(14A part 3):
Director Compensation
Each non-employee Director receives $1,500 for each meeting of the
Board of Directors attended (to a maximum of $7,500), $2,500 for dual attendance
at the Annual Meeting of Shareholders and of the Board, and an award of $5,000
payable in a cash or the Company's Common Shares at the end of the fiscal year.
Each non-employee Director is also reimbursed for reasonable expenses incurred
while traveling to attend meetings of the Board of Directors or while traveling
in furtherance of the business of the Company.
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EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years indicated the
compensation paid by the Company to its Chief Executive Officer and each of the
four other highest paid executive officers with annual compensation exceeding
$100,000:
Summary Compensation Table
Long Term
Annual Compensation (1) Compensation
Awards
Name and Underlying
Principal Position Fiscal Year Salary Bonus Options/SARS(#)
------------------ ----------- ------ ----- ---------------
Joseph Librizzi, President 1997 $160,000 $379,394 -
Chief Executive Officer and 1996 160,000 23,971 -
Treasurer 1995 135,000 -- -
Robert Lee, Vice President 1997 67,708 38,818 -
of Sales & Marketing 1996 52,303 14,925 -
1995 - - -
Howard Alliger, Director 1997 - - -
and, until March, 1996, 1996 - - -
Chairman of the Board 1995 135,000 - -
------------------------
(1) No other annual compensation is shown because the amounts of
perquisites and other non-cash benefits provided by the Company do not
exceed the lesser of $50,000 or 10% of the total annual base salary and
bonus disclosed in this table for the respective officer.
Employment Agreements
On September 1, 1995, the Company entered into an employment agreement
with Dr. Librizzi, who is employed as President and Chief Executive Officer. The
agreement now provides for an annual salary of $200,000. Dr. Librizzi receives
additional benefits that are generally provided to other employees of the
Company. The agreement is automatically renewed for a successive one year term
unless the Company or the executive elects not to renew. This agreement was
automatically renewed on August 31, 1997.
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In conformity with the Company's policy, all of its Directors, officers
and employees execute confidentiality and nondisclosure agreements upon the
commencement of employment with the Company. The agreements generally provide
that all inventions or discoveries by the employee related to the Company's
business and all confidential information developed or made known to the
employee during the term of employment shall be the exclusive property of the
Company and shall not be disclosed to third parties without prior approval of
the Company. Messrs. Librizzi, Gerstheimer, and Manna also have agreements with
the Company which provide for the payment of six months severance upon their
termination for any reason. The Company's employment agreement with Dr. Librizzi
also contains non-competition provisions that preclude him from competing with
the Company for a period of one year from the date of his termination of
employment unless his employment is terminated by the Company without cause.
Option Grants in Last Fiscal Year
The following table contains information concerning options granted to
executive officers named in the Summary Compensation Table during the fiscal
year ended June 30, 1997:
Individual Grants
Number of Securities
Underlying Options % of Total Options Granted
Name Granted (#)(1)(2) to Employees in Fiscal Year Exercise Price ($/sh)(2) Expiration Date
---- ------------------- --------------------------- ------------------------ ---------------
Joseph Librizzi 60,000 6.68 4.00 7/24/06
Robert Lee 0 - - -
Howard Alliger 75,000 8.35 .73 3/27/06
----------------
(1) All such options are immediately exercisable.
(2) Adjusted for fifty percent (50%) stock dividend paid on October 20, 1997.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
No options were exercised by any executive officer named in the Summary
Compensation Table during the fiscal year ended June 30, 1997. The following
table contains
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information concerning the number and value, at June 30, 1997, of unexercised
options held by executive officers named in the Summary Compensation Table:
Number of Securities Underlying
Unexercised Options at FY-End (#) Value of Unexercised In-the-Money Options at
Name (Exercisable/Unexercisable) FY-End (Exercisable/Unexercisable)($)(1)
---- ----------------------------- -------------------------------------------
Joseph Librizzi 150,000/0 $ 496,250/0
Robert Lee 15,000/0 63,725/0
Howard Alliger 75,000/0 336,000/0
----------------
(1) Fair market value of underlying securities (the closing price of the
Company's Common Shares on the National Association of Securities
Dealers Automated Quotation System) at fiscal year end (June 30, 1997)
minus the exercise price.
