SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Schick Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ______________________________
2) Form, Schedule or Registration Statement No. _____________
3) Filing Party: ________________________________________
4) Date Filed: _________________________________________
<PAGE>
[LOGO]
September 27, 2000
Dear Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Schick Technologies, Inc., to be held on Wednesday, October 25, 2000,
beginning at 11:00 a.m. at our company headquarters, located on the fifth floor
of 31-00 47th Avenue, Long Island City, New York.
Information about the meeting and the various matters on which the
stockholders will vote is included in the Notice of Meeting and Proxy Statement
which follow. Also included is a proxy card and postage-paid return envelope.
Please sign, date and mail the enclosed proxy card in the return envelope
provided, as promptly as possible, whether or not you plan to attend the
meeting.
I look forward to greeting you personally at the meeting.
Sincerely,
David B. Schick
Chief Executive Office
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 25, 2000
TO THE STOCKHOLDERS OF SCHICK TECHNOLOGIES, INC. :
Notice is hereby given that the Annual Meeting of Stockholders of Schick
Technologies, Inc. (the "Company") will be held on Wednesday, October 25, 2000
at 11:00 a.m. at the Company's offices, located at 31-00 47th Avenue, Long
Island City, New York, for the following purposes:
1. To elect two (2) directors to serve for three-year terms or until
their respective successors are elected and qualified, and to elect
two (2) directors to serve for two-year terms or until their
respective successors are elected and qualified;
2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized
shares of the Company's common stock, par value $.01 per share
("Common Stock"), from 25,000,000 to 50,000,000;
3. To approve an amendment to the Company's 1996 Employee Stock Option
Plan to increase the number of shares of Common Stock issuable
thereunder from 1,000,000 to 3,000,000;
4. To approve an amendment to the Company's 1997 Stock Option Plan for
Non-Employee Directors to increase the number of shares of Common
Stock issuable thereunder from 35,000 to 300,000;
5. To ratify the selection of Grant Thornton LLP as the Company's
independent certified public accountants for the fiscal year ending
March 31, 2001; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of Common Stock as of the close of business on
September 12, 2000 are entitled to notice of and to vote at the meeting and any
adjournment thereof.
In accordance with Delaware law, a list of the holders of Common Stock
entitled to vote at the 2000 Annual Meeting will be available for examination by
any stockholder for any purpose germane to the Annual Meeting, during ordinary
business hours, for at least 10 days prior to the Annual Meeting, at the offices
of the Company, 31-00 47th Avenue, Long Island City, New York.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU
MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors,
Zvi N. Raskin
Secretary
Long Island City, New York
September 27, 2000
<PAGE>
[LOGO]
31-00 47th Avenue
Long Island City, New York 11101
(718) 937-5765
--------------------------------------------------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 25, 2000
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors of Schick Technologies, Inc. (the
"Company") for use at the 2000 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on October 25, 2000, at 11:00 a.m., New York time, at the
Company's offices at 31-00 47th Avenue, Long Island City, New York, and at any
adjournment thereof, for the purposes set forth in the Notice of Annual Meeting
of Stockholders. This Proxy Statement and the form of proxy enclosed are being
mailed to stockholders with the Company's Annual Report to Stockholders
on or about September 27, 2000.
Only stockholders of record of the common stock, par value $0.01 per share,
of the Company (the "Common Stock") at the close of business on September 12,
2000 will be entitled to vote at the Annual Meeting. As of that date, a total of
10,136,113 shares of Common Stock were outstanding, each share being entitled to
one vote. There is no cumulative voting. The presence at the Annual Meeting, in
person or by proxy, of the holders of a majority of the shares of Common Stock
will constitute a quorum for the transaction of business at the Annual Meeting.
If, however, a quorum is not present or represented at the Annual Meeting, the
stockholders entitled to vote thereat, present in person or represented by
proxy, will have the power to adjourn the Annual Meeting, without notice other
than announcement at the Annual Meeting, until a quorum shall be present or
represented.
Shares of the Company's Common Stock represented by proxies in the
accompanying form, which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted in the manner directed by a stockholder. If no direction is given, the
proxy will be voted FOR the election of the nominees for director named in this
Proxy Statement, FOR approval of the amendment of the Company's Amended and
Restated Certificate of
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Incorporation, FOR approval of the amendment of the 1996 Employee Stock Option
Plan, FOR approval of the amendment of the 1997 Stock Option Plan for
Non-Employee Directors and FOR ratification of the selection of Grant Thornton
LLP as the Company's independent certified public accountants. A stockholder may
revoke a proxy at any time prior to its exercise by giving to an officer of the
Company a written notice of revocation of the proxy's authority, by submitting a
duly elected proxy bearing a later date or by delivering a written revocation at
the Annual Meeting.
If a stockholder returns a proxy withholding authority to vote the proxy
with respect to a nominee for director, then the shares of the Common Stock
covered by such proxy shall be deemed present at the Annual Meeting for purposes
of determining a quorum and for purposes of calculating the vote with respect to
such nominee, but shall not be deemed to have been voted for such nominee. If a
stockholder abstains from voting as to any matter, then the shares held by such
stockholder shall be deemed present at the Annual Meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such matter, but shall not be deemed to have been voted in favor of such matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on such matter, then the shares covered by such non-vote shall be deemed present
at the Annual Meeting for purposes of determining a quorum but shall not be
deemed to be present and entitled to vote at the Annual Meeting for purposes of
calculating the vote with respect to such matter. The two nominees for director
for two-year terms and the two nominees for director for three-year terms
receiving the highest number of votes at the Annual Meeting will be elected. The
affirmative vote of a majority of the outstanding shares of common stock is
required to approve Proposal Two; the affirmative vote of a majority of the
outstanding shares of Common Stock present in person or by proxy at the Annual
Meeting is required to approve Proposals Three, Four and Five.
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no business that will be presented for consideration at the
Annual Meeting other than the matters described in this Proxy Statement. If any
other matters are properly brought before the Annual Meeting, the persons named
in the enclosed form of proxy will vote the proxies in accordance with their
best judgment.
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Board of Directors of the Company is composed of six members divided
into three classes. The members of each class are elected to serve three-year
terms with the term of office of each class ending in successive years. David B.
Schick and Allen Schick, Ph.D. are the directors in the class whose term expires
at the Annual Meeting. Additionally, Euval S. Barrekette, Ph.D. and Jonathan
Blank, Esq., are the directors in the class whose term was initially scheduled
to expire at the Company's Annual
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Meeting of Stockholders in 1999. Such meeting was never held and Messrs.
Barrekette's and Blank's terms as members of the Board of Directors shall expire
once their respective successors are elected and qualified. The Board of
Directors has nominated Messrs. David B. Schick and Allen Schick for re-election
to the Board of Directors at the Annual Meeting for terms of three years, Mr.
Barrekette for re-election and Mr. Blank for election to the Board of Directors
at the Annual Meeting for terms of two years, and all nominees have indicated a
willingness to serve. The other directors of the Company will continue in office
for their existing terms. Jeffrey T. Slovin and Robert Barolak serve in the
class whose term expires in 2001. Upon the expiration of the term of a class of
directors, the members of such class will generally be elected for three-year
terms at the annual meeting of stockholders held in the year in which such term
expires. The affirmative vote of a majority of the shares of Common Stock
present and entitled to vote at the Annual Meeting is necessary to elect the
nominees for director.
The persons named as proxies in the enclosed form of proxy will vote the
proxies received by them for the election of Messrs. David B. Schick, Allen
Schick, Euval S. Barrekette and Jonathan Blank, unless otherwise directed. In
the event that any nominee becomes unavailable for election at the Annual
Meeting, the persons named as proxies in the enclosed form of proxy may vote for
a substitute nominee in their discretion as recommended by the Board of
Directors.
Information concerning the nominees and incumbent directors whose terms
will continue after the Annual Meeting is set forth below.
Euval Barrekette, Ph.D. Age 69, has served as a Director of the Company
(Nominee with new term since April 1992. Dr. Barrekette's current term on
expiring in 2002) the Board, which was initially scheduled to expire
at the Company's Annual Meeting of Stockholders in
1999, shall expire once his successor is elected
and qualified. Dr. Barrekette is a licensed
Professional Engineer in New York State. Since
1986 Dr. Barrekette has been a consulting engineer
and physicist. From 1984 to 1986 Dr. Barrekette
was Group Director of Optical Technologies of the
IBM Large Systems Group. From 1960 to 1984 Dr.
Barrekette was employed at IBM's T.J. Watson
Research Center in various capacities, including
Assistant Director of Applied Research, Assistant
Director of Computer Science, Manager of
Input/Output Technologies and Manager of Optics
and Electrooptics. Dr. Barrekette holds an A.B.
degree from Columbia College, a B.S. degree from
Columbia University School of Engineering, an M.S.
degree from its Institute of Flight Structures and
a Ph.D. from the Columbia University Graduate
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Faculties. Dr. Barrekette is a fellow of the
American Society of Civil Engineers, a Senior
Member of the Institute of Electronic & Electrical
Engineers, and a member of The National Society of
Professional Engineers, The New York State Society
of Professional Engineers, The Optical Society of
America and The New York Academy of Science. Dr.
Barrekette is the uncle of David B. Schick and the
brother-in-law of Dr. Allen Schick.
Jonathan Blank, Esq. Age 55, has served as a Director of the Company
(Nominee with new term since April 2000 when he was elected by the
expiring in 2002) remaining Directors to fill a vacancy in the class
originally scheduled to expire at the Company's
Annual Meeting of Stockholders in 1999. Since
1979, Mr. Blank has been a member of the law firm
of Preston Gates Ellis & Rouvelas Meeds LLP, a
managing partner of the firm since 1995 and a
member of the Executive Committee of Preston Gates
Ellis LLP since 1995. Mr. Blank is also a member
of the Board of Directors of Marine Transport
Corporation and of its Audit Committee.
David B. Schick Age 39, is a founder of the Company and, since its
(Nominee with new term inception in April 1992, has served as the
expiring in 2003) Company's Chief Executive Officer and Chairman of
the Board of Directors. From the Company's
inception to December 1999, Mr. Schick also served
as the Company's President. Mr. Schick's current
term on the Board expires at the Company's Annual
Meeting of Stockholders in 2000. Mr. Schick is
also a member of the Board of Directors of
Photobit Corporation. From September 1991 to April
1992, Mr. Schick was employed by Philips N.V.
Laboratories, where he served as a consulting
engineer designing high-definition television
equipment. From February 1987 to August 1991, Mr.
