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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
COMMISSION FILE NUMBER 0-21013
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XYBERNAUT CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 54-1799851
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
12701 FAIR LAKES CIRCLE,
FAIRFAX, VA 22033
(Address of principal executive offices) (Zip Code)
(703) 631-6925
(Issuer's telephone number, including area code)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: none
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
Common stock, $0.01 par value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No [
]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB: [ ]
State issuer's revenues for its most recent fiscal year: $3,340,272
The aggregate market value at April 19, 2000 of the Common Stock of the
issuer, its only class of voting stock, was $415,722,208, of which $347,937,078
was held by non-affiliates, calculated on the basis of the closing price of such
stock on the National Association of Securities Dealers Automated Quotation
System Small Cap Market on that date. Such market value of non-affiliates
excludes shares owned by all executive officers and directors (but includes
shares owned by their spouses); this should not be construed as indicating that
all such persons are affiliates.
The number of shares outstanding of the issuer's Common Stock at April 19,
2000 was 37,159,527.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Transitional Small Business Disclosure Format Yes [ ] No [X]
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
NAME AGE CLASS APPOINTED POSITION
---- --- ----- --------- --------
<S> <C> <C>
Edward G. Newman 56 III 1990 President, Chief Executive
Officer and Chairman of the
Board of Directors
John F. Moynahan 42 -- -- Senior Vice President,
Treasurer and Chief
Financial Officer
Steven A. Newman, M.D. (1)(2)(3) 54 III 1995 Executive Vice President and
Vice Chairman of the Board of Directors
Kazuyuki Toyosato 54 I 1998 Executive Vice President
and Director
Dr. Edwin Vogt 67 II 1998 Senior Vice President and
Director
George Allen, Esq. 48 III 1998 Director
Martin Eric Weisberg, Esq. (1)(3) 49 I 1997 Secretary and Director
Eugene J. Amobi 55 II 1996 Director
Keith P. Hicks, Esq. (2) 77 I 1994 Director
Phillip E. Pearce (2)(3) 71 II 1995 Director
James J. Ralabate, Esq 72 III 1995 Director
Lt. Gen. Harry E. Soyster (Ret.)(1)(3) 64 II 1995 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
Officers are appointed by and serve at the discretion of the Board of
Directors. The Company's Board of Directors is divided into three different
classes. At each annual meeting of stockholders, one class of directors will be
elected for a term of three years to succeed those directors in the class whose
terms then expire. All directors hold office until the third annual meeting of
shareholders following their election or until their successors are elected and
qualified.
The following is a brief summary of the background of each of our
directors.
CLASS I DIRECTORS
Keith P. Hicks, Esq. has been a director since July 1994 and is currently a
principal in C&H Properties and the owner of Hicks Bonding Co., Hicks
Auctioneering Co. and Hicks Cattle Company. Mr. Hicks is a graduate of the
University of Denver (B.A. 1954) and LaSalle University School of Law
(L.L.B. 1969).
Kazuyuki Toyosato joined the Company in 1997 as Executive Vice President of
Asian Operations. Mr. Toyosato is responsible for overseeing the Company's
operations in Asia, including Japan. Prior to joining the Company, Mr. Toyosato
spent 27 years with Sony Corporation in Japan where his last position was the
Vice President of Sony USA. He previously helped manage the Sony Walkman product
line, and managed Sony's 8mm video camcorder and its battery line of products.
Martin Eric Weisberg, Esq. who currently serves as Secretary of the
Company, is a partner of the law firm, Parker Chapin LLP, which serves as
general counsel to the Company. Mr. Weisberg specializes in the areas of
securities, mergers and acquisitions, financing and international transactions
and has been in the private practice of law for 24 years. Mr. Weisberg is a
summa cum laude graduate of Union College (B.A. 1972) and received his law
degree from The Northwestern University School of Law (1975), where
2
<PAGE>
he graduated summa cum laude, was Articles Editor of the Law Review and was
elected to the Order of the Coif. Mr. Weisberg also attended The London School
of Economics and Political Science.
CLASS II DIRECTORS
Eugene J. Amobi has been a director of the Company since January 1996.
Since 1983, Mr. Amobi has been President, a director and a principal stockholder
of Tech International, Inc. ("Tech International"), which provides engineering,
technical support and consulting services to government and domestic and
international commercial clients. Mr. Amobi has been president and director of
Tech International of Virginia Inc. ("Tech Virginia"), our wholly-owned
subsidiary, since its spin-off from Tech International. Prior to 1983, Mr. Amobi
was a Senior Engineer with E.I. DuPont de Nemours and a Managing Director of
Stanley Consultants, an international engineering consulting firm. Mr. Amobi is
a graduate of The Technion, Israel Institute of Technology (B.S. 1969),
Princeton University (M.S. 1970) and Syracuse University (M.B.A. 1973).
Phillip E. Pearce has been a director of the Company since October 1995.
Mr. Pearce has been an independent business consultant with Phil E. Pearce &
Associates, Chairman and Director of Financial Express Corporation since 1990
and since 1988 has been a principal of Pearce-Henry Capital Corp. Prior to 1988,
Mr. Pearce was Senior Vice President and a director of E.F. Hutton, Chairman of
the Board of Governors of the National Association of Securities Dealers, a
Governor of the New York Stock Exchange and a member of the Advisory Council to
the United States Securities and Exchange Commission on the Institutional Study
of the Stock Markets. Mr. Pearce also is a director of RX Medical Services,
Inc., an operator of medical diagnostic facilities and clinical laboratories,
InfoPower International, Inc., a software development company, StarBase
Corporation, a software development company and Mustang Software Inc., a
software and services company. Mr. Pearce is a graduate of the University of
South Carolina (B.A. 1953) and attended the Wharton School of Investment Banking
at the University of Pennsylvania.
Lt. Gen. Harry E. Soyster (Ret.) has been a director of the Company since
January 1995. He is currently Director of Washington Operations and Vice
President of International Operations of Military Professional Resources,
Incorporated. From 1988 until his retirement in 1991, Lieutenant General Soyster
(Ret.) was the Director of the United States Defense Intelligence Agency. Prior
to that time, he was Commander of the United States Army Intelligence and
Security Command and a Deputy Assistant Chief of Staff for Intelligence,
Department of the Army. Lieutenant General Soyster (Ret.) is a graduate of the
United States Military Academy at West Point (B.S. 1957), Penn State University
(M.S. 1963), the University of Southern California (M.S. 1973) and the National
War College (1977).
