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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
AMERICAN MEDICAL ALERT CORP.
------------------------------------------------
(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)(1)
and 0-11
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] 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>
AMERICAN MEDICAL ALERT CORP.
3265 LAWSON BOULEVARD
OCEANSIDE, NEW YORK 11572
----------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, JUNE 6, 1997
To the Shareholders of American Medical Alert Corp.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of
American Medical Alert Corp. will be held at the offices of Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas (18th floor), New York, New
York, on Friday, June 6, 1997 at 10:30 A.M., Eastern Daylight Time, to consider
and act upon the following matters:
1. The election of five directors to serve until the next Annual
Meeting of Shareholders and until their respective successors are
elected and qualified;
2. The approval of an amendment to the Company's Certificate of
Incorporation which would create a new class of 1,000,000 shares of
Preferred Stock and also authorize the Board of Directors to both issue
such Preferred Stock in series and fix the number of shares,
designations, preferences, rights and limitations of each such series;
3. The adoption of the 1997 Stock Option Plan of American
Medical Alert Corp.;
4. The ratification and approval of the appointment of Margolin,
Winer & Evens LLP as the Company's independent auditors for the fiscal
year ending December 31, 1997; and
5. The transaction of such other business as may properly come
before the Meeting or any adjournments or postponements thereof.
Information regarding the matters to be acted upon at the Meeting is
contained in the accompanying Proxy Statement.
The close of business on April 22, 1997 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting or any adjournments or postponements thereof.
By Order of the Board of Directors,
JOHN ROGERS,
Secretary
Oceanside, New York
May , 1997
-2-
<PAGE>
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EACH
SHAREHOLDER IS URGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WHICH IS
BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. AN ENVELOPE, ADDRESSED TO
THE COMPANY'S TRANSFER AGENT, IS ENCLOSED FOR THAT PURPOSE AND NEEDS NO POSTAGE
IF MAILED IN THE UNITED STATES.
-3-
<PAGE>
AMERICAN MEDICAL ALERT CORP.
3265 LAWSON BOULEVARD
OCEANSIDE, NEW YORK 11572
----------------
PROXY STATEMENT
----------------
This Proxy Statement is being furnished to the holders of Common Stock,
par value $.01 per share ("Common Stock"), of American Medical Alert Corp.
("Company") in connection with the solicitation by and on behalf of its Board of
Directors of proxies ("Proxy" or "Proxies") for use at the 1997 Annual Meeting
of Shareholders ("Meeting") to be held on Friday, June 6, 1997, at 10:30 A.M.,
Eastern Daylight Time, at the offices of Parker Chapin Flattau & Klimpl, LLP,
1211 Avenue of the Americas (18th floor), New York, New York and at any
adjournments or postponements thereof, for the purposes set forth in the
accompanying Notice of 1997 Annual Meeting of Shareholders. The cost of
preparing, assembling and mailing the Notice of 1997 Annual Meeting of
Shareholders, this Proxy Statement and the Proxies is to be borne by the
Company. The Company will also reimburse brokers who are holders of record of
Common Stock for their expenses in forwarding Proxies and Proxy soliciting
material to the beneficial owners of such shares of Common Stock. In addition to
the use of the mails, Proxies may be solicited without extra compensation by
directors, officers and employees of the Company by telephone, facsimile,
telegraph or personal interview. The approximate mailing date of this Proxy
Statement is May , 1997.
Unless otherwise specified, all Proxies, in proper form, received by
the time of the Meeting will be voted FOR the election of all nominees named
herein to serve as directors, FOR approval of an amendment to the Company's
Certificate of Incorporation which would create a new class of 1,000,000 shares
of Preferred Stock and authorize the Board of Directors to both issue such
Preferred Stock in series and fix the number of shares, designations,
preferences, rights and limitations of each such series, FOR the adoption of the
1997 Stock Option Plan of American Medical Alert Corp. and FOR the ratification
and approval of the appointment of Margolin, Winer & Evens LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
A Proxy may be revoked by a shareholder at any time before its exercise
by filing with John Rogers, the Secretary of the Company at the address set
forth above, an instrument of revocation or a duly executed proxy bearing a
later date or by attendance at the Meeting and voting in person. Attendance at
the Meeting will not, in and of itself, constitute revocation of a Proxy.
The close of business on April 22, 1997 has been fixed by the Board of
Directors as the record date ("Record Date") for the determination of
shareholders entitled to notice of and to vote at the Meeting or any
adjournments or postponements thereof. As of the Record Date, there were
5,866,291 shares of Common Stock outstanding. Each share of Common Stock
outstanding on the Record Date will be entitled to one vote on all matters to
come before the Meeting.
A majority of the total number of shares of the Company's Common Stock,
issued and outstanding and entitled to vote, represented in person or by proxy,
is required to constitute a quorum for the transaction of business. Proxies
submitted which contain abstentions or broker non-votes will be deemed present
at the Meeting for determining the presence of a quorum.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, shareholders will elect five directors to serve until
the next Annual Meeting of Shareholders and until their respective successors
are elected and qualified. Unless otherwise directed, the persons named in the
Proxy intend to cast all properly executed Proxies received by the time of the
Meeting FOR the election of Messrs. Howard M. Siegel, Myron Segal, M.D., Leonard
Herz, Peter Breitstone and Eli S. Feldman (the "nominees") to serve as directors
upon their nomination at the Meeting. Each of the nominees was elected by
shareholders at the 1996 Annual Meeting of Shareholders and each of the nominees
is a member of the current Board of Directors. The Board does not currently plan
to fill the vacancy created by the resignation, for personal reasons unrelated
to the operations, policies or practices of the Company, of Wilfred L. Mossey.
Each nominee has advised the Company of his willingness to serve as a director
of the Company. In case any nominee should become unavailable for election to
the Board of Directors for any reason, the persons named in the Proxies have
discretionary authority to vote the Proxies FOR one or more alternative nominees
who will be designated by the Board of Directors.
INFORMATION ABOUT NOMINEES
Set forth below is certain information with respect to each nominee:
HOWARD M. SIEGEL, 63, has been the Company's Chairman of the Board,
President and Chief Executive Officer and a director for more than the past five
years. Mr. Siegel also served as the Company's Chief Financial Officer for more
than the past five years, prior to the Company hiring Corey Aronin to serve in
such capacity in September, 1996
MYRON SEGAL, 73, M.D., F.A.C.S., has been a director of, and consultant
to, the Company since October 1983. Effective May 2, 1994, Dr. Segal became the
Company's Director of Medical Services. Prior to his retirement in 1995, Dr.
Segal was an Associate Medical Director of New York Blue Cross and Blue Shield
and served as an Advisor to the Federal Medical Program. He is a former
Associate Professor of Cardiac Surgery at the University of Miami, Florida and
is a fellow of the American College of Surgeons, The American College of Chest
Physicians and The American College of Cardiology.
LEONARD HERZ, 65, has been a director of the Company since June 1993.
He has been the President of Leonard Herz and Associates, a financial consulting
firm since 1982. Leonard Herz and Associates is located in Denver, Colorado. Mr.
Herz is a certified public accountant.
PETER BREITSTONE, 43, has been a director of the Company since March
1994. He has been the President of Breitstone & Co., Ltd., an insurance
brokerage and consulting firm located in Cedarhurst, New York, since December
1989. He is also the President of Shinecock Insurance Ltd., a company providing
reinsurance. He has served in such capacity since December 1987. Mr. Breitstone
has also been a practicing attorney in New York for more than the past five
years. Mr. Breitsone also serves as a director of Periphonics Corporation.
ELI S. FELDMAN, 57, has been a director of the Company since April
1996. He has been the Executive Vice President and Chief Executive Officer of
Metropolitan Jewish Health Systems, a not-for-profit corporation of
participating health care service entities for a period in excess of five years.
