SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1998
Commission file number 1-8696
COMPETITIVE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual Report
for the fiscal year ended July 31, 1998 on Form 10-K as set forth in the
pages attached hereto:
(List all such items, financial statements, exhibits or other portions amended)
Part III, Item 10. Directors and Executive Officers of the Registrant.
Part III, Item 11. Executive Compensation.
Part III, Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Part III, Item 13. Certain Relationships and Related Transactions.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned hereunto duly authorized.
COMPETITIVE TECHNOLOGIES, INC.
Registrant
Date: November 24, 1998 s/ Frank R. McPike, Jr.
By: Frank R. McPike, Jr.
President, Chief Operating Officer,
Vice President, Finance,
Treasurer, Chief Financial
Officer and Authorized Signer
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth information with respect to each
director of the registrant according to information furnished to the
registrant by him:
Name, Age and Principal Occupation
Positions Presently During Past Five Director of
Held with Years; Other Public Registrant
Registrant Directorships Since
George C.J. Bigar, Professional Investor. December,
42 1996
Michael G. Bolton, Managing Director, Pennsylvania September,
55 Early Stage Partners (a Safe- 1994
guard Scientifics, Inc. venture
capital fund) since September,
1997; prior thereto Vice
President, Lehigh University.
Robert H. Brown, Jr., President and CEO, RHB Capital, March, 1998
45 LLC (a private investment
company), since July, 1998;
prior thereto Executive Vice
President, Director of
Corporate Finance, Dain
Rauscher Incorporated,
(an investment banking firm).
Also a Director of Emerson
Radio Corporation, Stevens
Graphics Corporation and
Claimsnet.com.
Samuel M. Fodale, President, Central Maintenance October, 1998
55 Services, Inc. (a service and
warehousing corporation serving
the automobile industry).
John M. Sabin, Executive Vice President December,
44 and Chief Financial Officer 1996
of Hudson Hotels
Corporation (a limited
service hotel development
and management company)
since May, 1998;
Senior Vice President
and Treasurer, Vistana, Inc.
(a developer of vacation
timeshares) February, 1997
to May, 1998; Vice President,
Finance, Choice Hotels
International, Inc. October,
1996 to February, 1997; Vice
President-Mergers and Acquisi-
tions, Choice Hotels International,
Inc. June, 1995 to October, 1996;
Vice President-Finance and
Assistant Treasurer, Manor
Care, Inc. and Choice Hotels
International, Inc. December, 1993
to October, 1996; Vice President-
Corporate Mergers and Acquisitions,
Marriott Corporation, 1988 to
December, 1993.
The following table sets forth information with respect to the
registrant's sole executive officer when this amendment was prepared:
Name and Age Positions and Offices with the Registrant
Frank R. McPike, Jr., President and Chief Operating Officer of the
49 registrant since October, 1998; Secretary of the
registrant since August, 1989; Treasurer of the
registrant since July, 1988; Vice President,
Finance and Chief Financial Officer of the
registrant since December, 1983; Director of the
registrant from July, 1988 to March, 1998.
The terms of all officers of the registrant are until the first
meeting of the newly elected Board of Directors following the
forthcoming annual meeting of stockholders of the registrant and until
their respective successors shall have been duly elected and shall have
qualified, subject to employment agreements. Mr. McPike has an
employment contract with the registrant; this contract is described in
Item 11 of this Amendment to Form 10-K. There is no family relationship
between any director or executive officer of the registrant.