Dr. Edwin Vogt was appointed a director of the Company on September 28,
1998 and joined the Company in December 1998 as Senior Vice President. Prior to
this date, Dr. Vogt served as a consultant to the Company since 1996. Dr. Vogt
joined IBM in 1961 as Development Programmer and worked in the fields of
hardware development, holding 28 patents, as well as software development. As
manager he was responsible for hardware projects (IBM /360, /370, 433x) as well
as various software projects (a.o. voice recognition products) before being
appointed Director as manager of several Hardware and Software Product
Development Laboratories. As IBM Software Group Executive, Dr. Vogt held the
worldwide responsibility for the development and marketing of IBM Workflow
products and Reengineering tools until retiring from IBM at the end of 1995. In
early 1996 he was appointed Director for the SBS association (Softwarezentrum
Boeblingen / Sindelfingen e.V.) and directed the growth of this center to 39
member companies with over 200 experts, predominantly working in high-growth
areas such as Internet, Workflow, Process Automation and Multimedia. Dr. Vogt is
a graduate of the University of Stuttgart with a M.S. in Electrical Engineering
and Mathematics in Theoretical Electrical Engineering.
CURRENT CLASS III DIRECTORS
George Allen, Esq. is a partner of the law firm of McGuire Woods Battle &
Boothe, LLP. Mr. Allen was Virginia's 67th governor from 1994-1998, during which
period state taxes were cut by $1 billion and $14 billion in new investments
were made in the state resulting in 300,000 net new private sector jobs. Mr.
Allen's term in office also was noted for comprehensive reforms in primary and
secondary education, the abolition of parole, reform of the juvenile justice
systems and the replacement of the welfare system with reforms which promote
work ethic and personal responsibility. Prior to serving as Governor of
Virginia, Mr. Allen was a member of the U.S. House of Representatives in 1991
and a member of the Virginia House of Delegates from 1983-1991. Mr. Allen is a
member of the Board of Directors of Commonwealth Biotechnology, Inc. Mr. Allen
is a graduate of the University of Virginia at Charlottesville(B.A. 1974), with
distinction, and received his law degree from the University of Virginia at
Charlottesville (J.D. 1977).
Edward G. Newman has been the Company's President since March 1993, Chief
Executive Officer and Chairman of the Board of Directors since December 1994,
and a director since 1990. Mr. Newman served as our Treasurer from 1993 to 1994.
From 1984 to
3
<PAGE>
1992, Mr. Newman was President of ElectroTech International Corporation, a
software consulting firm. From 1973 to 1981, Mr. Newman was employed by Xerox
Corporation in several management positions in office systems strategy, legal
systems and international financial systems. Mr. Newman served with the Central
Intelligence Agency from 1966 to 1972. Mr. Newman also has been an Executive
Vice President of Tech International since 1990, and a director and Chief
Executive Officer of Tech Virginia since 1994. See "Certain Relationships and
Related Transactions." Mr. Newman is a graduate of the University of Maryland
(B.A. 1971) and the University of New Haven (M.B.A. 1984). Mr. Newman is the
brother of Steven A. Newman, M.D., an Executive Vice President and a director of
the Company.
Steven A. Newman, M.D. has been an Executive Vice President of the Company
since January 2000, a director of the Company since January 1995, and the Vice
Chairman of the Board of Directors since August 1997. See "Business - Employees
and Consultants." Dr. Newman was the Executive Vice President and Secretary from
December 1994 through October 1995 and a consultant of the Company between
January 1996 and December 1999. Dr. Newman also provides business, management
and administrative consulting services to various medical and business groups.
Dr. Newman was President and Chief Executive Officer of Fed American, Inc., a
mortgage banking firm, from 1988 to 1991. Dr. Newman has been a director of Tech
Virginia since 1994. See "Certain Relationships and Related Transactions." Dr.
Newman is also a director of Kanakaris Communications Inc., an internet content
company. Dr. Newman is a graduate of Brooklyn College (B.A. 1967) and the
University of Rochester (M.D. 1972). Dr. Newman is the brother of Edward G.
Newman, our President, Chief Executive Officer and Chairman of the Board of
Directors.
James J. Ralabate, Esq. has been a director of the Company since January
1995 and served as our Secretary until August 1997. Mr. Ralabate has been in the
private practice of patent law since 1982. Prior to that time, Mr. Ralabate was
General Patent Counsel for Xerox Corporation, responsible for worldwide patent
licensing and litigation, and an examiner for the Patent Office. Mr. Ralabate is
our intellectual property counsel and is a graduate of Canisius College (B.S.
1950) and The American University (J.D. 1959).
ADVISORY BOARD
The Company also has an Advisory Board which was established to provide
council and support to the Board of Directors. The members of the Advisory Board
are appointed by the Board of Directors. Its members currently include:
Lawrence Berk is currently Senior Managing Director of Brill Securities. He
has been a money manager and has structured and advised companies on financings
and strategic planning, having held executive positions with several investment
banking firms, including Oppenheimer & Co. where he was a partner. He was a
member of the Board of the Actors Studio for 15 years where he produced plays;
a founding Chairman of the Veterans Ensemble Theatre, a group of writers,
actors and directors from the Vietnam war; he was on the Board of the
Association of American Dance Companies; and a trustee of the Manhattan
Theatre Club. Mr. Berk is a member of the Financial Investment Analyst
Association and the Regional Investment Bankers Association.
Dr. Andrew Heller has been an advisor to the Board of Directors since 1995.
Since 1989 Dr. Heller has been Chairman and Chief Executive Officer of Heller
Associates, a consulting firm to high technology companies. From 1990 to 1993
Dr. Heller was Chairman and Chief Executive Officer of Hal Computer Systems,
Inc., a software and hardware systems development company. From 1966 to 1989 Dr.
Heller was employed by IBM (where he was the youngest person ever to be selected
as an IBM Fellow) in a variety of positions including Corporate Director of
Advanced Technology Systems, member of the Executive Committee on Technology,
member of the Technical Review Board, and General Manager, Advanced Workstation
Independent Business Unit. While at IBM, Dr. Heller created and ran the business
unit that created the AIX (UNIX) operating system for IBM and the RISC RS/6000
family of workstations and servers, from which the current Power PC was
developed. Dr. Heller is a director of Rambus, Inc., Cross/Z, Inc., Network
Translation, Inc., EPR, Inc., Eco Instrumentation, Inc. and UDI Software, Inc.
