SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as
permitted by Rule 14a-
6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MicroFrame, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________
(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:
______________________________________________________________
<PAGE>
(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:
______________________________________________________________
-2-<PAGE>
MICROFRAME, INC.
21 Meridian Road
Edison, New Jersey 08820
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on September 18, 1995
To the Shareholders of MICROFRAME, INC.:
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of
Shareholders (the "Meeting") of MicroFrame, Inc., a New Jersey corporation
(the "Company"), will be held at Bloomberg Business News, 499 Park Avenue ,
New York, New York 10022, on September 18, 1995, at 9:30 A.M., New York City
time, for the following purposes:
1. To elect a board of seven directors to serve until the
next annual meeting of shareholders and until their respective successors
are elected and qualified;
2. To take action concerning approval of an amendment to
the Company's 1994 Stock Option Plan;
3. T o ratify and approve the appointment of Price
Waterhouse LLP to serve as the Company' s independent accountants for the
fiscal year ending March 31, 1996; and
4. To transact such other business as may properly come
before the Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in
the Proxy Statement accompanying this Notice. Management is aware of no
other business which will come before the Meeting.
The Board of Directors has fixed the close of business on
August 11, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. Holders of a majority of the outstanding shares must
be present in person or by proxy in order for the Meeting to be held.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING.
YOU ARE URGED TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN
PERSON IF YOU WISH TO DO SO, EVEN IF YOU HAVE SIGNED AND RETURNED YOUR PROXY
CARD.
By Order of the Board of Directors,
Michael Radomsky, Secretary
Edison, New Jersey
August 17, 1995
IT IS IMPORTANT THAT THE ENCLOSED PROXY FORM
BE COMPLETED AND RETURNED PROMPTLY
<PAGE>
MICROFRAME, INC.
21 Meridian Road
Edison, New Jersey 08820
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
September 18, 1995
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation by the board of directors ("Board of Directors" or "the Board")
of MicroFrame, Inc., a New Jersey corporation (the "Company"), of proxies to
be voted at the Annual Meeting of Shareholders of the Company to be held on
September 18, 1995 (the "Meeting"), at 9:30 A.M., New York City time, at
Bloomberg Business News, 499 Park Avenue, New York, New York 10022 and at
any adjournment or postponement thereof.
A form of proxy is enclosed for use at the Meeting. The
proxy may be revoked by a shareholder at any time before it is voted by
execution of a proxy bearing a later date or by written notice to the
Secretary before the Meeting, and any shareholder present at the Meeting may
revoke his or her proxy there at and vote in person if he or she desires.
When such proxy is properly executed and returned, the shares it represents
will be voted at the Meeting in accordance with any instructions noted
thereon. If no direction is indicated, all shares represented by valid
proxies received pursuant to this solicitation (and not revoked prior to
exercise) will be voted (i) for the election of the nominees for director
named in this Proxy Statement, (ii) for approval of an amendment to the
Company's 1994 Stock Option Plan (the "1994 Plan"), (iii) for ratification
and approval of the appointment of Price Waterhouse LLP to serve as the
Company's independent accountants for the fiscal year ending March 31, 1996
and (iv) in accordance with the judgment of the persons named in the proxy
as to such other matters as may properly come before the Meeting and any
adjournment or postponement thereof.
The cost for soliciting proxies on behalf of the Board of
Directors will be borne by the Company. In addition to solicitation by
mail, proxies may be solicited in person or by telephone, telefax or cable
by personnel of the Company who will not receive any additional compensation
for such solicitation. The Company may reimburse brokers or other persons
holding stock in their names or the names of their nominees for the expenses
of forwarding soliciting material to their principals and obtaining their
proxies. This Proxy Statement and the accompanying form of proxy will be
first mailed to shareholders on or about August 17, 1995.
-2-<PAGE>
The close of business on August 11, 1995 has been fixed as
the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Meeting. On that date there were
3,686,798 shares of common stock, par value $.001 per share, of the Company
("Common Stock") outstanding. Each share entitles the holder thereof to one
vote and a vote of a majority of the shares present, or represented, and
entitled to vote at the Meeting is required to approve each proposal to be
acted upon at the Meeting. The holders of a majority of the shares of
Common Stock outstanding on the Record Date and entitled to be voted at the
Meeting, present in person or by proxy, will constitute a quorum for the
t r ansaction of business at the Meeting and at any adjournment or
postponement thereof.
-3-<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, the shareholders will elect seven 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 Statement intend to cast all proxies received
for the election of Messrs. Stephen M. Deixler, Lonnie L. Sciambi, Michael
Radomsky, William H. Whitney, David I. Gould, Michehl R. Gent and Stephen P.
Roma (the "nominees") to serve as directors upon their nomination at the
Meeting. On October 11, 1994, the Board of Directors of the Company
increased the number of directors that constitute the Board from seven to
nine members. At the Meeting a total of seven nominees will stand for
election. The Company's Nominating Committee is presently considering
additional candidates for the two vacant seats on the Board. Proxies cannot
be voted for a greater number of persons than the number of nominees named
and the seven nominees for election to the Board of Directors who receive
the greatest number of votes cast at the Meeting will be elected to the
Board of Directors.
Each of the nominees has consented to serve as a director if
elected. All of the nominees currently serve as a director. Unless
authority to vote for any director is withheld in a proxy, it is intended
that each proxy will be voted FOR each of the nominees. In the event that
any of the nominees for director should before the Meeting become unable to
serve or for good cause will not serve if elected, it is intended that
shares represented by proxies which are executed and returned will be voted
for such substitute nominees as may be recommended by the Company's existing
Board of Directors, unless other directions are given in the proxies. To
the best of the Company's knowledge, all the nominees will be available to
serve.
Directors and Executive Officers
The directors and executive officers of the Company, their
ages and present positions with the Company are as follows:
Director
Name Age Position Held with the Company Since
---- --- ------------------------------ --------
Stephen M. Deixler(1) 60 Chairman of the Board of Directors, 1985
Treasurer
Lonnie L. Sciambi 51 President and Chief Executive 1995
Officer, Director
Michael Radomsky 42 Executive Vice President, Secretary, 1982
Director
William H. Whitney 40 Vice President - Research and 1982
Development, Assistant Secretary,
Director
-4- <PAGE>
David I. Gould* 65 Director 1985
Michehl R. Gent(1) 54 Director 1984
Stephen P. Roma(1)* 48 Director 1991
Stephen B. Gray 38 Senior Vice President - Sales,
Marketing and Support
Mark A. Simmons 34 Vice President - Operations, Chief
Financial Officer
Robert M. Groll 61 Vice President - Marketing
______________________________
(1) Member of Compensation/Stock Option Committee
* Member of Nominating Committee
Information about Nominees
Set forth below is certain information with respect to each nominee:
STEPHEN M. DEIXLER has been Chairman of the Board of Directors since
1985 and served as Chief Executive Officer of the Company from June 1985
through October 1994. He was President of the Company from May 1982 to June
1985 and served as Treasurer of the Company from its formation in 1982 until
September 1993 and currently has served as Treasurer of the Company since
October 1994. Mr. Deixler is also currently a director of Farrington Bank.