Item 11. Executive Compensation
Summary Compensation
The following table summarizes the total compensation accrued,
earned or paid by the registrant for services rendered during each of
the fiscal years ended July 31, 1998, 1997 and 1996 to the Chief
Executive Officer of the registrant and each of the other executive
officers of the registrant who had annual compensation for the fiscal
year ended July 31, 1998 in excess of $100,000 (the "Specified
Executives"):
SUMMARY COMPENSATION TABLE
Annual Compensation (A)
Long Term
Compensation
Awards
Securities All Other
Name and Principal Fiscal Underlying Compensation
Position Year Salary ($) Bonus ($) Options (#) ($)
George M. Stadler, 1998 $197,000 -- 20,000 $318,245 (B)
President and 1997 197,808 18,000 20,000 15,105 (C)
Chief Executive 1996 172,923 -- 30,000 15,874 (C)
Officer
Frank R. McPike, 1998 167,000 -- 20,000 17,460 (C)
Jr., Vice Presi- 1997 167,712 12,000 12,000 14,320 (C)
dent, Finance and 1996 149,076 -- 15,000 14,977 (C)
Chief Financial
Officer, Secretary
and Treasurer
(A) The aggregate amount of any perquisites or other personal benefits was
less than 10% of the total of annual salary and bonus and is not
included in the above table.
(B) Includes $300,000 accrued in the fiscal quarter ended July 31, 1998,
to settle Mr. Stadler's employment contract which ran until July 31,
1999. On October 15, 1998, Mr. Stadler resigned from all positions
with the registrant. See Employment Agreements below. Also includes
amounts contributed for Mr. Stadler to Competitive Technologies, Inc.'s
Employees' Common Stock Retirement Plan.
The registrant contributed shares of its Common Stock valued at the
mean between its high and low prices on the American Stock Exchange
on July 31, 1998. Also includes premiums paid for term life insurance
policy (see below).
(C) Consists principally of amounts contributed for each executive officer
to Competitive Technologies, Inc.'s Employees' Common Stock
Retirement Plan. The registrant contributed shares of its Common Stock
valued at the mean between its high and low prices on the American Stock
Exchange on July 31 of each year. Also includes premiums paid for term
life insurance policies (see below).
Option Grants
The following table summarizes the stock options granted by the
registrant during the fiscal year ended July 31, 1998 to the Specified
Executives:
OPTION GRANTS IN LAST FISCAL YEAR
Individuals Grants
% of
Total
Number Options
of Granted
Securities to
Underlying Employees Grant
Options in Exercise Date
Granted Fiscal Price Expiration Present
Name (#) Year ($/Sh) Date Value ($)(C)
George M. Stadler 20,000 (A) 24% $11.094 (A) $62,207
Frank R. McPike, 20,000 (B) 24% 11.094 7/31/07 $62,207
Jr.
(A) The expiration date at time of grant was July 31, 2007. Options
for 5,000 shares became exercisable on August 1, 1998. The
remaining options as originally granted were to vest as shown in
note (B) below. Under the terms of the Voluntary Release and Exit
Agreement between the registrant and Mr. Stadler described below,
options for another 5,000 shares became exercisable on October 15,
1998 and Mr. Stadler forfeited options for 10,000 shares. Under
the terms of the Voluntary Release and Exit Agreement, all
exercisable options may be exercised on or before July 31, 2001.
(B) Options become exercisable as follows:
25% August 1, 1998;
25% August 1, 1999;
50% August 1, 2000.
(C) The fair value of each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following
assumptions: (1) dividend yield, 0.0%; (2) expected volatility,
42.1%; (3) risk-free interest rate, 6.39%; and (4) expected life,
4 years. These amounts have not been adjusted for any changes
subsequent to the grant date noted in note (A) above.