Schick was employed as a senior engineer at Cox
and Company, an engineering firm in New York City.
From January 1985 to January 1987, Mr. Schick was
employed as an electrical engineer at Grumman
Aerospace Co. Mr. Schick holds a B.S. degree in
electrical engineering from the University of
Pennsylvania's Moore School of Engineering. Mr.
Schick is the son of Dr. Allen Schick and the
nephew of Dr. Barrekette.
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Allen Schick, Ph.D. Age 65, has served as a Director of the Company
(Nominee with new term since April 1992. Dr. Schick's current term on the
expiring in 2003) Board expires at the Company's Annual Meeting of
Stockholders in 2000. Since 1981, Dr. Schick has
been a professor at the University of Maryland and
since 1988 has been a Visiting Fellow at the
Brookings Institution. Dr. Schick holds a Ph.D.
degree from Yale University. Dr. Schick is David
B. Schick's father and the brother-in-law of Dr.
Barrekette.
Jeffrey T. Slovin Age 35, has served as the Company's President and
(Term expires in 2001) as a Director since December 1999. Mr. Slovin's
current term on the Board expires at the Company's
Annual Meeting of Stockholders in 2001. Mr. Slovin
is currently a Managing Director of Greystone &
Co., Inc. ("Greystone & Co."). From 1996 to 1999,
Mr. Slovin served in various executive capacities
at Sommerset Investment Capital LLC, including
Managing Director, and as President of Sommerset
Realty Investment Corp. During 1995, Mr. Slovin
was a Manager at Fidelity Investments Co. From
1991 to 1994, Mr. Slovin was Chief Financial
Officer of SportsLab USA Corp. and, from 1993 to
1994, was also President of Sports and
Entertainment Inc. From 1987 to 1991, Mr. Slovin
was an associate at Bear Stearns & Co., Inc.,
specializing in mergers and acquisitions and
corporate finance. Mr. Slovin holds an MBA degree
from Harvard Business School.
Robert Barolak Age 46, has served as a Director of the Company
(Term expires in 2001) since December 1999. Mr. Barolak's current term on
the Board expires at the Company's Annual Meeting
of Stockholders in 2001. Since 1989, Mr. Barolak
has been employed at Greystone & Co. in various
executive capacities and has been its Executive
Vice President since 1995. From 1979 to 1989, Mr.
Barolak was an attorney at the firm of Ballard
Spahr Andrews & Ingersoll, LLP in Philadelphia.
Mr. Barolak holds a J.D. degree from the
University of Pennsylvania School of Law.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
MESSRS. DAVID B. SCHICK, ALLEN SCHICK, EUVAL S. BARREKETTE AND
JONATHAN BLANK AS DIRECTORS OF THE COMPANY.
--------------------------------------------------------------------------------
5
<PAGE>
Meetings and Committees of The Board of Directors
During fiscal 2000, the Board of Directors held fourteen (14) meetings.
Each Director holding office during the year attended at least 75% of the total
number of meetings of the Board of Directors and committees of the Board on
which he served. The Board of Directors has an Audit Committee and an Executive
Compensation Committee, which are described below. The Company does not have a
Nominating Committee.
The Audit Committee consists of at least two directors. Its primary duties
and responsibilities are to serve as an independent and objective party to
monitor the Company's financial reporting process and internal control system;
review and appraise the audit efforts of the Company's independent certified
public accountants; and provide an open avenue of communication among the
independent certified public accountants, financial and senior management and
the Board of Directors. The Audit Committee has oversight responsibility
relating to the Company's accounting practices, internal financial controls and
financial reporting, including the engagement of independent certified public
accountants and the planning, scope, timing and cost of any audit as well as
review of the independent accountant's report on the financial statements
following completion of each such audit. On June 7, 2000, the Board of Directors
approved a draft version of an Audit Committee Charter, pursuant to which the
Audit Committee shall operate, but deferred implementation thereof for a period
not to exceed 12 months. A copy of the draft Audit Committee Charter is attached
to this Proxy Statement as Appendix A. The members of the Audit Committee are
Messrs. Blank and Slovin. The Audit Committee held six (6) meetings during
fiscal 2000.
The Executive Compensation Committee has oversight responsibility relating
to the Company's employee benefit and compensation plans, including compensation
of the executive officers and administering and recommending awards under the
1996 Employee Stock Option Plan. The Executive Compensation Committee is also
responsible for the development and implementation of policies, procedures and
other matters relating to the hiring and retention of management and for
reviewing, monitoring and recommending (for approval by the Board of Directors)
plans with respect to succession of the chief executive officer. The members of
the Executive Compensation Committee during the fiscal year ended March 31, 2000
were Howard Wasserman, D.D.S. (until Mr. Wasserman resigned as a member of the
Board of Directors in November 1999) and Robert J. Barolak (whose term commenced
upon his election to the Board of Directors in December 1999, and who is
currently the sole member).
Compensation of Directors
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Directors who are also employees of the Company are not separately
compensated for any services they provide as directors. In fiscal 2000, each
non-employee director of the Company was eligible to receive $500 for each
meeting of the Board of Directors attended, $300 for each committee meeting
attended, and an annual retainer of $1,200. The Company may, but did not, pay
such fees in Common Stock. In addition, non-employee directors are eligible to
receive annual grants of stock options under the Company's 1997 Stock Option
Plan for Non-Employee Directors.
EXECUTIVE OFFICERS
The following table shows the names and ages of all executive officers of
the Company, their positions and offices and the period during which each such
person served as an officer. The term of office of each executive officer is
generally not fixed since each such person serves at the discretion of the Board
of Directors of the Company.
Officer
Name Age Position Since
---- --- -------- -----
David B. Schick.... 39 Chairman of the Board and Chief
Executive Officer 1992
Jeffrey T. Slovin.. 35 President and Director 1999
Zvi N. Raskin...... 37 Secretary and General Counsel 1992
Stan Mandelkern.... 40 Vice President of Engineering 1999
William Rogers..... 59 Vice President of Operations 1999
Michael Stone...... 47 Vice President of Sales and Marketing 2000
Ari Neugroschl..... 29 Vice President of Management
Information Systems 2000
The business experience of each of the executive officers who is not a
nominee for Director or a Director whose term of office will continue after the
Annual Meeting is set forth below.
ZVI N. RASKIN has served as Secretary of the Company since April 1992 and
as General Counsel of the Company since September 1995. From April 1992 to
May 1996, Mr. Raskin was a Director of the Company. Mr. Raskin is admitted
to practice law before the Bars of the State of New York, the United States
District Courts for the Southern and Eastern Districts of New York and the
United States Court of Appeals for the Second Circuit. From 1992 to 1995,
Mr. Raskin was
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a senior associate at the New York law firm of Townley & Updike. From 1990
to 1992, Mr. Raskin was an associate at the New York law firm of Dornbush
Mandelstam & Silverman. Mr. Raskin holds a J.D. degree from Yale Law
School.
STAN MANDELKERN has served as the Company's Vice President of Engineering
since November 1999. From 1998 to 1999, Mr. Mandelkern was the Company's
Director of Electrical Engineering, and was a Senior Electrical Engineer at
the Company from 1997 to 1998. From 1996 to 1997 Mr. Mandelkern was at
Satellite Transmission Systems as Project Leader for the Digital Video
Products Group. From 1989 to 1996 Mr. Mandelkern held various design and
management positions at Loral Corp. Mr. Mandelkern holds a M.S. Degree in
electrical engineering from Syracuse University.
WILLIAM ROGERS has served as the Company's Vice President of Operations
since January 2000. From August 1998 to January 2000, Mr. Rogers was the
Company's Director of Materials and Manufacturing Engineering. From June
1995 to August 1998, Mr. Rogers was Director of Operations at Veeco
Instruments Co., and from May 1993 to February 1995 was Director of
Manufacturing for Scully Signal Company. Mr. Rogers holds a B.S. Degree in
electrical engineering from Northeastern University.
MICHAEL STONE has served as the Company's Vice President of Sales and
Marketing since January 2000. From September 1993 to January 2000, Mr.
Stone was General Manager of the Dental Division of Welch-Allyn Company,
and from October 1989 to September 1993 was Director of Marketing for
Welch-Allyn. Mr. Stone holds an MBA degree from the University of
Rochester.
ARI NEUGROSCHL has served as the Company's Vice President of Management
Information Systems since July 2000. From November 1997 to July 2000, Mr.
Neugroschl was the Company's Director of Management Information Systems,
and from February 1996 to November 1997 he served as the Company's Director
of Customer Service and Support. Mr. Neugroschl holds a B.S. Degree in
Economics from Yeshiva University.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
received for the fiscal years ended March 31, 2000, 1999 and 1998 by the
Company's chief executive officer and each of the current and former executive
officers of the Company whose total salary and other compensation exceeded
$100,000 (the "Named Executives") for services rendered in all capacities
(including service as a director of the Company) during the year ended March 31,
2000.
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Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Other
Annual Securities All Other
Name and Principal Fiscal Compensa- Underlying Compensa
Position Year Salary($) Bonus($) tion(1) Options(#)(2) tion($)(3)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 $ 184,442 $ -- -- -- $ 3,802
David B. Schick
Chairman of the Board 1999 217,500 -- -- 12,251 3,980
and Chief Executive
Officer 1998 143,385 39,692 -- 3,267 4,569
------------------------------------------------------------------------------------------------------------------------
2000 165,769 -- -- -- 3,144
Fred Levine
Former Vice President of 1999 179,167 47,500(4) -- 12,055 4,366
Sales and Marketing and
Former Director 1998 137,318 23,826(4) -- 1,000 4,031
------------------------------------------------------------------------------------------------------------------------
2000 160,577 10,000 -- -- 4,265
Zvi N. Raskin, Esq
General Counsel and 1999 132,500 -- -- 17,006 3,286
Secretary
1998 99,539 25,000 -- 2,343 3,113
------------------------------------------------------------------------------------------------------------------------
George C. Rough, Jr 2000 139,385(5) -- -- -- --
Former Chief Financial
Officer 1999 13,846(6) 150,000(7) -- 100,000(8) --
1998 -- -- -- -- --
</TABLE>
----------
(1) Aggregate amount does not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for the named officer.
(2) Represents options to purchase shares of Common Stock granted during fiscal
1998, 1999 and 2000, pursuant to the Company's 1996 Employee Stock Option
Plan.
(3) Reflects amounts contributed by the Company in the form of matching
contributions to the Named Executive's Savings Plan account during fiscal
1998, 1999 and 2000.
(4) Represents a commission received by Mr. Levine in connection with certain
sales targets that were met or exceeded.
