adopt any changes that the Board of Directors
believes are the best corporate governance policies and practices for the
Company. The Company will adopt changes, as appropriate, to comply with
Sarbanes-Oxley requirements and any rule changes made by the Securities and
Exchange Commission. See Appendix A, "Corporate Governance Policy."
In March 2004, the Board adopted a Code of Business Conduct and Ethics for
its directors and employees to ensure all local, state and federal government
regulations are complied with; that all accounting rules, regulations and
procedures are followed; and that its business methods and practices are
ethical. The Code of Business Conduct and Ethics of Conduct also provided for
compliance with the specific financial and accounting procedural and reporting
requirements of Section 406 of Sarbanes-Oxley. See Appendix B, "Code of Business
Conduct and Ethics."
Audit Committee. During Fiscal 2003, the Audit Committee consisted of
Messrs. Anderson, McAlister, Zahradnik and Gury. Prior to October 2003, the
Audit Committee consisted of Messrs Anderson, McAlister and Zahradnik. Beginning
in October 2003, the Audit Committee consisted of Messrs. Anderson, Gury and
Zahradnik. Mr. Gury serves as Chairman of the Audit Committee and the Board has
determined that Mr. Gury is also the Audit Committee's financial expert. Each of
the Audit Committee members meet the definition of being "independent" as
defined under the Sarbanes-Oxley Act of 2002.
The Audit Committee met two times in 2003. In March 2004, the Audit
Committee adopted its charter that complies with the requirements related to
Sarbanes-Oxley. The Audit Committee has the sole authority to engage and
discharge, review the independence, qualifications, activities and compensation
of the Company's independent certified public accountants. The Audit Committee
reports to the Board the appointment of the independent certified public
accountants. The Audit Committee must assure regular rotation of the lead and
concurring audit partners. The Audit Committee is responsible for the Company's
financial policies, control procedures, accounting staff, and reviews and
approves the Company's financial statements. The Audit Committee is responsible
for the review of transactions between the Company and any Company officer,
director or entity in which a Company officer or director has a material
interest. The Audit Committee must develop and maintain procedures for the
submission of complaints and concerns about accounting and auditing matters. The
Audit Committee must assure CEO and CFO certifications meet their obligations by
performing a review and evaluation of the Company's disclosure controls and
procedures. The Audit Committee has the authority to engage the services of an
outside advisor when required. The Audit Committee must receive reports from the
independent auditor on critical accounting policies, significant accounting
judgments and estimates, off-balance sheet transactions and non-GAAP financial
measures. See "Report of the Audit Committee of the Board of Directors" and
Appendix C "Audit Committee Charter.
Nominating Committee. The Board of Directors does not have a separate
nominating committee. The entire Board functions as the Company's nominating
committee. The Board has not adopted a nominating committee charter. The Board
does not currently have a policy with regard to the consideration of any
director candidates recommended by security holders. Given the Company's current
size, stage of development, and size of the Board, the Board believes that it is
not currently appropriate to establish a separate policy for security holders to
submit such recommendations. Notwithstanding the lack of a formal policy
regarding security holder nominations, the Board may from time to time consider
candidates proposed for consideration for service on the Company's Board by
security holders. The Board has not set any specific minimum qualifications that
must be met by a nominee presented for consideration to the Board by a security
holder. A Board member may become aware of a potential nominee and present such
nominee to the full Board for consideration at a Board meeting. The Board would
evaluate the candidate and determine whether such person should be considered
for Board service based on a variety of criteria including but not limited to,
whether the individual has experience in the Company's industry, potential
conflicts, and the person's ability to work with existing Board members and
expected contributions. The Board would evaluate a nominee submitted by a
security holder in the same or similar manner as one submitted by a Board
member.
6
Compensation Committee. The Compensation Committee, which administers the
Company's various incentive and stock option plans, consisted of Messrs.
Anderson, McAlister, Zahradnik and Gury. Prior to October 2003, the Compensation
Committee consisted of Messrs Anderson, McAlister and Zahradnik. Beginning in
October 2003, the Compensation Committee consisted of Messrs. Anderson, Gury and
Zahradnik. Mr. Anderson serves as Chairman of the Compensation Committee. None
of the Committee members has ever been an officer or employee of the Company or
any of its subsidiaries.
The Compensation Committee met or unanimously consented to resolutions
twice in Fiscal 2003. The Compensation Committee is responsible for establishing
the compensation of the Company's directors, Chief Executive Officer and all
other executive officers, including salaries, bonuses, severance arrangements,
and other executive officer benefits. The Committee also administers the
Company's various incentive and stock option plans and designates both the
persons receiving awards and the amounts and terms of the awards. In March 2004,
the Compensation Committee adopted a charter to outline its compensation,
benefits and management development philosophy and to communicate to
shareholders the Company's compensation policies and the reasoning behind such
policies as required by the Securities and Exchange Commission. See Appendix D,
"Compensation Committee Charter."
DIRECT SHAREHOLDER COMMUNICATION TO BOARD MEMBERS
The Company does not currently have a formal process for direct security
holder communications to the Board. The basis for the Board's view that it is
appropriate for the Company to not have such a formal process includes but is
not limited to the following: the Company's limited financial and personnel
resources, the Company's stage of operations and development and the ability for
security holders to communicate with Board members informally.
7
COMPENSATION OF DIRECTORS AND MEMBERS OF SCIENTIFIC ADVISORY BOARD
Directors who are executive officers of the Company and directors who have
received compensation as outside consultants or founders of the Company receive
no additional or special compensation as such for service as members of either
the Board of Directors. All other directors ("outside directors") receive $2,500
for each Board meeting attended up to a maximum of $10,000 per year. Directors
who serve on the Audit Committee receive $1,000 for each Committee meeting
attended (except for the committee chairman, who receives $2,500 for each
committee meeting) and reimbursement of reasonable expenses. Directors who serve
on the Compensation Committee receive no additional compensation.
The Company has a stock option plan in which outside directors are
eligible to participate. Each outside director, except Messrs. McAlister and
Zahradnik due to their significant stock ownership positions, was granted an
option to purchase 60,000 shares on the date first elected or appointed.
Thereafter, on the date of each annual meeting of shareholders held during the
time the plan is in effect and if he or she continues to serve in such capacity
following such meeting, each outside director is granted an option to purchase
10,000 shares. During Fiscal 2003, Mr. Anderson and Mr. Gury were granted
options to purchase 10,000 and 60,000 shares, respectively.
Messrs. Soponis, Zahradnik, Hillman and McAlister do not receive any
compensation for serving as members of the board of directors. In consideration
of their agreement to serve as directors, we have granted Mr. Anderson and Mr.
Gury options to purchase 70,000 shares and 60,000 shares, respectively. These
options vest over 3 years from the date of grant.
Members of our Scientific Advisory Board receive $2,500 for each meeting
attended in addition to the discretionary grant of options to purchase shares
under our stock option plan. No options were granted to the members of our
Scientific Advisory Board in fiscal 2003.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) Beneficial Reporting Compliance Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's officers and Directors
and any persons who beneficially own more than ten percent of the Company's
Common Stock to file reports of ownership and changes in ownership of such
securities with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. Officers, Directors and beneficial
owners of more than ten percent of the Common Stock are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of copies of forms furnished to the Company and
written representations from the executive officers, directors and holders of
ten percent or more of the Company's Common Stock, the Company believes, all
persons subject to the reporting requirements with regard to the Common Stock
complied with all applicable filing requirements, except that the executive
officers and directors filed their initial Form 3's five days late.
8
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us from January 1,
2001 to December 31, 2003, for each of our officers. This information includes
the dollar value of base salaries, bonus awards and number of stock options
granted, and certain other compensation, if any.
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION ALL OTHER
NAME AND SALARY ANNUAL
PRINCIPAL POSITION YEAR (US $) COMPENSATION
- ------------------ ---- ------ ------------
Mento A. Soponis 2003 180,000 0
Chief Executive Officer & President 2002 121,978 0
2001 81,291 6,010(1)
Jeffrey D. Hillman 2003 135,000 0
Chief Scientific Officer 2002 63,824 0
2001 60,000 0
Paul A. Hassie
Chief Financial Officer, 2003 43,000(2) 0
Secretary/Treasurer 2002 15,000(2) 0
- ----------
(1) Represents a retirement plan contribution.
(2) Mr. Hassie received employment compensation as a part-time employee of the
Company in 2002 and 2003.
OPTIONS TO PURCHASE SECURITIES
Our directors and shareholders have previously approved the adoption of
our 2002 Stock Option and Incentive Plan ("Plan"). The purpose of the Plan is to
enable our company to attract, retain and motivate qualified directors and
employees, to reward directors and employees and key consultants, such as
members of our Scientific Advisory Board, for their contribution toward our long
term goals, and to enable and encourage such individuals to acquire our shares
as long term investments. We are seeking shareholder approval for an amendment
to the 2002 Stock Option and Incentive Plan in Proposal II to increase the
shares of common stock available for issuance from 1,000,000 to 1,500,000. A
description of our Plan is set forth under Proposal II.
We will not require or seek shareholder approval for the grant of options
under the stock option plan, or the exercise of options. We may grant options
under the stock option plan to employees of our company regularly employed on a
full-time or part-time basis, our directors and officers, and persons who
perform services for us on an ongoing basis or who have provided, or are
expected to provide, services of value to us.
There are no other stock option plans or profit sharing plans for the
benefit of our officers and directors other than as described herein. We do not
have any long-term incentive plans that provide compensation intended to serve
as incentive for performance.