-2-
<PAGE>
NON-DIRECTOR-EXECUTIVE OFFICER
COREY M. ARONIN, 44, joined the Company in September 1996, as the Chief
Financial Officer. Previously, Mr. Aronin held senior financial positions. From
December 1995 to May 1996, he served as the Executive Vice President of Finance
at Affiliated Island Grocers, Inc. From August 1982 until November 1995, Mr.
Aronin served as the controller and Treasurer at Golden Simcha Poultry, Inc., a
closely held corporation, in which Mr. Aronin was a shareholder. A petition was
filed under Chapter 7 of the Federal Bankruptcy Act in February 1996 in the
United States Bankruptcy Court, District of New Jersey, by several of the
creditors of Golden Simcha Poultry, Inc., which petition was confirmed on April
10, 1996. Mr. Aronin is a certified public accountant.
NON-DIRECTOR-SIGNIFICANT OFFICERS
JOHN LESHER, 42, became the Company's Vice President, Engineering in
March 1991. Prior thereto and from 1989, Mr. Lesher served as a senior engineer
at the Company's former Bristol, PA facility. From May 1984 to November 1988,
Mr. Lesher served as the Operations and Manufacturing Director of Advanced
Graphic Systems, Inc. (a subsidiary of Automation and Printing International
Technology, Inc.), a company engaged in the sale and marketing of computerized
printing equipment.
JOHN ROGERS, 50, joined the Company in 1984 as the Manager of the
Emergency Response, Installation and Service Center. He became the Company's
Vice President, Operations in July 1993. Additionally, he has been the Secretary
of the Company since July 1993. Prior to joining the Company he was employed at
Technical Liaison Corporation from 1969 through May 1984 as Installation &
Service Manager.
There is no family relationship between any of the directors, executive
officers or significant officers of the Company.
COMMITTEES
The Board of Directors is responsible for the affairs and the business
of the Company. During the Company's fiscal year ended December 31, 1996, the
Board of Directors held four meetings. During such year, the Board of Directors
acted on four occasions by unanimous written consent.
The Board of Directors has a Stock Option Committee. The function of
the Stock Option Committee is to administer the Company's employee stock option
plans. During the Company's fiscal year ended December 31, 1996, the Stock
Option Committee did not hold any meetings. During such year, the Stock Option
Committee acted on two occasions by unanimous written consent.
The Board of Directors has no standing Executive, Audit, Compensation
or Nominating Committees.
Each incumbent director attended at least 75% of the aggregate of all
meetings of the Board of Directors and the Stock Option Committee, if a member
thereof.
-3-
<PAGE>
COMPENSATION OF DIRECTORS
Pursuant to the terms of the Company's 1991 Stock Option Plan ("1991
Plan"), each director of the Company receives formula grants of stock options
under the 1991 Plan. The grants are made on the first Wednesday of the month
following the end of each two consecutive fiscal quarters of the Company, or if
such day is a holiday, the next succeeding business day. For each director who
is an employee of the Company, the number of shares subject to each such grant
is equal to five percent of the dollar amount of the director's aggregate salary
during the two fiscal quarters immediately preceding the date of grant. For each
director who is not an employee of the Company, the number of shares subject to
each such grant is equal to 2,500. As formula grants under the 1991 Plan, the
foregoing grants of options to directors are not subject to the determinations
of the Board of Directors or the Stock Option Committee. In addition, each
non-employee director receives $500 for each meeting of the Board of Directors
attended.
EXECUTIVE OFFICERS
The Executive Officers of the Company are Howard M. Siegel, Chairman of
the Board, President and Chief Executive Officer and Corey Aronin, Chief
Financial Officer. The other Significant Officers of the Company are, John
Lesher, Vice President, Engineering, and John Rogers, Vice President, Operations
and Secretary. Information regarding each of these persons is provided above.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the ownership of
shares of the Company's Common Stock, as of April 22, 1997, with respect to (a)
holders known to the Company to beneficially own more than five percent of the
outstanding Common Stock of the Company, (b) each director and nominee, (c) the
executive officer named in the Summary Compensation Table under the caption
"Executive Compensation" below and (d) all directors and executive officers of
the Company as a group. The Company understands that, except as noted below,
each beneficial owner has sole voting and investment power with respect to all
shares attributable to such owner.
-4-
<PAGE>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
Howard M. Siegel(2)..................... 1,362,734(3) 22.4%
Myron Segal, M.D.(2).................... 75,000(4) 1.3%
Leonard Herz............................ 57,000(5) *
254 Garfield Street
Denver, Colorado 80206
Peter Breitstone........................ 15,000(6) *
534 Willow Avenue
Cedarhurst, NY 11516
Eli S. Feldman.......................... 30,000(7) *
c/o Metropolitan Jewish Health System
6323 Seventh Avenue
Brooklyn, NY 11220
All directors and executive
officers as a group
(6 persons)........................... 1,517,034(8) 24.5%
(1) Asterisk indicates less than 1%. Shares subject to options are considered
outstanding only for the purpose of computing the percentage of
outstanding Common Stock which would be owned by the optionee if the
options were so exercised, but (except for the calculation of beneficial
ownership by all directors and executive officers as a group) are not
considered outstanding for the purpose of computing the percentage of
outstanding Common Stock owned by any other person.
(2) The business address of each of Mr. Siegel and Dr. Segal is 3265 Lawson
Boulevard, Oceanside, New York 11572.
(3) Includes 184,404 shares subject to currently exercisable stock options,
19,300 shares held by Mr. Siegel as custodian for his son and 10,000
shares owned by Mr. Siegel's wife. Mr. Siegel disclaims beneficial
ownership of the shares owned by his wife.
(4) Includes 22,500 shares subject to currently exercisable stock options.
(5) Includes 20,000 shares subject to currently exercisable stock options and
20,000 shares subject to currently exercisable warrants.
(6) Includes 15,000 shares subject to currently exercisable stock options.
(7) Includes 5,000 shares subject to currently exercisable stock options and
25,000 shares issued under the 1997 Stock Option Plan of American Medical
Alert Corp., subject the shareholder approval of such plan.
(8) Includes shares indicated in notes (3), (4), (5), (6) and (7).
-5-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation of the Company's Chief Executive Officer (the "Named
Executive Officer"), for services in all capacities to the Company and its
subsidiaries during the Company's 1994, 1995 and 1996 fiscal years:
LONG-TERM
NAME AND ANNUAL COMPENSATION COMPENSATION
PRINCIPAL -----------------------
POSITION YEAR SALARY BONUS OPTIONS(#)
-------- ---- ------ ----- ----------
Howard M. Siegel 1996 $168,699 $34,000 9,726
Chairman of the 1995 134,038 30,441 6,106
Board, President 1994 120,192 28,200 152,572
and Chief Executive
Officer
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options granted
during the Company's 1996 fiscal year to the Named Executive Officer. All such
options were granted under the 1991 Plan.
PERCENT
OF TOTAL
OPTIONS
GRANTED TO EXERCISE
NUMBER OF EMPLOYEES IN PRICE EXPIRATION
NAME OPTIONS FISCAL YEAR PER SHARE DATE
Howard M. Siegel 3,125(1) 6.59% $2.4063 January 2, 2001
7,601(2) 13.74% $2.8875 July 2, 2001
(1) These options were granted on January 3, 1996.
(2) These options were granted on July 3, 1996.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
The following table sets forth certain information concerning the number
of shares of Common Stock acquired upon the exercise of stock options during the
year ended December 31, 1996 by, and the number and value at December 31, 1996
of shares of Common Stock subject to unexercised options held by, the
individuals listed in the Summary Compensation Table.