We have a three-year consulting agreement with Dr. Heller whereby he provides us
with strategic planning, business management, strategic product development and
market and financial introduction services.
Vice Admiral Stephan F. Loftus (ret.) retired from the United States Navy
in May of 1994. Prior to that he served as the Deputy Chief of Naval Operations
(Logistics). Vice Admiral Loftus held previous positions with the U.S. Navy as
Commander, Fleet Air Mediterranean; Director, Office of Budget and Reports; and
Director, Office of Program Appraisal. Vice Admiral Loftus presently serves as
Executive Vice President of Quarterdeck Investment Partners, Inc. (specializing
in merger/acquisitions) and The Spectrum Group (a strategic planning group). He
consults for Lockheed Martin Corporation, SAIC, Johns Hopkins University -
Applied Physics Lab, Systems Planning Corporation, and Global Planning
Corporation. He is on the Board of Directors of AMSEC, Inc. and LLD, Inc., and
serves as a member of the Logistics Panel for the Defense Science Board. Also,
Admiral Loftus serves as the Chairman of the Board of Trustees at NMCCG
Foundation.
4
<PAGE>
Dr. Steve Mann is currently a faculty member at University of Toronto,
Department of Electrical and Computer Engineering. His work in using wearable
computers to capture and enhance the world around us was highlighted in his
award-winning documentary "Shooting Back." Dr. Mann has been involved with
various forms of wearable computing since the 1970s, starting with the use of
computers in photography. Dr. Mann was the founder and Publications Chair of the
first Institute of Electrical and Electronics Engineers (IEEE) International
Symposium on Wearable Computing. Dr. Mann chaired the first Special Issue on
Wearable Computing in Personal Technologies Journal, and has given numerous
keynote addresses on wearable computers, including the Third International
Conference on Wearable Computers, the Virtual Reality conference, and the
McLuhan Conference on Culture and Technology. He received his PhD degree from
Massachusetts Institute of Technology in 1997 in the Humanistic Intelligence.
General Richard H. Thompson (ret.) retired from the U.S. Army in 1987 after
43 years of service. His last assignment was as the Commander of the U.S. Army
Material Command, an organization of 132,000 personnel at 171 locations
worldwide with an annual budget in excess of $35 billion. Since his retirement,
General Thompson has served on the Board of Directors of several companies, has
consulted with many others, and has participated as a member of several Study
Groups for the National Academy of Sciences and the House of Representatives. He
is currently the Chairman and Chief Executive Officer and actively engaged in
the operations of three companies he has established: Thompson Delstar Inc., TMI
Asia, and TDIS.
CERTAIN INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF
DIRECTORS
The Board of Directors is responsible for the management of the Company.
The Board has established the following three committees: Audit, Compensation
and Nominating.
The functions of the Audit Committee include the nomination of independent
auditors for appointment by the Board; meeting with the independent auditors to
review and approve the scope of their audit engagement; meeting with the
Company's financial management and the independent auditors to review matters
relating to internal accounting controls, the Company's accounting practices and
procedures and other matters relating to the financial condition of the Company;
and to report to the Board periodically with respect to such matters. The Audit
Committee currently consists of Keith P. Hicks, Dr. Steven A. Newman and Phillip
E. Pearce.
The function of the Compensation Committee is to review and recommend to
the Board of Directors the appropriate compensation of executive officers and to
administer the 1996 Omnibus Stock Incentive Plan, the 1997 Stock Incentive Plan
and the 1999 Stock Incentive Plan. The Compensation Committee currently consists
of Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric
Weisberg, Esq.
The function of the Nominating Committee is to select and recommend to the
Board of Directors appropriate candidates for election to the Board of
Directors. The Nominating Committee currently consists of Dr. Steven A. Newman,
Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg, Esq.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company during the one-year period ended December 31, 1999,
certain Section 16(a) filing requirements applicable to its officers, directors
and greater than ten-percent beneficial owners were not complied with in a
timely manner by certain directors, and greater than ten-percent beneficial
owners, including the following: (i) each of Messrs. Allen, Amobi, Hicks,
Moynahan, Pearce, Ralabate, Soyster, Toyosato, Vogt and Weisberg did not timely
file a Form 5 with the SEC and (ii) Dr. Steven A. Newman did not timely file a
Form 4 with the SEC with respect to one transaction.
ITEM 10. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
5
<PAGE>
SUMMARY COMPENSATION TABLE. The following sets forth the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1999, 1998 and 1997 paid to (i) Edward G.
Newman, the President, Chief Executive Officer and Chairman of the Board of
Directors of the Company, (ii) Kazuyuki Toyosato, an Executive Vice President
and Director of the Company, (iii) Dr. Steven A. Newman, an Executive Vice
President and Vice Chairman of the Board of Directors of the Company, (iv) John
F. Moynahan, Chief Financial Officer, Treasurer and a Senior Vice President of
the Company, (v) Dr. Edwin Vogt, a Senior Vice President and Director of the
Company and (vi) Hussein Sallam, a former Vice President of the Company.
SUMMARY COMPENSATION TABLE
5
<PAGE>
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
NAME AND --------------------------- OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION
------------------ ---- ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
EDWARD G. NEWMAN 1999 $223,294 (1) $0 441,665 $35,400 (2)
President and Chief Executive 1998 $250,923 (1) $0 0 $47,400 (2)
Officerand Chairman of the Board of 1997 $224,687 (1) $0 0 $53,235 (2)
Directors
KAZUYUKI TOYOSATO 1999 $251,676 $0 110,000 $28,385 (2)
Executive Vice President and 1998 $172,086 $0 10,000 $ 0
Director 1997 $77,188 (3) $0 50,000 $ 0
DR. STEVEN A. NEWMAN 1999 $13,476 (4) $0 441,750 $176,550 (5)
Executive Vice President and Vice 1998 $13,476 (4) $0 10,000 $163,476 (5)
Chairman of the Board of Directors 1997 $13,476 (4) $0 100,000 $163,476 (5)
JOHN F. MOYNAHAN 1999 $82,288 (6) $0 331,741 $16,500 (2)
Senior Vice President, Chief 1998 $93,507 (6) $0 0 $ 7,500 (2)
Financial Officer and Treasurer 1997 $142,083 $0 0 $15,465 (2)
DR. EDWIN VOGT 1999 $138,319 $6,538 135,000 $ 0
Senior Vice President and Director 1998 0 (7) $0 70,000 (8) $61,000 (7)
1997 0 $0 0 $32,000 (7)
HUSSEIN SALLAM 1999 $117,320 (9) $0 3,484 $15,000 (2)
Vice President 1998 $115,000 $0 10,000 $1,727 (2)
1997 $ 9,852 (9) $0 50,000 $ 0
</TABLE>
- ------------------
(1) Includes $13,476 paid by Tech Virginia in each of 1999, 1998 and 1997.