9
OPTION GRANTS LAST FISCAL YEAR
PERCENTAGE OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION
NAME OPTIONS FISCAL YEAR PRICE DATE
- ---- ---------- ------------------ -------- ----------
Paul A. Hassie 20,000 12.1% $2.65 July 31, 2008
Paul A. Hassie 15,000 9.1% $3.60 Oct. 7, 2008
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF Value of
SECURITIES UNDER- Unexercised
LYING OPTIONS AT In-the-Money
FISCAL YEAR END Options at Fiscal
NUMBER OF UNEXERCISED Year End
SHARES OPTIONS Exercisable/
ACQUIRED ON VALUE EXERCISABLE/ Unexercisable
NAMES EXERCISE REALIZED (US$) UNEXERCISABLE (US $)(1)
- ----- -------- -------------- ------------- ---------
Mento A. Soponis 0 0 0/0 0/0
Jeffrey D. Hillman 0 0 0/0 0/0
Paul A. Hassie 0 0 10,000/55,000 27,600/88,550
_________________
(1) Values shown in this column reflect the difference between the closing price
of the Company's common stock on December 31, 2003 on the TSX Venture Exchange,
and the exercise prices of the underlying options.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS.
We have employment agreements with Mento A. Soponis, Jeffrey D. Hillman and Paul
A. Hassie.
On January 1, 2004, we entered into employment agreements with Messrs.
Hassie, Hillman and Soponis, which superceded our prior employment agreements
with Mr. Soponis and Mr. Hillman. Each of the agreements is for three years and
provides for automatic one-year extensions after December 31, 2007. Under the
terms of our employment agreements with Mr. Soponis, Dr. Hillman and Mr. Hassie
dated January 1, 2004, we are obligated to pay initial compensation of $180,000,
$180,000 and $135,000 per annum, respectively. These executive officers are also
eligible for participation in incentive bonus compensation plans. The employment
agreements also provides for other benefits including the right to participate
in fringe benefit plans, life and disability insurance plans, expense
reimbursement and 4 weeks accumulating vacation/sick leave annually. If any of
these executive officers' employment is terminated by the Company without cause
(as defined in the agreements) or within twelve months following a change of
control (as defined in the agreements), they will be entitled to severance
payments, at their then annual base salary and all stock options granted to the
executive and any benefits under any benefit plans shall become immediately
vested and to the extent applicable, exercisable. The employment agreements also
include non-disclosure and non-compete provisions, as well as salary payments
for a three month period in the event of an executive's death or disability
during the term of the agreements.
Dr. Hillman has also signed a Proprietary Information and Invention
Agreement with us. Under this agreement, Dr. Hillman has agreed to hold all our
proprietary information in the strictest confidence, and assigned to us all of
his right, title and interest in any inventions which he makes during the term
of his employment with us that incorporate, are based on or relate to any of our
proprietary intellectual property rights.
10
STOCK OPTION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The members of the Compensation Committee are Messrs. Anderson, Gury and
Zahradnik. No officer or employee of the Company participated in deliberations
of the Compensation Committee concerning executive officer compensation during
the year ended December 31, 2003.
11
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of three Directors. The Committee operates under a written charter
adopted by the Board of Directors on March 22, 2004 that complies with the
standards under Sarbanes-Oxley. The members of the Audit Committee are Brian
Anderson, Robert T. Zahradnik and David J. Gury. Each of the Audit Committee
members meet the definitions of "independence" as described under Sarbanes-Oxley
Section 301; SEC Rule 10A-3.
The Audit Committee reports to the Board of Directors, subject to
stockholder ratification, the selection of the Company's independent certified
public accountants. Management is responsible for the Company's internal
controls and the financial reporting process. The Audit Committee's
responsibility is to monitor and oversee these processes.
As required by Section 404 of Sarbanes-Oxley, during Fiscal 2003, the
Company began its process to develop internal control documentation and testing
of those controls to ensure the accuracy of its financial reporting.
Ernst & Young LLP, our independent certified public accountants, is
responsible for performing an independent audit of the Company's financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. Partner rotation of Ernst & Young LLP is required after the
fifth year.
The Audit Committee has met and held discussions with management and Ernst
& Young LLP. Management represented to the Audit Committee that the Company's
financial statements were prepared in accordance with generally accepted
accounting principles, and the Audit Committee has reviewed and discussed the
financial statements with management and the independent certified public
accountants. The Audit Committee discussed Ernst & Young LLP matters required to
be discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
Ernst & Young LLP also provided to the Audit Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with Ernst & Young LLP its independence.
Based upon the Audit Committee's discussion with management and Ernst &
Young LLP, and the Committee's review of the representation of management and
the report of Ernst & Young LLP to the Audit Committee, the Audit Committee
recommended that the Board of Directors include the audited financial statements
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
2003 filed with the Securities and Exchange Commission.
Audit Committee:
David J. Gury, Chairman
Robert T. Zahradnik
Brian Anderson
March 9, 2004
12
AUDIT AND OTHER FEES
Professional Fees of Ernst & Young LLP. The following summarizes fees
billed by Ernst & Young LLP for professional services rendered to the Company
during the fiscal years ended December 31, 2003 and December 31, 2002.
Audit Fees: Aggregate fees billed or to be billed by Ernst & Young LLP for
its professional services rendered in connection with its audit of the Company's
fiscal 2003 and fiscal 2002 financial statements, including the review of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for fiscal 2003, were $47,000 and $19,000 respectively.
Audit-Related Fees: There were no fees billed or to be billed by Ernst &
Young LLP for assurance and related services that are reasonably related to the
performance of the audit or review of the Company's financial statements that
are not reported above under the caption "Audit Fees."
Tax Fees: There were no fees billed by Ernst & Young LLP for professional
services for tax compliance, tax advice, and tax planning in fiscal 2003 or
fiscal 2002.
All Other Fees: We incurred fees and expenses billed by Ernst & Young LLP
of $52,000 for professional services rendered in fiscal 2003 in connection with
the Company's initial public offering and the preparation and filing of our Form
SB-2 registration statement.
The Audit Committee, in conducting its review of auditor independence,
considered whether the performance of services by the independent certified
public accountants in addition to their audit services was compatible with
maintaining the independence of Ernst & Young LLP as auditors.
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee of the Board of Directors is responsible for reviewing
all transactions between the Company and any officer or Director of the Company
or any entity in which an officer of Director has a material interest. Any such
transactions must be on terms no less favorable than those that could be
obtained on an arms-length basis from independent third parties.
INDEBTEDNESS
On February 22, 2001, Robert T. Zahradnik, a member of the board of
directors, loaned us $57,418 as evidenced by a promissory note of even date
therewith which accrues interest at the rate of 7% per annum until paid. The
note is payable on demand, or 2 years from its date if demand is not made
earlier. In December 2003, the principal portion of this note was repaid to Mr.
Zahradnik. At December 31, 2003, the total outstanding balance of accrued
interest was $11,331 which was paid in January 2004.
On February 22, 2001, Jeffrey Hillman, our Chief Scientific Officer and
chairman of the board of directors, loaned us $12,186 as evidenced by a
promissory note of even date therewith which accrues interest at the rate of 7%
per annum until paid. The note is payable on demand, or 2 years from its date if
demand is not made earlier. In December 2003, the principal portion of this note
was repaid to Dr. Hillman. At December 31, 2003, the total outstanding balance
of accrued interest was $2,393 which was paid in January 2004.
On February 28, 1999, Robert T. Zahradnik, a member of the board of
directors, loaned us $15,000 as evidenced by a promissory note of even date
therewith which accrues interest at the rate of 7% per annum until paid. The
note is payable on demand, or 2 years from its date if demand is not made
earlier. In December 2003, the principal portion of this note was repaid to Mr.
Zahradnik. At December 31, 2003, the total outstanding balance of accrued
interest was $4,728 which was paid in January 2004.
Prior to our initial public offering, Dr. Hillman and Mr. Zahradnik agreed
not to seek repayment of the indebtedness owed by the Company referenced above.
However, by December 16, 2003 over $900,000 had been received from warrant
exercises and the Company's management determined it was in the best interest of
the Company to repay the above referenced indebtedness to Dr. Hillman and Mr.
Zahradnik to avoid the further accrual of interest. The indebtedness was repaid
in December 2003 through payments of $13,036 to Dr. Hillman and $72,418 to Mr.
Zahradnik with the corresponding notes cancelled. The interest accrued on these
notes totaling $18,452 was paid to Mssrs. Hillman and Zahradnik in January 2004.
These actions were approved by the Company's Audit Committee excluding Mr.
Zahradnik.
In 2001 and 2002 we incurred consulting fees of $60,000 and $15,000,
respectively, payable to Dr. Jeffrey Hillman. The entire amount remains
outstanding.
CORNET CAPITAL CORP. AGREEMENTS
Under an agreement between ourselves and Cornet Capital Corp., a
corporation wholly owned by Brian McAlister, dated March 20, 2002, as amended by
an agreement dated December 2, 2002, Cornet Capital has agreed with us to place
$1,000,000 of our common stock with investors and use its best efforts to raise
an additional $2,500,000. In consideration of Cornet's agreement, we issued
800,064 shares of our common stock to Cornet. These shares were held in escrow
under an agreement between our company, Cornet and an escrow agent dated as of
May, 2002. Under the agreement, the escrow agent was to release the shares to
Cornet upon receipt of notice from us that Cornet has raised at least $1,000,000
for us. The shares were released from escrow on closing of our initial public
offering in June 2003. Neither Cornet nor Mr. McAlister will receive any
additional compensation.
14
The agreement with Cornet Capital also provides for a loan facility for up
to $500,000 between Cornet and us. Cornet has agreed to enter into a loan
agreement with us under which we may draw down funds up to $500,000 for three
years from December 2, 2002 as we need them. Advances under the loan agreement
will bear interest at 3% per annum above the U.S. dollar prime rate of the Royal
Bank of Canada. We will also issue to Cornet a number of shares of our common
stock equal to 20% of the dollar amount of the advance, divided by the
discounted market price of our shares on the TSX Venture Exchange.