(5) Reflects payment of salary to Mr. Rough from April 1, 1999 through the
termination of his employment with the Company in October 1999.
(6) Reflects payment of salary to Mr. Rough from March 1, 1999, upon
commencement of his employment with the Company, through March 31, 1999.
(7) In connection with commencement of his employment with the Company in March
1999, Mr. Rough was paid a bonus of $150,000.
(8) Upon his employment with the Company on March 1, 1999, Mr. Rough was
granted stock options to purchase 100,000 shares, 25% of which stock
options were to vest on March 1, 2000, 25% on March 1,
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2001, 25% on March 1, 2002, and the remaining 25% on March 1, 2003,
pursuant to the 1996 Employee Stock Option Plan. Upon his termination from
employment with the Company in October 1999, all such options terminated.
Stock Option Grants
No grants of options to purchase Common Stock were made by the Company
during the year ended March 31, 2000 to any of the Named Executives.
Option Exercises and Year-End Value Table
The following table sets forth information regarding the exercise of stock
options during fiscal 2000 and the number and value of unexercised options held
at March 31, 2000 by each Named Executive.
Aggregated Option Exercises in Fiscal 2000
and Fiscal 2000 Year-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised "In-the-Money"
Options at Options at
Shares March 31, 2000 March 31, 2000
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized ($) Unexercisable Unexercisable(1)
---- ----------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
David B. Schick -- -- 11,536 / 9,696 $ -- / --
Fred Levine -- -- 56,000(2) / 0 18,760 / 0
Zvi N. Raskin -- -- 6,425 / 12,673 -- / --
George C. Rough, -- -- 0/0(3) -- / --
Jr.
</TABLE>
(1) Options are "in-the-money" if the fair market value of the underlying
securities exceeds the exercise price of the options. The amounts set forth
represent the difference between $2.125 per share, the closing price per
share on March 31, 2000, and the exercise price of the option, multiplied
by the applicable number of options.
(2) Includes options to purchase 56,000 shares of Common Stock at an exercise
price of $1.79 a share granted to Mr. Levine in fiscal 1996 in connection
with Mr. Levine's commencement of employment with the Company, of which all
options are vested. Such options expire on December 31, 2000.
(3) Upon his termination from employment with the Company in October 1999, all
the stock options granted to Mr. Rough upon his employment with the Company
on March 1, 1999, terminated and were returned to the Company.
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EXECUTIVE COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report shall not be deemed incorporated by reference by any general
statement incorporating this Proxy Statement into any filing under the
Securities Act of 1933 or under the Exchange Act, except to the extent that the
Company specifically incorporates the information contained herein by reference,
and shall not otherwise be deemed filed under those acts.
Compensation Philosophy: The Company does business in a highly competitive
and dynamic industry. The Company's continued success in such an environment
depends, in large part, on its ability to attract and retain talented senior
executives. The Company must provide executives with long-and short-term
incentives to maximize corporate performance, and reward successful efforts to
do so. As a result, the Committee's compensation policies are designed to:
(i) Provide a competitive level of compensation to attract and retain
talented management;
(ii) Reward senior executives for corporate performance;
(iii)Align the interests of senior executives with the Company's
stockholders in order to maximize stockholder value;
(iv) Motivate executive officers to achieve the Company's business
objectives; and
(v) Reward individual performance.
To achieve these compensation objectives, the Committee has developed
compensation packages for senior executive officers generally consisting of base
salary, a bonus arrangement and awards of stock options.
Base Salary. The Company seeks to pay competitive salaries to executive
officers commensurate with their qualifications, duties and responsibilities. In
conducting salary reviews, the Committee considers each individual executive
officer's achievements during the prior fiscal year in meeting the Company's
financial and business objectives, as well as the executive officer's
performance of individual responsibilities and the Company's financial position
and overall performance.
Bonuses. The Committee believes that performance bonuses are a key link
between executive pay and stockholder value.
Option Grants. The Committee believes that equity ownership by executive
officers provides incentive to build stockholder value and aligns the interests
of officers with the stockholders. The Committee typically recommends or awards
an option grant upon hiring executive officers or within one year of their date
of hire, subject to a maximum four-year vesting schedule. After the initial
stock option grant, the Committee considers additional grants, usually on a
semi-annual basis, under the 1996 Employee Stock Option Plan.
11
<PAGE>
Options are granted at the current market price for the Company's Common Stock
and, consequently, have value only if the price of the Common Stock increases
over the exercise price for the period during which the option is exercisable.
The size of the initial grant is usually determined with reference to the
seniority of the officer, the contribution the officer is expected to make to
the Company and comparable equity compensation offered by others in the
industry. In determining the size of the periodic grants, the Committee
considers prior option grants to the officer, independent of whether the options
have been exercised, the executive's performance during the year and his or her
expected contributions in the succeeding year. The Committee believes that
periodic option grants provide incentives for executive officers to remain with
the Company.
Modification Of Compensation Policies. The Omnibus Budget Reconciliation
Act of 1993 includes potential limitations on tax deductions for compensation in
excess of $1,000,000 paid to the Company's executive officers. The Compensation
Committee has analyzed the impact of this provision of the tax law on the
compensation policies of the Company, has determined that historically the
effect of this provision on the taxes paid by the Company has not and would not
have been significant and has decided for the present not to modify the
compensation policies of the Company based on such provision. In the event that
a material amount of compensation might potentially not be deductible, it will
consider what actions, if any, should be taken to seek to make such compensation
deductible without compromising its ability to motivate and reward excellent
performance.
Chief Executive Officer Compensation. The Committee reviews the performance
of the Chief Executive Officer, and other executive officers of the Company,
generally on an annual basis. In January 2000, the Committee conducted a review
of David B. Schick's compensation. The Committee considered salary data for
other comparable companies and the Company's earnings and financial position in
comparison to preceding years. Based upon this review and Mr. Schick's
performance as C.E.O., in February 2000, the Company entered into a three-year
employment agreement with Mr. Schick, pursuant to which he is employed as Chief
Executive Officer of the Company. The term of the agreement is renewable
thereafter on a year-to-year basis unless either party gives 60-day written
notice of termination before the end of the then-current term. Mr. Schick's base
annual salary is $200,000, subject to annual increases of at least ten percent
(10%). In addition to base salary, Mr. Schick is eligible to receive annual
merit or cost-of-living increases as may be determined by the Executive
Compensation Committee, and approved by the Board of Directors. Mr. Schick will
also receive incentive compensation in the form of a bonus which is calculated
using a formula based on the Company's EBITDA as a percentage of the Company's
net revenues. Additionally, all Company stock options held by, or to be issued
to, Mr. Schick will immediately vest in the event that the Company has a change
in control or is acquired by another company or entity.
Robert Barolak
Member of the Executive
Compensation Committee
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee reviews and makes recommendations
regarding the compensation for top management and key employees of the Company,
including salaries and bonuses. The members of the Executive Compensation
Committee during the fiscal year ended March 31, 2000 were Howard Wasserman,
D.D.S. (until Mr. Wasserman resigned as a member of the Board of Directors in
November 1999) and Robert J. Barolak (commencing upon Mr. Barolak's election to
the Board of Directors in December, 1999). None of such persons is an officer or
employee, or former officer or employee, of the Company or any of its
subsidiaries. No interlocking relationship existed during the fiscal year ended
March 31, 2000, between the members of the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor had any such interlocking relationship existed in the
past. Mr. Barolak is an executive officer of Greystone & Co., an affiliate of
Greystone Funding Corporation ("Greystone"), the lender to the Company under an
Amended and Restated Loan Agreement dated as of December 27, 1999 (the "Loan
Agreement") between the Company and Greystone.
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative stockholder return on
its Common Stock with the return on the Russell 2000 Index and the Dow Jones
Advanced Technology Medical Devices Index from July 1, 1997 (the first trading
day for the Company's Common Stock) through March 31, 2000, the end of the
Company's fiscal year. The graph assumes investments of $100 on July 1, 1997 in
the Company's Common Stock, the Russell 2000 Index and the Dow Jones Advanced
Technology Medical Devices Index and assumes the reinvestment of all dividends.
COMPARE CUMULATIVE TOTAL RETURN
AMONG SCHICK TECHNOLOGIES,
RUSSELL 2000 INDEX AND PEER GROUP INDEX
[THE FOLLOWING TABLE IS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
7/01/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SCHICK TECHNOLOGIES 100.00 85.23 88.35 115.91 70.17 78.98
PEER GROUP INDEX 100.00 111.34 109.46 121.08 126.96 111.42
RUSSELL 2000 INDEX 100.00 114.86 111.02 122.18 116.48 93.02
<CAPTION>
12/31/98 3/31/99 6/30/99 9/30/99 12/31/99 3/31/00
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
SCHICK TECHNOLOGIES 46.02 18.75 13.92 2.27 5.68 9.66
PEER GROUP INDEX 142.44 143.15 154.28 144.21 146.36 182.82
RUSSELL 2000 INDEX 107.90 101.70 117.12 109.35 129.04 137.81
</TABLE>
ASSUMES $100 INVESTED ON JULY 01, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MAR. 31, 2000
CERTAIN TRANSACTIONS
In connection with the Amended Loan Agreement with Greystone, the Company
issued to Greystone warrants (the "Warrants") to purchase up to 17,250,000
shares (of which 4,250,000 are vested) of the Company's Common Stock, and to
Jeffrey Slovin, as Greystone's designee, Warrants to purchase 750,000 shares of
the Company's Common Stock. The Warrants are exercisable at $0.75 per share and
are subject to anti-dilution adjustment. Mr. Slovin is the Company's President
and serves as a Director of the Company as Greystone's designee. Messrs. Slovin
and Robert Barolak, who also serves as a Director as Greystone's designee, are
executive officers of Greystone & Co.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 18, 2000 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each director, (iii) each Named Executive of the Company and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise noted, the stockholders listed in the table have sole voting and
investment powers with respect to the shares of Common Stock owned by them.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name Beneficially Owned(1) Outstanding Shares
---- --------------------- ------------------
<S> <C> <C>
David B. Schick(2) .................................................. 2,197,590(3) ...............21.7%
George C. Rough Jr.(4) .............................................. --(5) ............... --
Fred Levine(6) ...................................................... 97,792(7) ............... *
Zvi N. Raskin(2) .................................................... 85,257(8) ............... *
Euval S. Barrekette(9) .............................................. 127,740(10) .............. 1.3%
Allen Schick(11) .................................................... 553,124(12) .............. 5.4%
Jeffrey T. Slovin(2) ................................................ 760,000(13)............... 7.0%
Robert Barolak (14) ................................................. 10,000(15)............... *
Jonathan Blank(16) .................................................. 110,075(17) .............. 1.1%
Greystone Funding Corporation(18) ................................... 4,250,000(19) ..............29.5%
All current executive Officers and Directors
as a group(20) ...................................................... 4,024,404 ..................36.4%
</TABLE>
* Less than 1%
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes voting power and/or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
of September 18, 2000 are deemed outstanding for computing the number and
the percentage of outstanding shares beneficially owned by the person
holding such options but are not deemed outstanding for computing the
percentage beneficially owned by any other person.
