SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and 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
RESEARCH FRONTIERS INCORPORATED
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(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 fees 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>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 11, 1998
To the Stockholders of Research Frontiers Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders of
Research Frontiers Incorporated (the "Company") will be held at the Fox
Hollow Inn, 7725 Jericho Turnpike, Woodbury, New York 11797, on June 11,
1998 at 11:00 A.M., local time, for the following purposes:
1. To elect one Class II director;
2. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998;
3. To adopt the Research Frontiers Incorporated 1998 Stock Option Plan,
heretofore approved by the Board of Directors of the Company, which provides
for the grant of stock options exercisable into a maximum of 540,000 shares of
Common Stock of the Company; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 17, 1998
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournments thereof.
Management requests all stockholders to sign and date the enclosed form
of proxy and return it in the postage paid, self-addressed envelope provided for
your convenience. Please do this whether or not you plan to attend the meeting.
Should you attend, you may, if you wish, withdraw your proxy and vote your
shares in person.
By Order of the Board of Directors,
VICTOR F. KEEN, Secretary
Woodbury, New York
April 30, 1998<PAGE>
RESEARCH FRONTIERS INCORPORATED
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, June 11, 1998
This Proxy Statement is furnished by the Board of Directors of
Research Frontiers Incorporated (the "Company") in connection with the
solicitation of proxies to be voted at the Annual Meeting of Stockholders
which will be held at the Fox Hollow Inn, 7725 Jericho Turnpike,
Woodbury, New York 11797, on June 11, 1998, at 11:00 A.M., local time,
and all adjournments thereof.
Any stockholder giving a proxy will have the right to revoke it at any
time prior to the time it is voted. A proxy may be revoked by written notice
to the Company, Attention: Secretary, by execution of a subsequent proxy
or by attendance and voting in person at the Annual Meeting of
Stockholders. Attendance at the meeting will not automatically revoke the
proxy. All shares represented by effective proxies will be voted at the
Annual Meeting of Stockholders, or at any adjournment thereof. Unless
otherwise specified in the proxy, shares represented by proxies will be
voted (i) for the election of the nominee for director listed below, (ii) for
the ratification of the selection of the independent auditors, and (iii) for
adoption of the Company's 1998 Stock Option Plan. The cost of proxy
solicitations will be borne by the Company. In addition to solicitations of
proxies by use of the mails, some officers or employees of the Company,
without additional remuneration, may solicit proxies personally or by
telephone. The Company will also request brokers, dealers, banks and their
nominees to solicit proxies from their clients, where appropriate, and will
reimburse them for reasonable expenses related thereto.
The Company's executive offices are located at 240 Crossways Park
Drive, Woodbury, New York 11797-2033. On or about April 30, 1998 this
Proxy Statement and the accompanying form of proxy together with a copy
of the Annual Report of the Company for the year ended December 31,
1997, including financial statements, are to be mailed to each stockholder
of record at the close of business on April 17, 1998.
VOTING SECURITIES
Only stockholders of record at the close of business on April 17,
1998 are entitled to vote at the meeting. As of April 17, 1998, the
Company had issued and outstanding and entitled to vote 10,852,283
shares of common stock, par value $0.0001 per share (the "Common
Stock"), the Company's only class of voting securities outstanding. Each
share of Common Stock entitles the holder thereof to one vote. The
majority of all the outstanding shares of Common Stock will constitute a
quorum at the meeting. A shareholder voting either in person or through
a proxy who abstains with respect to a matter being voted upon is
considered to be present and entitled to vote on such matter at the meeting,
and is in effect a negative vote upon such matter, but a shareholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on a matter shall not be considered present and
entitled to vote on the matter.
The following table sets forth certain information with respect to
those persons or groups known to the Company who beneficially own
more than 5% of the Company's Common Stock, and for all directors and
executive officers of the Company individually and as a group.