Stock Options
In September 1991, in order to attract and retain persons necessary for
the success of the Company, the Company adopted a stock option plan (the "1991
Plan") which, as amended, covers up to 375,000 of the Company's Common Shares.
Pursuant to the 1991 Plan, officers, Directors, consultants and key employees of
the Company are eligible to receive incentive and/or non-incentive stock
options. At June 30, 1997, options to purchase 200,250 Shares were outstanding
under the plan at $ .50 to $4.33 per share and 174,750 options had been
exercised.
In March 1996, the Board of Directors approved the 1996 Employee
Incentive Stock Option Plan covering an aggregate of 450,000 Common Shares of
the Company and a 1996 Non-Employee Director Stock Option Plan covering an
aggregate of 1,125,000 Common Shares of the Company. The Board then granted
options to acquire 120,000 Common Shares at prices of $4.00 and $6.00 under the
1996 Employee Incentive Stock Option Plan and options to acquire 778,500 shares
at a price of $.73 under the 1996 Non-Employee Director Stock Option Plan. At
June 30, 1997, no options under either of these Plans had been exercised. The
options are exercisable for 10 years. Both of these Plans and the transactions
under which options to acquire 898,500 Common Shares were granted were ratified
and approved at the annual meeting of shareholders held on February 19,1997.
Since the exercise price of the granted options was less than the market price
of the Company's Common Shares on February 19, 1997, this resulted in a non-cash
compensation charge in the amount of $4,544,600, of which $185,000 was recorded
during the fourth quarter of fiscal 1997.
The foregoing plans are administered by the Board of Directors with the
right to designate a committee. The selection of participants, allotments of
shares, determination of price and other conditions relating to options are
determined by the Board of Directors, or a committee thereof, in its sole
discretion. Incentive stock options granted under the plans are exercisable for
a period of up to ten years from the date of grant at an exercise price which is
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not less than the fair market value of the Common Shares on the date of the
grant, except that the term of an incentive stock option granted under the Plans
to a shareholder owning more than 10% of the outstanding Common Shares may not
exceed five years and its exercise price may not be less than 110% of the fair
market value of the Common Shares on the date of grant.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers, Directors and persons who own more than ten
percent of a registered class of the Company's equity securities ("Reporting
Persons") to file reports of ownership and changes in ownership on Forms 3, 4,
and 5 with the Securities and Exchange Commission (the "SEC"), the Boston Stock
Exchange, and the National Association of Securities Dealers, Inc. (the "NASD").
These Reporting Persons are required by SEC regulation to furnish the Company
with copies of all Forms 3, 4 and 5 they file with the SEC and NASD. Based
solely on the Company's review of the copies of the forms it has received, the
Company believes that all Reporting Persons complied on a timely basis with all
filing requirements applicable to them with respect to transactions during
fiscal year 1997.
ACCOUNTANTS
The Board of Directors has continued to retain the firm Ernst & Young LLP to act
as the Company's independent certified public accountants. A representative of
such firm is expected to be available either personally or by telephone hookup
at the Annual Meeting to respond to appropriate questions from shareholders and
will be given the opportunity to make a statement if he desires to do so.
MISCELLANEOUS INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
know of any business other than that specified above to come before the meeting,
but, if any other business does lawfully come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote in regard thereto,
in accordance with their judgment.
The Company will pay the cost of soliciting proxies in the accompanying
form and as set forth below. In addition to solicitation by use of the mails,
certain officers and regular employees of the Company may solicit proxies by
telephone, telegraph or personal interview without additional remuneration
therefor.
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SHAREHOLDER PROPOSALS
Shareholder proposals with respect to the Company's next Annual Meeting
of Shareholders must be received by the Company no later than July 13, 1998 to
be considered for inclusion in the Company's next Proxy Statement.
A copy of the Company's Annual Report of Shareholders for the fiscal
year ended June 30, 1997 has been provided to all shareholders. Shareholders are
referred to the report for financial and other information about the Company,
but such report is not incorporated in this proxy statement and is not a part of
the proxy soliciting material.
By Order of the Board of Directors,
PETER GERSTHEIMER
Secretary
Dated: November 10, 1997
Farmingdale, New York |