On February 14, 2003, we issued an uncollateralized promissory note in the
principal amount of $100,000 that pays interest at 10% per annum to Cornet
Capital Corp. as security for a loan of $100,000 cash. Principal and interest is
payable on demand and in any event before February 14, 2004. This borrowing was
not made under the loan facility with Cornet Capital Corp. No shares were issued
to Cornet Capital Corp. in connection with this borrowing. At the closing of our
IPO in June 2003, Cornet Capital Corp. was repaid principal of $100,000 and
accrued interest thereon of $3,611.
On April 29, 2003, we issued a further uncollateralized promissory note in
the amount of $75,000 that pays interest at 10% per annum to Cornet Capital
Corp. as security for a further loan of $75,000 cash. Principal and interest are
payable on April 29, 2004. This borrowing was not made under the loan facility
with Cornet Capital Corp. No shares were issued to Cornet Capital Corp. in
connection with this borrowing. At the closing of our IPO in June 2003, Cornet
Capital Corp. was repaid principal of $75,000 and accrued interest thereon of
$1,146.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Company as of March 31, 2004 by (i)
each person who is known by the Company to beneficially own more than five
percent of the Common Stock, (ii) each nominee for Director of the Company,
(iii) each of the Named Executive Officers (as defined under "Election of
Directors -- Executive Compensation" above), and (iv) all officers and Directors
as a group.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER (1) BENEFICIALLY OWNED OWNERSHIP
Jeffrey D. Hillman (2) 5,334,358 37.2%
Chairman and Chief Scientific Officer
Mento A. Soponis 1,120,133 7.8%
Chief Executive Officer, President
and Director
Brian McAlister (3) 800,064 5.6%
Director
Robert Zahradnik 756,000 5.3%
Director
Brian Anderson (4) 20,000 *
Director
David J. Gury 0 *
Director
Paul A. Hassie (4) 10,000 *
Chief Financial Officer,
Secretary and
Treasurer
ALL OFFICERS AND DIRECTORS AS A 8,040,555 56.1%
GROUP (7 PERSONS)
______________________
* Less than one percent.
(1) Except as indicated in the footnotes set forth below, the persons named in
the table have sole voting and investment power with respect to all shares
shown as beneficially owned by them. The numbers of shares shown include
shares that are not currently outstanding but which certain shareholders
are entitled to acquire or will be entitled to acquire within 60 days,
upon the exercise of stock options. Such shares are deemed to be
outstanding for the purpose of computing the percentage of Common Stock
owned by the particular shareholder and by the group but are not deemed to
be outstanding for the purpose of computing the percentage ownership of
any other person. Except as indicated in the table, the business address
of all persons named in the table is 12085 Research Drive, Alachua,
Florida 32615.
(2) Represents shares held directly by Jeffrey D. Hillman 2002 Trust and
Jeffrey D. Hillman Grantor Retained Annuity Trust.
(3) Represents shares held directly by Cornet Capital Corp., a corporation
wholly owned by Mr. McAlister.
(4) Represents stock options currently exercisable or exercisable within 60
days.
16
ESCROWED SECURITIES
National Escrow Policy. Under Canadian National Policy 46-201 "Escrow for
Initial Public Offerings," those of our shares of common stock which are held by
our Principals must be held in escrow. A "Principal" is:
(i) a director or senior officer of our company or of a material operating
subsidiary of our company;
(ii) a person or company who has acted as our promoter during the two years
before our initial public offering completed in June 2003;
(iii) a person or company who owns or controls more than 10% of our voting
securities immediately before and immediately after completion of our
initial public offering if that person has elected or appointed or has the
right to elect or appoint one of our directors or senior officers or a
director or officer of a material operating subsidiary of our company;
(iv) a person or company who owns or controls more than 20% of our voting
securities immediately before and immediately after completion of our
initial public offering; and
(v) associates and affiliates of any of the foregoing persons.
All of our directors and senior officers are Principals. Under the
National Escrow Policy, we have entered into an escrow agreement with
Computershare Trust Company of Canada as escrow agent, and our Principals dated
March 28, 2003. Under the escrow agreement, our Principals initially deposited
their common shares aggregating 8,200,764 or 68.8% in escrow with the escrow
agent. The number and holders of our common shares that were initially subject
to escrow under the escrow agreement were as follows:
NUMBER OF ESCROW
NAME OF PRINCIPAL SHARES HELD
- --------------------- ----------------
Jeffrey Hillman 5,400,108
Mento A. Soponis 1,244,592
Robert Zahradnik 756,000
Cornet Capital Corp. (1) 800,064
----------
8,200,764
______________________
(1) Brian McAlister, one of our directors, is the sole shareholder and
director of Cornet Capital Corp.
______________________
Under the terms of the escrow agreement, the escrow agent released 10% and
15% of our Principals' common shares from escrow on June 24, 2003 and December
24, 2003, respectively. As of March 31, 2004, an aggregate of 6,150,573 shares
of our Principals' common stock, 43.0%, remain in escrow. Our Principals'
remaining common shares held in escrow will be released from escrow every 6
months as set forth in the following table.
% OF ESCROWED SHARES
RELEASE DATE TO BE RELEASED
- ------------- ----------------------
June 24, 2004 15%
December 24, 2004 15%
June 24, 2005 15%
December 24, 2005 15%
June 24, 2006 15%
We are an "emerging issuer" as defined in the National Escrow Policy. A
faster, 18 month (from the initial public offering date) release schedule
applies to "established issuers" under the policy. If we become an "established
issuer" while our Principals' common shares are in escrow, we will "graduate."
If we graduate, there will be a catch-up release and an accelerated release of
our Principals' common shares that remain in escrow under the 18 month schedule
as if we were originally an established issuer. We will "graduate" from being an
"emerging" issuer to an "established" issuer if:
17
1. Our shares of common stock are listed on the Toronto Stock Exchange;
2. We are classified as a Tier 1 issuer on the TSX Venture Exchange.
Under the National Policy escrow agreement, our Principals' common shares
may not be transferred or otherwise dealt with while they are in escrow unless
the transfers or dealings are:
(i) transfers to our directors and senior officers, with approval of our board
of directors;
(ii) transfers to a person or company that before the transfer holds more than
20% of the voting rights attached to our outstanding securities;
(iii) transfers to a person or company that after the transfer will hold more
than 10% of the voting rights attached to our outstanding securities and
has the right to elect or appoint one or more of our directors or senior
officers;
(iv) transfers to an RRSP or similar trusteed plan provided that the only
beneficiaries are the transferor or the transferor's spouse or children;
(v) transfers upon bankruptcy to the trustee in bankruptcy; pledges to a
financial institution as collateral for a good faith loan, and upon a
realization; or
(vi) tenders of escrowed securities to a take-over bid, provided that if the
person tendering to the bid is a Principal of the company resulting from
completion of the take-over bid, the securities the Principal receives in
exchange for tendered escrowed securities will be placed in escrow on the
basis of the resulting company's escrow classification.
Shares must remain in escrow after a permitted transfer. The Principals
are able to vote all shares held in escrow.
TSX Venture Exchange Escrow Policy. The TSX Venture Exchange applies its
own escrow requirements to initial listings. The Exchange's Seed Share Resale
Restrictions are hold periods of various lengths that apply where shares are
issued to non-Principals prior to an initial public offering. The purchase price
of those shares, and the time of their purchase relative to the date of issue of
the receipt for preliminary prospectus receipt for an initial public offering
determines which Exchange hold period will apply. The University of Florida
Research Foundation, Inc. is subject to the TSX Venture Exchange escrow
requirements with respect to the 599,940 shares it acquired on July 15, 1999 as
consideration for the grant of the license to the Company:
The University of Florida Research Foundation, Inc. is subject to a Value
Security Escrow Agreement dated March 28, 2003. A Value Security Agreement
imposes a schedule of escrow release for TSX Venture Exchange Tier 2 Issuers
that is identical to that of the National Escrow Policy described above. As of
March 31, 2004, 449,955 shares remain subject to the terms of the escrow
agreement.
Pooling Agreement. The underwriter of our initial public offering, Haywood
Securities Inc., required that certain of our shareholders who were not
otherwise subject to escrow under the National Escrow Policy or TSX Venture
Exchange requirements place a total of 625,000 of their shares in escrow under
an escrow agreement between Computershare Trust Company, those shareholders,
Haywood and us. The escrow agreement is dated March 28, 2003. Under this escrow
agreement, one sixth of the shares subject to escrow is released every three
months following the closing of our initial public offering, with the first
release occurring upon closing of our initial public offering. All of these
shares will have been released from escrow by September 24, 2004. As of March
31, 2004, 208,333 shares remain subject to the terms of the escrow agreement.
18
EQUITY COMPENSATION PLAN INFORMATION
The Company has reserved an aggregate of 1,000,000 shares of the Company's
common stock for issuance pursuant to its 2002 Stock Option and Incentive Plan
(subject to the approval of Proposal II by the shareholders to increase the
amount of shares available to 1,500,000). The per share exercise price of each
stock option or similar award granted under these plans must be at least equal
to the closing fair market value of the stock on the date of grant. The
following table represents the number of shares issuable upon exercise and
reserved for future issuance under these plans as of December 31, 2003.