Total Exercisable
Beneficial Warrants
Percent
Name of Beneficial Owner Ownership(1)
and Options of Class
Robert L. Saxe . . . . . . . . . . . . . . . . 1,054,135(2) 394,737 9.37
19 East 80th Street
New York, NY 10021
Bernard D. Gold. . . . . . . . . . . . . . . . 437,766(3) 93,625 4.00
Robert I. Thompson . . . . . . . . . . . . . . 425,486 257,125 3.83
Joseph M. Harary . . . . . . . . . . . . . . . 197,824 188,387 1.79
Robert M. Budin. . . . . . . . . . . . . . . . 128,869(4) 91,562 1.18
All directors and officers as a group (5 persons) 2,244,080(5) 1,025,436 18.89
(1) All information is as of April 17, 1998 and was determined in
accordance with Rule 13d-3 under the Securities Exchange Act of
1934 based upon information furnished by the persons listed or
contained in filings made by them with the Securities and Exchange
Commission or otherwise known to the Company. Unless otherwise
indicated, beneficial ownership disclosed consists of sole voting and
dispositive power. Shares of Common Stock of the Company
acquired by officers, directors and employees through the exercise of
stock options or otherwise are subject to restrictions on their transfer,
including restrictions imposed by applicable securities laws, as well
as additional restrictions imposed by the Company in accordance
with written agreements and policy statements.
(2) Includes (i) 1,687 shares of Common Stock owned by Mr. Saxe's
wife, Marie Saxe; (ii) 71,812 shares owned by a trust u/w Leonard S.
Saxe for which Mr. Saxe serves as a co-trustee, and has a beneficial
interest in one-half of the income from such trust; and (iii) 11,250
shares of Common Stock owned by a trust for the children of the late
George Backer and certain others for which Mr. Saxe serves as sole
trustee. Mr. Saxe disclaims beneficial ownership to all securities
described in items (i) and (iii) above.
(3) Includes (i) 31,500 shares of Common Stock owned by the Bernard
D. Gold DMD and Andrew P. Marks DDS, PC Pension Trust of
which Dr. Gold is a co-trustee; (ii) 49,217 shares of Common Stock
owned by Denise Gold, Dr. Gold's wife; and (iii) 6,187 shares of
Common Stock which Dr. Gold owns jointly with his wife. Dr. Gold
disclaims beneficial ownership to all securities owned by his wife.
(4) Includes 712 shares of Common Stock owned by McLafs Jr.
Investment Club over which Mr. Budin has the sole dispositive
power.
(5) Includes the securities described above in footnotes (2) through (4).
ELECTION OF DIRECTORS
(Item 1)
Pursuant to the Company's By-Laws, after the death in February
1998 of Robert I. Thompson, a Director and the Executive Vice President
of the Company, the Board of Directors fixed the number of Directors
constituting the entire Board of Directors at four members. The Board of
Directors is divided into three classes, as nearly equal in number as
possible. Each class serves three years, with the terms of office of the
respective classes expiring in successive years. The term of office of the
director in Class II expires at the 1998 Annual Meeting of Stockholders.
The Board of Directors proposes that the nominee described below be
elected to hold office for a three-year term expiring at the 2001 Annual
Meeting of Stockholders, and until the election and qualification of his
respective successors. If no other choice is specified in the accompanying
proxy, the persons named therein have advised management that it is their
present intention to vote the proxy for the election of the nominee set forth
below. Each of the members of the Board of Directors of the Company,
including the nominee listed below, is presently a director of the Company,
and was elected to such office by the stockholders of the Company.
Should any nominee become unable to accept nomination or election, it is
intended that the persons named in the accompanying proxy will vote for
the election of such other person as management may recommend in the
place of such nominee. There is no indication at present that the nominee
will be unable to accept nomination.
The following biographical information is provided with respect to
each director:
Director Standing for Election
Bernard D. Gold
Dr. Gold, age 66, has been a director of the Company since June 1991. Dr.