Compensation does not include $53,732, $50,000 and $50,000 paid to Frances
C. Newman, wife of Edward G. Newman in 1999, 1998 and 1997, respectively.
(2) Includes payment of non-accountable expense allowances and transportation
allowances, but not reimbursement of expenses.
(3) Represents compensation for an eight month period. Mr. Toyosato joined the
Company in 1997 and joined the Board of Directors in 1998.
(4) Dr. Newman is an officer and director of Tech Virginia and was hired as an
Executive Vice President of the Company on January 1, 2000. Compensation
represents payments made to Dr. Newman in his capacity as an employee of
Tech Virginia.
(5) Compensation includes (i) consulting fees paid to Dr. Newman in his
capacity as a consultant to the Company prior to January 1, 2000 and (ii)
non-accountable expense allowances. Compensation excludes reimbursement of
expenses of $21,595, $63,469 and $23,789 during 1999, 1998 and 1997,
respectively.
(6) Mr. Moynahan resigned from his positions with the Company effective June 3,
1998 and resumed these positions effective May 10, 1999.
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<PAGE>
(7) Dr. Vogt was hired as an employee of the Company in December 1998 and
joined the Board of Directors in September 1998. Prior to December 1998,
Dr. Vogt served as a consultant to the Company. Compensation in 1998 and
1997 represents consulting fees paid to Dr. Vogt in his capacity as a
consultant to the Company prior to his employment in December 1998 and
excludes reimbursement of expenses of $10,985 and $10,250 during 1998 and
1997, respectively.
(8) Includes a grant of 20,000 shares of Common Stock and options to purchase
50,000 shares of Common Stock.
(9) Mr. Sallam was hired as an employee of the Company in December 1997 and
resigned from his position with the Company in December 1999.
OPTION GRANTS TABLE. The following table sets forth information on grants
of stock options during fiscal 1999 to executive officers and directors of the
Company. All such options are exercisable to purchase shares of Common Stock.
<TABLE>
<CAPTION>
OPTIONS PERCENT OF TOTAL EXERCISE OR
GRANTED OPTIONS GRANTED TO BASE PRICE
NAME (SHARES) EMPLOYEES IN YEAR ($/SHARE) EXPIRATION DATE
---- -------- ----------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
George Allen 10,000 0.3022% $1.5625 August 27, 2009
Eugene J. Amobi 60,000 1.8131% $1.5625 August 27, 2009
100,000 3.0218% $5.4375 December 28, 2009
Keith Hicks, Esq. 10,000 0.3022% $1.5625 August 27, 2009
John F. Moynahan 150,000 4.5327% $3.7188 May 10, 2009
31,741 0.9592% $1.7800 September 10, 2009
150,000 4.5327% $4.0938 December 3, 2009
Edward G. Newman 41,665 1.2590% $1.7800 September 10, 2009
300,000 9.0654% $1.3750 October 1, 2009
100,000 3.0218% $4.0938 December 3, 2009
Dr. Steven A. Newman 10,000 0.3022% $1.5625 August 27, 2009
31,750 0.9594% $1.7800 September 24, 2009
300,000 9.0654% $1.3750 October 1, 2009
100,000 3.0218% $4.0938 December 3, 2009
Phillip E. Pearce 10,000 0.3022% $1.5625 August 27, 2009
50,000 1.5109% $5.4375 December 28, 2009
James J. Ralabate, Esq. 70,000 2.1153% $1.5625 August 27, 2009
Hussein Sallam (1) 3,484 0.1053% $1.6000 September 24, 2009
Lt. Gen. Harry E. Soyster 10,000 0.3022% $1.5625 August 27, 2009
50,000 1.5109% $5.4375 December 28, 2009
William Tauskey (2) 494,000 14.9277% $4.0938 December 3, 2009
Kazuyuki Toyosato 10,000 0.3022% $1.5625 August 27, 2009
100,000 3.0218% $4.0938 December 3, 2009
Dr. Edwin Vogt 10,000 0.3022% $1.5625 August 27, 2009
25,000 0.7555% $1.7800 September 24, 2009
50,000 1.5109% $5.4375 December 28, 2009
Martin Eric Weisberg, Esq. 35,000 1.0577% $1.5625 August 27, 2009
</TABLE>
7
<PAGE>
- ----------
(1) Mr. Sallam was hired as an employee of the Company in December 1997 and
resigned from his positions with the Company in December 1999.
(2) The Company has reserved options to purchase up to 494,000 shares of Common
Stock under its stock option plan for a contingent grant to Mr. William
Tauskey, an Executive Vice President of the Company. The grant to Mr.
Tauskey is contingent upon the establishment of appropriate goals for the
vesting of the options which are satisfactory to the Company's Board of
Directors and Mr. Tauskey entering into an employment agreement with the
Company on terms and conditions satisfactory to the Company and Mr.
Tauskey.
FISCAL YEAR-END OPTIONS/OPTION VALUES TABLE.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END ($)
-------------------------- ----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
George Allen 60,000 0 38,125 0
Eugene J. Amobi 130,000 100,000 383,750 0
Keith Hicks, Esq. 80,000 0 193,125 0
John F. Moynahan 60,580 271,161 102,095 452,630
Edward G. Newman 413,888 27,777 1,378,047 99,858
Dr. Steven A. Newman 540,583 21,167 1,697,416 76,095
Phillip E. Pearce 130,000 0 74,375 0
James J. Ralabate, Esq. 140,000 0 421,875 0
Hussein Sallam (1) 43,484 0 129,050 0
Lt. Gen. Harry E. Soyster 130,000 0 193,125 0
William Tauskey (2) 0 494,000 0 632,913
Kazuyuki Toyosato 70,000 100,000 176,875 128,120
Dr. Edwin Vogt 78,333 106,667 81,833 114,917
Martin Eric Weisberg, Esq. 105,000 0 297,813 0
</TABLE>
- ---------------
(1) Mr. Sallam was hired as an employee of the Company in December 1997 and
resigned from his position with the Company in December 1999.