NUMBER OF
SECURITIES
NUMBER OF REMAINING AVAILABLE
SECURITIES TO BE WEIGHTED-AVERAGE FOR FUTURE ISSUANCE
ISSUED UPON EXERCISE PRICE OF UNDER EQUITY
EXERCISE OF OUTSTANDING COMPENSATION PLANS
PLAN CATEGORY OUTSTANDING OPTIONS, WARRANTS (EXCLUDING
OPTIONS, WARRANTS AND RIGHTS SECURITIES
AND RIGHTS REFLECTED IN COLUMN (A))
(A) (B) (C)
- ------------------------ --------------------- --------------------- ---------------------
EQUITY COMPENSATION
PLANS APPROVED BY 600,000 $2.22 400,000
SECURITY HOLDERS
- ------------------------ --------------------- --------------------- ---------------------
EQUITY COMPENSATION
PLANS NOT APPROVED BY N/A N/A N/A
SECURITY HOLDERS
- ------------------------ --------------------- --------------------- ---------------------
TOTAL 600,000 $2.22 400,000
- ------------------------ --------------------- --------------------- ---------------------
19
PROPOSAL II
APPROVAL OF AMENDMENT TO STOCK INCENTIVE PLAN TO PROVIDE ADDITIONAL SHARES
The Company adopted the Oragenics, Inc. 2002 Stock Option and Incentive
Plan (the "Plan") on September 17, 2002. The purpose of the Plan is to give the
Company and its affiliates a competitive advantage in attracting, retaining and
motivating officers, employees, non-employee directors, Advisory Board members
and consultants, and to provide the Company and its affiliates with a stock plan
providing incentives linked to the financial results of the Company's businesses
and increases in shareholder value.
Currently, the number of shares of Common Stock authorized for issuance
under the Plan is 1,000,000 shares. However, as of March 31, 2004, only 260,000
shares remain available for issuance under the Plan (subject to increases
resulting from the forfeiture and termination of previously issued awards as
discussed below).
The Board of Directors has unanimously adopted, subject to stockholder
approval at the Annual Meeting and TSX Venture Exchange acceptance, an amendment
to the Plan (the "Plan Amendment"), to increase the number of shares of Common
Stock authorized for issuance pursuant to the Plan from 1,000,000 to 1,500,000
shares. The increase is considered necessary and in the best interest of the
Company to permit the Company to continue to attract, retain and motivate
officers, employees, non-employee directors and consultants. The Plan Amendment
will not affect any other terms of the Plan.
SUMMARY OF THE PLAN
The following is a summary of the Plan:
o Only those individuals who are bona fide directors, employees and key
consultants of our company may participate in the plan.
o The plan will be administered by a committee of at least two directors
appointed by our board of directors. Where directors, senior officers, 10%
beneficial owners of our securities or those committee members are in a
position to receive stock options, the board will decide as a whole about
the grant of options to them, or appoint two non-employee directors to
serve as the committee members with respect to such options.
o Subject to any antidilution adjustments permitted under the plan, the
maximum number of shares that may be issued upon the exercise of stock
options granted under the plan may not exceed 1,000,000 (1,500,000 subject
to the approval of this Proposal II) shares of common stock.
o All options we grant under the plan will have a vesting period of at least
18 months from the date they are granted, with either (a) equal release of
shares on a quarterly basis; or (b) the release of the majority of the
shares later in the vesting period.
o The exercise price of stock options will be determined by the committee.
The minimum exercise price will be the closing price of our shares on the
TSX Venture Exchange on the day prior to the date of grant, less allowable
discounts.
o If an option expires and it has not been exercised in full, or if an
option is otherwise terminated without having been exercised in full, the
number of shares which were subject to the expired or terminated option
will again be available for the purposes of the plan.
o All options which we grant under the stock option plan must expire no more
than five years from the date on which the committee grants and we
announce the granting of the option.
o If an option holder ceases to be a director of our company or ceases to be
employed by our company (other then by reason of death), then the option
granted shall expire no later than the 90th day following the date that
the option holder ceases to be a director or ceases to be employed by us,
subject to the terms and conditions set out in the plan.
o For so long as we are classified as a Tier 2 company on the TSX Venture
Exchange, all the options we grant under the plan will vest as determined
by the committee in accordance with the requirements of the TSX Venture
Exchange and the plan will be administered in accordance with the
requirements of the TSX Venture Exchange.
o No individual may receive grants of options to purchase more than 5% of
our issued and outstanding shares during any one year period.
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o The aggregate number of shares reserved for issuance under options that
have been granted to insiders cannot exceed 10% of our outstanding shares,
and the aggregate number of shares issued to insiders under the plan
cannot exceed 10% of our outstanding shares in any one year period.
o No options we grant under the stock option plan may be assigned or
transferred, other than by will or the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order if it is a non-incentive
stock option.
Stock options granted under the Plan may include incentive stock options
(as defined), nonqualified stock options or both. The term of each stock option
is fixed by the Compensation Committee and stated in the option agreement, but
in no event may the term be more than ten years from the date of grant. Stock
options are not transferable other than by will or the laws of descent and
distribution. Vested stock options may be exercised in whole or in part by
payment of the exercise price by certified or bank check or other instrument
acceptable to the Company or, if approved by the Compensation Committee, in the
form of unrestricted Common Stock already owned by the participant for at least
six months of the same class as the Common Stock subject to the stock option. In
addition, the Compensation Committee, in its discretion, may allow the cashless
exercise of stock options.
The Compensation Committee, in its discretion, may allow payment of the
exercise price by the delivery of a properly executed exercise notice, together
with a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the purchase price, and, if
requested by the Company, the amount of any federal, state, local or foreign
withholding taxes. When the participant's employment with the Company or one of
its applicable affiliates is terminated for cause, all stock options held by the
participant are immediately terminated and canceled. Upon a participant's death
or when the participant's employment with the Company or one of its applicable
affiliates is terminated for any reason other than for cause, the participant's
then-unvested stock options are forfeited and the participant or his or her
legal representative may, within up to 90 days if such termination of employment
is for any reason other than death or disability, or within one year in the case
of the participant's death or disability, exercise any previously vested stock
options.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
our Chief Executive Officer or any of the four other most highly compensated
officers. Certain performance-based compensation is specifically exempt from the
deduction limit if it otherwise meets the requirements of Section 162(m). One of
the requirements for equity compensation plans is that there must be a limit to
the number of shares granted to any one individual under the plan. Accordingly,
the Plan provides that the committee shall not grant an incentive stock option
such that the fair market value of the underlying stock to which the option is
exercisable for the first time during any calendar year is in excess of
$100,000.
The Compensation Committee shall determine to whom and the time at which
grants of restricted stock will be awarded under the Plan, the number of shares
to be awarded, and the conditions for vesting. The terms and conditions of
restricted stock awards shall be set forth in a restricted stock agreement,
including provisions permitting the Company to hold the restricted stock in
custody until the restrictions lapse.
Upon a change of control transaction as described in the Plan, the
Compensation Committee may, in its sole discretion, do one or more of the
following:
o shorten the period during which stock options are exercisable;
o accelerate any vesting schedule to which a stock option or restricted
stock award is subject; or
o cancel stock options or unvested stock awards upon payment to the
participants in cash, with respect to each stock option or restricted
stock award to the extent then exercisable or vested, including, if
applicable, any stock options or restricted stock awards as to which the
vesting schedule has been accelerated by decision of the Compensation
Committee because of the change of control transaction, of an amount that
is the equivalent of the excess of the fair market value of the Common
Stock at the effective time of the change of control transaction over, in
the case of stock options, the exercise price of the stock option.
21
The Compensation Committee may also provide for one or more of the
foregoing alternatives in any particular award agreement. The Compensation
Committee may grant to any participant, on terms and conditions determined by
the Committee, the right to receive cash payments to be paid at that time if an
award results in compensation income to the participant in order to assist the
participant in paying the resulting taxes.
If any shares of restricted stock are forfeited or if any stock option
(and related stock appreciation right, if any) terminates without being
exercised, is exercised or settled for cash, the shares subject to such awards
shall again be available for distribution in connection with awards under the
Plan.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, the optionee will recognize
long-term capital gain or loss equal to the difference between the sale price
and the exercise price. If the holding periods are not satisfied, then: (1) if
the sale price exceeds the exercise price, the optionee will recognize capital
gain equal to the excess, if any, of the sale price over the fair market value
of the shares on the date of exercise and will recognize ordinary income equal
to the difference, if any, between the lesser of the sale price or the fair
market value of the shares on the exercise date and the exercise price; or (2)
if the sale price is less than the exercise price, the optionee will recognize a
capital loss equal to the difference between the exercise price and the sale
price. Unless limited by Section 162(m) of the Code, we are entitled to a
deduction in the same amount as and at the time the optionee recognizes ordinary
income.
Non-Statutory Stock Options. An optionee does not recognize any taxable
income at the time a non-statutory stock option is granted. Upon exercise, the
optionee recognizes taxable income generally measured by the excess of the then
fair market value of the shares over the exercise price. Any taxable income
recognized in connection with an option exercise by an employee of ours is
subject to tax withholding by us. Unless limited by Section 162(m) of the Code,
we are entitled to a deduction in the same amount as and at the time the
optionee recognizes ordinary income. Upon a disposition of such shares by the
optionee, any difference between the sale price and the exercise price, to the
extent not recognized as taxable income as provided above, is treated as
long-term or short-term capital gain or loss, depending on the holding period.
Stock Awards. Stock awards will generally be taxed in the same manner as
non-statutory stock options. However, a restricted stock award is subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code to
the extent the award will be forfeited in the event that the employee ceases to
provide services to us. As a result of this substantial risk of forfeiture, the
employee will not recognize ordinary income at the time of award. Instead, the
employee will recognize ordinary income on the dates when the stock is no longer
subject to a substantial risk of forfeiture, or when the stock becomes
transferable, if earlier. The employee's ordinary income is measured as the
difference between the amount paid for the stock, if any, and the fair market
value of the stock on the date the stock is no longer subject to forfeiture.