During April 1995, Mr. Deixler sold his interest in Princeton Credit
Corporation, a company engaged in the business of buying, selling, and
leasing high technology products, to Greyvest Capital Inc., a Toronto Stock
Exchange company. Prior to the sale, Mr. Deixler was Chairman of Princeton
Credit Corporation. He previously served as President of Atlantic
International Brokerage, a leasing company, which is a wholly owned
subsidiary of Atlantic Computer Systems, Inc., which was liquidated as a
result of the bankruptcy proceedings of its parent company, Atlantic
Computer Systems PLC. Prior to holding this position, he was President and
sole shareholder of Princeton Computer Associates, Inc. ("PCA"). PCA was a
company engaged in the business of buying, selling and leasing of large-
scale computer systems as well as functioning in consulting and facilities
management and was sold to Atlantic Computer Systems, Inc. in 1988. From
1964 to 1970, Mr. Deixler worked for Honeywell, Inc. a New York Stock
Exchange listed company, as a systems analyst, sales representative and
ultimately as a sales manager.
LONNIE L. SCIAMBI has been the Company s President since November
1994, its Chief Executive Officer since October 1994 and has served as a
director since June 1995. He served as Acting Chief Executive Officer from
June 1994 through October 1994 and Acting Chief Financial Officer from
-5- <PAGE>
November 1994 until January 1995. Prior to joining the Company, Mr. Sciambi
was President and Chief Executive Officer of Perceptive Solutions, Inc., a
Dallas, Texas-based provider of intelligent disk controller products from
December 1993. From March 1993 to December 1993, and from January 1989 to
November 1991, Mr. Sciambi was Managing Partner of Technology Directions
Group, which was founded by Mr. Sciambi, and provided management consulting
and investment banking services, exclusively focused on small technology
companies. From December 1991 to February 1993, Mr. Sciambi was President
and Chief Executive Officer of Integrated Multimedia Solutions, Inc., which
designed and developed multimedia PCs, and computer-based training
solutions. From 1986 through 1988, he was Executive Vice President,
responsible for all the software businesses of MTech Corp., an Irving,
Texas-based bank computer services firm.
MICHAEL RADOMSKY is an original founder of the Company and has been
the Executive Vice President and a director since the Company s formation in
1982 and has served as Secretary of the Company since November 1994. He is
currently responsible for all International Operations. Previously, he has
been charged with multiple tasks, the most important being the
identification of industry directions, and the technical appropriateness of
Company designs as well as products acquired, licensed or jointly developed
with others. In addition, Mr. Radomsky has been responsible for the design
of network topologies for large corporate customers, ensuring compatibility
for future products. Mr. Radomsky has also previously been responsible for
the Company s technical support, purchasing and manufacturing operations.
Prior to 1989, Mr. Radomsky was responsible for the mechanical and
electronic engineering of the Company's products.
WILLIAM H. WHITNEY is an original founder of the Company and has been
the Vice President - Software Development (which title has currently been
changed to Vice President - Research and Development ) and a director since
the Company's formation in 1982 and has served as Assistant Secretary of the
Company since November 1994. Along with Mr. Radomsky, he developed all of
the Company's initial products, including the DL-4000 and the IPC product
line. As Vice President - Research and Development, Mr. Whitney, has been
responsible for development of hardware and software for all of the
Company's standard offerings, including all products being sold through OEM
and distributor channels.
DAVID I. GOULD, retired as Vice Chairman of the Board of Directors at
the end of April 1995, a position which he had served since December 1993.
He presently is a director of the Company and has been since April 1985.
Since his retirement, he has served as a consultant to the Company . He
served as President and Chief Operating Officer of the Company from June
1985 until December 1993. He was Vice President-Marketing of the Company
from April 1985 until June 1985. From 1982 until joining the Company in
1985, he was an officer of The Ultimate Corporation ("Ultimate"), a computer
manufacturer, formerly listed on the New York Stock Exchange, eventually
serving as Senior Vice President of Marketing. During his three years at
Ultimate, Mr. Gould managed the growth of that company's revenues from $40
million to more than $100 million. From 1978 to 1982, Mr. Gould was
employed by Honeywell, Inc. ultimately as Director of Headquarters Marketing
Minicomputer Operations and Director of Marketing, Page Printing Operations.
From 1975 to 1978, Mr. Gould had sales experience at General Automation,
-6- <PAGE>
Inc., a company traded over-the-counter, including serving as Eastern
Regional Director. From 1972 to 1975, Mr. Gould was Senior Vice President
of Marketing of Computer Optics, Inc., a privately-held terminal
manufacturer. From 1969 to 1972, Mr. Gould was Vice President, Sales,
Eastern Operations at Recognition Equipment, Inc.
MICHEHL R. GENT has been a director of the Company since October 1984
and is the President of the North American Electric Reliability Council
("NERC"), an association of the North American electric utilities
responsible for establishing various operating standards and criteria for
that industry. Mr. Gent joined NERC in 1980 as Executive Vice President.
From 1973 to 1980 he was the General Manager of the Florida Coordinating
Group, a power pool of electric utilities in Florida. He holds a Master of
Science in Electrical Engineering from the University of Southern California
and is a Registered Professional Engineer. He also belongs to several
industry professional groups and is the author of several technical papers.
STEPHEN P. ROMA has been a director of the Company since August 1991.
During April 1995, he sold his interest in Princeton Credit Corporation, a
company engaged in the business of buying, selling and leasing high
technology products, to Greyvest Capital, Inc., a Toronto Stock Exchange
company, where he has served since April 1995 as General Manager. Prior to
the sale, Mr. Roma was President and Chief Operating Officer of Princeton
Credit Corporation. He previously served as Vice President of
Sales/Northeast Region of Atlantic Computer Systems, Inc., which was
liquidated as a result of the bankruptcy proceedings of its parent company,
Atlantic Computer Systems, PLC. Prior to holding this position, he was a
principal and President and Chief Operating Officer of Princeton Computer
Group, Inc., which was sold to Atlantic Computer Systems, Inc. in 1988. Mr.
Roma was a co-founder of Princeton Computer Systems, Inc., in 1980, which
was a minicomputer, turnkey supplier and was the predecessor of Princeton
Computer Group, Inc. Prior to joining Princeton Computer Systems, Inc.,
Mr. Roma spent 13 years with Zale Corporation (a Fortune 500 retailing and
manufacturing concern), eventually holding the positions of Vice President
of MIS and Senior Vice President of Administration.