(2) Such person's business address is c/o Schick Technologies, Inc., 31-00 47th
Avenue, Long Island City, New York 11101.
14
<PAGE>
(3) Consists of 2,183,300 shares held jointly by Mr. Schick and his wife; 5,715
shares issuable upon the exercise of stock options granted to Mr. Schick in
July 1996; 2,450 shares issuable upon the exercise of stock options granted
to Mr. Schick in July 1997; 1125 shares issuable upon the exercise of stock
options granted to Mr. Schick in April 1998; and 5,000 shares issuable upon
the exercise of stock options granted to Mr. Schick in October 1998,
pursuant to the 1996 Employee Stock Option Plan.
(4) Such person's business address is c/o PricewaterhouseCoopers LLP, 1301
Avenue of the Americas, New York, New York 10036.
(5) Upon his employment with the Company on March 1, 1999, Mr. Rough was
granted stock options to purchase 100,000 shares, 25% of which stock
options were to vest on March 1, 2000, 25% on March 1, 2001, 25% on March
1, 2002, and the remaining 25% on March 1, 2003, pursuant to the 1996
Employee Stock Option Plan. Upon his termination from employment with the
Company in October 1999, all such options terminated and reverted to the
Company.
(6) Such person's address is 3 Cottonwood Lane, Wesley Hills, New York 10901.
(7) Consists of 41,792 shares held jointly by Mr. Levine and his wife, and
56,000 shares issuable upon the exercise of options granted to Mr. Levine
in fiscal 1996.
(8) Consists of 75,000 shares (the "Shares") issued by the Company to Mr.
Raskin on February 6, 2000, which are subject to the following restrictions
on their sale or transfer: (i) none of the Shares may be sold or
transferred prior to December 31, 2000, (ii) one-third (i.e., 25,000) of
the Shares may be sold or transferred on or after December 31, 2000, (iii)
an additional one-third (i.e., an additional 25,000) of the Shares may be
sold or transferred on or after December 31, 2001, and (iv) the final
one-third (i.e., the final 25,000) of the Shares may be sold or transferred
on or after December 31, 2002. The aforementioned 75,000 shares are subject
to a risk of forfeiture which expires as to 25,000 shares on each of
December 31, 2000, 2001 and 2002; 1,755 shares issuable upon the exercise
of stock options granted to Mr. Raskin in July 1997; 1,002 shares issuable
upon the exercise of options granted to Mr. Raskin in April 1998; 2,500
shares issuable upon the exercise of options granted to Mr. Raskin in July
1998; and 5,000 shares issuable upon the exercise of options granted to Mr.
Raskin in October 1998, pursuant to the 1996 Employee Stock Option Plan.
(9) Such person's address is 90 Riverside Drive, New York, New York 10024.
(10) Consists of 115,240 shares held by Dr. Barrekette; 2,500 shares issuable
upon the exercise of stock options granted to Dr. Barrekette in July, 1998;
and 10,000 shares issuable upon the exercise of stock options granted to
Dr. Barrekette in June, 2000, pursuant to the 1997 Directors Stock Option
Plan.
(11) Such person's address is 1222 Woodside Parkway, Silver Spring, Maryland
20910.
(12) Consists of 493,324 shares held jointly by Dr. Schick and his wife; 44,800
shares held by Dr. Schick as custodian for the minor children of David
Schick; 5,000 shares issuable upon the exercise of stock options granted to
Dr. Schick in July 1998; and 10,000 shares issuable upon the exercise of
stock options granted to Dr. Schick in June, 2000, pursuant to the 1997
Directors Stock Option Plan. Dr. Schick disclaims beneficial ownership of
the 44,800 shares held as custodian.
(13) Consists of 750,000 shares issuable upon the exercise of warrants held by
Mr. Slovin (which Mr. Slovin received as designee of Greystone) and 10,000
shares issuable upon the exercise of stock options granted to Mr. Slovin in
June, 2000, pursuant to the 1997 Directors Stock Option Plan.
(14) Such person's business address is c/o Greystone & Co., 152 West 57th
Street, New York, New York 10019.
(15) Consists of 10,000 shares issuable upon the exercise of stock options
granted to Mr. Barolak in June 2000, pursuant to the 1997 Directors Stock
Option Plan.
15
<PAGE>
(16) Such person's business address is c/o Preston Gates Ellis & Rouvelas Meeds
LLP, 1735 New York Avenue, NW, Washington, D.C. 20006.
(17) Consists of 100,075 shares held by Mr. Blank; and 10,000 shares issuable
upon the exercise of stock options granted to Mr. Blank in June 2000,
pursuant to the 1997 Directors Stock Option Plan.
(18) Greystone's address is 152 West 57th Street, New York, New York 10019.
(19) Consists of 4,250,000 shares issuable upon the exercise of warrants held by
Greystone. Does not include 13,000,000 shares issuable upon exercise of
warrants held by Greystone which vest if and when additional amounts are
advanced under the Greystone Loan Agreement.
(20) Includes the shares underlying warrants described in Note 13 as well as
shares subject to options held by current officers and directors.
In connection with, and as a condition to, the Loan Agreement with
Greystone on December 27, 1999, the Company, David B. Schick, Allen Schick and
Greystone entered into a Stockholders Agreement (the "Stockholders Agreement")
dated as of December 27, 1999. (David B. Schick and Allen Schick are
collectively referred to herein as the "Stockholders") pursuant to which, among
other things, (i) the Stockholders agree to vote shares of Common Stock which
they or family members or certain affiliates own or which the Stockholders
control (the "Stockholder Shares") as necessary to cause the Company's Board of
Directors (the "Board") to consist of a minimum of six members or such other
number as required by the Loan Agreement; (ii) the Stockholders agree to vote
the Stockholder Shares in favor of the election or reelection of designees of
Greystone for the number of seats on the Board (initially two) as provided in
the Loan Agreement; (iii) the Stockholders agree to take action and vote to
appoint a Greystone designee to fill any vacancy on the Board by reason of the
death, resignation or removal of a Greystone designee; (iv) the Stockholders
agree not to vote Stockholder Shares to remove a Greystone designee from the
Board; (v) each Stockholder who is a director of the Company agrees, in his
capacity as director (and subject to his fiduciary duties), to cause Jeffrey
Slovin to hold the office of President of the Company and to vote as provided in
clauses (i) through (iv) above, as well as to vote to elect or reelect (and not
vote to remove) individuals appointed by Greystone to the audit committee and
compensation committee of the Board, as provided in the Loan Agreement. The
Stockholders have also agreed to vote all of their respective Stockholder Shares
in favor of a proposal to increase the number of stock options available for
grant to employees.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who beneficially own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Commission. Such executive officers and
directors and greater than 10% beneficial owners are required by the regulations
of the Commission to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely on a review of the copies of such reports furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors and greater than 10% beneficial owners were
complied with, except that the Form 3 for Mr. Stone, Vice President of Sales and
Marketing, was not timely filed.
16
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The second item to be acted upon at the meeting is a proposal to approve an
amendment (the "Amendment") to the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") to increase the number of
authorized shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), from 25,000,000 to 50,000,000. The Board of Directors of the
Company has unanimously adopted a resolution declaring it advisable that the
Certificate of Incorporation be so amended. The Board of Directors further
directed that the Amendment be submitted for consideration by stockholders at
the Annual Meeting. In the event the Amendment is approved by stockholders, the
Company will thereafter execute and submit to the Delaware Secretary of State
for filing a Certificate of Amendment of the Certificate of Incorporation
providing for the Amendment. The Amendment will become effective at the close of
business on the date the Certificate of Amendment is accepted for filing by the
Secretary of State.
Under the Certificate of Incorporation, the authorized capital stock of the
Company consists of 25,000,000 shares of Common Stock and 2,500,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock"). As of
September 25, 2000, there were 10,138,922 shares of Common Stock outstanding, no
shares of Preferred Stock outstanding, and options and warrants for 19,723,392
shares outstanding, of which 6,197,762 were vested.
The Board of Directors recommends that the Certificate of Incorporation be
amended to ensure that sufficient shares of Common Stock are authorized and
available for issuance (i) upon the exercise of warrants held by DVI Financial
Services, Inc. ("DVI") and Greystone Funding Corporation ("Greystone") and
Greystone's designee, as set forth in more detail below; and (ii) upon the
exercise of stock options under the 1996 Employee Stock Option Plan (the "Plan")
and the 1997 Stock Option Plan for Non-Employee Directors (the "Directors
Plan"), as well as to provide additional authorized shares of Common Stock for
possible use in connection with future financings, investment opportunities,
business transactions (including corporate mergers and acquisitions), employee
benefit plans, distributions to existing stockholders (such as stock dividends
or stock splits) or for other corporate purposes. The issuance of additional
shares of Common Stock for any of these purposes could have a dilutive effect on
earnings per share, depending on the circumstances, and could dilute a
stockholder's percentage voting power in the Company. The Board of Directors
will make the determination for future issuances of authorized shares of Common
Stock, which will not require further action by the stockholders except as
otherwise provided by law or then applicable listing requirements.
In connection with the renewal in July 1999 of notes for $6,222,000 payable
to DVI, the Company granted DVI a warrant to purchase 650,000 shares of Common
Stock at an exercise price of $2.19 per share, to expire on November 15, 2004.
In connection with a June 2000
17
<PAGE>
amendment of such notes, increasing their principal balance to $6,596,189, the
warrant's exercise price was reduced to $0.75 per share and the expiration date
extended to December 2006. The warrant provides an anti-dilution right entitling
DVI to purchase up to 5% of the Company's issued and outstanding Common Stock on
a fully-diluted basis. Such anti-dilution right terminates once the loans
evidenced by such notes are repaid.