-6-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard Siegel 241,330 $428,360.75 185,342/0 $ 5,702.79/0
</TABLE>
- ---------------------
(1) Represents the closing bid price on the National Association of Securities
Dealers Automated Quotation System of the underlying shares of Common Stock on
the date of exercise less the option exercise price.
COMPENSATION COMMITTEE AND INSIDER PARTICIPATION
The Board of Directors has no Compensation Committee or other committee
performing equivalent functions. As a member of the Board of Directors Mr.
Siegel participated in the deliberations of the Company's Board of Directors
during the Company's 1996 fiscal year concerning executive officer compensation.
STOCK OPTION PLANS
Until 1994 the Company had in effect two stock option plans. The
Incentive Stock Option Plan ("1984 Plan") was approved by the Company's Board of
Directors and shareholders in 1984 and an amendment to the 1984 Plan was adopted
by the Board of Directors in February 1991 and approved by the Company's
shareholders in February 1992. The maximum number of shares that were issuable
under the 1984 Plan was 500,000. The 1991 Stock Option Plan ("1991 Plan") was
adopted by the Board of Directors in December 1991 and approved by the Company's
shareholders in February 1992 and an amendment to the 1991 Plan was adopted by
the Board of Directors in February 1994 and approved by the Company's
shareholders in August 1994. The maximum number of shares that may be issued
under the 1991 Plan, as amended, is 750,000. The 1984 Plan provided for and the
1991 Plan provides for the granting of incentive stock options (within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended) to
employees of the Company and non-qualified stock options to nonemployee
directors, consultants and advisors of the Company. The 1984 Plan did not
provide for and the 1991 Plan does not provide for the granting of stock
appreciation rights.
Except with respect to formula grants, pursuant to the 1991 Plan, the
exercise price of an incentive stock option granted under the 1991 Plan is
determined by the Stock Option Committee but may not be less than the fair
market value (as defined) per share of the Company's Common Stock on the date
such option is granted; provided that the exercise price per share for such
options granted to a holder of in excess of 10% of the Company's Common Stock
may not be less than 110% of such fair market value. The exercise price of a
non-qualified stock option granted under the 1991 Plan is determined by the
Stock Option Committee. The term of each option granted may not be for more than
ten years from the date the option is granted; provided that the term for
options granted to a holder of in excess of 10% of the Company's Common Stock
may not be for more than five years from such date.
-7-
<PAGE>
EMPLOYMENT AGREEMENT
The Company and Howard M. Siegel are parties to an Employment Agreement
("Employment Agreement"), as of January 1, 1997, which expires on December 31,
1999. Under the terms of the Agreement, pursuant to which Mr. Siegel serves as
the Company's Chairman of the Board, President and Chief Executive Officer, Mr.
Siegel is paid an annual base salary of $200,000 for the first year of
employment, $215,000 for the second year of employment and $230,000 for the
remainder of the employment term.
In addition, Mr. Seigel will receive as additional compensation, for
any year that the Company's pre-tax income, as defined in the Employment
Agreement, exceeds $2,000,000 an amount equal to 8% of the Company's pre-tax
income between $2,000,000 and $3,000,000, 9% of the Company's pre-tax income
between $3,000,000 and $4,000,000 and 10% of the Company's pre-tax income in
excess of $4,000,000. Such additional compensation may be paid to Mr. Siegel, at
his option in cash, Common Stock of the Company or a combination of both.
In the event of his death during the term of the Employment Agreement,
Mr. Siegel's estate or such other person as he shall designate shall be entitled
to receive his base pay for a period of one year from the date of his death. In
the event that Mr. Siegel should become disabled and be unable to perform his
duties for a period of one hundred eighty (180) consecutive days or an aggregate
of more than one hundred and eighty (180) days in any 12 month period, the
Company may terminate the Employment Agreement after the expiration of such
period. Mr. Siegel shall be entitled to receive the base pay and the additional
compensation earned for such fiscal year, if any, pro rated to the date of
termination.
Mr. Siegel has agreed that for the term of the Employment Agreement and
for 18 months after he ceases being an employee of the Company he will not
directly or indirectly engage in any activity in the United States that is,
directly or indirectly, competitive with the business conducted by the Company.
Mr. Siegel has also agreed that he will not use or disclose to any third person
any trade secrets or confidential information of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's executive offices and primary monitoring center are
located in a 5,600 square foot facility at 3265 Lawson Boulevard, Oceanside, New
York. The Company leases this space and the adjoining 8,000 square foot parking
lot from Howard M. Siegel pursuant to a five-year lease which expires on
December 31, 1999. The lease provides for a current base annual rent of
approximately $74,600, plus certain operating expenses, subject to a 5% annual
increase. The Company believes that the terms of this lease are as favorable as
could be obtained from an unaffiliated third party.
The Company purchases insurance through Breitstone & Co., Ltd., an
insurance brokerage and consulting firm which is owned by Mr. Peter Breitstone.
The annual commission currently earned by Breitstone & Co., Ltd. on such
insurance is approximately $15,000 The Company believes that the premiums paid
to the various insurance carriers are competitive and the commissions paid to
Breitstone & Co., Ltd. are customary in the insurance industry.
-8-
<PAGE>
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO CREATE A CLASS OF PREFERRED STOCK
Shareholders are being asked to approve an amendment to Paragraph
Fourth of the Company's Certificate of Incorporation to create one million
shares of Preferred Stock, $.01 par value (the "Preferred Stock"), which the
Board of Directors would have authority to issue from time to time in series.
The Board of Directors would also have the authority to fix, before issuance of
each series, the number of shares in such series and the designation,
preferences, rights and limitations of such series including, among other
things, the relative dividend, liquidation, voting, conversion and redemption
rights of each such series.
DESCRIPTION OF PREFERRED STOCK
The following summary of the terms of the Preferred Stock does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the language of the proposed amendment to Paragraph Fourth of the
Company's Certificate of Incorporation creating the Preferred Stock which is set
forth under the heading "Proposed New Article Fourth to the Company's
Certificate of Incorporation" in Exhibit A to this Proxy Statement.
DIVIDEND RIGHTS The Board of Directors will have authority to determine
the dividend rights, if any, of shares of Preferred Stock. Any such dividends
would be payable in preference to any dividends on Common Stock. Holders of
Common Stock are entitled to receive, when and as declared by the Board of
Directors, out of assets of the Company legally available therefor, such
dividends as may be declared from time to time by the Board of Directors.
LIQUIDATION RIGHTS The Board of Directors will also have authority to
determine the liquidation rights of the holders of Preferred Stock. Amounts
payable on liquidation would be payable in preference to any amounts payable on
liquidation to holders of Common Stock. Subject to the rights of any other class
or series of stock, holders of Common Stock are entitled to receive all assets
of the Company available for distribution to shareholders in the event of the
liquidation, dissolution or winding up of the Company.
VOTING RIGHTS Holders of Preferred Stock will have such voting rights
as may be determined by the Board of Directors at the time of issuance of each
series. Voting rights are presently vested exclusively in the holders of Common
Stock, each of whom has one vote in respect of each share held. Shares of Common
Stock do not have cumulative voting rights in the election of directors and,
therefore, at present, the holders of a majority of the shares outstanding may
elect all directors of the Company.
MISCELLANEOUS Preferred Stock will have such redemption, conversion or
exchange rights as may be determined by the Board of Directors at the time of
issuance thereof. The Company's Common Stock is neither redeemable nor
convertible into or exchangeable for any other securities of the Company.
If the proposed amendment is approved by shareholders, the Board of
Directors will, without further action by shareholders (except as may be
required by law or any rules of any stock exchange or over-the-counter market on
which the Company's Common Stock may now or in the future be listed), be
empowered to authorize the issuance of shares of Preferred Stock at such times,
to such persons and for such consideration as it may deem desirable. However,
the Company has no present plans, understandings, agreements or arrangements,
and is not involved in any negotiations or discussions, involving the issuance
of any of the Preferred Stock proposed to be authorized.