Non-Director Executive Officers
Set forth below is certain information with respect to each executive
officer of the Company who is not also a director of the Company:
STEPHEN B. GRAY has been Senior Vice President-Sales, Marketing and
Support of the Company since December 1994. From April 1994 to December
1994, he served as President and Chief Executive Officer of Human Resources
Development, Inc., a Boca Raton, Florida-based developer and supplier of
human resources services to Fortune 500 companies. From July 1993 through
April 1994, Mr. Gray was an independent consultant, engaged in assisting
both private and publicly-held companies with strategy development, internal
operational reviews and shareholder value enhancement programs. From
September 1988 through June 1993, he held a series of management positions
within Siemens Nixdorf USA, the last as Vice President, (reporting to the
Chief Executive Officer and Board of Directors), and a member of the
executive committee overseeing Siemens Information Systems businesses in the
-7-<PAGE>
United States. Prior to joining Siemens, Mr. Gray previously held a series
of rapidly progressive positions within IBM including various technical,
sales and marketing assignments.
MARK A. SIMMONS has been the Company s Vice President - Operations
and Chief Financial Officer since January 1995. His responsibilities
include finance, administration, purchasing/materials management and
production. Mr. Simmons is a finance professional and Certified Public
Accountant. From 1987 through 1994, he was with the Communications Division
of General Instrument Corporation where he served as Controller from 1992
through 1994 and Manager of Financial Reporting and Accounting Services from
1987 to 1992. From 1985 to 1987, Mr. Simmons was Accounting Manager for UGI
Development Company, an oil and gas equipment supplier. Prior to this, he
was with KPMG Peat Marwick.
ROBERT M. GROLL has been Vice President - Marketing of the Company
since March 1986. From 1970 until joining the Company in June 1985, as
Director of Marketing, Mr. Groll was the President of PTM Associates, Inc.
("PTM"), a firm engaged in management consulting in the areas of technical
marketing and computer system design. While with PTM, during 1983 and 1984,
Mr. Groll became Vice President of Cable Applications, Inc., a New York
corporation, where he was responsible for initiating and managing new
product development efforts.
The officers of the Company are elected by the Board of Directors at
its first meeting after each annual meeting of the Company's shareholders
and hold office until their successors are chosen and qualified, until their
death, or until they resign or have been removed from office. No family
relationship exists between any director or executive officer and any other
director or executive officer.
Board Meetings and Committees
The Nominating Committee of the Board of Directors currently consists
of Messrs. Gould and Roma. The Nominating Committee nominates members of
the Board of Directors and it will consider nominees recommended by
shareholders. The Nominating Committee held two meetings during fiscal 1995.
The Board of Directors has a Compensation/Stock Option Committee
which currently consists of Messrs. Deixler, Roma, and Gent. The function
of the Compensation/Stock Option Committee is to review and establish
policies, practices and procedures relating to compensation of key
employees, including officers and directors who are key employees, outside
directors and consultants, to grant cash and non-cash bonuses to employees
and grant non-plan stock options and warrants to employees, outside
directors and consultants and to administer employee benefit plans,
including all stock option plans of the Company. During the fiscal year
ended March 31, 1995, there was action taken by unanimous written consent on
seven occasions.
The Board of Directors has no standing audit committee or any other
committee performing similar functions.
-8- <PAGE>
During the Company's fiscal year ended March 31, 1995, there were
twelve meetings of the Board of Directors. Each of the members of the
Board of Directors who is currently a nominee for election attended 75% or
more of the meetings of the Board of Directors during fiscal 1995 and
attended all of meetings held by the committees on which such nominee
served.
Compensation of Directors
During fiscal 1995, the directors did not receive any
compensation for their attendance at Board of Directors meetings.
In addition, subject to shareholder approval at the Meeting,
the Company's 1994 Plan provides that each non-employee director of the
Company receives formula grants of stock options under the 1994 Plan, as
described below.
Immediately following each annual meeting of shareholders of
the Company at which directors are elected (an "Annual Meeting") during the
term of the Plan, every person who is a non-employee director ("Non-Employee
Director") at such time, whether or not elected at such meeting, shall be
granted an option ("Non-Employee Director Option") to purchase 10,000 shares
of Common Stock. In addition, on the day an individual first becomes a Non-
Employee Director if other than at an Annual Meeting, such Non-Employee
Director shall be granted an option to purchase a number of shares of Common
Stock equal to 2,500 multiplied by the number of full three-month periods
remaining until the first anniversary of the immediately preceding Annual
Meeting. Each Non-Employee Director Option shall become exercisable as to
2,500 shares of Common Stock upon each three-month anniversary of the date
of grant, provided that the holder continues to serve as a Non-Employee
Director on such date; and further provided, that if the next Annual Meeting
is held on or before the first anniversary of the immediately preceding
Annual Meeting, the last 2,500 shares of Common Stock under such Non-
Employee Director Option shall become exercisable on the day preceding the
next Annual Meeting (if he continues to be a Non-Employee Director on such
date). As formula grants under the 1994 Plan, the foregoing grants of
options to directors are not subject to the determinations of the Board of
Directors or the Compensation/Stock Option Committee. For information on
the 1994 Plan and the proposal for the amendment, see "Approval of Amendment
to the Company's 1994 Stock Option Plan."
Commencing October 1, 1995, each of the Company's Non-
Employee Directors traveling more than fifty miles to a Board meeting shall
be reimbursed for all reasonable travel expenses upon receipt by the Company
of proper documentation.
Executive Officers
The executive officers of the Company are Stephen M.
Deixler, Chairman of the Board of Directors and Treasurer, Lonnie L.
Sciambi, President and Chief Executive Officer, Stephen B. Gray, Senior Vice
President-Sales, Marketing and Support, Mark A. Simmons, Vice President-
Operations, and Chief Financial Officer, Michael Radomsky, Executive Vice
President, William H. Whitney, Vice President-Research and Development and
Assistant Secretary, and Robert M. Groll, Vice President-Marketing.
-9- <PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table sets forth the number of shares of
Common Stock known to the Company to be beneficially owned as of August 11,
1995 by (i) holders known to the Company to own beneficially 5% or more of
the outstanding shares of Common Stock of the Company, (ii) each of the
directors and nominees, (iii) each executive officer named in the Summary
Compensation Table under the caption "Executive Compensation" below, and
(iv) all directors and executive officers of the Company as a group, and the
percentage of the total outstanding shares of Common Stock such shares
represented as of August 11, 1995. 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.