(2) The Company has reserved options to purchase up to 494,000 shares of Common
Stock under its stock option plan for a contingent grant to Mr. William
Tauskey, an Executive Vice President of the Company. The grant to Mr.
Tauskey is contingent upon the establishment of appropriate goals for the
vesting of the options which are satisfactory to the Company's Board of
Directors and Mr. Tauskey entering into an employment agreement with the
Company on terms and conditions satisfactory to the Company and Mr.
Tauskey.
The foregoing options were exercisable within 60 days of December 31, 1999
with respect to in the aggregate 1,981,868 shares of Common Stock.
The Company has no retirement, pension or profit sharing program for the
benefit of its directors, officers or other employees, but the Board of
Directors may recommend one or more such programs for adoption in the future.
PROFIT SHARING PROGRAM
The Company intends to establish a profit sharing program to be
administered by the Board of Directors. Under this program, which will remain in
effect for five years unless extended by the Board of Directors, executives, key
employees and consultants will be eligible to participate in a cash bonus pool.
The amount of the cash bonus pool will be determined annually and will be up to
10% of the amount by which the Company's pretax income exceeds 10% of
stockholders' equity.
8
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Edward G. Newman
dated as of January 1, 2000 that provides for a three-year term through December
31, 2002. This agreement calls for an initial base salary of $250,000 with
annual increases at the United States Consumer Price Index ("CPI") percentage
plus three percent, subject to a ceiling of 10%; an annual cash bonus to be
determined by the Board of Directors; a $2 million life insurance policy payable
to his designated beneficiaries; and an annual grant of stock options to be
determined by increases in revenues or market capitalization over the prior
year, at the price in effect at the time such grant is made, with a limit on
such grant of the greater of 500,000 shares or 1.5% of the then-outstanding
stock in any given year ("Performance Options"). As an incentive to enter into
this agreement, Mr. Newman received an initial payment of $50,000. In the event
of a change of control or Mr. Newman terminating his employment for good cause,
Mr. Newman is entitled to a severance payment of the greater of two years or the
remaining term of this agreement and the Performance Options for the year of
termination and the following year. This agreement provides Mr. Newman with
benefits which the Company may provide to its executive officers including
health care insurance, automobile allowance and vacation.
The Company has entered into an employment agreement with John F. Moynahan
dated as of January 1, 2000 that provides for a three-year term through December
31, 2002. This agreement calls for an initial base salary of $170,000 with
annual increases at the CPI percentage plus three percent subject to a ceiling
of 10%; an annual cash bonus to be determined by the Board of Directors; a
$750,000 life insurance policy payable to his designated beneficiaries; and an
annual grant of stock options to be determined by increases in revenues or
market capitalization over the prior year, at the price in effect at the time
such grant is made, with a limit on such grant of the greater of 100,000 shares
or 0.33% of the then-outstanding stock in any given year. As an incentive to
enter into this agreement, Mr. Moynahan received an initial payment of $25,000.
In the event of a change of control or Mr. Moynahan terminating his employment
for good cause, Mr. Moynahan is entitled to a severance payment of the greater
of two years or the remaining term of this agreement, the Performance Options
for the year after termination and the following year, and immediate vesting of
options. This agreement provides Mr. Moynahan with benefits which the Company
may provide to its executive officers and including health care insurance,
automobile allowance and vacation.
The Company has entered into an employment agreement with Dr. Steven A.
Newman dated as of January 1, 2000 that provides for a three-year term through
December 31, 2002. This agreement calls for an initial base salary of $225,000
with annual increases at the CPI percentage plus three percent, subject to a
ceiling of 10%; an annual cash bonus to be determined by the Board of Directors,
with a minimum bonus of $100,000 set for 2000; a $2 million life insurance
policy payable to his designated beneficiaries; and an annual grant of stock
options to be determined by increases in revenues or market capitalization over
the prior year, at the price in effect at the time such grant is made, with a
limit on such grant of the greater of 500,000 shares or 1.5% of the
then-outstanding stock in any given year. As an incentive to enter into this
agreement, Dr. Newman received an initial payment of $50,000. In the event of a
change of control or Dr. Newman terminating his employment for good cause, Dr.
Newman is entitled to a severance payment of the greater of two years or the
remaining term of this agreement, and the Performance Options for the year after
termination and the following year. This agreement provides Dr. Newman with
benefits which the Company may provide to its executive officers including
health care insurance, automobile allowance and vacation.
Mr. Toyosato is employed pursuant to a three-year employment agreement with
a term expiring on March 3, 2000. The employment agreement provided for a
minimum annual salary of $153,575.23.
CONSULTING AGREEMENTS
The Company and Dr. Steven A. Newman entered into a consulting agreement
dated as of January 1, 1996, as amended January 1, 1997, which was superseded by
the January 1, 2000 employment agreement. Pursuant to the consulting agreement,
Dr. Newman provided consulting services which included, among other things, the
review and assistance in the preparation of the Company's business strategies,
assisting with the recruitment and hiring of key executives and providing advice
regarding financing, contracting, management, overseas operations, strategic
alliances and ventures. The annual consulting fee was $150,000 payable on a
monthly basis. The consulting agreement also provided for additional
compensation, as determined by the Company's Compensation Committee, for
services by Dr. Newman in connection with the successful completion of
financings, mergers, acquisitions, dispositions, joint ventures and other
material transactions. The term of the consulting agreement was four years.