The employee may accelerate his or her recognition of ordinary income, if
any, and begin his or her capital gains holding period by timely filing (i.e.,
within thirty days of the award) an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as the
difference between the amount paid for the stock, if any, and the fair market
value of the stock on the date of award, and the capital gain holding period
commences on such date. The ordinary income recognized by an employee will be
subject to tax withholding by us. Unless limited by Section 162(m) of the Code,
we are entitled to a deduction in the same amount as and at the time the
employee recognizes ordinary income.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME
TAXATION UPON AWARDEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF
AWARDS UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS
THE TAX CONSEQUENCES ARISING IN THE CONTEXT OF THE EMPLOYEE'S DEATH OR THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE'S INCOME OR GAIN MAY HE TAXABLE.
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ACCOUNTING TREATMENT
Option grants or stock issuances made to employees under the Plan that
have fixed exercise or issue prices that are equal to or greater than the fair
market value per share on the grant or issue date and that have a fixed number
of shares as associated with the award will not result in any direct charge to
the Company's reported earnings. However, the fair value of those awards is
required to be disclosed in the notes to the Company's financial statements, and
the Company also must disclose, in the notes to its financial statements, the
pro forma impact those awards would have upon the Company's reported earnings
and earnings per share were the fair value of those awards at the time of grant
treated as a compensation expense over the life of the award.
Option grants or stock issuances made to employees under the Plan that
have fixed exercise or issue prices that are less than the fair market value per
share on the grant or issue date and that have a fixed number of shares
associated with the award will result in a direct compensation expense in an
amount equal to the excess of such fair market value over the exercise or issue
price. The expense must be amortized against the Company's earnings over the
period that the options or issued shares are to vest.
The Financial Accounting Standards Board has initiated a project to
consider the appropriate accounting treatment for employee stock options.
Accordingly, the foregoing summary of the applicable accounting treatment for
options may change substantially.
TERMINATION AND AMENDMENT
The authority to grant incentive stock options terminates on September 17,
2012. However, awards outstanding at that time will not be affected or impaired
by the termination for granting incentive stock options. The Board has authority
to amend, alter or discontinue the Plan and the compensation committee has the
authority to amend awards granted thereunder, but no amendment may impair the
rights of any participant thereunder without the participant's consent. In
addition, shareholder approval is required for certain types of amendments to
the Plan, including but not limited to
INCORPORATION BY REFERENCE
The foregoing is only a summary of the Plan and is qualified in its
entirety by reference to its full text, a copy of which is filed as Exhibit
10.26 to our Form 10-KSB and the Plan Amendment which is attached hereto as
Appendix E.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock of the
Company present in person or represented by proxy and entitled to vote at the
Meeting is necessary for approval of the Plan Amendment to increase the number
of shares available under the Plan. On this matter, abstentions are treated as
being entitled to vote and broker non-votes are treated as not being entitled to
vote at the meeting. If the Plan Amendment is not approved, the Plan will
continue in full force without any increase in the number of shares of Common
Stock available under the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE PLAN AMENDMENT.
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SHAREHOLDER PROPOSALS
FOR 2005 ANNUAL MEETING OF SHAREHOLDERS
Proposals of shareholders, including nominations for the Board of
Directors, intended to be presented at the Company's annual meeting of
shareholders to be held in 2005 should be submitted by certified mail, return
receipt requested, and must be received by the Company at its executive offices
in Alachua, Florida on or before December 24, 2004 to be eligible for inclusion
in the Company's Proxy Statement and Proxy relating to that meeting. Any
shareholder proposal must be in writing and must set forth (i) a description of
the business desired to be brought before the meeting and the reasons for
conducting the business at the meeting, (ii) the name and address, as they
appear on the Company's books, of the shareholder submitting the proposal, (iii)
the class and number of shares that are beneficially owned by such shareholder,
(iv) the dates on which the shareholder acquired the shares, (v) documentary
support for any claim of beneficial ownership, (vi) any material interest of the
shareholder in the proposal, (vii) a statement in support of the proposal, and
(viii) any other information required by the rules and regulations of the
Commission.
OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
Directors, officers or other employees of the Company personally, by telephone
or by telegraph. The Company does not expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers, custodians or other persons
holding stock in their names or in the names of nominees for their expenses in
sending proxy materials to principals and obtaining their instructions.
MISCELLANEOUS
Management does not know of any matters to be brought before the Annual
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in accordance with their best judgment on such matters.
Representatives from Ernst & Young LLP are not expected to be present at the
Annual Meeting and, therefore, will not be making a statement or be available to
respond to questions.
INTERIM CORPORATE MAILINGS
In accordance with National Instrument 54-102 of the Canadian Securities
Administrators, registered and beneficial shareholders of the subject
Corporation may elect annually to receive interim corporate mailings, including
interim financial statements of the Corporation, if they so request. If you wish
to receive such mailings, please complete the form in Exhibit F and mail as
instructed on the form.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
Accompanying this Proxy Statement is a copy of the Company's Annual Report
on Form 10-KSB for 2003. Shareholders who would like additional copies of the
Annual Report on Form 10-KSB should direct their requests in writing to:
Oragenics, Inc., 12085 Research Drive, Alachua, Florida 32615, Attention: Paul
Hassie, Secretary.
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APPENDIX A
ORAGENICS, INC.
BOARD OF DIRECTORS
CORPORATE GOVERNANCE POLICY
MARCH 22, 2004
1. PURPOSE
The Board of Directors of Oragenics, Inc. has adopted this policy statement to
set forth its views on significant issues of corporate governance.
2. PRIMARY FUNCTIONS OF THE BOARD OF DIRECTORS
The Board of Directors is expected to promote the best interests of the
shareholders in terms of corporate governance; fiduciary responsibilities;
compliance with applicable laws and regulations; and maintenance of accounting,
financial, and other controls. Their primary responsibility is to provide
effective guidance of the affairs of the Company for the benefit of its
shareholders.
3. ACCESS TO MANAGEMENT AND OUTSIDE ADVISORS
The Directors have complete access to the Company's senior management, including
the executive officers. As a courtesy, Directors should use judgment to ensure
this contact would not be disruptive to the business operations of the Company
and any written requests for information should be copied to the Chief Executive
Officer. The Board expects that from time to time executives and/or managers
will be present at Board meetings to provide additional insight into the items
being discussed and to provide the Board the opportunity to evaluate their
performance and management skills. The Board shall also have access to the
Company's outside counsel and auditors and may retain outside counsel of its
choice with respect to any issue relating to any of its activities.
4. SIZE OF THE BOARD OF DIRECTORS
The Board periodically reviews its size and adopts changes it determines to be
appropriate given the needs of the Company. Under the Company's Bylaws, the
number of members on the Board may be increased or decreased by resolution of
the Board.
5. MIX OF INSIDE AND OUTSIDE DIRECTORS
A majority of the Board should be independent Directors. There are significant
advantages to be derived from representation on the Board of the Company's
management, however, and it is appropriate that the Chief Executive Officer
serve on the Board. The Chief Executive shall not serve as Chairman of the
Board.
6. DEFINITION OF INDEPENDENCE FOR OUTSIDE DIRECTORS
The Board has adopted the following definition of "independence": a Director
will not be considered as "Independent" if the Director (1) is an employee or
was an employee of the Company within the past two (2) years, (ii) has received
more than $60,000 in compensation (this $60,000 limit includes receipt of
payments by a family member of the director), or (iii) is the spouse, parent,
child, or sibling of an executive officer of the Company, or (iv) owns or
controls 10% or more of stock of the Company. The status of each Director as
Independent under the foregoing definition is reviewed annually by the Board.
7. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
Board members are expected to prepare for, attend, and participate in meetings
of the Board and the committees of which they are members. Although the Board
recognizes that, on occasion, circumstances may prevent Board members from
attending meetings, the Board expects its members to ensure that other
commitments do not materially interfere with the performance of their duties.
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8. SELECTION OF BOARD MEMBERS
The Board is responsible for filling vacancies in its membership, replacing
directors who are unable to continue to serve effectively, and nominating
candidates to stand for election at the annual meeting of shareholders. The full
Board identifies and screens candidates when a vacancy is to be filled.
9. BOARD MEMBERSHIP CRITERIA AND SELECTION OF NEW DIRECTOR CANDIDATES
The Board is responsible for reviewing candidates for election as members of the
Board. Consideration of potential candidate is based upon the assessment of the
individual's background, skills, and abilities and such characteristics that
qualify the individual to fulfill the needs of the Board at that time.
10. SELECTION OF AGENDA
The Chief Executive Officer shall establish the agenda for each Board meeting.
Any Director may suggest inclusion of additional items on the agenda and it is
anticipated that the agenda will be distributed at least one (1) week in advance
of the Board meeting. Directors may also raise at any regular Board meeting
subjects for discussion that are not on the formal agenda; however, the desire
for inclusion of such items should be communicated to the Chief Executive
Officer or Corporate Secretary in advance of the meeting. The agenda should
allow for holding periodic sessions of the independent directors only.
11. DISTRIBUTION OF BOARD MATERIALS
In addition to the Board agenda, information that is important to the Board's
understanding of the business of the Company shall be distributed to Directors
prior to each Board meeting. Directors also receive interim financial reports as
well as certain press releases, analysts reports, and other information designed
to keep them informed of the material aspects of the Company's business
performance and prospects.
12. TERM LIMITS OF THE BOARD
The Board's term expires each year at the annual meeting. Currently, the size of
the Board is six (6) members, although an increase in the membership would be
appropriate in order to accommodate the availability of an outstanding Board
candidate. The Board also believes that as a matter of policy a majority of the
members of the Board should be Independent Directors.
At the end of the term, unless the Director no longer desires to remain a
Director and subject to the recommendation of the Board, the Director will stand
for re-election at the Company's Annual Meeting of Shareholders.