Number of Shares
Name and Address of Beneficially
Beneficial Owner Owned* Percent of Class
Stephen M. Deixler(1) 653,037 17.7%
371 Eagle Drive
Jupiter, Florida 33477
David I. Gould(2) 320,137 8.6%
10844 White Aspen Way
Boca Raton, Florida 33428
Michael Radomsky(3) 221,537 6.0%
8 Zaydee Drive
Edison, New Jersey 08837
William H. Whitney (4) 115,096 3.1%
15 Jackson Avenue
Chatham, New Jersey 07928
Robert M. Groll(5) 66,082 1.8%
52 Village Lane
Freehold, New Jersey 07728
Michehl R. Gent 49,160 1.3%
916 Aspen Drive
Plainboro, New Jersey 08536
Stephen P. Roma(6) 376,904 10.2%
91 Durand Drive
Marlboro, New Jersey 07748
-10- <PAGE>
Number of Shares
Name and Address of Beneficially
Beneficial Owner Owned* Percent of Class
Lonnie L. Sciambi(7) 51,657 1.4%
262 N. Maple Avenue
Basking Ridge, New Jersey 07920
Stephen B. Gray(8) 20,770 **
37 Shy Creek Road
Alexandria, New Jersey 08867
Special Situations Fund, 455,000 12.3%
III, L.P. (9)
MGP Advisers Limited 455,000 12.3%
Partnership (9)
AWM Investment Company, 615,000 16.7%
Inc. (9)
Austin W. Marxe (9) 615,000 16.7%
Directors and executive
officers as a group 1,884,906 49.2%
(11 Persons)
_________________
* All shares and per share amounts have been adjusted to take
into account the Company's Reverse Stock Split.
** Less than 1% of the outstanding shares of Common Stock.
(1) Does not include 214,436 shares of Common Stock owned
by Mr. Deixler's wife, mother, children and
grandchildren as to which shares Mr. Deixler disclaims
beneficial ownership. Includes 90,000 shares of
Common Stock of which Mr. Deixler is the beneficial
owner, and which have been issued to and are
registered in the name of Olen and Company custodian
f/b/o Stephen M. Deixler.
(2) Includes 50,000 shares of Common Stock which may be
acquired pursuant to currently exercisable options
granted outside the Company's 1984 Stock Option Plan
(the "1984 Plan") and the 1994 Plan ("Non-Plan
Options").
(3) Includes 7,133 shares of Common Stock which may be
acquired pursuant to currently exercisable options
granted under the 1994 Plan.
-11- <PAGE>
(4) Includes 7,115 shares of Common Stock which may be
acquired pursuant to currently exercisable options
granted under the 1994 Plan.
(5) Includes 10,000 shares of Common Stock which may be
acquired pursuant to currently exercisable options
granted under the Company's 1984 Plan. Also includes
11,915 shares of Common Stock which may be acquired
pursuant to currently exercisable options granted
under the 1994 Plan.
(6) Includes 47,877 shares of Common Stock held by
Donaldson, Lufkin & Jenrette Securities Corporation
custodian f/b/o Stephen P. Roma, IRA. Includes 8,400
shares of Common Stock held by Mr. Roma and his wife
as joint tenants. Does not include 1,200 shares of
Common Stock held by Mr. Roma as custodian for his son
or 29,108 shares owned by Mr. Roma's wife, some of
which are held in Mrs. Roma's individual retirement
account, as to which shares Mr. Roma disclaims
beneficial ownership.
(7) Includes 26,657 shares of Common Stock which may be
acquired pursuant to currently exercisable options
granted under the 1994 Plan.
(8) Includes 20,770 shares of Common Stock which may be
acquired pursuant to currently exercisable options
granted under the 1994 Plan.
(9) Special Situations Fund III, L.P., a Delaware limited
partnership (the "Fund"), MGP Advisers Limited
Partnership, a Delaware limited partnership ("MGP"),
AWM Investment Company, Inc., a Delaware corporation
("AWM"), and Austin W. Marxe have filed a Schedule
13G, the latest amendment of which is dated January 6,
1995, with respect to a total of 600,000 shares of
Common Stock. All presented information is based on
the information contained in the Schedule 13G and
subsequent information known to the Company. The
address of each of the reporting persons is 153 East
53rd Street, New York, New York 10022. The Schedule
13G indicates that: the Fund has sole voting and
dispositive power with respect to 455,000 shares; MGP
has sole dispositive power with respect to 455,000
shares; AWM has sole voting power with respect to
160,000 shares and sole dispositive power with respect
to 615,000 shares; and Mr. Marxe has sole voting power
with respect to 160,000 shares, shared voting power
with respect to 455,000 shares and sole dispositive
power with respect to 615,000 shares. MGP is a
general partner of and investment advisor to the Fund.
AWM, which is primarily owned by Mr. Marxe, is the
-12- <PAGE>
sole general partner of MGP. Mr. Marxe, the
principal limited partner of MGP and the President of
AWM, is principally responsible for the selection,
acquisition and disposition of the portfolio
securities by AWM on behalf of MGP, the Fund and
another fund that beneficially owns shares included in
the shares beneficially owned by AWM and Mr. Marxe.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
During the fiscal year ended March 31, 1995, the following person has
failed to file on a timely basis, a certain report required by Section 16(a)
of the Securities Exchange Act of 1934 (the "Exchange Act"): Mr. Roma filed
one late report, a Form 5, disclosing the expiration of an option granted
outside the Company s stock option plans. The Company is not aware of other
late filings, or failures to file, any other reports required by Section
16(a) of the Exchange Act.
-13- <PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or
accrued by the Company during the three fiscal years ended March 31, 1995,
to those individuals who as of March 31, 1995 served as the Company's Chief
Executive Officer during fiscal 1995 and to the Company's five most highly
compensated officers other than those who served as the Chief Executive
Officer during fiscal 1995 (these seven executive officers being hereinafter
referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other
Name and Annual Restricted Securities LT- All Other
Principal Compen- Stock Underlying IP Compensa-
Position Year Salary Bonus sation Award(s) Options(#) Payouts tion($)
Stephen 1995 0 0 0 0 0 0 0
M.Deixler 1994 0 0 0 0 0 0 0
Chairman(1)1993 10,800 0 0 0 0 0 0
Lonnie L. 1995 129,135(7)39,375(5) 0 0 26,595 0 0
Sciambi,
President
Chief Exe-
cutive
Officer(2)
Stephen 1995 42,000(7) 2,213(3) 0 0 40,000 0 0
B. Gray
Senior Vice-
President
David I. 1995 100,000 0 0 0 50,000 0 1,800(4)
Gould 1994 100,000 0 0 0 0 0 2,770(4)
Vice 1993 100,000 12,500(6) 0 0 0 0 0
Chariman
Michael 1995 111,588 2,910(3) 0 0 1,192 0 1,997(4)
Randomsky 1994 100,000 0 0 0 0 0 2,770(4)
Executive 1993 100,000 12,500(6) 0 0 0 0 0
Vice-
President
William H. 1995 111,588 2,841(3) 0 0 1,209 0 1,997(4)
Whitney 1994 100,000 0 0 0 0 0 2,770(4)
Vice- 1993 100,000 12,500(6) 0 0 0 0 0
President
Research &
Development
Robert M. 1995 100,000 2,410(3) 0 0 5,908 0 1,800(4)
Groll Vice 1994 100,000 0 0 0 0 0 2,770(4)
President 1993 100,000 12,500(6) 0 0 10,000 0 0
Marketing
-14- <PAGE>
(1) The Company does not have a written employment agreement with Mr.