Option Exercises and Year End Value
The following table summarizes the stock options exercised during
the fiscal year ended July 31, 1998 and stock options held at the end of
the fiscal year ended July 31, 1998 by the Specified Executives:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION
VALUES
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options Options at
on Value at FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) $ Unexercisable Unexercisable
George M. Stadler None -- 180,000/20,000 $152,500/N/A
Frank R. McPike, Jr. 10,958 $51,278 83,542/20,000 54,574/N/A
Employment Agreements
On October 15, 1998, Mr. Stadler and the registrant entered into a
Voluntary Release and Exit Agreement under which Mr. Stadler resigned
from his employment, positions, offices and directorships with the
registrant, including his employment under an employment contract dated
August 1, 1995 which had provided for a term of employment through July
31, 1999. The Voluntary Release and Exit Agreement, a copy of which is
attached as Exhibit 10.11 to this Form 10-K, provides, among other
things, that (i) the registrant will continue to pay Mr. Stadler his
base salary at the rate of $197,000 per year through July 31, 1999; (ii)
at Mr. Stadler's request received after March 20, 1999, the registrant
will pay the remaining balance of the salary continuation in a lump sum
payment; (iii) the registrant will pay Mr. Stadler the gross sum of
$25,000 to cover unused vacation pay; (iv) the registrant will pay the
costs of outplacement assistance for Mr. Stadler up to six months at up
to $2,000 per month; (v) the registrant will make additional payments in
connection with maintenance of health, life and dental insurance and car
expenses through July 31, 1999; and (vi) 190,000 currently vested
options held by Mr. Stadler under the registrant's stock option plans
will remain vested though July 31, 2001.
On January 7, 1997, the registrant entered into an employment
contract with Frank R. McPike, Jr. providing for his employment as Chief
Financial Officer of the registrant through January 6, 2000 and for
payment of compensation to him at a minimum rate of $167,000 per year
with such rate to be reviewed annually by the Board of Directors. The
agreement provides for automatic one-year renewals beginning in 2000
unless terminated by either party and for noncompetition by Mr. McPike
for two years following termination. The agreement contains provisions
for termination in the event of death or disability and gives the
registrant the right to terminate for cause, which is defined as any
criminal act by Mr. McPike.
Other Arrangements
The registrant provides term life insurance for certain of its
officers. The policy amount in the event of death is $500,000 for Mr.
Stadler and $250,000 for Mr. McPike. Premiums of $1,245 for Mr.
Stadler's policy in each of 1998, 1997 and 1996 and $460 for Mr.
McPike's policy in each of 1998, 1997 and 1996 were paid by the
registrant.
Through December 31, 1996, the registrant maintained a simplified
employee pension ("SEP") plan for its employees pursuant to the Internal
Revenue Code. Effective January 1, 1997, the registrant established a
401-K plan. Under both the SEP plan and the 401-K plan, an eligible
employee may elect a salary reduction up to 15% of his compensation as
defined in the plan to be contributed by the registrant to the plan for
the employee. Employee contributions for any calendar year are limited
to a specific dollar amount determined by the Internal Revenue Service
($9,500 for 1997 and $10,000 for 1998). For fiscal 1998, the registrant
contributed $13,768 for Mr. Stadler and $13,768 for Mr. McPike. The
amounts contributed for Messrs. Stadler and McPike in fiscal 1998
covered two annual calendar years and did not exceed the Internal
Revenue Service limitation.
Effective August 1, 1990, the registrant adopted the Competitive
Technologies, Inc. Employees' Common Stock Retirement Plan (the
"Retirement Plan"). The Retirement Plan is a qualified stock bonus plan
under the Internal Revenue Code. All employees of the registrant are
eligible to participate in the Retirement Plan. Annually, a committee
of independent directors determines the number of shares of the
registrant's Common Stock, if any, to be contributed to the Retirement
Plan. These shares are allocated among participants employed on the
last day of the year and who performed at least 1,000 hours of service
during the year in proportion to their relative compensation in a manner
that is integrated with the registrant's Social Security contribution on
behalf of employees; that is, the contribution made with respect to
compensation in excess of the Social Security wage base generally will
be twice as large in proportionate terms as the contribution made with
respect to compensation below that wage base. The registrant's
contributions are held in trust with a separate account established for
each participant.
The maximum amount of registrant Common Stock that may be
contributed to the Retirement Plan in any year is the number of shares
with a fair market value equal to 15% of that year's compensation
reduced by the 401-K plan contributions made for Retirement Plan
participants, but in no event more than 1% of the registrant's
outstanding shares at the end of the previous year. There is no minimum
or required contribution. The maximum number of shares that can be
allocated to any individual participant's account in any year is the
number of shares with a fair market value equal to the lesser of $30,000
or 25% of his compensation for that year reduced by his 401-K plan
contributions.