Gold has been an oral and maxillofacial surgeon in private practice since
1960, and retired from his practice in 1994. He is also an assistant
professor of oral surgery at Columbia University School of Dental and
Oral Surgery in New York, New York, and retired in 1993 as the director
of oral and maxillofacial surgery at Kings County Hospital Center in
Brooklyn, New York.
Directors Continuing In Office
Class I - Term to Expire at the 2000 Annual Meeting of
Stockholders
Joseph M. Harary
Mr. Harary, age 37, became Vice President and General Counsel to the
Company in April 1992 and has been a director of the Company since
February 1993. Mr. Harary has been counsel to the law firm of Solovay
Marshall & Edlin, New York, New York, since 1992. Mr. Harary was
associated with the law firm of Howard, Darby & Levin from 1990 to
1992, and with the law firm of Kronish, Lieb, Weiner & Hellman from
1986 to 1990. Mr. Harary graduated Summa Cum Laude from Columbia
College in 1983 with an A.B. degree in economics, and received a Juris
Doctor degree from Columbia Law School in 1986. Prior to attending law
school, Mr. Harary was an economist with the Federal Reserve Bank of
New York.
Class III - Term Expires at the 1999 Annual Meeting of Stockholders
Robert L. Saxe
Mr. Saxe, age 62, is a founder of the Company and has been Chairman of
the Board of Directors of the Company since its inception in 1965, and
President and Treasurer since October 1966. He graduated from Harvard
College in 1956 with an A.B. degree, Cum Laude in General Studies (with
a major in physics). Mr. Saxe also received an M.B.A. degree from
Harvard Business School in 1960.
Robert M. Budin
Mr. Budin, age 65, has been a director of the Company since 1987. Mr.
Budin was a Senior Vice President of Harold C. Brown & Co., Inc. until
his retirement in 1990. Mr. Budin was a stockbroker and had been
employed at Harold C. Brown & Co., Inc. since 1963.
The Board of Directors has an Audit Committee and Executive
Committee, but does not have a nominating or compensation committee.
The Board of Directors' Executive Committee is composed of Robert L.
Saxe, Joseph M. Harary and Robert M. Budin. Robert M. Budin and
Bernard D. Gold served on the Audit Committee in 1997. The Audit
Committee reviews and reports to the Board of Directors with respect to
various auditing and accounting matters, including the nomination of the
Company's independent public accountants, the scope of audit procedures,
general accounting policy matters, and the performance of the Company's
independent public accountants. During 1997, the Company's Board of
Directors met four times and acted by written consent once, and the
Board's Audit Committee met twice. No incumbent director failed to
attend any meetings of the Board of Directors during 1997. Mr. Budin and
Dr. Gold each elected in 1997, in lieu of cash, to receive certain directors
fees in the form of warrants to purchase Common Stock. As more fully
described on page 10 of this Proxy Statement, non-employee directors of
the Company also receive a prescribed amount of non-qualified stock
options under the terms of the Company's 1992 Stock Option Plan.
Biographical information for the Company's executive officers, Robert L.
Saxe and Joseph M. Harary, is provided above.
The Board of Directors recommends a vote FOR election of the
nominee listed above and it is intended that proxies not marked to the
contrary will be so voted. Election of such nominee requires the
affirmative vote of the holders of a plurality of the shares of the
Company's Common Stock present, or represented, and entitled to
vote at the Annual Meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2)
The Board of Directors unanimously recommends a vote FOR
ratification of the selection of the accounting firm of KPMG Peat
Marwick LLP as independent auditors of the Company for the fiscal
year ending December 31, 1998. The ratification requires a majority
vote of those shares of Common Stock represented and eligible to vote
at the 1998 Annual Meeting of Stockholders. Representatives of
KPMG Peat Marwick LLP are expected to attend the meeting, will have
the opportunity to make a statement should they desire to do so, and are
expected to be available to respond to appropriate questions.