Stephen M. Deixler, the Company's Chairman of the Board. However,
under an informal agreement, the Company has agreed to pay him $1,000
per day to perform such services as jointly agreed to by the Company
and Mr. Deixler, and approved by the Board of Directors. Mr. Deixler
relinquished his position as Chief Executive Officer to Mr. Lonnie L.
Sciambi on October 11, 1994.
(2) On October 11, 1994, the Company entered into an employment agreement
with Mr. Lonnie L. Sciambi appointing him Chief Executive Officer of
the Company.
(3) Represents compensation earned under the Company s Incentive Bonus
Plan for the fiscal year ended March 31, 1995 (the "Incentive Plan").
The Incentive Plan covers all Company employees and was effective as
of October 1, 1994. The Incentive Plan is based on achievement in
three specific areas - Company revenue, Company operating income, and
individual/ departmental objectives.
(4) Represents contribution of the Company under the Company's 401(k)
Plan.
(5) Represents $4,375 in compensation earned under the Incentive Plan as
described in (3) above as well as a stock bonus award of 25,000 shares
of the Company s Common Stock granted on October 11, 1994, pursuant to
Mr. Sciambi's employment agreement with the Company, which shares had
a fair market value of $1.40 per share on the date of grant or $35,000
in the aggregate.
(6) Before the commencement of fiscal years 1992 and 1993, the Board of
Directors consented to provide performance bonuses to Messrs. Gould,
Radomsky, Whitney and Groll for fiscal years 1992 and 1993. The
bonuses were calculated to be an amount equal to 5% of each fiscal
year's net profit, after taxes, for each of the above mentioned
officers. The bonuses could not exceed $150,000 for each officer.
Payment for bonuses earned for fiscal years 1992 and 1993 was deferred
until fiscal year 1994. In July 1993, the Board of Directors adopted
a bonus plan for fiscal year 1994 pursuant to which each executive
officer of the Company would be entitled to earn a bonus of up to a
maximum of six percent (6%) of after-tax profits in the form of Non-
Plan Options. Awards were to be made at the end of the 1994 fiscal
year pursuant to a weighted formula based on revenue, after-tax
profits and stock price as of the close of the fiscal year. The
number of options to be granted were to be determined by dividing the
dollar amount of the bonus by $1.50, the per share exercise price of
the options to be granted. The Board of Directors has waived any
bonus payments for fiscal year 1994 and has decided to discontinue
this bonus plan commencing with fiscal year 1995.
(7) Compensation for Messrs. Sciambi and Gray includes payments they
earned as consultants of the Company in the amounts of $45,000 and
$42,000, respectively. Messrs. Sciambi and Gray served as consultants
to the Company prior to the time they became full-time employees
pursuant to their employment agreements with the Company dated October
11, 1994 and March 27, 1995, respectively.
-15- <PAGE>
Option Grants in Fiscal Year 1995
The following table sets forth certain information concerning stock
option grants during the year ended March 31, 1995 to the Named Executive
Officers (after giving effect to the Reverse Stock Split):
Individual Grants
Percent
Number of of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
Stephen M. Deixler 0 0 0
Lonnie L. Sciambi 25,000 8.5% $1.83 10/10/99
1,595 0.5% $2.14 (1)
Stephen B. Gray 40,000 13.6% $2.75 (2)
David I. Gould 50,000(3) 17.0% $1.92 11/13/99
Michael Radomsky 1,192 0.4% $2.14 (1)
William H. Whitney 1,209 0.4% $2.14 (1)
Robert M. Groll 5,000 1.7% $1.83 10/10/99
908 0.3% $2.14 (1)
-----------------
(1) One-third of options are exercisable on or after April 1, 1995 with an
expiration date of March 31, 2000, an additional one-third are exercisable
on or after April 1, 1996 with an expiration date of March 31, 2001 and
an additional one-third are exercisable on or after April 1, 1997 with
an expiration date of March 31, 2002.
(2) One-third of options are exercisable on or after March 27, 1995 with an
expiration date of March 26, 2000, an additional one-third are exercisable
on or after March 27, 1996 with an expiration date of March 26, 2001 and
an additional one-third are exercisable on or after March 27, 1997 with
an expiration date of March 26, 2002.
(3) Granted on November 14, 1994 outside of the Company's 1984 Plan and the
Company's 1994 Plan. These options replace options which were issued
under the 1994 Plan and subsequently canceled. (The options granted on
August 10, 1994 had replaced options which were granted under the 1984
Plan and subsequently canceled.)
-16- <PAGE>
Aggregated Option Exercises in Fiscal Year 1995
and Fiscal Year-End Option Values
The following table sets forth certain information concerning each
exercise of stock options during the fiscal year ended March 31, 1995 by each
of the Named Executive Officers and the number and value of unexercised
options held by each of the Named Executive Officers on March 31, 1995 (after
giving effect to the Reverse Stock Split).
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options at
Shares at FY-End(#) FY-End($)(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized($) Unexercisable Unexercisable
Stephen M. Deixler 0 0 0 0
Lonnie L. Sciambi 0 0 25,531/1,064 $26,515/$782
Stephen B. Gray 0 0 20,000/20,000 $2,500/$2,500
David I. Gould 0 0 50,000/0 $47,750/$0
Michael Radomsky 0 0 397/795 $292/$584
William H. Whitney 20,000 $3,000 403/806 $296/$592
Robert M. Groll 0 0 15,303/605 $21,698/$445
_______________________
(1) The average price for the Common Stock as reported by the National Quotation
Bureau on March 31, 1995 was $2.875 per share. Value is calculated on the
basis of the difference between the option exercise price and $2.875 multi-
plied by the number of shares of Common Stock underlying the options.
-17- <PAGE>
Employment Contracts, Termination of Employment and Change of Control
Arrangements
The Company entered into employment agreements with each of Messrs.
Robert M. Groll, Michael Radomsky and William H. Whitney, which commenced as
of January 1, 1994 and expire on December 31, 1996. Each agreement provides
for a salary of not less than $100,000 per year to continue through the
term of the agreement unless terminated for cause. Each agreement also
provides each executive during the term with disability payments, reimburse-
ment for reasonable expenses and fringe benefits that generally are available
to the Company's executives. Each of the executives have agreed not to dis-
close any confidential information of the Company during the term of his
employment or thereafter and will not compete with the Company for a period of
two years following termination of his employment.