Participants become entitled to distributions of the vested shares
allocated to their accounts upon disability, death or other termination
of employment. Participants obtain a 100% vested interest in the shares
allocated to their accounts upon completing 5 years of service with the
registrant. If the Retirement Plan becomes "top heavy" as defined by
the Internal Revenue Code, participants become 20% vested after 2 years
of service, 40% vested after 3 years of service, 60% vested after 4
years of service, and 100% vested after 5 years of service.
Registrant stock contributed to the Retirement Plan is held in the
custody of the Retirement Plan's trustee, Webster Trust in Westport,
Connecticut. The trustee has the power to vote registrant shares owned
by the Retirement Plan. For the fiscal year ended July 31, 1998, the
Board authorized a contribution of 11,594 shares. Shares allocated to
Messrs. Stadler and McPike under the Retirement Plan for the year ended
July 31, 1998, were 1,971 and 1,971, respectively, and were 3,942 shares
for all executive officers as a group. See also Summary Compensation
Table - "All Other Compensation" for dollar values ascribed to
contributions for Messrs. Stadler and McPike.
The registrant has an incentive compensation plan pursuant to which
an amount equal to 10% of the operating income of the registrant
(defined and adjusted as provided in said plan) shall be credited each
year to an incentive fund from which cash awards are to be made to key
employees of the registrant by a committee, none of whose members is
eligible to receive awards. No amounts may be credited to the incentive
fund until such time, if ever, as the registrant experiences a fiscal
year in which operating income (as defined in said plan) has been
earned. No such operating income has yet been earned.
The registrant has in effect a Key Employees' Stock Option Plan and
a 1997 Employees' Stock Option Plan ("the Option Plans") with respect to
its Common Stock, $.01 par value, which provide for granting either
incentive stock options under Section 422 of the Internal Revenue Code
or nonqualified options. (Incentive options under both Option Plans and
non-qualified options granted under the 1997 Employees' Stock Option
Plan must be granted at not less than 100% of fair market value on the
grant date. Nonqualified options under the Key Employees' Stock Option
Plan may be granted at not less than 85% of fair market value on the
grant date.) Stock appreciation rights may also be granted under the
Key Employees' Stock Option Plan. In certain instances, stock options
which are vested or become vested upon the happening of an event or
events specified by the registrant's Stock Option Committee, may
continue to be exercisable through up to 10 years after the date
granted, irrespective of the termination of the optionee's employment
with the registrant.
Director Compensation
The registrant pays each director who is not an employee of the
registrant or a subsidiary of the registrant the sum of $750 for each
Board meeting attended. Directors also receive $250 for attending each
committee meeting that coincides with a Board meeting and $500 for
attendance at a committee meeting that does not coincide with a Board
meeting. Directors who participate in telephonic board and/or committee
meetings are paid one half the fee for attendance at such meetings.
Out-of-pocket expenses involved in attendance are also reimbursed.
Commencing January 1, 1997, in addition to meeting fees, outside
directors are paid an annual cash retainer of $5,000, payable in
quarterly installments.
The registrant has a 1996 Director's Stock Participation Plan
pursuant to which, on the first business day of January from January
1997 through January 2006, the registrant issues, to each non-employee
director who has been elected by the stockholders and has served at
least one full year, a number of shares of the registrant's Common Stock
equal to the lesser of (i) $15,000 divided by the per share fair market
value of such stock on the issuance date, or (ii) 2,500 shares. If a
non-employee director were to leave the Board after serving at least one
full year but prior to the January issuance date, the annual stock
compensation described above would be payable in shares on a pro-rata
basis up to the termination date. In January, 1998 an aggregate of
10,908 shares were issued under this plan (1,818 each to Messrs. Bigar,
Bolton and Sabin and three directors who did not stand for re-election
at the last annual meeting). On April 1, 1998 an aggregate of 1,098
shares were issued under this Plan to three (3) directors who did not
stand for re-election.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following information indicates the beneficial ownership of the
registrant's Common Stock by each director of the registrant, by the
sole current executive officer of the registrant, and by each person
known to the registrant to be the beneficial owner of more than 5% of
the registrant's outstanding Common Stock. Such information has been
furnished to the registrant by the indicated owners as of November 5,
1998 except as otherwise indicated in the footnotes.