-9-
<PAGE>
The issuance of Preferred Stock by the Board of Directors could affect
the rights of the holders of Common Stock. For example, such issuance could
result in a class of securities outstanding that would have preference with
respect to voting rights and dividends and in liquidation over the Common Stock,
and could (upon conversion or otherwise) enjoy all of the rights appurtenant to
Common Stock.
The authority possessed by the Board of Directors to issue Preferred
Stock could also potentially be used to discourage attempts by others to obtain
control of the Company through merger, tender offer, proxy contest or otherwise,
which attempts could increase the value of the Company's stock, by making such
attempts more difficult or costly to achieve.
The Board of Directors has no immediate plans or intentions to issue
any shares of Preferred Stock. Notwithstanding the foregoing, however, the Board
of Directors considers it desirable to have such shares available for use in
acquisitions, the raising of additional capital and other corporate purposes.
The Board further believes that if authorization for each such issuance were
postponed until a particular need arises, the Company would not then have the
degree of flexibility in negotiations which may be important to the effective
use of such shares.
FINANCIAL INFORMATION
In considering this proposed amendment to the Company's Certificate of
Incorporation, shareholders should examine the Company's consolidated financial
statements and notes to such consolidated financial statements which are
contained in the Company's Annual Report to Shareholders (which is being
furnished to all shareholders concurrently with this Proxy Statement).
PROPOSAL 3
APPROVAL OF 1997 STOCK OPTION PLAN
OF AMERICAN MEDICAL ALERT CORP.
On March 26, 1997, the Board of Directors adopted the 1997 Stock Option
Plan of American Medical Alert Corp. (the "1997 Plan"), a copy of which is
included as Exhibit B to this Proxy Statement. The 1997 Plan is designed to
provide an incentive to employees (including directors and officers who are key
employees) and to consultants and directors who are not key employees of the
Company and its subsidiaries and to offer an additional inducement in obtaining
the services of such individuals. At a meeting of the Board of Directors held on
April 4, 1997, the Board of Directors, the Board of Directors granted Eli S.
Feldman, a director of the Corporation, a stock option for 25,000 shares of
Common Stock under the 1997 Plan, subject to shareholder approval of the 1997
Plan.
ADMINISTRATION
The 1997 Plan is to be administered by the Board of Directors or the
Stock Option Committee which is required to consist of at least three members of
the Board of Directors, each of whim is a "non-employee director" within the
meaning of Rule 16b-3 promulgated under the 1934 Act.
ELIGIBILITY
All employees (including officers and directors who are employees) and
all consultants and directors who are not employees of the Company or any of its
subsidiaries are eligible to receive options under the 1997 Plan.
-10-
<PAGE>
OPTIONS GRANTED UNDER THE 1997 PLAN
Options may be granted by the Stock Option Committee to eligible
employees in such numbers and at such times as the Stock Option Committee shall
determine.
OPTION CONTRACTS
Each grant of an option will be evidenced by a written contract between
the Company and the optionee receiving the grant containing such terms,
provisions and conditions, not inconsistent with the 1997 Plan, as may be
determined by the Stock Option Committee (the "Contract").
TERMS AND CONDITIONS OF OPTIONS
The options granted under the 1997 Plan will be subject to, among other
things, the following terms and conditions:
(a) Options may be granted for terms determined by the Stock Option
Committee, provided, however, that the term of an incentive stock option may not
exceed 10 years (5 years if the option holder owns (or is deemed to own) stock
possessing more than 10% of the voting power of the Company).
(b) The exercise price for each option granted will be determined by
the Stock Option Committee, provided, however, that the exercise price of an
incentive stock option may not be less than the fair market value of the Common
Stock on the date of grant (110% in the case of an incentive stock option
granted to an optionee who owns (or is deemed to own) more than 10% of the total
combined voting power of the Company). Options are payable in full upon exercise
or, if the Contract permits, in installments. Payment of the exercise price of
an option may be made in cash, certified check, or with the authorization of the
Stock Option Committee, with cash, a certified check and/or with previously
acquired shares of Common Stock or any combination thereof, depending on the
terms of the Contract.
(c) Options may not be transferred other than by will or by the laws of
descent and distribution, and may be exercised during the lifetime of the
optionee only by him or his legal representatives.
(d) If the relationship of the optionee whose employment or consulting
relationship with the Company is terminated for any reason other than death or a
permanent and total disability, the option may be exercised, to the extent
exercisable by the holder at the time of such termination within three months
thereafter, but in no event after expiration of the term of the option. However,
if such relationship was terminated either for cause or without the consent of
the Company, such option shall terminate immediately. In the case of the death
of the optionee while employed by, or as a consultant to the Company or its
parent or any subsidiary of the Company (or within three months after
termination of the employment or consulting relationship or within one year
after termination of the employment or consulting relationship by reason of
disability), his or her legal representative may exercise the option, to the
extent exercisable on the date of death, within one year after such date, but in
no event after the expiration of the term of the option. An optionee whose
employment or consulting relationship was terminated by disability may exercise
his or her option, to the extent exercisable at the time of such termination,
within one year thereafter, but not after the expiration of the term of the
option.
(e) The Company, its parent or any subsidiary may withhold cash or with
the consent of the Stock Option Committee shares of Common Stock to be issued
upon the exercise of an option or a combination of both having an aggregate fair
market value equal to the amount which the Stock Option Committee determines is
necessary to satisfy its obligation to withhold federal, state and local taxes
-11-
<PAGE>
incurred by reason of the grant or exercise of an option, its disposition or the
disposition of shares acquired upon the exercise of the option. Alternatively,
the Company may require the optionee to pay the Company such amount, in cash,
promptly upon demand.
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments shall be made in the number and kind of shares
available under the 1997 Plan, in the number and kind of shares subject to each
outstanding option and in the exercise prices of such options in the event of
any change in the Common Stock by reason of any stock dividend,
recapitalization, merger in which the Company is the surviving corporation,
spinoff, split-up, combination or exchange or shares or the like.
In the event of the Company's liquidation or dissolution, merger in
which the Company is not the surviving corporation or consolidation, or any
other capital reorganization in which more than 50% of the Company's Common
Stock are exchanged, any outstanding options shall terminate, unless otherwise
provided in the transaction.
DURATION AND AMENDMENT OF THE 1997 PLAN
No option may be granted pursuant to the 1997 Plan after April 3, 2007.
The Board of Directors may at any time suspend, terminate or amend the 1997
Plan, in whole or in part, or amend it from time to time, provided, however,
that, without the approval of the Company's shareholders, no amendment may be
made which would increase the maximum number of shares available for the grant
of options (except the anti-dilution adjustments described above), change the
eligibility requirements for employees who may receive options or make any
change for which applicable law or any governmental agency or regulatory body
requires shareholder approval.
FEDERAL INCOME TAX TREATMENT
The following is a general summary of the federal income tax
consequences under current tax law of incentive and non-qualified stock options.
It does not purport to cover all of the special rules, including special rules
relating to optionees subject to Section 16(b)of the 1934 Act, and the exercise
of an option with previously-acquired shares, or the state or local income or
other tax consequences inherent in the ownership and exercise of stock options
and the ownership and disposition of the underlying shares.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of an incentive stock option or a non-qualified stock
option.
In the case of an incentive stock option, no taxable income is
recognized upon exercise of the option. If the optionee disposes of the shares
acquired pursuant to the exercise of an incentive stock option more than two
years after the date of grant and more than one year after the transfer of the
shares to him or her, the optionee will recognize long-term capital gain or loss
and the Company will not be entitled to a deduction. However, if the optionee
disposes of such shares within the required holding period, a portion of his or
her gain will be treated as ordinary income and the Company will generally be
entitled to deduct such amount.