13. COMPENSATION OF THE BOARD MEMBERS
The Board establishes the form and amount of compensation of outside directors.
Outside directors are called on to devote significant time and energy to the
performance of their duties. To attract and retain able and experienced
directors, the Company must compensate them fairly. In general, the Board
believes that the compensation for outside directors should consist of both
stock options and cash. Any changes in Director compensation are to be
recommended by the Compensation Committee with concurrence by the Board of
Directors. Directors who are employees of the Company receive no additional
compensation for service on the Board.
14. AUDIT COMMITTEE
The Audit Committee's functions include appointing the independent auditors for
the Company; establishing and reviewing the activities of the independent
auditors; reviewing recommendations of the independent auditors and the
responses of management to such recommendations; and reviewing and discussing
with the independent auditors and the Company's management of the Company's
financial reporting, loss exposures and internal controls. In addition, the
Committee reviews and recommends debt and equity financings; and reviews and
approves the annual financial and capital plans.
26
15. COMPENSATION COMMITTEE
It is the responsibility of the Committee to ensure that the Company's
compensation, benefits and management development philosophy will be
sufficiently competitive to attract and retain skilled employees and leaders,
will be appropriate to the businesses in which the Company competes and will be
internally fair to the employees of the Company. The Committee communicates to
shareholders the Company's compensation policies and the reasoning behind such
policies as required by the Securities and Exchange Commission. The Committee
also monitors the development and selection of key executive and management
personnel, and the administration of management development and succession
planning.
16. COMMITTEE CHARTERS
Each standard Committee shall have a board-approved written charter detailing
its duties.
17. OTHER COMMITTEES
The Board may also establish other Committees from time to time to deal with
specific issues.
18. COMMITTEE COMPOSITION
It is the policy of the Board that only Independent Directors serve on the Audit
and Compensation Committees. In addition, the composition of the Audit and
Compensation Committees will be reviewed annually to ensure that each of its
members meet the criteria set forth in applicable SEC and listing exchange rules
and regulations.
19. ASSIGNMENT AND ROTATION OF COMMITTEE MEMBERS
The Board of Directors with direct input from the Chief Executive Officer,
determines the membership of the various Committees and their Chairman. The
Board will take into consideration the continuity; subject matter expertise;
tenure; and experience of the individual Board members in deciding Committee
membership.
20. FREQUENCY AND LENGTH OF COMMITTEE MEETINGS
The Chair of each Committee, in consultation with its members and appropriate
officers, determines the frequency and length of the meetings of the Committee.
In addition, the Chairman of a Committee or the Chief Executive Officer may call
a special meeting of a Committee at any time.
21. COMMITTEE AGENDAS/REPORTS TO THE BOARD
Appropriate members of management and staff will prepare draft agendas and
related background information for each Committee meeting which, to the extent
desired by the relevant Committee Chairman, will be reviewed and approved by
such Chairman in advance of distribution to the other Committee members. Any
background materials, together with such agenda, should be distributed to
Committee members and Corporate Secretary in advance of the meeting for their
review and discussion. In addition, each Committee member is free to suggest
items for inclusion on the agenda and to raise at any Committee meeting subjects
that are not on the agenda for that meeting.
Reports on the items considered on each Committee meeting are to be furnished to
the full Board at its next meeting. In addition, all Directors are to be
furnished copies of each Committee's minutes.
22. FREQUENCY OF BOARD MEETINGS
The Board has four (4) regularly scheduled meetings per year and special
meetings are called as necessary.
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23. MEETING OF INDEPENDENT DIRECTORS
The "independent" members of the Board shall meet periodically without the Chief
Executive Officer to discuss any matters that any of them believe should be
discussed privately.
24. LOCATION OF MEETINGS
The meetings of the Board and the Committees are routinely held at the offices
of the Company, in Alachua, Florida or will be held by telephonic conferencing,
but occasionally will be held at other locations to provide consideration for
time and convenience for its members.
25. RELATED PARTY TRANSACTIONS
The Company's Audit Committee will be responsible for reviewing all related
party transactions. A related party is one who can exercise control or
significant influence over the Company to the extent that either the related
party or the Company may be prevented from pursuing its own separate interest.
26. ORIENTATION AND CONTINUING EDUCATION
Members of the Board are selected with attention to their diverse professional
backgrounds and experience. In addition to their individual professional
expertise, it is important that members of the Board be knowledgeable about the
Company and its business. They should also be familiar with the duties and
responsibilities of directors of public companies and emerging practices in
corporate governance.
Presentations on, and discussions of, various aspects of the Company and its
business are a significant part of each regular Board and Committee meeting.
Various members of the Company's management are called on to make presentations,
which allows the Board to become familiar with the leadership talents and
business acumen in those Company employees. From time to time, the Company will
provide Board members with product demonstrations, facility tours and other
special presentations intended to deepen their familiarity with the Company and
its industry.
Board members are encouraged to attend seminars, conferences and other
continuing education programs designed especially for directors of public
companies. Although most of the outside directors have significant experience on
boards of directors, participation in such programs is encouraged by the
Company.
27. SERVICE ON OTHER BOARDS
Interference with the performance of a director's duties to the Company by his
or her service on other boards depends on the individual. Accordingly, the Board
does not believe it wise to establish a fixed policy regarding the number of
other boards of directors on which one of its members may serve. However, in
selecting nominees for membership, the Board will take into account the other
demands on the candidate and will attempt to avoid candidates whose other
responsibilities might interfere with effective service to the Company.
28. CODE OF CONDUCT/CODE OF ETHICS
The Company will maintain a Code of Business Conduct and Ethics for all its
employees and directors. All officers, directors and employees are vested with
both the responsibility and authority to protect and preserve the interests of
all of the Company's stakeholders, including shareholders, clients, employees,
suppliers, and citizens of the communities in which we conduct business,
Embodied within our Code of Conduct/Code of Ethics will be specific guidance
with regard to the responsibilities of our financial management employees.
Financial management employees will fulfill their responsibility by prescribing
and enforcing the policies and procedures employed in the operation of the
Company's financial organization.
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APPENDIX B
ORAGENICS, INC.
CODE OF BUSINESS CONDUCT AND ETHICS
MARCH 26, 2004
PURPOSE AND SCOPE
Since our founding, we have insisted that all of our employees maintain the
highest level of integrity in their dealings with us and on our behalf with
entities with which we do business. This Code of Business Conduct and Ethics is
intended to document the principles of conduct and ethics to be followed by our
directors, officers and employees. Its purpose is to deter wrongdoing and to
promote:
o Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o Full, fair, accurate, timely, and understandable disclosure in the
reports and documents that we file with, or submit to, the SEC and
in other public communications made by us;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the Code to an
appropriate person or persons identified in the Code; and
o Accountability for adherence to the Code.
HONEST AND ETHICAL CONDUCT
All employees must at all times deal fairly with our customers, suppliers,
competitors and employees and not take unfair advantage of anyone through
manipulation, concealment, abuse of privileged information, misrepresentation of
facts or any other unfair-dealing practice. All employees will exhibit and
promote the highest standards of honest and ethical conduct through the
adherence to policies and procedures that:
o Encourage and reward professional integrity in all aspects of the
organization, by eliminating inhibitions and barriers to responsible
behavior, such as coercion, fear of reprisal, or alienation from
Oragenics.
o Prohibit and eliminate the appearance or occurrence of conflicts
between what is in the best interest of Oragenics and what could
result in material personal gain for a member of the Company.
o Provide a mechanism for employees of Oragenics to inform senior
management of deviations in practice from policies and procedures
governing honest and ethical behavior.
o Demonstrate their personal support for such policies and procedures
through periodic communication reinforcing these ethical standards
throughout the organization.
ACCURATE REPORTING AND COMMUNICATIONS
All employees must honestly and accurately report all business transactions,
including records, time sheets and reports. No undisclosed or unrecorded account
or fund shall be established for any purpose. No false or misleading entries
shall be made in Oragenics books or records for any reason, and no disbursement
of corporate funds or other corporate property shall be made without adequate
supporting documentation or for any purpose other than as described in the
documents.
29
Senior Officers and all employees will manage the Company's transaction and
reporting systems and establish procedures to ensure that:
o Business transactions are properly authorized and completely and
accurately recorded on Oragenics' books and records in accordance
with Generally Accepted Accounting Principles (GAAP) and established
company financial policy.
o The retention or proper disposal of Company records shall be in
accordance with established Company financial policies and
applicable legal and regulatory requirements.
o Periodic financial reports and communications are delivered in a
manner that facilitates the highest degree of clarity of content and
meaning so that readers and users will quickly and accurately
determine their significance and consequence.
COMPLIANCE WITH LAWS, RULES AND REGULATIONS
All employees must at all times comply with applicable laws, rules and
regulations. Employees are strictly prohibited from trading in our stock or
securities while in possession of material, nonpublic information about our
Company, as delineated in our "Insider Trading Policy" adopted by our Board of
Directors on March 22, 2004.
Senior Financial Officers will establish and maintain mechanisms to:
o Educate appropriate members of Oragenics about any federal, state or
local statute, regulation or administrative procedure that affects
the operation of the Company.
o Monitor the compliance of the Company with any applicable federal,
state or local statute, regulation or administrative rule.
o Identify, report and correct in a swift and certain manner any
detected deviations from applicable federal, state or local statute
or regulation.
CONFLICTS OF INTEREST, SAFEGUARDING OF ASSETS AND CONFIDENTIALITY
Employees must avoid conflicts of interest or the appearance of conflicts of
interest. A "conflict of interest" occurs when your private interest interferes
in any way - or even appears to interfere - with the interests of the Company as
a whole.