In December 1999, the Company entered into a Loan Agreement (the "Loan
Agreement") with Greystone to provide the Company with up to $7.5 million of
subordinated debt in the form of a secured credit facility. Pursuant to the Loan
Agreement, and to induce Greystone to enter into said Agreement, the Company
issued to Greystone and its designees, warrants to purchase 3,000,000 shares of
the Company's Common Stock at an exercise price of $.75 per share. The Company
agreed to issue Greystone an additional 2,000,000 shares at an exercise price of
$.75 per share in connection with a cash payment of $1 million by Greystone to
the Company in consideration of a sale of Photobit stock by the Company to
Greystone. The sale of the Photobit stock was made subject to a right of first
refusal held by Photobit and it founders. By letter dated February 17, 2000,
counsel for Photobit informed the Company that Photobit considers the Company's
sale of its shares to Greystone to be void on the basis of the Company's
purported failure to properly comply with Photobit's right of first refusal.
On March 17, 2000, the Company and Greystone entered into an Amended and
Restated Loan Agreement effective as of December 17, 1999 (the "Amended Loan
Agreement"), which amended and restated the Loan Agreement, pursuant to which
Greystone agreed to provide up to $7.5 million of subordinated debt in the form
of a secured credit facility. The $1 million cash payment to the Company was
converted as of December 27, 1999 into an initial advance of $1 million under
the Amended Loan Agreement. Pursuant to the Amended Loan Agreement and to induce
Greystone to enter into said Agreement, the Company issued warrants to Greystone
and its designees, consisting of those warrants previously issued under the Loan
Agreement and Photobit stock sale arrangement, to purchase 5,000,0000 shares, of
the Company's Common Stock at an exercise price of $0.75 per share, exercisable
at any time after December 27, 1999. Under the Amended Loan Agreement, the
Company also issued to Greystone or its designees warrants (the "Additional
Warrants") to purchase an additional 13,000,000 shares of common stock, which
Additional Warrants will vest and be exercisable at a rate of two shares of
Common Stock for each dollar advanced under the Amended Loan Agreement in excess
of the initial draw of $1 million. Any Additional Warrants which do not vest
prior to the expiration or surrender of the line of credit will be forfeited and
canceled. In connection with the Greystone secured credit facility, effective as
of February 15, 2000, DVI consented to the Company's grant to Greystone of a
second priority lien encumbering the Company's assets, under and subject in
priority and right of payment to all liens granted by the Company to DVI. To
date, no additional funds have been advanced under the Amended Loan Agreement in
excess of the initial draw of $1 million.
Pursuant to the Stockholders Agreement with Greystone described under
Security Ownership of Certain Beneficial Owners and Management described above,
David B. Schick and Allen Schick have agreed to vote shares of Common Stock
which they or their family members or certain affiliates own (an aggregate of
approximately 2,716,424 shares) in favor of Proposal Two.
18
<PAGE>
The total number of shares of Common Stock for which options may be granted
pursuant to the Plan was originally 470,400, subject to certain adjustments
reflecting changes in the Company's capitalization. On September 10, 1998, the
Company's stockholders approved an amendment to the Plan to increase the number
of shares of Common Stock issuable thereunder from 470,400 to 1,000,000. Under
Proposal Three below, such number would be increased to 3,000,000. As of the
date of this Proxy Statement, 859,892 options are granted and outstanding under
the Plan.
The total number of shares for which options may be granted pursuant to the
Directors Plan is 35,000, subject to certain adjustments reflecting changes in
the Company's capitalization. Under Proposal Four below, such number would be
increased from 35,000 to 300,000. As of the date of this Proxy Statement,
157,500 options are granted and outstanding under the Directors Plan, including
150,000 issued subject to approval of Proposal Four.
If the DVI warrants (assuming no anti-dilution adjustment) and Greystone
warrants and the outstanding employee stock and director options were to vest
and be exercised in their entirety, the Company estimates that there would be
29,715,843 shares of Common Stock outstanding, which is in excess of the number
currently authorized.
Other than the shares which may be issued upon exercise of the options and
warrants described above, the Company has no definitive plans or commitments
requiring the issuance of additional shares of Common Stock, except for such
shares as may be issuable in the normal course under the Company's employee
benefit plans, within the amounts reserved for such purposes. The Board of
Directors believes authorization of the additional shares is appropriate,
however, so that it may have the flexibility to issue shares from time to time,
without the delay of seeking stockholder approval (unless required by law or
then applicable listing requirements), whenever, in its judgment, such issuance
is in the best interest of the Company and its stockholders.
In the event stockholders approve the Amendment, Article Sixth of the
Certificate of Incorporation will be amended to increase the number of shares of
Common Stock which the Company is authorized to issue from 25,000,000 to
50,000,000. The par value of such stock will remain one cent ($.0l) per share.
The Amendment does not change the authorized preferred stock, which remains at
2,500,000 shares. Upon effectiveness of the Amendment, the first paragraph of
Article Sixth of the Certificate of Incorporation will read as follows:
"SIXTH: CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation shall have authority to issue is fifty-two million five hundred
thousand (52,500,000), of which fifty million (50,000,000) shall be common
stock, par value $.01 per share (the "Common Stock"), and two million five
hundred thousand (2,500,000) shall be preferred stock, par value $.01 per
share (the "Preferred Stock")."
19
<PAGE>
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, also be construed as having an anti-takeover effect (for
example, by permitting easier dilution of the stock ownership of a person
seeking to effect a change in the composition of the Board of Directors or
contemplating a tender offer or other transaction resulting in the acquisition
of the Company by another company), the proposed Amendment is not in response to
any effort by any person or group to accumulate the Company's stock or to obtain
control of the Company by any means. In addition, the proposal is not part of
any plan by the Board of Directors to recommend or implement a series of
anti-takeover measures.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
--------------------------------------------------------------------------------
PROPOSAL THREE
APPROVAL OF AMENDMENT TO
1996 EMPLOYEE STOCK OPTION PLAN
The third item to be acted upon at the meeting is a proposal to approve an
amendment to the Company's 1996 Employee Stock Option Plan (the "Plan") to
increase the number of shares of Common Stock issuable under the Plan from
1,000,000 to 3,000,000 (the "Amendment"). Otherwise, the Plan would remain
unchanged.
The Plan, which was adopted by the Board of Directors and approved by the
stockholders of the Company in April 1996, provides for the grant to officers,
employees of the Company and consultants, advisors and independent contractors
of the Company of both "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and stock
options that are non-qualified for federal income tax purposes. The purpose of
the Plan is to attract, retain and reward officers, employees and others
providing services to the Company, and any successor corporation thereto and any
present or future parent and/or subsidiary corporations of such corporation, and
to motivate such persons to contribute to the growth and profitability of the
Company in the future. The total number of shares of Common Stock for which
options may be granted pursuant to the Plan was originally 470,400, subject to
certain adjustments reflecting changes in the Company's capitalization. On
September 10, 1998, the Company's stockholders approved an amendment to the Plan
to increase the number of shares of Common Stock issuable thereunder from
470,400 to 1,000,000. As of the date of this Proxy Statement, 859,892 options
are granted and outstanding under the Plan. The Plan must be administered by the
Board of Directors and/or by a duly appointed committee thereof. The Executive
Compensation Committee determines, among other things, which officers,
employees, consultants, advisors and contractors will receive options under the
plan, the type of option (incentive stock options or non-qualified stock
options, or both)
20
<PAGE>
to be granted, the vesting schedule, the number of shares subject to each
option, and, subject to certain conditions discussed below, the exercise price
of the option and duration of the options. Members of the Executive Compensation
Committee are not eligible to receive options under the Plan. To date, the
entire Board of Directors has approved each grant under the Plan. The Board of
Directors recommends that additional options be available for issuance under the
Plan.
The exercise price of incentive stock options is determined by the
Executive Compensation Committee, but may not be less than the fair market value
of the Common Stock on the date of grant and the term of any such option may not
exceed ten years from the date of grant. With respect to any participant in the
Plan who owns stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any incentive
stock option may not be less than 110% of the fair market value of the Common
Stock on the date of grant and the term of such option may not exceed five years
from the date of grant.
The exercise price of non-qualified stock options is determined by the
Executive Compensation Committee on the date of grant, but may not be less than
85% of the fair market value of the Common Stock on the date of grant, and the
term of such option may not exceed ten years from the date of grant.
Payment of the exercise price may generally be made by cash, check or cash
equivalent, by tender of shares of Common Stock then owned by the optionee, by a
recourse promissory note in a form approved by the Company, by the assignment of
the proceeds of the sale of some or all of the shares of Common Stock being
acquired upon the exercise of an option or by any combination of the foregoing.
Options may be granted which do not permit all of the foregoing forms of
payment. Options granted pursuant to the Plan are not transferable, except by
will or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee.
The Board of Directors has the right at any time and from time to time to
terminate or amend the Plan or any option without the consent of the Company's
stockholders or optionees, provided, however, that no such action may adversely
affect options previously granted without the optionee's consent, and provided
further that no such action, without the approval of the stockholders of the
Company, may increase the total number of shares of Common Stock which may be
purchased pursuant to options under the Plan or expand the class of persons
eligible to receive grants of options under the Plan. The expiration date of the
Plan, after which no option may be granted thereunder, is April 22, 2006.
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the Plan. The grant of an option is not
expected to
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result in any taxable income for the recipient. The holder of an incentive stock
option generally will have no taxable income upon exercising the incentive stock
option (except that a liability may arise pursuant to the alternative minimum
tax), and the Company will not be entitled to a tax deduction when an incentive
stock option is exercised. Upon exercising a non-qualified stock option, the
optionee must recognize ordinary income equal to the excess of the fair market
value of the shares of Common Stock acquired on the date of exercise over the
exercise price, and the Company will be entitled at that time to a tax deduction
for the same amount. The tax consequence to an optionee upon a disposition of
shares acquired through the exercise of an option will depend on how long the
shares have been held and upon whether such shares were acquired by exercising
an incentive stock option or by exercising a non-qualified stock option.
Generally, there will be no tax consequence to the Company in connection with
disposition of shares acquired under an option, except that the Company may be
entitled to a tax deduction in the case of a disposition of shares acquired
under an incentive stock option before the applicable incentive stock option
holding periods set forth in the Internal Revenue Code have been satisfied.
Special rules may apply in the case of individuals subject to Section 16 of
the Securities Exchange Act of 1934, as amended, for a grant which is not exempt
under such Section. In particular, unless a special election is made pursuant to
the Code, shares received pursuant to the exercise of a stock option may be
treated as restricted as to transferability and subject to a substantial risk of
forfeiture for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the amount of the
Company's tax deduction, are determined as of the end of such period.