ADOPTION OF 1998 STOCK OPTION PLAN
(Item 3)
On December 12, 1997, the Board of Directors of the Company
adopted a stock option plan entitled the "1998 Stock Option Plan" (the
"1998 Plan"). A copy of the 1998 Plan is annexed hereto as Exhibit A.
The purpose of the 1998 Plan is to afford an incentive to executive officers,
other employees and non-employee directors and consultants of the
Company to acquire a proprietary interest in the Company, to continue as
employees or non-employee directors (as the case may be), to increase
their efforts on behalf of the Company and to promote the success of the
Company's business. To further such purposes, stock options, stock
appreciation rights and restricted stock may be granted pursuant to the
1998 Plan. The Board of Directors believes that the granting of stock
options under the 1998 Plan will promote continuity of management, help
attract new employees, and encourage employees, directors and officers,
to increase their stock ownership in the Company and give an increased
incentive and personal interest in the welfare of the Company by those who
are or may become primarily responsible for shaping and carrying out the
long range plans of the Company and securing its continued growth,
development and financial success.
A maximum of 540,000 shares of Common Stock are reserved for the
grant of awards under the 1998 Plan. If any awards expire, are canceled,
or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for the purposes
of the 1998 Plan.
Under the 1998 Plan, stock options, stock appreciation rights (SARs)
or restricted stock may be awarded by the Company to the participants.
The 1998 Plan will be administered by a committee of at least two
directors who are not officers and employees of the Company (the
"Administrators"). At the outset, the Administrators will consist of Mr.
Budin and Dr. Gold, who serve as members of the Company's Stock
Option Committee.
Stock Options. The 1998 Plan provides that Incentive Stock Options
("ISO") under Section 422 of the Internal Revenue Code of 1986, as
amended, (the "Code") may be granted only to employees of the Company,
including directors and officers who are also employees and Non-Qualified
Stock Options ("NQSO") may be granted to employees, directors, officers
and consultants regardless of whether they are employees of the Company.
All ISOs granted under the 1998 Plan will have an exercise price equal to
the fair market value of the Company's common stock on the date of grant
(110% of fair market value in the case of 10% or more stockholders).
Unless otherwise agreed to by the Company, all options granted under the
1998 Plan shall be non-transferable except by will or pursuant to the laws
of descent and distribution. In no event may ISO's exercisable for stock
having an aggregate fair market value of $100,000 (together with all ISO's
granted under any other Company plan) be granted which first become
exercisable in any one calendar year. No options granted under the 1998
Plan may have a term greater than ten years (five years in the case of ISO's
granted to 10% or greater stockholders). Options (both ISO's and
NQSO's) will have termination provisions substantially the same as are
provided under the Company's 1992 Stock Option Plan (e.g. after
termination of employment, leaving office or directorship, death, disability
and at the end of the option term). The terms of exercising the options
granted under the 1998 Plan will be substantially the same as those provide
in the 1992 Stock Option Plan. The 1998 Plan will eliminate the mandatory
formula based awards which existed under the 1992 Stock Option Plan.
Under the 1998 Plan, the grant of stock options and other awards shall be
discretionary.
Stock Appreciation Rights. If a SAR is awarded under the 1998 Plan,
upon exercise of an SAR, the Company will pay the recipient an amount
equal to the excess of the then fair market value of the stock over the
option price, multiplied by the number of SARs being exercised. This
payment may be in cash, common stock or any combination of the two, in
the discretion of the Company.