Employees are expected to use extreme diligence to protect Oragenics' assets and
ensure their efficient use. All Company assets should be used only for
legitimate business purposes. Employees must not:
o use Company property or corporate information for personal purposes
that otherwise should inure to the benefit of Oragenics;
o make it possible for somebody other than the Company to take
advantage of an opportunity in any of our areas of business of which
you become aware in the course of your activities on behalf of the
Company, unless we have expressly decided not to attempt to take
advantage of the opportunity;
o otherwise use Company property, information, or position for
personal gain; or
o compete with Oragenics generally or with regard to specific
transactions or opportunities.
Employees must maintain the confidentiality of all information that Oragenics or
our customers have entrusted to them, except when disclosure is authorized or
legally mandated.
30
CHANGE IN OR WAIVER OF THE CODE
Any waiver of any provision of this Code for executive officers or directors
must be approved by the Board of Directors and promptly disclosed to
shareholders. Any waiver of any provision of this Code for any employee who is
not an executive officer or director must be approved by the Chief Executive
Officer.
COMPLIANCE
If any employee believes there are any violations of this code or any violations
of the requirement of compliance with law, that employee must immediately report
such violations to his/her supervisor, the Chief Financial Officer or the Chief
Executive Officer. Such reports may be either verbal or placed in writing.
Otherwise, employees may report the possible violation directly to the Audit
Committee of our Board of Directors. Such a communication should be in writing
and placed in a sealed envelope and labeled: "To be opened by the Oragenics,
Inc. Audit Committee only." The sealed envelope shall be sent to Oragenics
outside General Counsel as follows:
Shumaker, Loop and Kendrick LLP
101 East Kennedy Blvd., Suite 2800
Tampa, FL 33602
Attn: Darrell C. Smith, Esq.
Complaints may also be submitted to our General Counsel, Attention Darrell C.
Smith, Esq., via telephonic voicemail at 1-800-677-7661 ext. 2226, telefax at
1-813-229-1660, or by email at dsmith@slk-law.com. Any communications received
by our General Counsel will be immediately forwarded to the Chairman of the
Audit Committee of the Board of Directors.
Following receipt of any complaint or concern submitted, the Audit Committee
will investigate each matter and take appropriate action. The Audit Committee
will retain all documents related to any complaints for the statutory period
required.
If an employee reports a possible violation of this Code, the employee's
identity will be kept confidential, except to the extent that the employee
consents to be identified or his/her identification is required by law.
Oragenics will not allow retaliation for reports of possible violations made in
good-faith.
************************************************************************
CODE OF BUSINESS CONDUCT AND ETHICS
ACKNOWLEDGEMENT FORM
I have received and read the Code of Business Conduct and Ethics (the "Code") of
Oragenics, Inc. (the "Company"), and I understand its contents. I agree to
comply fully with the standards contained in the Code and the Company's related
policies, procedures and guidelines. I understand that I have an obligation to
report any suspected violations of the Code of which I am aware. I acknowledge
that the Code is a statement of policies for business conduct and does not, in
any way, constitute an employment contract or an assurance of continued
employment.
- ------------------------------- --------------------------------
Printed Name Date
- -------------------------------
Signature
31
APPENDIX C
ORAGENICS, INC.
AUDIT COMMITTEE CHARTER
MARCH 22, 2004
The Audit Committee has been established by the Board of Directors of
Oragenics, Inc. (the "Company") for the purpose of overseeing the accounting and
financial reporting processes of the Company and audits of the financial
statements of the Company.
The Audit Committee shall be comprised of at least three Directors who
meet the independence, education and experience requirements of the Securities
Exchange Act of 1934, as in effect from time to time. Except as the Board of
Directors may otherwise determine, the Audit Committee shall make its own rules
for the conduct of its business, but unless otherwise permitted by the Board,
its business shall be conducted as nearly as may be in the same manner as the
By-laws of the Company provide for the conduct of business by the Board of
Directors.
The duties of the Audit Committee shall be as follows:
1. The Audit Committee shall be directly responsible for the appointment,
compensation, retention and oversight of the work of any public accounting firm
engaged by the Company (including resolution of disagreements between management
and such firm regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work or performing other audit, review or
attest services for the Company, and each such firm shall report directly to the
Audit Committee.
2. The Audit Committee shall monitor the independence of the Company's
accountants, including any relationship or services that may impact the
objectivity and independence of the Company's accountants and shall obtain a
written statement from the Company's accountants delineating all relationships
between the accountants and the Company. The Audit Committee (or one or more
designated members thereof) shall pre-approve all auditing and non-audit
services (except de minimis non-audit services and auditing services within the
scope of an approved engagement of the accountant) provided to the Company by
the accountant. These accountants shall be ultimately accountable to the Board
of Directors of the Company and the Audit Committee as representatives of the
stockholders.
3. The Audit Committee shall review the Company's financial statements to
be filed with the Securities and Exchange Commission and the results of any
independent audit thereof, including the adequacy of internal controls and
financial accounting policies. The Audit Committee shall review management's
assessment of the effectiveness of the internal control structure and procedures
of the Company for financial reporting and the auditor's attestation and report
on the assessment made by management. The Audit Committee shall review and
discuss the Company's annual audited financial statements with management and
shall recommend to the Board of Directors whether these financial statements
should be included in the Company's Annual Report on Form 10-K to be filed with
the Securities and Exchange Commission.
4. The Audit Committee shall review reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, including
the disclosures under Management's Discussion and Analysis of Financial
Condition and Results of Operations, to the extent required by the rules and
regulations of the Securities and Exchange Commission.
5. The Audit Committee shall review and approve all related-party
transactions.
6. The Audit Committee shall establish procedures for:
(a) the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal controls, or auditing
matters, and
(b) the confidential, anonymous submission by employees of the Company
of concerns regarding questionable accounting or auditing matters.
32
7. The Audit Committee shall oversee or conduct special investigations or
other functions at the request of the Board of Directors.
The Audit Committee shall have the authority to engage, and to determine
appropriate compensation for, independent counsel and other advisers, as it
determines necessary to carry out its duties. The Company shall provide
appropriate funding, as determined by the Audit Committee, for payment of
compensation to any public accounting firm engaged for the purpose of rendering
or issuing an audit report or related work or performing other audit, review or
attest services for the Company and to any advisors employed by the Audit
Committee as provided in this charter. The Audit Committee may request any
officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee. The Audit Committee shall meet as
a separate Committee at least four times per year and as often as it deems
necessary to carry out its duties. The Audit Committee shall make regular
reports to the Board of Directors.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor.
33
APPENDIX D
ORAGENICS, INC.
COMPENSATION COMMITTEE CHARTER
MARCH 22, 2004
PURPOSE
The Compensation Committee is responsible for establishing the compensation of
the Company's Directors and executive officers, including employment agreements,
salaries, bonuses, severance arrangements, and other executive officer benefits.
The Committee also administers the Company's various incentive and stock option
plans and designates both the persons receiving awards and the amounts and terms
of the awards.
ORGANIZATION
The Committee is composed of three directors. No member will be a current or
former employee of the Company. The members of the Committee shall be appointed
by the Board of Directors and shall continue to act until their successors are
appointed, but subject to removal at any time by a majority of the whole Board.
Any resulting vacancy shall be filled by the Board. The Chief Executive Officer
attends meetings as deemed necessary by the Committee. Other executives of the
Company attend the meetings of the Committee by special invitation or as deemed
appropriate.
PRINCIPAL FUNCTIONS
It is the responsibility of the Committee to ensure that the Company's
compensation, benefits and management development philosophy will be
sufficiently competitive to attract and retain skilled employees and leaders,
will be appropriate to the businesses in which the Company competes and will be
internally fair to the employees of the Company. The Committee communicates to
shareholders the Company's compensation policies and the reasoning behind such
policies as required by the Securities and Exchange Commission. The Committee
also monitors the development and selection of key executive and management
personnel, and the administration of management development and succession
planning.
DUTIES
1) Review from time to time and evaluate the Company's overall compensation
philosophy to ensure that management is rewarded appropriately for its
contributions to Company growth and profitability, and that the executive
compensation strategy supports organization objectives and shareholder interest.
2) Review annually and make recommendations to the Board of Directors regarding
the individual elements of total compensation and perquisites for the Chief
Executive Officer and communicate in the annual Board Compensation Committee
Report to shareholders the factors and criteria on which the Chief Executive
Officer's compensation for the last year was based, including the relationship
of the Company's performance to the Chief Executive Officer's compensation.
3) Review and approve the individual elements of total compensation and
perquisites for the executive officers of the Company other than the Chief
Executive Officer, and communicate in the annual Board Compensation Committee
Report to shareholders the specific relationship of corporate performance to
executive compensation.
4) Assure that the Company's cash incentive compensation, stock bonus and stock
option plans for senior management are administered in a manner consistent with
the Company's compensation strategy as to participation, targeting annual
incentive awards, setting and measuring achievement of corporate financial
goals, and determining actual awards paid to senior management.
5) Review and make recommendations to the Board of Directors regarding all new
equity-related incentive plans for senior management.
34
6) Review compensation arrangements with any executive officer.
7) Review the Company's significant employee benefit programs and approve
changes subject, where appropriate, to shareholder or Board of Directors
approval.
8) If appropriate, hire experts in the field of executive compensation to assist
the Committee with its reviews.
9) Annually review the Committee's Charter and update it as appropriate.
10) Such other duties and responsibilities as may be assigned to the Committee,
from time to time, by the Board of Directors of the Company and/or the Chairman
of the Board of Directors, or as designated in benefit plan documents.
MEETINGS
The Committee meets as often as necessary to carry out its responsibilities.