Under the Plan, the Committee may permit participants receiving or
exercising awards, subject to the discretion of the Committee and upon such
terms and conditions as it may impose, to surrender shares of Common Stock
(either shares received upon the receipt or exercise of the award or shares
previously owned by the optionee) to the Company to satisfy federal and state
tax obligations.
Pursuant to the Stockholders Agreement with Greystone described under
"Security Ownership of Certain Beneficial Owners and Management" above, David B.
Schick and Allen Schick have agreed to vote shares of Common Stock which they or
their family members or certain affiliates own (an aggregate of approximately
2,716,424 shares) in favor of Proposal Three.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE AMENDMENT TO THE 1996 EMPLOYEE STOCK OPTION PLAN
--------------------------------------------------------------------------------
PROPOSAL FOUR
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APPROVAL OF AMENDMENT TO
1997 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
The fourth item to be acted upon at the meeting is a proposal to approve an
amendment to the Company's 1997 Stock Option Plan for Non-Employee Directors
(the "Directors Plan") to increase the number of shares of Common Stock issuable
under the Plan from 35,000 to 300,000 (the "Directors Plan Amendment").
Otherwise, the Directors Plan would remain unchanged.
The Directors Plan, which was adopted by the Board of Directors in April
1997, provides members of the Company's Board of Directors (who are not
employees of the Company) with stock options that are non-qualified for federal
income tax purposes. The purpose of the Directors Plan is to assist the Company
in attracting, retaining and compensating qualified individuals who are not
employees for service as members of the Board of Directors by providing such
individuals with an ownership interest in the Company's Common Stock. The
Directors Plan allows non-employee Directors a personal financial stake in the
Company through ownership interest in the Company's Common Stock and strengthens
their mutual interest with the Company's stockholders in increasing the value of
the Company's stock over the long term. The total number of shares of Common
Stock for which options may be granted pursuant to the Directors Plan was
originally 35,000, subject to certain adjustments reflecting changes in the
Company's capitalization. On June 7, 2000, the Board of Directors, subject to
the approval of the Stockholders, granted options to non-employee Directors in
the total amount of 150,000 options. As of the date of this Proxy Statement, an
aggregate of 157,500 Options, including the 150,000 options granted on June 7,
2000, are granted and outstanding under the Directors Plan.
All directors who are not employees of the Company ("Director
Participants") are eligible to receive options under the Directors Plan. The
Directors Plan provides for the grant to each Director Participant upon each
anniversary of such Director Participant's joining the Board of Directors
options to purchase 500 shares of Common Stock. The Directors Plan is
administered by the Board of Directors (or a committee designated by the Board
of Directors) which determines the time when options will be granted (other than
those to be granted on the anniversary of a Director Participant's joining the
Board), the terms of the options, the initial exercise date of the options and
the number of shares of Common Stock subject to any options in addition to the
500-share annual grant. The term of such options may not exceed ten years from
the date of grant.
The exercise price of each option is 100% of the fair market value of the
Common Stock on the date of grant. Options provided under the Directors Plan
generally vest at least six months after the date of grant and are subject to
certain other restrictions at the
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Board of Directors' sole discretion. Options will also generally vest
immediately by the holder thereof at the time of a change of control of the
Company.
Payment of the exercise price may generally be made by cash, by tender of
shares of Common Stock then owned by the optionee, by a recourse promissory note
in a form approved by the Company, by the Company's withholding of shares of
Common Stock being acquired upon the exercise of an option equal in value to the
exercise price, by any combination of the foregoing or on such other terms and
conditions as the Board of Directors determines. Except for permitted transfers
of options to certain family members and family, options granted pursuant to the
Plan are not transferable, except by will or the laws of descent and
distribution in the event of death. During an optionee's lifetime, the option is
exercisable only by the optionee.
The Board of Directors has the right at any time and from time to time to
terminate or amend the Directors Plan or any option without the consent of the
Company's stockholders or optionees, provided, however, that no such action may
adversely affect options previously granted without the optionee's consent. The
expiration date of the Directors Plan, after which no option may be granted
thereunder, is the date of the Annual Meeting of Stockholders of the Company in
2007.
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the Directors Plan. The grant of an option
is not expected to result in any taxable income for the recipient. Upon
exercising a non-qualified stock option, the optionee must recognize ordinary
income equal to the excess of the fair market value of the shares of Common
Stock acquired on the date of exercise over the exercise price, and the Company
will be entitled at that time to a tax deduction for the same amount. The tax
consequence to an optionee upon a disposition of shares acquired through the
exercise of an option will depend on how long the shares have been held.
Generally, there will be no tax consequence to the Company in connection with
disposition of shares acquired under an option.
Special rules may apply in the case of individuals subject to Section 16 of
the Securities Exchange Act of 1934, as amended, for a grant which is not exempt
under such Section. In particular, unless a special election is made pursuant to
the Code, shares received pursuant to the exercise of a stock option may be
treated as restricted as to transferability and subject to a substantial risk of
forfeiture for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the amount of the
Company's tax deduction, are determined as of the end of such period.
Under the Directors Plan, the Committee may permit participants receiving
or exercising awards, subject to the discretion of the Committee and upon such
terms and conditions as it may impose, to surrender shares of Common Stock
(either shares
24
<PAGE>
received upon the receipt or exercise of the award or shares previously owned by
the optionee) to the Company to satisfy federal and state tax obligations.
Pursuant to the Stockholders Agreement with Greystone described under
"Security Ownership of Certain Beneficial Owners and Management" above, David B.
Schick and Allen Schick have agreed to vote shares of Common Stock which they or
their family members or certain affiliates own (an aggregate of approximately
2,716,424 shares) in favor of Proposal Four.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE AMENDMENT TO THE 1997 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS.
--------------------------------------------------------------------------------
PROPOSAL FIVE
SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP as independent
accountants for the Company for the fiscal year ending March 31, 2001. A
proposal to ratify the appointment of Grant Thornton LLP will be presented at
the Annual Meeting. Representatives of Grant Thornton LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so and will be available to answer appropriate questions from
stockholders. If the appointment of Grant Thornton LLP is not approved by the
stockholders, the Board of Directors is not obligated to appoint other
accountants, but the Board of Directors will give consideration to such
unfavorable vote.
We first engaged Grant Thornton as our independent accountants on September 17,
1999. On August 25, 1999 PricewaterhouseCoopers LLP, the Company's prior
independent accountants, had informed the then Chief Financial Officer of the
Company of its resignation as the independent accountants of the Company. The
reports of PricewaterhouseCoopers LLP on the financial statements of the Company
for the years ended March 31, 1997 and 1998 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. PricewaterhouseCoopers LLP did not complete
their audit or issue an audit opinion on the financial statements for the year
ended March 31, 1999. The decision to resign was made by PricewaterhouseCoopers
LLP and was neither recommended nor approved by the Company's Audit Committee or
Board of Directors. In connection with its audits for the years ended March 31,
1997 and 1998 and through August 25, 1999, there have been no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of
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PricewaterhouseCoopers LLP would have caused them to make reference thereto in
their report on the financial statements for such years. The following matters
were previously communicated by PricewaterhouseCoopers LLP during the years
ended March 31, 1998 and 1999 and the interim period through August 25, 1999,
and are included herein pursuant to Paragraph 304(a) (1) (v) of Regulation S-K:
(a) In their report to the Audit Committee of the Company, entitled
"Recommendations to Improve Internal Accounting Controls and Administrative
Efficiencies," dated May 9, 1997 (which related to the audit of the March
31, 1997 financial statements and was presented to the Audit Committee on
October 27, 1997), PricewaterhouseCoopers LLP noted certain matters
involving internal control and its operation that they considered to be
reportable conditions under standards established by the American Institute
of Certified Public Accountants. PricewaterhouseCoopers LLP noted that
certain deferrals, accruals and estimates required to present accurate and
consistent interim financial results had not been reflected in the
Company's interim financial statements. PricewaterhouseCoopers LLP
recommended the Company implement formal procedures to ensure that its
interim financial statements be prepared on a basis consistent with the
preparation of its annual statements.
PricewaterhouseCoopers LLP also noted a lack of written evidence of
approval for transactions with related parties by an independent unrelated
officer of the Company. PricewaterhouseCoopers recommended that all
transactions with related parties be reviewed and authorized by an
independent and unrelated officer of the Company and that supporting
documentation be signed by such officer indicating evidence of review.
PricewaterhouseCoopers LLP noted that monthly physical inventory
counts were not all inclusive and that count sheets for items counted were
not maintained. PricewaterhouseCoopers LLP further noted that labor and
overhead rates and inventory pricing were not updated on a monthly basis.
The Company did not have perpetual inventory or standard cost systems at
that time. PricewaterhouseCoopers LLP recommended that the Company perform
a complete count of physical inventory, update raw material pricing,
production yields and labor and overhead rates on a monthly basis and
retain original count sheets from each monthly physical count for at least
four fiscal quarters.
PricewaterhouseCoopers LLP noted that the Company did not maintain
formal procedures to track compliance with its debt covenants.
PricewaterhouseCoopers LLP recommended that the Company implement formal
procedures to track and ensure compliance with covenants contained in its
debt agreements.
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(b) In their report to the Audit Committee of the Company, entitled
"Recommendations to Improve Internal Accounting Controls and Administrative
Efficiencies," dated June 9, 1998 (which related to the audit of the March
31, 1998 financial statements and was presented to the Audit Committee on
September 11, 1998), PricewaterhouseCoopers LLP noted certain matters
involving internal control and its operation that they considered to be
reportable conditions under standards established by the American Institute
of Certified Public Accountants. PricewaterhouseCoopers LLP considered
certain of those reportable conditions to be material control weaknesses.
PricewaterhouseCoopers LLP recommended that the Company implement a
computerized perpetual inventory system, which it believed would allow the
Company to (i) manage its inventory in a more efficient and accurate
manner, (ii) better match inventory levels to the Company's production
needs and sales projections, and (iii) assist management in determining
whether inventory includes items which are obsolete or in excess of current
demand. PricewaterhouseCoopers LLP believed that the lack of such a system
contributed to the significant increase in inventory levels, which exceeded
the corresponding increase in sales volume and expanded production
requirements. The lack of a perpetual inventory system during fiscal 1998
required the Company to perform a full physical inventory each month to
determine inventory on hand and cost of sales. PricewaterhouseCoopers LLP
indicated that the lack of a perpetual inventory system significantly
increases the risk of an inaccurate inventory valuation, and limited the
ability of management to assess levels of excess and obsolete inventory and
to determine what items are on hand at any point in time.
PricewaterhouseCoopers LLP considered the Company's lack of a perpetual
inventory system to be a material control weakness.