Restricted Stock. The Company may award shares of Restricted
Stock to any eligible employee. Each award of Restricted Stock under the
Plan shall be evidenced by a written Agreement between the Company and
the employee which states the number of shares of Restricted Stock to be
subject to such award, and the conditions of grant. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and
distribution, for such period as the Company shall determine from the date
on which the award is granted (the "Restricted Period"). The Company
may also impose such other restrictions and conditions on the shares as it
deems appropriate including the satisfaction of performance criteria and the
vesting of such awards over time. Certificates for shares of stock issued
pursuant to Restricted Stock awards shall bear an appropriate legend
referring to such restrictions and during the Restricted Period, and such
certificates shall be held in escrow by an escrow agent appointed by the
Company. The Company has the authority to waive or cancel all or any
portion of any outstanding restrictions prior to the expiration of the
Restricted Period with respect to any or all of the shares of Restricted
Stock awarded on such terms and conditions as the Company deems
appropriate. Subject to any restrictions imposed on the grant, during the
Restricted Period the grantee shall possess all incidents of ownership of
such shares including the right to receive dividends with respect to such
shares and to vote such shares. Subject to such exceptions as may be
determined by the Company, if the grantee's continuous employment with
the Company shall terminate for any reason prior to the expiration of the
Restricted Period of an award, any shares remaining subject to restrictions
shall thereupon be forfeited by the grantee and transferred to, and
reacquired by, the Company.
FEDERAL INCOME TAX ASPECTS OF AWARDS UNDER THE 1998 PLAN
The following is a brief summary of the federal income tax
consequences of awards made under the 1998 Plan based upon the federal
income tax laws in effect on the date hereof. This summary is not intended
to be exhaustive, and does not describe state or local tax consequences.
Incentive Stock Options. No regular taxable income is realized by the
participant upon the grant or exercise of an incentive stock option ("ISO").
However, a tax preference item under the Alternative Minimum Tax would
be generated upon exercise of the ISO. If a participant does not sell the
stock received upon the exercise of an ISO ("ISO Shares") for at least two
years from the date of grant and within one year from the date of exercise,
when the shares are sold any gain (loss) realized will be long term or short
term capital gain (loss) depending upon the actual holding period. In such
circumstances, no deduction will be allowed to the Company for federal
income tax purposes. If ISO Shares are disposed of prior to the expiration
of either of the holding periods described above, the participant generally
will realize ordinary income at that time equal to the excess, if any, of the
fair market value of the shares at exercise (or, if less, the amount realized
on the disposition of the shares) over the price paid for such ISO Shares.
The Company will be entitled to deduct any such recognized amount. Any
further gain or loss realized by the participant will be taxed as short term
or long term capital gain or loss. Subject to certain exceptions for disability
or death, if an ISO is exercised more than three months following the
termination of the participant's employment, the option will generally be
taxed as a non-qualified stock option.
Non-Qualified Stock Options. No income is realized by the participant at
the time a non-qualified stock option is granted. Generally upon exercise
of a non-qualified stock option, the participant will realize ordinary income
in an amount equal to the difference between the price paid for the shares
and the fair market value of the shares on the date of exercise. The
Company will be entitled to a tax deduction in the same amount. Any
appreciation (or depreciation) after the date of exercise will be either short
term or long term capital gain (or loss), depending upon the length of time
that the participant has held the shares.
Stock Appreciation Rights. No income will be realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, the
participant will generally be required to include as taxable ordinary income
in the year of exercise an amount equal to the amount of cash and/or the
fair market value of any shares received. The Company will be entitled to
a deduction at the time and in the amount included in the participant's
income by reason of the exercise. If the participant receives common stock
upon exercise of an SAR, the post-exercise appreciation or depreciation
will be treated in the same manner discussed above under Non-Qualified
Stock Options.
Restricted Stock. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
any consideration paid for the stock. The Company will be entitled to a
deduction at the same time and in the same amount. The holding period to
determine whether the participant has long term or short term capital gain
or loss on a subsequent sale generally begins when the stock is no longer
subject to forfeiture, and the participant's tax basis for such shares will
generally equal the fair market value of such shares on such date.