9
<PAGE>
OMNIBUS STOCK INCENTIVE PLAN
The 1996 Omnibus Stock Incentive Plan (the "1996 Incentive Plan") was
adopted by the Company's Board of Directors effective January 1, 1996. The 1996
Incentive Plan provides for the granting of incentive stock options ("Incentive
Stock Options") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), nonqualified stock options, stock appreciation
rights ("SARs") and grants of shares of Common Stock subject to certain
restrictions ("Restricted Stock") up to a maximum of 650,000 shares to officers,
directors, employees and others. Incentive Stock Options can be awarded only to
employees of the Company at the time of the grant. No options, SARs or
restricted stock ("Restricted Stock") may be granted under the 1996 Incentive
Plan subsequent to December 31, 2006. To date, options have been granted to
purchase all of the 650,000 shares of Common Stock reserved for issuance under
the 1996 Incentive Plan.
The 1996 Incentive Plan is administered by the Compensation Committee of
the Board of Directors (subject to the authority of the full Board of
Directors), which determines the terms and conditions of the options, SARs and
Restricted Stock granted under the 1996 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Compensation Committee.
The exercise price of all Incentive Stock Options granted under the 1996
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of an optionee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company ("Substantial Stockholders"), the exercise price of Incentive Stock
Options must be at least 110% of the fair market value of the Common Stock on
the date of grant. The exercise price of all nonqualified stock options granted
under the 1996 Incentive Plan shall be determined by the Compensation Committee.
The term of any Incentive Stock Option granted under 1996 the Incentive Plan may
not exceed ten years, or, for Incentive Stock Options granted to Substantial
Stockholders, five years. The 1996 Incentive Plan may be amended or terminated
by the Board of Directors, but no such action may impair the rights of a
participant under a previously granted option.
9
<PAGE>
The 1996 Incentive Plan provides the Board of Directors or the Compensation
Committee the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options. Upon termination of a
participant's employment or relationship with the Company, all options terminate
and no longer are exercisable unless termination is due to death or disability,
in which case the options are exercisable within one year of termination. The
Compensation Committee has granted extensions of the period before which options
may be exercised for certain terminated employees.
The 1996 Incentive Plan provides that upon a change in control of the
Company, all previously granted options and SARs immediately shall become
exercisable in full and all Restricted Stock immediately shall vest and any
applicable restrictions shall lapse. The 1996 Incentive Plan defines a change of
control as the consummation of a tender offer for 25% or more of the outstanding
voting securities of the Company, a merger or consolidation of the Company into
another corporation less than 75% of the outstanding voting securities of which
are owned in aggregate by the stockholders of the Company immediately prior to
the merger or consolidation, the sale of substantially all of the Company's
assets other than to a wholly-owned subsidiary, or the acquisition by any
person, business or entity other than by reason of inheritance of over 25% of
the Company's outstanding voting securities. The change of control provisions of
the 1996 Incentive Plan may operate as a material disincentive or impediment to
the consummation of any transaction which could result in a change of control.
The 1996 Incentive Plan provides the Board of Directors or the Compensation
Committee discretion to grant SARs in connection with any grant of options. Upon
the exercise of a SAR, the holder shall be entitled to receive a cash payment in
an amount equal to the difference between the exercise price per share of
options then exercised by him and the fair market value of the Common Stock as
of the exercise date. The holder is required to exercise options covering the
number of shares, which are subject to the SAR so exercised. SARs are not
exercisable during the first six months after the date of grant, and may be
transferred only by will or the laws of descent and distribution.
The 1996 Incentive Plan also provides the Board of Directors or the
Compensation Committee discretion to grant to key persons shares of Restricted
Stock subject to certain limitations on transfer and substantial risks of
forfeiture.
1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan (the "1997 Incentive Plan") was adopted by
the Company's Board of Directors on April 10, 1997. The 1997 Incentive Plan
provides for the granting of Incentive Stock Options within the meaning of
Section 422 of the Code, nonqualified stock options, SARs and grants of shares
of Common Stock subject to certain restrictions (collectively, "Awards") up to a
maximum of 1,650,000 shares to officers, directors, key employees and others.
Incentive Stock Options can be awarded only to
10
<PAGE>
employees of the Company at the time of the grant. No ISO may be granted under
the 1997 Incentive Plan after April 9, 2007.
The 1997 Incentive Plan is administered by the Board of Directors or a
Committee of the Board of Directors, which determines the terms and conditions
of the Awards granted under the 1997 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Committee.
The exercise price of all Incentive Stock Options granted under the 1997
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of Substantial Stockholders, the exercise price
of Incentive Stock Options must be at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of all nonqualified stock
options granted under the 1997 Incentive Plan shall be determined by the
Compensation Committee. The term of any Incentive Stock Option granted under the
1997 Incentive Plan may not exceed ten years, or, for Incentive Stock Options
granted to Substantial Stockholders, five years. The 1997 Incentive Plan may be
amended or terminated by the Board of Directors, but no such action may impair
the rights of a participant under a previously granted option.
The 1997 Incentive Plan provides the Committee the discretion to determine
when options granted thereunder shall become exercisable and the vesting period
of such options. Upon termination of a participant's employment or relationship
with the Company, options may be exercised only to the extent exercisable on the
date of such termination (within three months), but not thereafter, unless
termination is due to death or disability, in which case the options are
exercisable within one year of termination.
The 1997 Incentive Plan provides the Committee discretion to grant SARs to
key employees, consultants and directors. Promptly after exercise of a SAR the
holder shall be entitled to receive in chase, by check or in shares of Common
Stock, an amount equal to the excess of the fair market value on the exercise
date of the shares of Common Stock as to which the SAR is exercised over the
base price of such shares, which shall be determined by the Committee
The 1997 Incentive Plan also provides the Committee discretion to grant to
key persons shares of restricted stock subject to certain contingencies and
restrictions as the Committee may determine.
1999 STOCK INCENTIVE PLAN
The 1999 Stock Incentive Plan (the "1999 Incentive Plan") was adopted by
the Company's Board of Directors on November 12, 1999. The 1999 Incentive Plan
provides for the granting of Incentive Stock Options within the meaning of
Section 422 of the Code, nonqualified stock options, SARs and grants of shares
of Common Stock subject to certain restrictions (collectively, "Awards") up to a
maximum of 3,000,000 shares to officers, directors, key employees and others.
Incentive Stock Options can be awarded only to employees of the Company at the
time of the grant. No ISO may be granted under the 1999 Incentive Plan after
November 12, 2009.
The 1999 Incentive Plan is administered by the Board of Directors or a
Committee of the Board of Directors, which determines the terms and conditions
of the Awards granted under the 1999 Incentive Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof.