PricewaterhouseCoopers LLP noted significant errors in the calculation
of inventory value. Such errors resulted from the cumbersome preparation
process and the lack of timely management review of inventory costing and
valuation reports. Labor and overhead rates, as well as inventory prices
were not updated on a timely basis. In addition, new products were not
allocated labor and overhead. Labor costs were not captured and measured by
product and the allocation of the costs of miscellaneous production
supplies was not well supported. PricewaterhouseCoopers LLP recommended
that the Company update raw material pricing, production yields, and labor
and overhead rates on a monthly basis and that inventory valuation
calculations be appropriately reviewed in a timely manner each month.
PricewaterhouseCoopers LLP considered the Company's lack of timely update
and review of inventory costing and valuation to be a material control
weakness.
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<PAGE>
PricewaterhouseCoopers LLP noted that the Company did not maintain the
detail of parts issued to customers pursuant to warranty obligations. (If
the customer requires a replacement component the Company will ship the
replacement component prior to receiving the potentially defective
component from the customer ("RMA part").) PricewaterhouseCoopers LLP
recommended the Company implement procedures to maintain and update on a
timely basis a detailed listing of RMA parts, and such listing should be
compared on a monthly basis to the corresponding value included in
inventory.
PricewaterhouseCoopers LLP also noted the Company did not have formal
procedures for managing inventory held by third parties, nor did it have
procedures for tracking and reconciling advances and payments made to such
third parties against quantities produced and shipped.
PricewaterhouseCoopers LLP recommended that the Company establish formal
procedures to manage, track and reconcile both inventory levels of
components manufactured and held by third parties and amounts advanced and
paid to third parties.
(c) On February 22, 1999, PricewaterhouseCoopers LLP advised the Audit
Committee that the previously weak internal control structure had further
deteriorated, and PricewaterhouseCoopers LLP can give no assurance on the
quarterly financial statements. Further, on March 23, 1999,
PricewaterhouseCoopers LLP provided the Audit Committee with an update of
Material Control Weaknesses and Reportable Conditions resulting from
limited procedures performed by them, not comprising an audit, relating to
the quarter ended December 31, 1998. PricewaterhouseCoopers LLP made the
following recommendations regarding material control weaknesses:
(i) The Company should improve the accuracy of its perpetual inventory
records and fully integrate its perpetual inventory system with the general
ledger. The Company should create standard reports from its inventory
system to allow management to manage inventory in a more efficient and
accurate manner, better match inventory levels and purchasing requirements
to production needs and sales projections, and to assist management in
evaluating obsolete and slow moving inventory.
(ii) Ensure that product returns are recorded in the Company's
accounting system in a timely manner.
(iii) Enforce procedures for approval of returns in accordance with
Company policies.
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<PAGE>
(iv) Formally document and enforce credit granting policies, prior to
shipment of goods, in order to ensure proper revenue recognition and
collectability of accounts receivable.
The following recommendations were made by PricewaterhouseCoopers LLP regarding
reportable conditions:
(i) Analyze and reconcile all inventory and cost of sales related
accounts in the general ledger.
(ii) Establish procedures to maintain and update the detailed listing
of RMA-parts inventory, including tracking of recovery rates.
(iii) Establish formal procedures to manage, track and reconcile both
the inventory levels of components manufactured and held by third parties
and amounts advanced and paid to third parties.
(iv) Establish policies to review inventory balances for obsolete,
slow moving and excess items.
(v) Establish procedures to track sales returns by product and the
reason for return in order to better analyze and report the results of
operations.
(vi) Establish procedures for timely review of the status of accounts
receivable including accounts receivable aging and significant outstanding
balances. Management should assess the recoverability of accounts
receivable and establish appropriate reserves for bad debts as necessary.
Furthermore, in the course of the preparation of the Company's 1999
financial statements, the Company's then-Chief Financial Officer (who commenced
employment with the Company on March 1, 1999) identified certain customer sales
and sales promotion programs undertaken during fiscal 1999, some of which
circumvented the Company's system of internal controls and raised revenue
recognition questions (the "Sales Practices"). In June 1999, the Company's
management brought the Sales Practices to the attention of
PricewaterhouseCoopers LLP for consideration in connection with their audit of
the financial statements for the year ended March 31, 1999. In addition, in the
course of its audit work, PricewaterhouseCoopers LLP received an accounts
receivable confirmation reply from one of the Company's customers indicating
that a Company salesperson had granted the customer extended payment terms in a
side letter to the customer. In a meeting with the Audit Committee of the Board
of Directors of the Company on June 29, 1999, PricewaterhouseCoopers LLP
discussed the Sales Practices with the Audit Committee and requested that the
Audit Committee perform an independent investigation. PricewaterhouseCoopers LLP
also informed the Audit
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<PAGE>
Committee that no assurance can be given on the Company's quarterly financial
statements by PricewaterhouseCoopers LLP and that the audit of the Company's
March 31, 1999 financial statements was incomplete, and that after the
investigation was completed, PricewaterhouseCoopers LLP would reassess the scope
of the audit. On July 1, 1999 the Audit Committee engaged independent legal
counsel to provide legal advice to the Committee and to perform an investigation
of the Sales Practices.
Legal counsel was asked by the Audit Committee to: (i) determine the facts
and circumstances of the Sales Practices and their potential effects on the
Company's fiscal 1999 interim and annual financial statements; (ii) take
reasonable steps to identify any other sales practices that may have a material
effect on the Company's interim and annual financial statements for fiscal 1999;
and (iii) make recommendations to the Audit Committee concerning appropriate
remedial measures based on legal counsel's findings. Legal counsel conducted the
investigation in an expedited manner to ensure a prompt response to the Audit
Committee. PricewaterhouseCoopers LLP was consulted with concerning the initial
scope of the investigation.
In addition, the Audit Committee also engaged independent accountants,
Ernst & Young LLP, to perform certain agreed-upon procedures concerning the
Company's revenue recognition policies and practices during fiscal 1999.
PricewaterhouseCoopers LLP was consulted with concerning the initial scope of
the agreed-upon procedures performed by Ernst & Young LLP.
During the course of the investigation consultations were held with
PricewaterhouseCoopers LLP to discuss preliminary findings and the results of
the agreed-upon procedures performed by Ernst & Young LLP. During these
consultations PricewaterhouseCoopers LLP requested that certain additional
agreed-upon procedures be performed based on the preliminary findings. The
Company accepted all suggestions for additional agreed-upon procedures.
On August 12, 1999, legal counsel and Ernst & Young LLP met with
PricewaterhouseCoopers LLP to discuss the results of their work and the
preliminary recommendations of legal counsel. At such meeting,
PricewaterhouseCoopers LLP commented upon legal counsel's preliminary
recommendations and as a result legal counsel added recommendations.
In a report dated August 13, 1999, legal counsel reported the following
conclusions:
1. Financial statements for the year ended March 31, 1999. The Sales Practices
legal counsel was asked to investigate were largely trial programs and
consignment orders. Nothing came to counsel's attention during the course of
their investigation that indicates that the Company continued to engage in any
of the Sales Practices as of
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March 31, 1999, or that any material misstatement exists in the Company's
financial statements as of March 31, 1999 as a result of any sales practices.
2. Interim financial statements for the quarters ended June 30, September 30 and
December 31, 1998. Legal counsel determined, in conjunction with Ernst & Young
LLP, that certain transactions they investigated failed to qualify as sales or
were prematurely (or in some cases erroneously) recognized as sales. These
transactions primarily consisted of "Bill & Hold" transactions, promotional
programs whereby the customer was provided a trial period prior to the actual
purchase of the Company's CDR and accuDEXA systems and consignment sales to
distributors. In addition, during the course of the investigation certain
additional revenue recognition issues were identified. None of the additional
issues affected the financial statements as of March 31, 1999. These additional
issues consisted of trial programs "Bill & Hold" transactions recorded during
the first quarter of fiscal 1999, the deferral of sales revenue and unusual
extended payment terms. Upon consultation with Ernst & Young LLP, legal counsel
concluded that the magnitude of prematurely and/or improperly recorded revenues
was material to the Company's interim financial statements for the first, second
and third quarters of fiscal 1999. Accordingly, the Company intends to restate
such interim financial statements as soon as practical after the retention of
new independent accountants.
Based on its findings the legal counsel recommended the following remedial
actions to the Audit Committee:
1. Chief Operating Officer. Legal counsel recommended that the Company hire an
experienced executive for a newly-created position of Chief Operating Officer,
who will have responsibility for managing the operations of the Company,
including the accounting and financial reporting functions.
2. Personnel Changes. As part of the Company's efforts to improve its control
environment and put an end to the Sales Practices that led to the misstatements
of the Company's interim financial statements, legal counsel recommended that
the Company's incumbent vice president of sales and marketing, its vice
president of operations and its director of vendor relations be removed from
their positions.
3. Documentation and Enforcement of Policies Concerning Sales. Legal counsel
recommended that the Company (i) ensure that all policies relating to sales
terms, returns and payments are fully and clearly documented; (ii) prepare
written policies requiring appropriate authorizations for any variances from
established policies and requiring the recording of any such variances in the
Company's order processing system; and (iii) strictly enforce all policies.
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4. Change in the Constitution of the Audit Committee. Although legal counsel
noted that it was impressed by the professionalism and responsiveness of both
members of the Audit Committee and believed that the Audit Committee had
properly discharged its responsibilities during 1999, counsel noted that one
member of the Committee, Euval Barrekette, is related by marriage to David
Schick, the Chief Executive Officer of the Company. In order to avoid any
potential appearance of a conflict of interest, counsel recommended that it
would be desirable to replace Mr. Barrekette on the Audit Committee with another
outside director who has no family or business relationship to any member of
management.
5. Other Recommendations. Legal counsel also recommended that the Audit
Committee consult with PricewaterhouseCoopers LLP as to any additional
recommendations that PricewaterhouseCoopers LLP may have to improve the
Company's internal controls, or, otherwise, to put in place structural,
personnel or organizational changes that will help minimize the risk of material
misstatements of any future financial statements.