Name (and Address if more
than 5%) of Beneficial Amount Beneficially
Owners Owned (A) Percent (B)
Directors
George C.J. Bigar 17,481 --
Michael G. Bolton 8,012 --
Robert H. Brown, Jr. 1,000 --
Samuel M. Fodale 161,700 (C) 2.7%
John M. Sabin 2,418 --
Executive Officer
Frank R. McPike, Jr. 86,323 (D) 1.4%
All directors and executive
officers as a group 276,871 (E) 4.6%
Additional 5% Owners
Dimensional Fund Advisors, Inc. 311,800 (F) 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
(A) Except as indicated in the notes which follow, the designated
person or group has sole voting and investment power.
(B) Percentages of less than 1% are not shown.
(C) Includes 99,100 shares of Common Stock held by Central Maintenance
Services, Inc., 9,000 shares of Common Stock held by Missouri
Recycling - St. Louis, Inc., 3,200 shares of Common Stock held by
children and 2,000 shares held by spouse.
(D) Consists of 17,781 shares of Common Stock, plus 68,542 stock
options deemed exercised solely for purposes of showing total
shares owned by Mr. McPike. Includes 4,423 shares of Common Stock
held by Webster Trust as Trustee under the registrant's Employees'
Common Stock Retirement Plan, as to which Mr. McPike has shared
investment power. Does not include 8,781 shares of Common Stock
allocated to Mr. McPike under said Retirement Plan; Trustee has
sole voting and investment power with regard thereto.
(E) Consists of 208,329 shares of Common Stock plus 68,542 stock
options to purchase shares of Common Stock deemed exercised solely
for purposes of showing total shares owned by such group.
(F) Information taken from Schedule 13G which states that the
information is as of December 31, 1997 and shows sole voting power
as to 199,700 shares and sole power of disposition as to 311,800
shares. The Schedule 13G states that all securities reported on
the schedule are owned by advisory clients of Dimensional Fund
Advisors, Inc. and Dimensional Fund Advisors, Inc. disclaims
beneficial ownership of all such securities.
At November 5, 1998, the stock transfer records maintained by the
registrant with respect to its Preferred Stock showed that the largest
holder of Preferred Stock owned 500 shares.
The following table sets forth information with respect to the
common stock, $.001 par value per share, of University Optical Products
Co. ("UOP"), a subsidiary of the registrant, beneficially owned by each
director of the registrant, by the sole current executive officer of the
registrant, and by each person known to the registrant to be the
beneficial owner of more than 5% of the registrant's outstanding Common
Stock at November 5, 1998.
Shares of Common Percent
Name Stock of UOP (A) of Class (B)
George C.J. Bigar None --
Michael G. Bolton None --
Robert H. Brown, Jr. None --
Samuel M. Fodale None --
John M. Sabin None --
Frank R. McPike, Jr. 14,000 --
All directors and executive
officers of the registrant
as a group 14,000 --
(A) Does not include 1,333,333 shares of UOP class A stock (which have
four votes per share and are convertible into an equal number of
shares of UOP common stock) and 2,757,735 shares of UOP common
stock owned by the registrant and 1,927 shares of UOP common stock
owned by Genetic Technology Management, Inc., a wholly-owned
subsidiary of the registrant.
(B) Percentages of less than 1% are not shown.
Item 13. Certain Relationships and Related Transactions
N/A