Mr. Gould had a three-year employment agreement with the Company
on substantially the same terms as the above executive officers, which agree-
ment expired on April 30, 1995, after which time he became a consultant to the
Company pursuant to a consulting agreement. See Certain Relationships and
Related Transactions.
On October 11, 1994, the Company entered into an employment agreement
with Mr. Lonnie L. Sciambi in which he was appointed Chief Executive Officer
of the Company for a period of three (3) years. The agreement provides for an
initial annual salary of $175,000 from the commencement of the agreement
until March 31, 1995 ("Initial Salary") with additional annual increases or
decreases in the Initial Salary based upon the Company's performance in
the prior fiscal year measured against the achievement by the Company of
certain performance goals as established by the Board of Directors with
respect to certain weighted performance criteria. Pursuant to the
employment agreement, Mr. Sciambi also received a bonus of 25,000
shares of the Company's Common Stock as well as options to acquire
25,000 shares of Common Stock under the Company's 1994 Plan. Mr. Sciambi
shall also receive in accordance with the agreement, disability payments,
reimbursement for reasonable expenses and fringe benefits that generally
are available to the Company s executives. Mr. Sciambi has agreed not to
disclose any confidential information of the Company during the term of his
employment or thereafter and will not compete with the Company for a period of
two years following termination of his employment.
On November 14, 1994, the Board of Directors approved the termination
of its employment agreement with Mr. P. David Bocksch, the Company's then
President and Chief Operating Officer and simultaneously approved a
consulting agreement with Mr. Bocksch to be effective as of such date,
which agreement has subsequently been terminated. See Certain Relationships
and Related Transactions.
On March 27, 1995, the Company entered into an employment agreement
with Mr. Stephen B. Gray, in which he was appointed Senior Vice President -
Sales, Marketing and Support for a period of one (1) year with an option to
renew for two (2) additional years. The agreement provides for an initial
annual salary of $125,000 from the commencement of the agreement until March
31, 1995 ("Initial Salary") with additional annual increases or decreases in
the Initial Salary based upon the Company's performance in the prior
fiscal year measured against the achievement by the Company of certain
performance goals as established by the Board of Directors with respect to
certain weighted performance criteria. Pursuant to the employment agreement,
Mr. Gray also received options to acquire 40,000 shares of Common Stock under
the Company's 1994 Plan. As additional compensation, Mr. Gray shall be
entitled to receive at the end of each quarterly fiscal period, a cash
bonus in the amount of 2.5% of the difference between the actual revenue
of the Company in a given fiscal quarter and the revenue
-18- <PAGE>
performance goal set by the Board for such fiscal quarter. In addition, Mr.
Gray shall receive in accordance with the agreement, disability payments,
reimbursement for reasonable expenses and fringe benefits that generally are
available to the Company's executives. Mr. Gray has agreed not to disclose
to anyone confidential information of the Company during the term of his
employment or thereafter and will not compete with the Company for a period
of two years following termination of his employment.
CERTAIN TRANSACTIONS
In May 1993, the Company completed a private placement (the "Private
Placement") to accredited investors of an aggregate of 800,000 shares
(after giving effect to a one-for-five reverse stock split) of the
Company's Common Stock for $1,000,000. In connection with the Private
Placement, Stephen M. Deixler, an executive officer and a director of the
Company and Stephen P. Roma, a director of the Company, each purchased 90,000
shares of the Company's Common Stock at $1.25 per share. Each of them paid
by a promissory note in the principal amount of $112,500, which was due on
June 2, 1993. The notes provided that if not paid when due, interest would
accrue at 10% per year. The principal amount of the notes was paid on July
23, 1993, and the interest has been waived by the Company. Additionally, in
connection with the Private Placement, Special Situations Fund, III, L.P.,
purchased 440,000 shares of the Company's Common Stock at $1.25 per share
for $550,000.
On September 20, 1993, the Company effectuated a one-for-five
reverse stock split of its shares of Common Stock.
On November 11, 1994, the Company entered into a consulting agreement
with Mr. P. David Bocksch, a former executive officer and a current director
of the Company, and simultaneously terminated its existing employment
agreement with Mr. Bocksch. The consulting agreement, which provided for
an annualized payment of $100,000 per year, as well as certain benefits for a
six-month period, was subsequently terminated on May 5, 1995, at which time
all payments ceased thereunder. In addition, an option held by Mr. Bocksch
to acquire 170,000 shares of the Company s Common Stock under the 1984 Plan
was deemed canceled as of November 11, 1994.
Mr. David I. Gould, formerly an executive officer and a current direc-
tor of the Company entered into a consulting agreement with the Company
which become effective on May 1, 1995 upon the expiration date of his
employment agreement on April 30, 1995. The consulting agreement provides
for a four-year term, with an automatic one year renewal, and compensation
at the rate of $1,000 per day for services provided. The consulting agreement
further provides that Mr. Gould will not receive less than $40,000 nor more
than $220,000 per year, and that the rendering of any services above $40,000
must be with the prior approval of the Company.
-19-
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN
The Company's 1994 Plan (the "1994 Plan") was adopted by the
Company's Board of Directors in August 1994 and approved by the Company's
shareholders in September 1994. In July 1995, the Company's Board of
Directors approved an amendment to the 1994 Plan and directed that
the amendment be submitted to the Company's shareholders for approval at
the Meeting. The amendment (i) provides for the annual award under the 1994
Plan to non-employee directors of the Company of options to purchase up to
10,000 shares of Common Stock, and (ii) increases by 500,000, from
250,000 to 750,000, the number of shares of Common Stock for which
options may be granted under the 1994 Plan. The Board of Directors adopted
the amendment upon evaluating the Company's existing compensation programs
and the company's long-range goals and expansion plans.
The Board concluded that the annual awards to non-employee directors
would benefit the Company by providing those directors with a favorable
opportunity to become holders of shares of Common Stock, thereby providing
them with a stake in the growth and prosperity of the Company, enabling them
to represent the viewpoint of other shareholders of the Company more effecti-
vely and encouraging them to continue serving as directors of the Company.
The Board also concluded that the increase in the number of shares of Common
Stock covered by the 1994 Plan was necessary for the Company to continue to
attract, motivate and retain qualified employees, consultants and directors.