Upon the exercise of a non-qualified stock option, the optionee
recognizes ordinary income in an amount equal to the excess, if any, of the fair
market value of the shares acquired on the date of exercise over the exercise
price thereof, and the Company is generally entitled to a deduction for such
amount on the date of exercise. If the optionee later sells shares acquired
pursuant to the non-qualified stock option, he or she will recognize long-term
or short-term capital gain or loss.
-12-
<PAGE>
In addition to the federal income tax consequences described above, an
optionee may be subject to the alternative minimum tax. For this purpose, upon
the exercise of an incentive stock option, the excess of the fair market value
of the shares over the exercise price therefor is an adjustment which increases
alternative minimum taxable income. In addition, the optionee's basis in such
shares is increased by such amount for purposes of computing the gain or loss on
the disposition of the shares for alternative minimum tax purposes. If an
optionee is required to pay an alternative minimum tax, the amount of such tax
which is attributable to deferral preferences (including the incentive stock
option adjustment) is allowed as a credit against the optionee's regular tax
liability in subsequent years. To the extent the credit is not used, it is
carried forward.
Since the number of options that may be granted pursuant to the 1997
Plan will be determined by the Committee it is not possible, at this time, to
state the number that will be received by or allocated by the Company to any
eligible participant. The Board of Directors has granted Eli S. Feldman, a
director of the Corporation, a stock option for 25,000 shares of Common Stock
under the 1997 Plan, subject to shareholder approval of the 1997 Plan.
PROPOSAL 4
RATIFICATION OF SELECTION
OF
INDEPENDENT AUDITORS
The Board of Directors believes that it is appropriate to submit for
approval by its shareholders its selection of Margolin, Winer & Evens LLP as the
Company's independent auditors for the fiscal year ended December 31, 1997.
Unless otherwise directed, persons named in the Proxy intend to cast all
properly executed Proxies received by the time of the Meeting FOR the
ratification and approval of the appointment of Margolin, Winer & Evens LLP as
the Company's independent auditors for the fiscal year ending December 31, 1997.
On August 17, 1995, the Company's Board of Directors approved the
dismissal of Deloitte & Touche LLP as its independent public accountants, which
dismissal would take effect simultaneously with the Company's appointment of a
new independent public accountant. There was no adverse opinion or disclaimer of
opinion, or modification as to uncertainty, audit scope or accounting principles
contained in the reports of Deloitte & Touche LLP for either of the past two
fiscal years ended December 31, 1994.
During the Company's two most recent fiscal years ended December 31,
1994 and the subsequent interim period preceding Deloitte & Touche LLP's
dismissal on August 17, 1995, there were no disagreements with Deloitte & Touche
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 Deloitte & Touche LLP, would have caused Deloitte &
Touche LLP to make reference in connection with its report concerning the
Company's financial statements to the subject matter of the disagreements.
On August 17, 1995, the Company's Board of Directors approved the
proposal to engage Margolin, Winer & Evens LLP to be the Company's independent
public accountants for its fiscal year ending December 31, 1995.
A representative of Margolin, Winer & Evens LLP is expected to be
present at the Annual Meeting of Shareholders with the opportunity to make a
statement and to be available to respond to appropriate questions from
shareholders.
-13-
<PAGE>
VOTING REQUIREMENTS
Directors are elected by a plurality of the votes cast at the Meeting
(Proposal 1). The affirmative vote of a majority of all outstanding shares
entitled to vote at the Meeting will be required to approve the amendment to the
Company's Certificate of Incorporation creating a new class of 1,000,000 shares
of Preferred Stock (Proposal 2) and to approve the adoption of the 1997 Stock
Option Plan of American Medical Alert Corp. (Proposal 3). The affirmative vote
of a majority of the votes cast at the meeting will be required to ratify the
appointment of Margolin, Winer & Evens LLP as auditors of the Company for the
fiscal year ending December 31, 1997 (Proposal 4). Abstentions and broker
nonvotes with respect to any matter are not considered as votes cast with
respect to that matter. THE BOARD OF DIRECTORS HAS UNANIMOUSLY RECOMMENDED A
VOTE IN FAVOR OF EACH NOMINEE NAMED IN THE PROXY AND FOR PROPOSALS 2, 3 AND 4.
MISCELLANEOUS
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company not later than January
[_], 1998 for inclusion in the Company's proxy statement and form of proxy for
that meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act 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 of ownership with the Securities and Exchange Commission and furnish
copies of those reports to the Company. Based solely on a review of the copies
of the reports furnished to the Company to date, or written representations that
no reports were required, the Company believes that all filing requirements
applicable to such persons were complied with, except that during 1996, Mr.
Leonard Herz failed to timely file one report with respect to the extension of
the term of certain Warrants to Purchase Common Stock owned by him.
OTHER MATTERS
Management does not intend to bring before the Meeting for action any
matters other than those specifically referred to above and is not aware of any
other matters which are proposed to be presented by others. If any other matters
or motions should properly come before the Meeting, the persons named in the
Proxy intend to vote thereon in accordance with their judgment on such matters
or motions, including any matters or motions dealing with the conduct of the
Meeting.
PROXIES
All shareholders are urged to fill in their choices with respect to the
matters to be voted on, sign and promptly return the enclosed Proxy.
By Order of the Board of Directors,
JOHN ROGERS
Secretary
May [ ], 1997
-14-
<PAGE>
PROXY PROXY
AMERICAN MEDICAL ALERT CORP.
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned holder of Common Stock of AMERICAN MEDICAL ALERT CORP.,
revoking all proxies heretofore given, hereby constitutes and appoints Howard M.
Siegel and John Rogers and each of them, Proxies, with full power of
substitution, for the undersigned and in the name, place and stead of the
undersigned, to vote all of the undersigned's shares of said stock, according to
the number of votes and with all the powers the undersigned would possess if
personally present, at the 1997 Annual Meeting of Shareholders of AMERICAN
MEDICAL ALERT CORP., to be held at the offices of Parker Chapin Flattau &
Klimpl, LLP, 1211 Avenue of the Americas (18th floor), New York, New York, on
Friday, June 6, 1997 at 10:30 A.M., Eastern Daylight Time, and at any
adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the Meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the discretion of
the Proxies on any other matter that may come before the meeting. Where no
choice is specified, this Proxy will be voted (i) FOR all listed nominees to
serve as directors, (ii) FOR approval of an amendment to the Company's
Certificate of Incorporation, (iii) FOR adoption of the 1997 Stock Option Plan
of American Medical Alert Corp. and (iv) FOR the ratification and approval of
the appointment of Margolin, Winer & Evens LLP as the Company's independent
auditors for the fiscal year ending December 31, 1997 and in accordance with
their discretion on such other matters as may properly come before the meeting.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ALL LISTED NOMINEES.
1. Election of FOR all nominees WITHHOLD AUTHORITY
five Directors listed (except as to vote for all
marked to the listed nominees
contrary) below
Nominees: Howard M. Siegel, Myron Segal, M.D., Leonard Herz, Peter
Breitstone and Eli S. Feldman.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CIRCLE
THAT NOMINEE'S NAME IN THE LIST PROVIDED ABOVE.)
2. Approval of an Amendment to the Company's Certificate of Incorporation
which would create a new class of Preferred Stock consisting of 1,000,000
shares, with $.01 par value
[_] FOR [_] AGAINST [_] ABSTAIN
3. The adoption of the 1997 Stock Option Plan of American Medical Alert Corp.
[_] FOR [_] AGAINST [_] ABSTAIN
4. The ratification and approval of the appointment of Margolin, Winer & Evens
LLP as the Company's independent auditors for the fiscal year ending
December 31, 1997.
[_] FOR [_] AGAINST [_] ABSTAIN
5. The proxies are authorized to vote in their discretion upon such other
matters as may properly come before the meeting.