However, a participant may elect, under Section 83(b) of the Internal
Revenue Code, within 30 days of the grant of the stock, to recognize
taxable ordinary income on the date of grant equal to the excess of the fair
market value of the shares of restricted stock (determined without regard
to the restrictions) over the purchase price of the restricted stock. By reason
of such an election, the participant's holding period will commence on the
date of grant and the participant's tax basis will be equal to the fair market
value of the shares on that date (determined without regard to restrictions).
Likewise, the Company generally will be entitled to a deduction at that
time in the amount that is taxable as ordinary income to the participant. If
shares are forfeited after making such an election, the participant will be
entitled to a deduction, refund, or loss for tax purposes only in an amount
equal to the purchase price of the forfeited shares regardless of whether he
made a Section 83(b) election.
The 1998 Plan shall terminate on December 11, 2007. Any option
outstanding under the 1998 Plan at the time of the termination of the 1998
Plan shall remain in effect until such option shall have been exercised or
shall have expired in accordance with its terms. The Board of Directors
may make such modifications of the 1998 Plan as it shall deem advisable.
However, the Board may not without further approval of the holders of a
majority of the shares of the Common Stock present in person or by proxy
at any special or annual meeting of the stockholders increase the number
of shares as to which options may be granted or change the class of persons
eligible to receive an award under the 1998 Plan. The Company intends
to file a registration statement under the Securities Act of 1933, as
amended covering the securities issuable under the 1998 Plan.
The Board of Directors recommends a vote FOR approval of the
1998 Plan and it is intended that proxies not marked to the contrary
will be so voted. Approval of the 1998 Plan requires the affirmative
vote of the holders of a majority of the shares of the Company's
Common Stock present, or represented, and entitled to vote at the
Annual Meeting.
EXECUTIVE COMPENSATION
The following table sets forth information regarding all cash
compensation paid by the Company and stock options granted during the
fiscal years indicated to Robert L. Saxe, the Company's chief executive
officer, and to each of the Company's executive officers during the past
fiscal year.
Name of Executive and Other Annual Number of Stock
Principal Positions Year Salary Compensation (1) Options Awarded
Robert L. Saxe, 1997 $297,589 $ 4,428 70,000
Director, Chairman of 1996 $268,419 $ 36,150 120,000
the Board, President 1995 $246,311 $ 12,316 61,100
and Treasurer
Robert I. Thompson, 1997 $247,769 $ -- 49,000
Director, Executive 1996 $215,510 $ 33,939 82,500
Vice President and 1995 $197,462 $ 9,873 39,200
Assistant Secretary
Joseph M. Harary, 1997 $211,473 $ 15,769 35,000
Director, Vice President 1996 $177,435 $ 38,381 60,000
and General Counsel, 1995 $162,575 $ 12,506 29,200
and Assistant Secretary
(1) Consists of the payment of accrued but unused vacation, and a
performance bonus of $25,000 which was paid during 1996.
Report on Executive Compensation
The compensation of executive officers of the Company, including
the Company's chief executive officer, is determined by the Company's
entire Board of Directors whose names are listed below at the end of this
report. The salaries of all executive officers are reviewed at least twice
annually by the Board. Numerous factors are reviewed in determining
compensation levels. These factors include: the compensation levels of
executive officers with comparable experience and qualifications,
compensation levels at comparable companies, individual and Company
performance, past compensation levels, years of service, performance of
the Company's stock, and other relevant considerations. The Company's
goal is to set salary levels somewhat below those of comparable
companies, and to supplement such compensation with the grant of stock
options and bonuses. This approach is designed to more closely align total
executive compensation with the long-term performance of the Company
and enable all employees of the Company to participate in the Company's
growth. Through ownership of stock options, the executive is rewarded if
the Company's stockholders receive the benefit of appreciation of the price
of the Company's Common Stock. As the Company believes that its
success is dependent upon the coordinated efforts of all of its employees,
and that teamwork is essential in further developing the Company's
technology and meeting the expectations of the Company's licensees and
stockholders, all current employees of the Company were granted stock
options during the past fiscal year.