Meetings may be called by the Chairman of the Committee and/or management of the
Company. All meetings of the Committee shall be held pursuant to the Bylaws of
the Company with regard to notice and waiver thereof, and written minutes of
each meeting shall be duly filed in the Company records. Reports of meetings of
the Committee shall be made to the Board of Directors at its next regularly
scheduled meeting following the Committee meeting accompanied by any
recommendations to the Board of Directors approved by the Committee.
35
APPENDIX E
ORAGENICS, INC.
AMENDMENT NO. 1 TO 2002 STOCK OPTION AND INCENTIVE PLAN
The first paragraph of Subsection 5.1 of Oragenics, Inc. 2002 Stock Option and
Incentive Plan is amended to read as follows:
5.1 Limitations. Subject to any antidilution adjustment pursuant to the
provisions of Section 5.2 of this Plan, the maximum number of shares
of Stock that may be issued hereunder shall be 1,500,000 shares of
Stock. Any or all shares of Stock subject to the Plan may be issued
in any combination of Incentive Stock Options, non-Incentive stock
Options, Restricted Stock, or SARs, and the amount of Stock subject
to the Plan may be increased from time to time in accordance with
Article 10, provided that the total number of shares of Stock
issuable pursuant to Incentive Stock Options may not be increased to
more than 1,000,000 (other than pursuant to antidilution
adjustments) without shareholder approval. Shares subject to an
Option or issued as an Award may be either authorized and unissued
shares or shares issued and later acquired by the Company. The
shares covered by any unexercised portion of an Option that has
terminated for any reason (except as set forth in the following
paragraph), or any forfeited portion of an Award, may again be
optioned or awarded under the Plan, and such shares shall not be
considered as having been optioned or issued in computing the number
of shares of Stock remaining available for option or award
hereunder.
In all other respects, the Plan continues in full force and affect, unamended.
This Amendment No. 1 is dated effective May 25, 2004.
36
APPENDIX F
ORAGENICS, INC.
REQUEST FOR INTERIM FINANCIAL STATEMENTS
In accordance with National Instrument 54-102 of the Canadian Securities
Administrators, registered and beneficial shareholders of the subject
Corporation may elect annually to receive interim corporate mailings, including
interim financial statements of the Corporation, if they so request. If you wish
to receive such mailings, please complete and return this form to:
COMPUTERSHARE TRUST COMPANY OF CANADA
100 UNIVERSITY AVENUE
9TH FLOOR
TORONTO, ON
M5J 2Y1
NAME: _____________________________________________________________
ADDRESS: _____________________________________________________________
_____________________________________________________________
POSTAL CODE: ___________________________
I confirm that I am an owner of common stock of the Corporation.
SIGNATURE OF
SHAREHOLDER: ______________________________________DATE:____________
CUSIP: 684023104
SCRIP COMPANY CODE: ORGQ
37
2004 ANNUAL MEETING OF SHAREHOLDERS OF
ORAGENICS, INC.
TO BE HELD AT 12085 RESEARCH DRIVE, ALACHUA, FLORIDA 32615
ON TUESDAY, MAY 25, 2004 AT 10:00 A.M. LOCAL TIME
The undersigned shareholder of Oragenics, Inc.(the "Company"), Alachua, Florida,
hereby constitutes and appoints Mento A. Soponis and Paul A. Hassie, or either
one of them, each with full power of substitution or in the place of the
foregoing, ____________________ as proxyholder for and on behalf of the
undersigned shareholder with the power of substitution to attend, act and vote
the number of shares of Common Stock which the undersigned would be entitled to
vote if personally present at the 2004 Annual Meeting of Shareholders or at any
adjournments thereof (the "Annual Meeting"), upon the proposals described in the
Notice to the Holders of Common Stock of the Annual Meeting of Shareholders and
Proxy Statement, both dated April 22, 2004, the receipt of which is
acknowledged, in the manner specified below. The proxies, in their discretion,
are further authorized to vote on any shareholder proposals not submitted to the
Company for a vote of the shareholders at the Annual Meeting within a reasonable
time prior to the mailing of the proxy materials, as well as on the election of
any person as a Director if a Director nominee named in Proposal I is unable to
serve or for good cause will not serve, and on matters incident to the conduct
of the Annual Meeting. At the present time, the Board of Directors knows of no
other business to be presented to a vote of the shareholders at the Annual
Meeting. The Board of Directors recommends a vote FOR the proposals.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this Proxy will be voted FOR
the proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ORAGENCIS,
INC. AND MAY BE REVOKED BY THE SHAREHOLDER PRIOR TO ITS EXERCISE.
VOTE THIS PROXY CARD TODAY BY RETURNING IT IN THE ENCLOSED ENVELOPE OR
TELEFAXING FROM WITHIN NORTH AMERICA TO (866) 249-7775 OR
FROM OUTSIDE NORTH AMERICA TO (416) 263-9524.
This Proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this Proxy will be voted FOR
the proposals.
Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each shareholder should sign. When signing as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in full partnership name by
authorized person.
Shares Held: _______________________________________
Signature of Shareholder ________________________________________
Signature of Shareholder (If held Jointly) ______________________
Dated: ___________________________________________
THIS PROXY FORM IS NOT VALID UNLESS IT IS SIGNED.
PROXY
Proposal I: Election of Directors. On the proposal to elect the following
Directors to serve until the indicated Annual Meeting of Shareholders of the
Company and until their successors are elected and qualified:
Jeffrey D. Hillman For |_| Withhold Authority |_|
Mento A. Soponis For |_| Withhold Authority |_|
Robert T. Zahradnik For |_| Withhold Authority |_|
Brian Anderson For |_| Withhold Authority |_|
David J. Gury For |_| Withhold Authority |_|
Proposal II: Approval of the Company's amendment to its 2002 Stock Option and
Incentive Plan. On the Proposal to approve the amendment to the 2002 Stock
Option and Incentive Plan to increase the shares available for issuance from
1,000,000 to 1,500,000:
For |_| Against |_| Abstain |_|
38
INSTRUCTIONS FOR COMPLETION OF PROXY
1. THIS PROXY IS SOLICITED BY THE MANAGEMENT OF THE COMPANY.
This form of proxy ("Instrument of Proxy") MUST BE SIGNED by you, the Registered
Shareholder, or by your attorney duly authorized by you in writing, or, in the
case of a corporation, by a duly authorized officer or representative of the
corporation; and IF EXECUTED BY AN ATTORNEY, OFFICER, OR OTHER DULY APPOINTED
REPRESENTATIVE, the original or a notarial copy of the instrument so empowering
such person, or such other documentation in support as shall be acceptable to
the Chairman of the Meeting, must accompany the Instrument of Proxy.
3. IF THIS INSTRUMENT OF PROXY IS NOT DATED in the space provided, authority is
hereby given by you, the Registered Shareholder, for the proxyholder to date
this proxy seven (7) calendar days after the date on which it was mailed to you,
the Registered Shareholder, by Computershare Trust Company of Canada..
4. A REGISTERED SHAREHOLDER WHO WISHES TO ATTEND THE MEETING AND VOTE ON THE
RESOLUTIONS IN PERSON, may simply register with the scrutineers before the
Meeting begins.
A REGISTERED SHAREHOLDER WHO IS NOT ABLE TO ATTEND THE MEETING IN PERSON BUT
WISHES TO VOTE ON THE RESOLUTIONS, may do the following:
(A) APPOINT ONE OF THE MANAGEMENT PROXYHOLDERS named on the Instrument of
Proxy, by leaving the wording appointing a nominee as is (i.e. do not strike out
the management proxyholders shown and do not complete the blank space provided
for the appointment of an alternate proxyholder). Where no choice is specified
by a Registered Shareholder with respect to a resolution set out in the
Instrument of Proxy, a management appointee acting as a proxyholder will vote in
favour of each matter identified on this Instrument of Proxy and for the
nominees of management for directors and auditor as identified in this
Instrument of Proxy;
OR
(B) APPOINT ANOTHER PROXYHOLDER, who need not be a Registered Shareholder
of the Company, to vote according to the Registered Shareholder's instructions,
by striking out the management proxyholder names shown and inserting the name of
the person you wish to represent you at the Meeting in the space provided for an
alternate proxyholder. If no choice is specified, the proxyholder has
discretionary authority to vote as the proxyholder sees fit.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OF PROXY WILL BE VOTED OR WITHHELD
FROM VOTING IN ACCORDANCE WITH THE INSTRUCTIONS OF THE REGISTERED SHAREHOLDER ON
ANY POLL of a resolution that may be called for and, if the Registered
Shareholder specifies a choice with respect to any matter to be acted upon, the
securities will be voted accordingly. Further, the securities will be voted by
the appointed proxyholder with respect to any amendments or variations of any of
the resolutions set out on the Instrument of Proxy or matters which may properly
come before the Meeting as the proxyholder in its sole discretion sees fit.
If a Registered Shareholder has submitted an Instrument of Proxy, THE REGISTERED
SHAREHOLDER MAY STILL ATTEND THE MEETING AND MAY VOTE IN PERSON. To do so, the
Registered Shareholder must record his/her attendance with the scrutineers
before the commencement of the Meeting and revoke, in writing, the prior votes.
To be represented at the Meeting, this proxy form must be received at the office
of COMPUTERSHARE TRUST COMPANY OF CANADA by mail or by fax no later than forty
eight (48) hours (excluding Saturdays, Sundays and holidays) prior to the time
of the Meeting, or adjournment thereof or may be accepted by the Chairman of the
Meeting prior to the commencement of the Meeting. The mailing address is:
COMPUTERSHARE TRUST COMPANY OF CANADA
PROXY DEPT. 100 UNIVERSITY AVENUE 9TH FLOOR
TORONTO ONTARIO M5J 2Y1
FAX: WITHIN NORTH AMERICAN: 1-866-249-7775 OUTSIDE NORTH AMERICA: (416) 263-9524
39