The shares represented by this Proxy will be voted in the manner
directed. In the absence of any direction, the shares will be voted FOR each
nominee listed above, FOR the amendment to the Certificate of Incorporation of
American Medical Alert Corp., FOR the adoption of the 1997 Stock Option Plan of
American Medical Alert Corp., FOR the ratification and approval of the
appointment of Margolin, Winer & Evens LLP as the Company's independent auditors
for the fiscal year ending December 31, 1997 and in accordance with their
discretion on such other matters as may properly come before the Meeting.
Dated _____________________, 1997
__________________________________
__________________________________
Signature(s)
(Signature(s) should conform to
names as registered. For jointly
owned shares, each owner should
sign. When signing as attorney,
executor, administrator, trustee,
guardian or officer of a
corporation, please give full
title.)
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
AMERICAN MEDICAL ALERT CORP.
(Under Section 805 of the Business Corporation Law)
1. The name of the corporation is American Medical Alert
Corp.
2. The Certificate of Incorporation of the corporation was
filed by the Department of State on January 14, 1981.
3. A Certificate of Amendment of the Certificate of
Incorporation of American Medical Alert Corp. was filed in the office on each of
August 12, 1981 and December 1, 1983.
4. The certificate of incorporation of the corporation is
hereby amended by striking out Article Fourth thereof and by substituting in
lieu of said Article Fourth the following new Article Fourth:
"The total number of shares of stock which the corporation shall have
authority to issue shall be 11,000,000, of which 10,000,000 shares
shall be common stock, par value $.01 per share, and 1,000,000 shares
shall be preferred stock, par value $.01 per share. The shares of
preferred stock shall be issuable in one or more series as determined
from time to time by the Board of Directors. The Board of Directors
hereby is expressly vested with authority, by resolution or
resolutions, to establish with respect to each such series, its
designation, number, full or limited voting powers or the denial of
voting powers, and relative, participating, optional or other special
rights, and any qualifications, limitations and restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determining the following:
(i) the number of shares constituting that series and the
distinctive designation of that series;
(ii) whether the holders of shares of that series shall be
entitled to receive dividends and, if so, the rates of
such dividends, conditions under which and times such
dividends may be declared or paid, any
<PAGE>
preference of any such dividends to, and the relation to,
the dividends payable on any other class or classes of
stock or any other series of the same class and whether
dividends shall be cumulative or non-cumulative and, if
cumulative, from which date or dates;
(iii) whether the holders of shares of that series have
voting rights in addition to the voting rights provided by
law and, if so, the terms and conditions of exercise of
such voting rights;
(iv) whether shares of that series shall be convertible
into or exchangeable for shares of any other class, or any
series of the same or any other class, and, if so, the
terms and conditions thereof, including the date or dates
when such shares shall be convertible into or exchangeable
for shares of any other class, or any series of the same
or any other class, the price or prices of or the rate or
rates at which shares of such series shall be so
convertible or exchangeable, and any adjustments which
shall be made, and the circumstances in which any such
adjustments shall be made, in such conversion or exchange
prices or rates;
(v) whether the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall
be redeemable and the amount per share payable in case of
redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) whether the shares of that series shall be subject to
the operation of a retirement or sinking fund and, if so
subject, the extent and the manner in which it shall be
applied to the purchase or redemption of the shares of
that series, and the terms and provisions relative to the
operation thereof;
(vii) the rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation and any presence of any such
rights to, and the relation to, the rights in respect
thereto of any class or
-2-
<PAGE>
classes of stock or any other series of the same class;
and
(viii) any other relative rights, preferences and
limitations of that series;
PROVIDED, HOWEVER, that if the stated dividends and amounts payable
on liquidation with respect to shares of any series of the Preferred
Stock are not paid in full, the shares of all series of the Preferred
Stocks shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sums which would be
payable on such shares if all dividends were declared and paid in
full, and in any distribution of assets (other than by way of
dividends) in accordance with the sums which would be payable on such
distribution if all sums payable were discharged in full."
5. The amendment to the corporation's Certificate of
Incorporation was authorized by vote of the board of
directors followed by vote of the holders of a majority of
all the outstanding shares of Common Stock of the
corporation.
IN WITNESS WHEREOF, we have executed this certificate this ____ day
of ______, 1997, and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
_________________________________
Howard M. Siegel, President
_________________________________
John Rogers, Secretary
-3-
<PAGE>
EXHIBIT B
---------
1997 STOCK OPTION PLAN
of
AMERICAN MEDICAL ALERT CORP.
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan")
is designed to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and directors who are not
employees of American Medical Alert Corp., a New York corporation (the
"Company"), or any of its Subsidiaries (as such term is defined in Paragraph
19), and to offer an additional inducement in obtaining the services of such
individuals. The Plan provides for the grant of "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and nonqualified stock options which do not qualify as
ISOs ("NQSOs"). The Company makes no representation or warranty, express or
implied, as to the qualification of any option as an "incentive stock option"
under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 12, the aggregate number of shares of Common Stock, $.01 par value per
share, of the Company ("Common Stock") for which options may be granted under
the Plan shall not exceed [750,000]. Such shares of Common Stock may, in the
discretion of the Board of Directors of the Company (the "Board of Directors"),
consist either in whole or in part of authorized but unissued shares of Common
Stock or shares of Common Stock held in the treasury of the Company. Subject to
the provisions of Paragraph 13, any shares of Common Stock subject to an option
which for any reason expires, is canceled or is terminated unexercised or which
ceases for any reason to be exercisable shall again become available for the
granting of options under the Plan. The Company shall at all times during the
term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the Board of Directors or a committee of the Board of Directors (the
"Committee") consisting of not less than three directors, each of whom shall be
a "non-employee director" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (as the same may be in effect and
interpreted from time to time, "Rule 16b-3"). Unless otherwise provided in the
By-Laws of the Company or by resolution of the Board of Directors, a majority of
the members of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, and
any acts approved in writing by all members without a meeting, shall be the acts
of the Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the persons who shall
be granted options; the times when they shall receive options; whether an option
granted to an employee shall be an ISO or a NQSO; the number of shares of Common
Stock to be subject to each option; the term of each
<PAGE>
option; the date each option shall become exercisable; whether an option shall
be exercisable in whole or in installments, and, if in installments, the number
of shares of Common Stock to be subject to each installment; whether the
installments shall be cumulative; the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any option or installment; whether shares of Common Stock may be
issued upon the exercise of an option as partly paid, and, if so, the dates when
future installments of the exercise price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the
exercise price; the fair market value of a share of Common Stock; whether and
under what conditions to restrict the sale or other disposition of the shares of
Common Stock acquired upon the exercise of an option and, if so, whether and
under what conditions to waive any such restriction; whether and under what
conditions to subject the exercise of all or any portion of an option to the
fulfillment of certain restrictions or contingencies as specified in the
contract referred to in Paragraph 11 (the "Contract"), including without
limitation, restrictions or contingencies relating to entering into a covenant
not to compete with the Company, its Parent (as such term is defined in
Paragraph 19) and Subsidiaries, to financial objectives for the Company, any of
its Subsidiaries, a division, a product line or other category, and/or the
period of continued employment of the optionee with the Company or any of its
Subsidiaries, and to determine whether such restrictions or contingencies have
been met; the amount, if any, necessary to satisfy the obligation of the
Company, any of its Subsidiaries or a Parent to withhold taxes or other amounts;
whether an optionee is Disabled (as such term is defined in Paragraph 19); with
the consent of the optionee, to cancel or modify an option, PROVIDED that the
modified provision is permitted to be included in an option granted under the
Plan on the date of the modification, and PROVIDED FURTHER, that in the case of
a modification (within the meaning of Section 424(h) of the Code) of an ISO,
such option as modified would be permitted to be granted on the date of such
modification under the terms of the Plan; to construe the respective Contracts
and the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; to approve any provision of the Plan or any option granted under the
Plan or any amendment to either which, under Rule 16b-3, requires the approval
of the Board of Directors, a committee of non-employee directors or the
shareholders to be exempt (unless otherwise specifically provided herein); and
to make all other determinations necessary or advisable for administering the
Plan. Any controversy or claim arising out of or relating to the Plan, any
option granted under the Plan or any Contract shall be determined unilaterally
by the Committee in its sole discretion. The determinations of the Committee on
the matters referred to in this Paragraph 3 shall be conclusive and binding on
the parties.