Dr. Steven A. Newman, Lt. Gen. Harry E. Soyster (Ret.) and Martin Eric Weisberg,
Esq. currently are the members of the Committee.
The exercise price of all Incentive Stock Options granted under the 1999
Incentive Plan must equal at least the fair market value of the Common Stock on
the date of grant. In the case of Substantial Stockholders, the exercise price
of Incentive Stock Options must be at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of all nonqualified stock
options granted under the 1999 Incentive Plan shall be determined by the
Compensation Committee. The term of any Incentive Stock Option granted under the
1999 Incentive Plan may not exceed ten years, or, for Incentive Stock Options
granted to Substantial Stockholders, five years. The 1999 Incentive Plan may be
amended or terminated by the Board of Directors, but no such action may impair
the rights of a participant under a previously granted option.
The 1999 Incentive Plan provides the Committee the discretion to determine
when options granted thereunder shall become exercisable and the vesting period
of such options. Upon termination of a participant's employment or relationship
with the Company, options may be exercised only to the extent exercisable on the
date of such termination (within three months), but not thereafter, unless
termination is due to death or disability, in which case the options are
exercisable within one year of termination.
The 1999 Incentive Plan provides the Committee discretion to grant SARs to
key employees, consultants and directors. Promptly after exercise of a SAR the
holder shall be entitled to receive in chase, by check or in shares of Common
Stock, an amount equal to the
11
<PAGE>
excess of the fair market value on the exercise date of the shares of Common
Stock as to which the SAR is exercised over the base price of such shares, which
shall be determined by the Committee
The 1999 Incentive Plan also provides the Committee discretion to grant to
key persons shares of restricted stock subject to certain contingencies and
restrictions as the Committee may determine.
As of December 31, 1999 a total of 4,761,311 options had been issued and
were outstanding pursuant to the Company's stock incentive plans. Each of the
outstanding options has an exercise price at least equal to the fair market
value of the Common Stock on the date of grant. As of December 31, 1999, there
were no SARs outstanding and there has been one grant of Restricted Stock of
10,000 shares of Common Stock to a former officer of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 19, 2000, certain information
regarding the ownership of voting securities of the Company by each stockholder
known to the management of the Company to be (i) the beneficial owner of more
than 5% of the Company's outstanding Common Stock, (ii) the directors of the
Company during the last fiscal year, (iii) the executive officers named in the
Summary Compensation Table herein under "Executive Compensation" and (iv) all
executive officers and directors as a group. The Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares.
<TABLE>
<CAPTION>
AMOUNT OF SHARES PERCENTAGE
NAME BENEFICIALLY OWNED OWNED
---- ------------------ -----
<S> <C> <C> <C>
GEORGE ALLEN, ESQ. 60,300 (4) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
EUGENE J. AMOBI 430,000 (5) 1.15%
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
MAARTEN R. HEYBROEK 1,500 (2) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
KEITH P. HICKS, ESQ. 399,597 (11) 1.07%
4121 Roberts Road
Fairfax, Virginia 22032
JOHN F. MOYNAHAN 111,680 (9) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
EDWARD G. NEWMAN 3,089,911 (1) 8.22%
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
STEVEN A. NEWMAN, M.D. 1,841,064 (6) 4.88%
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PHILLIP E. PEARCE 130,000 (5) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
JAMES J. RALABATE, ESQ 168,726 (7) *
5792 Main Street
Williamsville, New York 14221
HUSSEIN SALLAM 43,484 (13) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
LT. GEN. HARRY E. SOYSTER (RET.) 149,364 (5) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
WILLIAM TAUSKEY 0 *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
KAZUYUKI TOYOSATO 70,000 (3) *
Urban Square Yokohama Bldg. 10F 1-1
Sakae-cho Yokohoma-shi Kanagawa
221-0052 Japan
DR. EDWIN VOGT 98,333 (8) *
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
MARTIN ERIC WEISBERG, ESQ. 105,000 (12) *
405 Lexington Avenue
New York, New York 10174
Officers and directors as a group (15 6,698,959 (10) 17.11%
persons)
</TABLE>
- ----------
* Less than 1%
(1) Includes (a) 413,888 shares of Common Stock issuable upon exercise of
currently exercisable options, (b) 200,000 shares of Common Stock
beneficially owned by an irrevocable trust established by Mr. Newman for
the benefit of his children , (c) 500,000 shares registered under the name
of Bear Stearns pursuant to a pledge agreement between Mr. Newman and Bear
Stearns and (d) 9,000 shares owned by an irrevocable trust established by
Dr. Steven A. Newman for which Mr. Newman is trustee. Does not include (a)
776,950 shares of Common Stock beneficially owned by Mr. Newman's wife,
Francis C. Newman; (b) 28,900 shares of Common Stock beneficially owned by
an irrevocable trust established by Mr. Newman for the benefit of his
sister; and (c) 28,900 shares of Common Stock beneficially owned by an
irrevocable trust established by Mr. Newman for the benefit of his mother.
Mr. Newman disclaims beneficial ownership of all such shares.
(2) Includes 1,500 shares of Common Stock beneficially owned by Mr. Heybroek's
children. Mr. Heybroek resigned from his position with the Company on June
15, 1999.
13
<PAGE>
(3) Includes 70,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(4) Includes 60,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(5) Includes 130,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(6) Includes (a) 540,583 shares of Common Stock issuable upon exercise of
currently exercisable options, (b) 100,000 shares of Common Stock
beneficially owned by an irrevocable trust established by Dr. Newman for
the benefit of his children, for which shares Dr. Newman disclaims
beneficial ownership, (c) 500,000 shares registered under the name of Bear
Stearns pursuant to a pledge agreement between Dr. Newman and Bear Stearns
and (d) 32,000 shares owned by an irrevocable trust established by Edward
G. Newman for which Dr. Newman is trustee.
(7) Includes (a) 110,000 shares of Common Stock issuable upon exercise of
currently exercisable options and (b) 30,000 shares issued upon exercise of
options and currently held by Mr. Ralabate.
(8) Includes 78,333 shares of Common Stock issuable upon exercise of currently
exercisable options.
(9) Includes 60,580 shares of Common Stock issuable upon exercise of currently
exercisable options and 50,000 shares of Common Stock issuable upon
exercise of options exercisable within 60 days of April 19, 2000.