A summary of legal counsel's findings and a copy of Ernst & Young LLP's
report of agreed-upon procedures were provided to PricewaterhouseCoopers LLP on
August 16, 1999. On August 25, 1999, the Audit Committee of the Company provided
PricewaterhouseCoopers LLP with a letter stating that (a) the Board of Directors
would undertake all reasonable measures, in a timely fashion, to retain an
appropriate individual to fill the role of Chief Operating Officer with full
authority for the operations of the Company, including the accounting and
financial reporting functions; (b) the Chief Operating Officer and Chief
Financial Officer will report directly to the Audit Committee; (c) the Chief
Executive Officer will be involved in decisions regarding overall Company
strategy and will report to the Audit Committee; (d) the Audit Committee will
assume responsibility for the implementation of the roles of the Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer; and (e) the Board
has also undertaken to adopt and is implementing the recommendations contained
in the report of legal counsel. Subsequent to its receipt of such letter,
PricewaterhouseCoopers LLP informed the Company of its resignation as
independent accountants for the Company. PricewaterhouseCoopers LLP did not
indicate the reason for its resignation and stated to Company management that it
was PricewaterhouseCoopers LLP's firm policy not to provide the reason for
resignation. At the time of its resignation, PricewaterhouseCoopers LLP had not
completed its audit of the financial statements of the Company for the fiscal
year ended March 31, 1999 and had not reassessed the scope of its audit in light
of the results of the independent investigation.
During the two most recent fiscal years and through September 17, 1999, the
Company has not consulted with Grant Thornton LLP regarding either (i) the
application of accounting principles to a specified transaction, either
completed or
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proposed; or the type of audit opinion that might be rendered on the Company's
financial statements, and no written report or oral advice was provided by Grant
Thornton LLP that was an important factor considered by the Company in reaching
a decision as to any accounting, auditing or financial reporting issue; or (ii)
any matter that was either the subject of a disagreement, as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to
Item 304 of Regulation S-K, or a reportable event as that term is defined in
Item 304(a)(1)(v) of Regulation S-K. Grant Thornton LLP has audited the
Company's financial statements for the years ended March 31, 1999 and 2000.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE SELECTION OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
--------------------------------------------------------------------------------
SOLICITATION OF PROXIES
The Company is paying the costs of solicitation, including the cost of
preparing and mailing this Proxy Statement. Proxies are being solicited
primarily by mail, but in addition, the solicitation by mail may be followed by
solicitation in person, or by telephone or facsimile, by regular employees of
the Company without additional compensation. The Company will reimburse brokers,
banks and other custodians and nominees for their reasonable out-of-pocket
expenses incurred in sending proxy materials to the Company's stockholders.
PROPOSALS FOR THE 2001 ANNUAL MEETING
Pursuant to federal securities laws, any proposal by a stockholder to be
presented at the 2001 Annual Meeting of Stockholders and to be included in the
Company's proxy statement must be received at the Company's executive office at
31-00 47th Avenue, Long Island City, New York 11101, no later than the close of
business on May 30, 2001. Proposals should be sent to the attention of the
Secretary. Pursuant to the Company's By-laws, in order for business to be
properly brought before an annual meeting of stockholders by a Stockholder, the
stockholder must give written notice of such stockholder's intent to bring a
matter before the annual meeting not less than ninety days prior to the date of
such meeting; provided, however, that if less than ninety days' notice or prior
public disclosure of the date of such meeting is given to stockholders or made,
the stockholder must give such written notice no later than the close of
business on the tenth (10th) day following the day on which notice or public
disclosure of the date of such meeting is given or made. Each such notice should
be sent to the attention of the Secretary, and must set forth certain
information with respect to the stockholder who
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<PAGE>
intends to bring such matter before the meeting and the business desired to be
conducted, as set forth in greater detail in the Company's By-laws.
GENERAL
The Company's Annual Report for the fiscal year ended March 31, 2000 is
being mailed to stockholders together with this Proxy Statement. The Annual
Report is not to be considered part of the soliciting materials.
The information set forth in this Proxy Statement under the caption
"Executive Compensation Committee Report on Executive Compensation" and
"Performance Graph" shall not be deemed to be (i) incorporated by reference into
any filing by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that in any such filing the Company
expressly incorporates such information by reference, and (ii) "soliciting
material" or to be "filed" with the SEC.
By Order of the Board of Directors
Zvi N. Raskin
Secretary
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<PAGE>
SCHICK TECHNOLOGIES, INC.
PROXY
Annual Meeting of Stockholders
October 25, 2000
(Solicited On Behalf Of The Board Of Directors)
The undersigned stockholder of Schick Technologies, Inc. hereby constitutes and
appoints David B. Schick, Jeffrey Slovin and Zvi N. Raskin, and each and any of
them, the attorneys and proxies of the undersigned, with full power of
substitution and revocation, to vote for and in the name, place and stead of the
undersigned at the Annual Meeting of Stockholders of Schick Technologies, Inc.
to be held at Schick Technologies, at 31-00 47th Avenue, fifth floor, Long
Island City, New York, on Wednesday, October 25, 2000 at 11:00 a.m., and at any
adjournments thereof, the number of votes the undersigned would be entitled to
cast if present.
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WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS
AND FOR EACH OF THE FOLLOWING PROPOSALS.
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1. Election of four directors nominated by the Board of Directors.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as indicated to to vote for all nominees
the contrary below)
Three year terms: David Schick and Allen Schick Ph.D.
Two year terms: Euval S. Barrekette, Ph.D and Jonathan Blank, Esq.
(INSTRUCTION: To withhold authority to vote for any nominee, write such
nominee's name in the space provided below.)
-------------------------------
-------------------------------
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-------------------------------
(Continued and to be signed on reverse side)
2. Proposal to amend the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock, as
described in the Proxy Statement accompanying the Notice of Annual Meeting of
Stockholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the 1996 Employee Stock Option Plan described in the
Proxy Statement accompanying the Notice of Annual Meeting of Stockholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to amend the 1997 Stock Option Plan for Non-Employee Directors
described in the Proxy Statement accompanying the Notice of Annual Meeting of
Stockholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to ratify the selection of Grant Thornton LLP as the Company's
independent accountants for the fiscal year ending March 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, upon such other matters as may come properly before
the meeting.
Said attorneys and proxies, or their substitutes (or if only one, that
one), at said meeting, or any adjournments thereof, may exercise all of the
powers hereby given. Any proxy heretofore given is hereby revoked.
Receipt is acknowledged of the Notice of Annual Meeting of Stockholders,
the Proxy Statement accompanying such Notice and the Annual Report to
stockholders for the fiscal year ended March 31, 2000.
__________________________ ,2000 _______________________________
Date Stockholder(s) signature(s)
__________________________ ,2000 _______________________________
Date Stockholder(s) signature(s)
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Note: If shares are held jointly, both holders should sign. Attorneys,
executors, administrators, trustees, guardians or others signing in a
representative capacity should give their full titles. Proxies executed in the
name of a corporation should be signed on behalf of the corporation by its
president or other authorized officer.
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APPENDIX A
DRAFT CHARTER
OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The primary function of the Audit Committee of the Schick Technologies
Board of Directors (the "Audit Committee") is to provide assistance to the
directors of Schick Technologies (the "Company") in fulfilling their
responsibility to the stockholders, potential stockholders, and investment
community relating to corporate accounting, reporting practices of the Company,
and the quality and integrity of the financial reports of the Company.
The Audit Committee's primary duties and responsibilities are to:
(i) Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
(ii) Review and appraise the audit efforts of the Company's independent
accountants and internal auditing department.
(iii) Provide an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department, and the
Board of Directors.
II. COMPOSITION
The Audit Committee shall be elected by the Board and shall be comprised
of three or more directors (the precise number to be determined by the Board),
all of whom shall be independent directors, and free from any relationship that,
in the opinion of the Board, would interfere with the exercise of their
independent judgment as members of the Audit Committee. All members of the Audit
Committee shall have a working familiarity with basic finance and accounting
practices, and at least one member of the Audit Committee shall have accounting
or related financial management expertise.
Unless a Chair is elected by the full Board, the members of the Audit
Committee may designate a Chair by majority vote of the full Audit
Committee membership.
III. MEETINGS
The Audit Committee shall meet at follows:
(i) Four times annually, or more frequently as circumstances dictate;
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(ii) Once annually with Company Management, the Company's principal accounting
officer and the independent accountants;
(iii) Once each quarter with the independent accountants and Company Management
to review the Company's financials, consistent with Section IV(iii) below.
The Chair of the Audit Committee may represent the entire Committee for
purposes of these meetings;
(iv) Four times annually, or more frequently as circumstances dictate, with the
Company's Chief Executive Officer for the purpose of obtaining his report
to the Audit Committee;
(v) Four times annually, or more frequently as circumstances dictate, with the
Company's Chief Financial Officer for the purpose of obtaining his report
to the Audit Committee; and
(vi) Four times annually, or more frequently as circumstances dictate, with the
Company's Chief Operating Officer for the purpose of obtaining his report
to the Audit Committee.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, The Audit Committee shall:
(i) Review and update this Charter periodically, as deemed necessary or
appropriate by the Board of Directors or members of the Audit Committee.
(ii) Review the Company's annual financial statements and any other financial
information filed with the S.E.C. or disseminated to the public, including
any certification, report, opinion, or review rendered by the independent
accountants.
(iii) Review with financial management and the independent accountants each Form
10-Q quarterly report prior to its filing. The Chair of the Audit
Committee may represent the entire Committee for purposes of this review.
Independent Accountants
(iv) Recommend to the Board of Directors the yearly selection of the
independent accountants (considering independence and effectiveness) and
approve the fees and other compensation to be paid to the independent
accountants. On an annual basis, the Audit Committee should review and
discuss with the accountants all significant relationships the accountants
have with the Company to determine the accountants' independence.
(v) Review the performance of the independent accountants.
(vi) Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
Company's financial statements.
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Financial Reporting Processes
(vii) In consultation with the independent accountants and the Company's
accounting personnel, review the integrity of the Company's financial
reporting processes, both internal and external.
(viii)Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants or management.
Process Improvement
(ix) Establish regular and separate systems of reporting to the Audit Committee
by each of management, the independent accountants and the internal
auditors regarding any significant judgments made in management's
preparation of the financial statements and the view of each as to
appropriateness of such judgments.
(x) Following completion of the annual audit, review separately with each of
management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or access to
required information.
(xi) Review any significant disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements.
(xii) Review with the independent accountants and management the extent to which
changes or improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented. (This review should be
conducted at an appropriate time subsequent to implementation of changes
or improvements, as decided by the Audit Committee.)
(xiii)Review activities, organizational structure, and qualifications of the
Company's accounting and finance department.
(xiv) Review, with the Company's counsel, legal compliance matters including
corporate securities trading policies.
(xv) Review, with the Company's counsel, any legal proceedings that could have
a significant impact on the Company's financial statements.
(xvi) Perform any other activities consistent with this Charter, the Company's
By-Laws and governing law, as the Audit Committee or the Board deems
necessary or appropriate.
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