No member or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted hereunder. In addition, each member and former member of the
Committee shall be indemnified and held harmless by the Company from and against
any liability, claim for damages and expenses in connection therewith by reason
of any action or failure to act under or in connection with the Plan, any option
granted hereunder or any Contract to the fullest extent permitted with respect
to directors under the Company's certificate of incorporation, By-Laws and
applicable law.
- 2 -
<PAGE>
4. ELIGIBILITY. The Committee may from time to time,
consistent with the purposes of the Plan, grant options to such key employees
(including officers and directors who are key employees) of, or consultants to,
the Company or any of its Subsidiaries, and to such directors of the Company
who, at the time of grant, are not common law employees of the Company or of any
of its Subsidiaries, as the Committee may determine in its sole discretion. Such
options granted shall cover such number of shares of Common Stock as the
Committee may determine in its sole discretion; PROVIDED, HOWEVER, that the
maximum number of shares subject to options that may be granted to any employee
during any calendar year under the Plan shall be 250,000 shares; and PROVIDED
FURTHER that the aggregate market value (determined at the time the option is
granted) of the shares of Common Stock for which any eligible employee may be
granted ISOs under the Plan or any other plan of the Company, or of a Parent or
a Subsidiary of the Company, which are exercisable for the first time by such
optionee during any calendar year shall not exceed $100,000. The $100,000 ISO
limitation shall be applied by taking ISOs into account in the order in which
they were granted. Any option (or the portion thereof) granted in excess of such
ISO limitation amount shall be treated as a NQSO to the extent of such excess.
5. EXERCISE PRICE. The exercise price of the shares of Common
Stock under each option shall be determined by the Committee in its sole
discretion; PROVIDED, HOWEVER, that the exercise price of an ISO shall not be
less than the fair market value of the Common Stock subject to such option on
the date of grant; and PROVIDED FURTHER that if, at the time an ISO is granted,
the optionee owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the exercise
price of such ISO shall not be less than 110% of the fair market value of the
Common Stock subject to such ISO on the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of the
Common Stock on such day as reported by such exchange or on a consolidated tape
reflecting transactions on such exchange, (b) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is
quoted on the Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price
information is available with respect to the Common Stock, the average of the
highest and lowest sales prices per share of the Common Stock on such day on
Nasdaq, or (ii) if such information is not available, the average of the highest
bid and the lowest asked prices per share for the Common Stock on such day on
Nasdaq, or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average of
the highest bid and lowest asked prices per share for the Common Stock on such
day as reported on the OTC Bulletin Board Service or by National Quotation
Bureau, Incorporated or a comparable service; PROVIDED that if clauses (a), (b)
and (c) of this Paragraph are all inapplicable, or if no trades have been made
or no quotes are available for such day, the fair market value of a share of
Common Stock shall be determined by the Committee by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options.
- 3 -
<PAGE>
6. TERM. Each option granted pursuant to the Plan shall be
for such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; PROVIDED, HOWEVER, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and PROVIDED FURTHER that if, at the time an ISO
is granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a Parent, the
term of the ISO shall be for a period not exceeding five years from the date of
grant. Options shall be subject to earlier termination as hereinafter provided.
7. EXERCISE. An option (or any installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the applicable Contract permits
installment payments) (a) in cash and/or by certified check or (b) with the
authorization of the Committee, with cash, a certified check and/or with
previously acquired shares of Common Stock, having an aggregate fair market
value (determined in accordance with Paragraph 5), on the date of exercise,
equal to the aggregate exercise price of all options being exercised; PROVIDED,
HOWEVER, that in no case may shares be tendered if such tender would require the
Company to incur a charge against its earnings for financial accounting
purposes.
The Committee may, in its sole discretion, permit payment of the
exercise price of an option by delivery by the optionee of a properly executed
notice, together with a copy of his irrevocable instructions to a broker
acceptable to the Committee to deliver promptly to the Company the amount of
sale or loan proceeds sufficient to pay such exercise price. In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
An optionee shall not have the rights of a shareholder with respect
to such shares of Common Stock to be received upon the exercise of an option
until the date of issuance of a stock certificate to him for such shares or, in
the case of uncertificated shares, until the date an entry is made on the books
of the Company's transfer agent representing such shares; PROVIDED, HOWEVER,
that until such stock certificate is issued or until such book entry is made,
any optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a shareholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be
expressly provided in the applicable Contract, any optionee whose employment or
consulting relationship with the Company (and its Parent and Subsidiaries) has
terminated for any reason
- 4 -
<PAGE>
other than the death or Disability of the optionee may exercise any option
granted to him as an employee or consultant, to the extent exercisable on the
date of such termination, at any time within three months after the date of
termination, but not thereafter and in no event after the date the option would
otherwise have expired; PROVIDED, HOWEVER, that if such relationship is
terminated either (a) for cause, or (b) without the consent of the Company, such
option shall terminate immediately. Except as may otherwise be expressly
provided in the applicable Contract, options granted under the Plan to an
employee or consultant of the Company or any of its Subsidiaries shall not be
affected by any change in the status of the holder so long as he continues to be
an employee or a consultant of the Company, its Parent or any of the
Subsidiaries (regardless of a change in status from one to the other or having
been transferred from one corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the corporation, any of its Subsidiaries or a Parent is
guaranteed either by statute or by contract. If the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed by statute or
by contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose directorship with the Company has terminated for any
reason other than his death or Disability may exercise the options granted to
him as a director who was not an employee of or consultant to the Company or any
of its Subsidiaries, to the extent exercisable on the date of such termination,
at any time within three months after the date of termination, but not
thereafter and in no event after the date the option would otherwise have
expired; PROVIDED, HOWEVER, that if his directorship is terminated for cause,
such option shall terminate immediately.
Nothing in the Plan or in any option granted under the Plan shall
confer on any person any right to continue in the employ or as a consultant of
the Company, its Parent or any of its Subsidiaries, or as a director of the
Company, or interfere in any way with any right of the Company, its Parent or
any of its Subsidiaries to terminate such relationship at any time for any
reason whatsoever without liability to the Company, its Parent or any of its
Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may
otherwise be expressly provided in the applicable Contract, if an optionee dies
(a) while he is employed by, or a consultant to, the Company, its Parent or any
of its Subsidiaries, (b) within three months after the termination of his
employment or consulting relationship with the Company, its Parent and its
Subsidiaries (unless such termination was for cause or without the consent of
the Company) or (c) within one year following the termination of such employment
or consulting relationship by
- 5 -
<PAGE>
reason of his Disability, the options granted to him as an employee of, or
consultant to, the Company or any of its Subsidiaries, may be exercised, to the
extent exercisable on the date of his death, by his Legal Representative (as
such term is defined in Paragraph 19), at any time within one year after death,
but not thereafter and in no event after the date the option would otherwise
have expired. Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose employment or consulting relationship with the
Company, its Parent and its Subsidiaries has terminated by reason of his
Disability may exercise such options, to the extent exercisable upon the
effective date of such termination, at any time within one year after such date,
but not thereafter and in no event after the date the option would otherwise
have expired.