Subject to shareholder approval of the amendment to the 1994 Plan,
set forth below is the number of shares of Common Stock underlying options
currently determined to be granted under the 1994 Plan each calendar year (as
defined in the 1994 Plan) to each of the persons indicated:
Name Number of Options
Stephen M. Deixler - Chairman, Treasurer . . . . . . . . . . . . 10,000
Lonnie L. Sciambi - President, CEO . . . . . . . . . . . . . . . 0
Stephen B. Gray - Senior Vice President-Sales . . . . . . . . . . 0
David I. Gould . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Michael Radomsky - Executive Vice President, Secretary . . . . . 0
William H. Whitney - Vice President - Research & Development . . 0
Robert M. Groll - Vice President - Marketing . . . . . . . . . . 0
Executive Officers as a Group . . . . . . . . . . . . . . . . . . 0
Non-Executive Directors as a Group . . . . . . . . . . . . . . . 40,000
Non-Executive Officer Employee Group . . . . . . . . . . . . . . 0
-20-
THE 1994 STOCK OPTION PLAN
The following is a discussion of certain terms of the 1994 Plan, as
amended:
Share Subject to the 1994 Plan
The maximum number of shares as to which options may be granted
under the 1994 Plan (subject to adjustment as described below) is 750,000
shares of Common Stock. Upon expiration, cancellation or termination of
unexercised options, the shares of Common Stock subject to such options
will again be available for the grant of options under the 1994 Plan.
Type of Options
Options granted under the 1994 Plan may either be incentive
stock options, within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended, or non-qualified stock options.
Administration
The 1994 Plan is administered by a Stock Option Committee (the "1994
Committee") consisting of at least two members of the Board of Directors, each
of whom is a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Exchange Act.
Eligibility
Plan participation is limited to key employees (including officers
and directors who are key employees), non-employee directors and con-
sultants, of the Company or of any subsidiary of the Company. The
aggregate fair market value (determined at the time the option is granted)
of shares with respect to which incentive stock options may be granted
under the 1994 Plan or any other plan of the Company or any parent or subsi-
diary which are exercisable during any calendar year may not exceed $100,000.
The maximum number of shares subject to options that may be granted to any
one person during any calendar year under the 1994 Plan may not exceed 75,000
shares.
Terms and Conditions of Options
The options granted under the 1994 Plan will be subject to, among
other things, the following terms and conditions:
a. Options granted to key employees ("Employee Options")
or options granted to consultants ("Consultant Options") may be
granted for terms determined by the 1994 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 more
than 10% of the voting power of the Company).
-21-
b. Immediately following each annual meeting of shareholders
of the Company at which directors are elected (an "Annual Meeting")
during the term of the Plan, every person who is a non-employee
director option ("Non-Employee Director") at such time, whether or not
elected at such meeting, shall be granted an option ("Non-Employee
Director Option") to purchase 10,000 shares of Common Stock. In addi-
tion, on the day an individual first becomes a Non-Employee Director
if other than at an Annual Meeting, such Non-Employee Director shall
be granted an option to purchase a number of shares of Common Stock
equal to 2,500 multiplied by the number of full three-month periods
remaining until the first anniversary of the immediately preceding
Annual Meeting. Each Non-Employee Director Option shall become
exercisable as to 2,500 shares of Common Stock upon each three-month
anniversary of the date of grant, provided that the holder
continues to serve as a Non-Employee Director on such date; and
further provided, that if the next Annual Meeting is held on or before
the first anniversary of the immediately preceding Annual Meeting, the
last 2,500 shares of Common Stock under such Non-Employee Director
Option shall become exercisable on the day preceding the next Annual
Meeting (if he continues to be a Non-Employee Director on such
date). In the event the remaining shares available for grant under
the Plan are not sufficient to grant the Non-Employee Director
Options to each such Non-Employee Director in any year, the number
of shares subject to the Non-Employee Director Options for such year
shall be reduced proportionately. The Committee shall not have any
discretion with respect to the selection of directors to receive
Non-Employee Director Options or the amount, the price or the timing
with respect thereto. A Non-Employee Director shall not be entitled
to receive any options under the Plan other than Non-Employee
Director Options. Subject to earlier termination as provided in
the Plan, the term of each Non-Employee Director Option shall be
five years.
c. The exercise price of the shares of Common Stock subject to
Employee Options and Consultant Options will be determined by the
1994 Committee; provided, however, that the exercise price of an
incentive stock option may not be less than 100% of the fair market
value of the Common Stock subject to such option on the date of
grant; and further provided that the exercise price of an incentive
stock option granted to an employee who owns (or is deemed to own)
more than 10% of the voting power of the Company must be at least
110% of the fair market value of the Common Stock subject to such
incentive stock option on the date of grant. The exercise price of
the shares of Common Stock under each Non-Employee Director Option is
equal to the fair market value of the Common Stock subject to the
option the date of grant.
d. Each option is payable in full upon exercise or, if the
applicable stock option contract permits, in installments. Payment of
the exercise price of an option may be made in cash or, if the appli-
cable stock option contract permits, in shares of Common Stock or any
combination thereof.
e. Options may not be transferred other than by will or by the
laws of descent and distribution, and may be exercised during the
employee's lifetime only by him.
-22-
f. If the employment of the holder of an Employee Option 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 on the date of such termination of employment, within
three months thereafter, but not thereafter and in no event after
expiration of the term of the option. However, if such employment
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 holder of an option while employed (or within three months after
termination of employment, or within one year after termination
of employment by reason of disability), his or her legal representa-
tive or beneficiary 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, was terminated by disability may exercise his or her
Employee Option, to the extent exercisable at the time of such
termination, within one year thereafter, but not thereafter and in
no event after the expiration of the term of the Employee Option.
g. Except as may otherwise be provided in the stock option
contract, the holder of a Consultant Option whose consulting relation-
ship with the Company has terminated for any reason may exercise such
option 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 shall be
terminated either (a) for cause, or (b) without the consent of the
Company (other than as a result of the death or disability of the
holder or a key employee of the holder), the option shall terminate
immediately.
h. Except as may otherwise be provided in the stock option
contract, the holder of a Non-Employee Director Option who ceases
to be a director with the Company for any reason or who becomes an
employee or consultant of the Company or any of its subsidiaries,
may exercise such option, to the extent exercisable, on the date of
such termination, at any time during the term; provided, however,
that if such relationship shall be terminated either for cause, the
option shall terminate immediately.
i. The Company may withhold cash and/or shares of Common Stock
having an aggregate value equal to the amount which the Company
determines is necessary to meet its obligation to withhold federal,
state and local taxes or other amounts 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 holder to pay the Company such amount,
in cash, promptly upon demand.
Option Contracts
Each option will be evidenced by a written contract between the
Company and the optionee, containing such terms and conditions not inconsis-
tent with the 1994 Plan as may be determined by the 1994 Committee.
-23-
Adjustment in Event of Capital Changes
Appropriate adjustments shall be made in the number and kind of share
available under the 1994 Plan, in the number and kind of shares subject
to each outstanding option, in the exercise prices of such options and in
the maximum number of shares of subject to options that may be granted to any
individual in any calendar year, 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, split-up, combination or exchange
of shares or the like.
In the event of (a) the liquidation or dissolution of the Company, or
(b) a merger in which the Company is not the surviving corporation or a
consolidation involving the Company, any outstanding options shall terminate,
unless other provision
is made therefore in the transaction.