(10) Includes 1,951,868 shares of Common Stock issuable to the group upon
exercise of currently exercisable options and 50,000 shares of Common Stock
issuable upon exercise of options exercisable within 60 days of April 19,
2000.
(11) Includes 80,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(12) Includes 105,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(13) Includes 43,484 shares of Common Stock issued to Mr. Sallam upon exercise
of options. Mr. Sallam was hired as an employee of the Company in December
1997 and resigned from his position with the Company in December 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with transactions described below, the Company did not secure
an independent determination of the fairness and reasonableness of such
transactions and arrangements with affiliates of the Company. In each instance
described below, the disinterested directors (either at or following the time of
the transaction) reviewed and approved the fairness and reasonableness of the
terms of the transaction. The Company believes that each transaction was fair
and reasonable to the Company and on terms at least as favorable as could have
been obtained from non-affiliates. Transactions between any corporation and its
officers and directors are subject to inherent conflicts of interest.
TECH INTERNATIONAL AND TECH VIRGINIA
Since December 1992, the Company has maintained various business
relationships with Tech International and since 1994, with Tech Virginia. Tech
International operates a computer software and consulting business. Until
December 30, 1994, Tech International's Virginia operations were conducted
through its Virginia business unit. In December 30, 1994, Tech International
spun-off the Virginia business unit (the "Spin-Off") as Tech Virginia. Edward G.
Newman, a principal stockholder, director and the Chairman, President and Chief
Executive Officer of the Company, Steven A. Newman, an Execuive Vice President
and Vice Chairman of the Board of Directors of the Company and Eugene J. Amobi,
a director of the Company, were the stockholders, and continue as officers and
directors of Tech Virginia. Eugene J. Amobi is the sole director and stockholder
of Tech International
MANAGEMENT PERSONNEL AGREEMENTS WITH TECH VIRGINIA
Messrs. Edward G. Newman, Steven A. Newman and Eugene Amobi each had
employment agreements with Tech Virginia under which each of them was entitled
to a salary and each was eligible to receive certain bonuses. The agreements
with Messrs. Edward G. Newman and Steven A. Newman required each of them to
devote only reasonable time and attention to Tech Virginia, provided their
activities for Tech Virginia did not interfere with their obligations to the
Company. Upon the acquisition of Tech Virginia by the
14
<PAGE>
Company, such employment agreements were terminated by agreement with Messrs.
Newman, Newman, and Amobi. Messrs. Newman, Newman and Amobi have continued to
provide services to Tech Virginia since the acquisition without contract but
under similar terms and conditions as their terminated agreements.
LEGAL SERVICES
The Company incurred $239,598 in fees and disbursements for legal services
rendered to the Company for the year ended December 31, 1999, payable to James
J. Ralabate, Esq. In addition, Mr. Ralabate served as processing agent for
payments of $224,377 to domestic and international law firm during the year
ended December 31, 1999 for fees and expenses related to the filing and
maintenance of the Company's patents and trademarks.
The Company incurred $663,075 in fees and disbursements for legal services
rendered to the Company for the year ended December 31, 1999, payable to Parker
Chapin LLP, the law firm where Martin Eric Weisberg, Esq. is a partner.
The Company incurred $218,687 in fees and disbursements for legal services
rendered to the Company for the year ended December 31, 1999, payable to McGuire
Woods Battle & Boothe, LLP, the law firm in which George Allen, Esq. is a
partner.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
EXHIBIT DESCRIPTION
- ------- -----------
23.1 Consent of Grant Thornton LLP
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
XYBERNAUT CORPORATION
By: /s/ Edward G. Newman
-----------------------------
Name: Edward G. Newman
Title: Chairman of the Board, President and
Chief Executive Officer
Dated: April 21, 2000
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes Edward G. Newman and Steven A. Newman, each acting
alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Form 10-KSB and
to file the same with exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this annual
report on Form 10-KSB has been signed below by the following persons in the
capacities and on the date indicated.
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Company and the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/s/ EDWARD G. NEWMAN President, Chief Executive April 21, 2000
------------------------------- Officer and Chairman of
Edward G. Newman the Board of Directors
/s/ WILLIAM H. TAUSKEY Executive Vice President April 21, 2000
-------------------------------
William H. Tauskey
/s/ JOHN F. MOYNAHAN Senior Vice President, April 21, 2000
------------------------------- Chief Financial Officer and
John F. Moynahan Treasurer
/s/ EDWIN VOGT Senior Vice President and April 21, 2000
------------------------------- Director
Edwin Vogt
/s/ STEVEN A. NEWMAN Executive Vice President April 21, 2000
------------------------------- and Vice Chairman of the
Steven A. Newman Board of Directors
/s/ KAZUYUKI TOYOSATO Executive Vice President April 21, 2000
------------------------------- and Director
Kazuyuki Toyosato
/s/ MARTIN ERIC WEISBERG Secretary and Director April 21, 2000
-------------------------------
Martin Eric Weisberg
/s/ GEORGE ALLEN, ESQ. Director April 21, 2000
-------------------------------
George Allen
/s/ EUGENE J. AMOBI Director April 21, 2000
-------------------------------
Eugene J. Amobi
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ KEITH P. HICKS Director April 21, 2000
-------------------------------
Keith P. Hicks
/s/ PHILLIP E. PEARCE Director April 21, 2000
-------------------------------
Phillip E. Pearce
/s/ JAMES J. RALABATE Director April 21, 2000
-------------------------------
James J. Ralabate
/s/ LT. GEN. HARRY E. SOYSTER Director April 21, 2000
-------------------------------
Lt. Gen. Harry E. Soyster
</TABLE>
17
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated February 25, 2000, accompanying the
consolidated financial statements and schedules incorporated by reference in the
Annual Report of Xybernaut Corporation (the "Company") on Form 10-KSB/A for the
year ended December 31, 1999. We hereby consent to the incorporation by
reference of said report in the Registration Statements of the Company of Forms
S-3 (File No. 333-43693, effective January 30, 1998, File No. 333-52567,
effective June 11, 1998, File No. 333-68859, effective January 25, 1999, File
No. 333-77769, effective May 17, 1999 and File No. 333-80837, effective January
28, 2000) and on Form S-8 (File No. 333-94463, effective January 12, 2000).
/s/ Grant Thornton LLP
Vienna, Virginia
April 21, 2000
E-1