Except as may otherwise be expressly provided in the applicable
Contract, if an optionee dies (a) while he is a director of the Company, (b)
within three months after the termination of his directorship with the Company
(unless such termination was for cause) or (c) within one year after the
termination of his directorship by reason of his Disability, the options granted
to him as a director who was not an employee of or consultant to the Company or
any of its Subsidiaries, may be exercised, to the extent exercisable on the date
of his death, by his Legal Representative at any time within one year after
death, but not thereafter and in no event after the date the option would
otherwise have expired. Except as may otherwise be expressly provided in the
applicable Contract, an optionee whose directorship with the Company has
terminated by reason of Disability, may exercise such options, to the extent
exercisable on the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.
10. COMPLIANCE WITH SECURITIES LAWS. It is a condition to the
exercise of any option that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Common Stock to be issued upon such exercise shall be effective and
current at the time of exercise, or (b) there is an exemption from registration
under the Securities Act for the issuance of the shares of Common Stock upon
such exercise. Nothing herein shall be construed as requiring the Company to
register shares subject to any option under the Securities Act or to keep any
Registration Statement effective or current.
The Committee may require, in its sole discretion, as a condition to
the grant or exercise of an option, that the optionee execute and deliver to the
Company his representations and warranties, in form, substance and scope
satisfactory to the Committee, which the Committee determines is necessary or
convenient to facilitate the perfection of an exemption from the registration
requirements of the Securities Act, applicable state securities laws or other
legal requirement, including without limitation, that (a) the shares of Common
Stock to be issued upon exercise of the option are being acquired by the
optionee for his own account, for investment only and not with a view to the
resale or distribution thereof, and (b) any subsequent resale or distribution of
shares of Common Stock by such optionee will be made only pursuant to (i) a
Registration Statement under the Securities Act which is effective and current
with respect to the shares of Common Stock being sold, or (ii) a specific
exemption from the registration
- 6 -
<PAGE>
requirements of the Securities Act, but in claiming such exemption, the
optionee, prior to any offer of sale or sale of such shares of Common Stock,
shall provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
In addition, if at any time the Committee shall determine that the
listing or qualification of the shares of Common Stock subject to such option on
any securities exchange, Nasdaq or under any applicable law, or that the consent
or approval of any governmental agency or regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an option or
the issuance of shares of Common Stock thereunder, such option may not be
granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by
an appropriate Contract which shall be duly executed by the Company and the
optionee. Such Contract shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee in its sole
discretion. The terms of each option and Contract need not be identical.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding
any other provision of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger in which
the Company is the surviving corporation, spinoff, split-up, combination or
exchange of shares or the like which results in a change in the number or kind
of shares of Common Stock which is outstanding immediately prior to such event,
the aggregate number and kind of shares subject to the Plan, the aggregate
number and kind of shares subject to each outstanding option and the exercise
price thereof, and the maximum number of shares subject to options that may be
granted to any employee in any calendar year, shall be appropriately adjusted by
the Board of Directors, whose determination shall be conclusive and binding on
all parties thereto. Such adjustment may provide for the elimination of
fractional shares that might otherwise be subject to options without payment
therefor.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger in which the Company is not the surviving corporation or a
consolidation, or (c) any transaction (or series of related transactions) in
which (i) more than 50% of the outstanding Common Stock is transferred or
exchanged for other consideration or (ii) shares of Common Stock in excess of
the number of shares of Common Stock outstanding immediately preceding the
transaction are issued (other than to shareholders of the Company with respect
to their shares of stock in the Company), any outstanding options shall
terminate upon the earliest of any such event, unless other provision is made
therefor in the transaction.
- 7 -
<PAGE>
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was
adopted by the Board of Directors on April 4, 1997. No option may be granted
under the Plan after April 3, 2007. The Board of Directors, without further
approval of the Company's shareholders, may at any time suspend or terminate the
Plan, in whole or in part, or amend it from time to time in such respects as it
may deem advisable, including without limitation, in order that ISOs granted
hereunder meet the requirements for "incentive stock options" under the Code, to
comply with the provisions of Rule 16b-3 promulgated the Exchange Act or Section
162(m) of the Code or any change in applicable law or regulation, ruling or
interpretation of any governmental agency or regulatory body; PROVIDED, HOWEVER,
that no amendment shall be effective without the requisite prior or subsequent
shareholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or change the maximum number of shares for which options
may be granted to employees in any calendar year, (b) change the eligibility
requirements for individuals entitled to receive options hereunder or (c) make
any change for which applicable law or any governmental agency or regulatory
body requires shareholder approval. No termination, suspension or amendment of
the Plan shall adversely affect the rights of an optionee under any option
granted under the Plan without such optionee's consent. The power of the
Committee to construe and administer any option granted under the Plan prior to
the termination or suspension of the Plan shall continue after such termination
or during such suspension.
14. NON TRANSFERABILITY OF OPTIONS. No option granted under
the Plan shall be transferable other than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the optionee,
only by the optionee or his Legal Representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process, and any such attempted
assignment, transfer, pledge, hypothecation or disposition shall be null and
void AB INITIO and of no force or effect.
15. WITHHOLDING TAXES. The Company, or its Subsidiary or
Parent, as applicable, may withhold (a) cash or (b) with the consent of the
Committee, shares of Common Stock to be issued upon exercise of an option or a
combination of cash and shares, having an aggregate fair market value
(determined in accordance with Paragraph 5) equal to the amount which the
Committee determines is necessary to satisfy the obligation of the Company, a
Subsidiary or Parent to withhold Federal, state and local income taxes or other
amounts incurred by reason of the grant, vesting, exercise or disposition of an
option or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the optionee to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required
payments have been made.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of
- 8 -
<PAGE>
an option under the Plan and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as it determines, in its sole
discretion, to be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act,
applicable state securities laws or other legal requirements, (b) implement the
provisions of the Plan or any agreement between the Company and the optionee
with respect to such shares of Common Stock, or (c) permit the Company to
determine the occurrence of a "disqualifying disposition," as described in
Section 421(b) of the Code, of the shares of Common Stock transferred upon the
exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds to be received upon the
exercise of an option under the Plan shall be added to the general funds of the
Company and used for such corporate purposes as the Board of Directors may
determine, in its sole discretion.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the shareholders,
substitute new options for prior options of a Constituent Corporation (as such
term is defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.
19. DEFINITIONS.
(a) "Constituent Corporation" shall mean any corporation
which engages with the Company, its Parent or any Subsidiary in a transaction to
which Section 424(a) of the Code applies (or would apply if the option assumed
or substituted were an ISO), or any Parent or any Subsidiary of such
corporation.
(b) "Disability" shall mean a permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
(c) "Legal Representative" shall mean the executor,
administrator or other person who at the time is entitled by law to exercise the
rights of a deceased or incapacitated optionee with respect to an option granted
under the Plan.
(d) "Parent" shall have the same definition as "parent
corporation" in Section 424(e) of the Code.
(e) "Subsidiary" shall have the same definition as
"subsidiary corporation" in Section 424(f) of the Code.
- 9 -
<PAGE>
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder, the Contracts and all related matters shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of law provisions that would defer to the substantive laws of
another jurisdiction.
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision in the Plan, any option or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
22. SHAREHOLDER APPROVAL. The Plan shall be subject to
approval by a majority of the votes of all outstanding shares entitled to vote
hereon at the next duly held meeting of the Company's shareholders at which a
quorum is present. No options granted hereunder may be exercised prior to such
approval, PROVIDED that the date of grant of any option shall be determined as
if the Plan had not been subject to such approval. Notwithstanding the
foregoing, if the Plan is not approved by a vote of the shareholders of the
Company on or before _________, 1998, the Plan and any options granted hereunder
shall terminate.
- 10 -