Indemnification by Company
No member of the 1994 Committee is liable for any action or deter-
mination made in good faith with respect to the 1994 Plan or any option. In
addition, the Company will indemnify and hold each member of the 1994
Committee harmless from and against any liability, claim for damages and
expenses incurred by reason of any action or failure to act under or in
connection with the 1994 Plan or any option granted thereunder, to the fullest
extent permitted with respect to directors of the Company under the
Company's certificate of incorporation, by-laws or applicable law.
Duration and Amendment of the 1994 Plan
No option may be granted pursuant to the 1994 Plan after August 9,
2004. The Board of Directors may at any time terminate or amend the 1994 Plan,
provided, however, that, without the approval of the Company's shareholders,
no amendment may be made which would (a) increase the maximum number of
shares available for the grant of options (except as a result of the
anti-dilution adjustment described above),(b) materially increase the benefits
accruing to participants under the 1994 Plan or (c) change the eligibility
requirements for individuals who may receive options.
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 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 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 recog-
nized 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
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. Long-term
capital gains are generally taxed at more favorable rates than ordinary
income. 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.
-24-
Upon the exercise of a non-qualified stock option, the optionee recog-
nizes 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, depending on the period for
which the shares were held.
In addition to the federal income tax consequences described above, an
optionee may be subject to the alternative minimum tax, which is payable to
the extent it exceeds the optionee's regular 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.
The Board of Directors recommends a vote FOR approval of the amendment
to the Company's 1994 Stock Option Plan.
-25- <PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Price
Waterhouse LLP to serve as independent accountants of the Company for the
year ending March 31, 1996 and proposes the ratification of such decision.
Price Waterhouse LLP has served as the principal independent accountants
of the Company since March 13, 1995 and is familiar with the business and
operations of the Company, and is intended to continue to serve for the year
ending March 31, 1996. Representatives of Price Waterhouse LLP are expected
to be present at the Meeting and will have the opportunity to make a statement
if they desire to do so. Such representatives are also expected to be
available to respond to appropriate questions during the Meeting.
On February 21, 1995, the Company's Board of Directors approved the
dismissal of Feldman Sablosky & Company as its independent accountants, whose
dismissal took effect simultaneously with the Company's entering into an
engagement letter with Price Waterhouse LLP. There was no adverse opinion
or disclaimer of opinion, or modification as to uncertainty, audit scope or
accounting principles contained in the reports of Feldman Sablosky & Company
for the fiscal years ended March 31, 1993, March 31, 1994 or any later interim
period that they served.
During the Company's two most recent fiscal years in which they
served, ended March 31, 1994 and the subsequent interim period preceding
Feldman Sablosky & Company's dismissal on March 13, 1995, there were
no disagreements with Feldman Sablosky & Company 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
Feldman Sablosky & Company, would have caused Feldman Sablosky & Company to
make reference in connection with its report concerning the Company's
financial statements to the subject matter of the disagreements.
On February 21, 1995, the Company's Board of Directors approved the
proposal to engage Price Waterhouse LLP to be the Company's independent
accountants for its fiscal year ended March 31, 1995, which engagement took
effect as of the date the Company entered into a formal engagement letter on
March 13, 1995.
The Board of Directors recommends a vote FOR ratification of the
selection of Price Waterhouse LLP as the independent accountants for the
Company for the year ending March 31, 1996.
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SHAREHOLDER PROPOSALS
Shareholders who wish to include proposals for action at the
Company's 1996 Annual Meeting of Shareholders in next year's proxy statement
and proxy card must cause their proposals to be received in writing by the
Company at its address set forth on the first page of this Proxy Statement
no later than April 19, 1996. Such proposals should be addressed to the
Company's Secretary.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Meeting. Should any
other matters properly come before the Meeting or any adjournments thereof,
the persons named in the enclosed proxy will have the discretionary authority
to vote all proxies received with respect to such matters in accordance with
their judgment.
ANNUAL REPORT TO SHAREHOLDERS
The Company's 1995 Annual Report to Shareholders has been mailed to
shareholders prior to the mailing of this Proxy Statement, but except as
herein stated, such report is not incorporated herein and is not deemed to
be a part of this proxy solicitation material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS, WILL BE FURNISHED
WITHOUT CHARGE TO ANY PERSON FROM WHOM THE ACCOMPANYING PROXY IS SOLICITED
UPON WRITTEN REQUEST TO THE COMPANY'S SECRETARY, MICHAEL RADOMSKY,
MICROFRAME, INC., 21 MERIDIAN ROAD, EDISON, NEW JERSEY 08820.
By Order of the Board of Directors
Michael Radomsky, Secretary
Edison, New Jersey
August 17, 1995
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. A PROMPT RESPONSE
IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.
-27- <PAGE>
PROXY PROXY
MICROFRAME, INC.
(Solicited on behalf of the Board of Directors)
The undersigned holder of Common Stock of MICROFRAME, INC.,
revoking all proxies heretofore given, hereby constitutes and appoints Lonnie
L. Sciambi and Stephen M. Deixler or either of them, Proxies, with full power
of substitution, for 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 1995 Annual Meeting of Shareholders of MICROFRAME, INC., to be
held at the offices of Bloomberg Business News, 499 Park Avenue, New York, New
York 10022 on Monday, September 18, 1995 at 9:30 A.M., New York City time, and
at any adjournment or postponement 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 properly come before the meeting.
Where no choice is specified, this Proxy will be voted FOR all listed nominees
to serve as directors and FOR each of the proposals set forth on the reverse
side.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
The Board of Directors Recommends a Vote FOR all listed nominees
and for each of Proposals 2 and 3
(1) Election of Seven FOR all nominees listed WITHHOLD AUTHORITY
to vote for all
Directors (except as marked to nominees
the contrary) __ listed below __
Nominees: Stephen M. Deixler, Lonnie L. Sciambi, David I. Gould, Michael
Radomsky, William H. Whitney, Michehl R. Gent and Stephen P. Roma.
(Instruction) To withhold authority to vote for any individual nominee, circle
that nominee's name in the list provided above.
<PAGE>
(2) Proposal to approve an amendment to the Company's 1994 Stock Option Plan
which (i) increases by 500,000, from 250,000 to 750,000, the aggregate
number of shares of Common Stock for which options may be granted
thereunder and (ii) grants an annual award to each non-employee director
of the Company of options to purchase up to 10,000 shares of Common
Stock thereunder.
FOR ___ AGAINST ___ ABSTAIN ___
(3) Proposal to ratify the Board of Directors' selection of Price Waterhouse
LLP as the Company's independent public accountants for the year ending
March 31, 1996.
FOR ___ AGAINST ___ ABSTAIN ___
(4) The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the meeting.
Dated _______________________________, 1995
______________________________________________________________
______________________________________________________________
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, please give full title. If a corporation,
please sign full corporate name by the President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.)
-2-<PAGE>