The Board of Directors and the stockholders have adopted one stock
option plan which remains in effect, the Company's Amended and
Restated 1992 Stock Option Plan (the "1992 Plan"). The purpose of the
1992 Plan is to attract key employees, officers and directors and to
encourage their continued employment and services and their increased
stock ownership in the Company. The Board of Directors believes that the
granting of stock options under the 1992 Plan will promote continuity of
management, and will result in the increased incentive and personal interest
in the welfare of the Company by those who are or may become primarily
responsible for shaping and carrying out the long range plans of the
Company and securing its continued growth, development and financial
success. As of December 31, 1997, there were 1,783 options available for
issuance under the 1992 Plan. If any options expire or terminate for any
reason without having been exercised in full, the unpurchased shares
subject thereto will again be available for issuance under the 1992 Plan.
The 1992 Plan is administered by a committee of at least two
directors (the "Administrators") of the Company who are disinterested
within the meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange
Act of 1934, as amended. To be disinterested, a director may not have
received options under any of the Company's plans, except pursuant to a
formula, during the prior one-year period. Currently Mr. Budin and Dr.
Gold are the Administrators of the 1992 Plan. Options which qualify as
Incentive Stock Options ("ISO's") under the Internal Revenue Code of
1986, as amended (the "Code"), and non-qualifying options ("NQSO's")
may be issued under the 1992 Plan.
The 1992 Plan provides for a two-prong method for calculating the
number of options to be granted based upon a formula and upon the
discretion of the Administrators.
Formula-based grants: Formula grants are made to all officers and
directors of the Company once each calendar year following the
Company's Annual Meeting of Stockholders. The formula provisions of
the 1992 Plan may be amended not more than once every six months other
than to comport with changes in IRS and ERISA rules and regulations. The
formula for option grants under the 1992 Plan is listed below and is based
solely upon an individual's position with the Company.
Title Fair Market Value of Stock Underlying Options Granted
President $100,000, rounded down to the nearest round lot
of shares.
Executive Vice President $60,000, rounded up or down to the nearest round lot of
shares.
Vice President $45,000, rounded up or down to the nearest round lot of
shares.
Independent Directors $45,000, rounded up or down to the nearest round lot of
shares.
Discretionary Grants: The Administrators of the 1992 Plan also have the
discretionary authority to grant options under the 1992 Plan to employees,
officers and directors of the Company (including officers and directors
who are not also employees), in addition to any number of options granted
pursuant to the formula above, as a reward for past services rendered
and/or as an incentive for future services to be rendered.
The Company's obligation to issue stock options pursuant to the formula
specified above under the Company's 1992 Stock Option Plan, and any
prohibition on making discretionary grants of stock options to members of
the Company's Stock Option Committee contained in such Plan will be
terminated if the Company's 1998 Stock Option Plan which the
stockholders of the Company are being asked to approve at the 1998
Annual Meeting of Stockholders is adopted.
The purchase price of Common Stock subject to each option issued
under the 1992 Plan will be determined by the Board of Directors or the
Administrators, as the case may be, but in the case of an ISO (or NQSO
issued pursuant to a formula grant under the 1992 Plan) may not be less
than (i) the fair market value of the Common Stock subject to the option
on the date of grant or (ii) in the case of an option granted to an employee
who, at the time the option is granted, owns (within the meaning of the
Code) more than 10% of the total combined voting power of all classes of
stock of the Company, 110% of the fair market value of the Common
Stock subject to the option on the date of grant. Options under the 1992
Plan may be exercised in the manner and at such times fixed by the Board
of Directors, but may not be exercised for a term of more than 10 years, or
for a term of five years in the case of an employee who, at the time an ISO
is granted, owns (within the meaning of the Code) more than 10% of the
total combined voting power of all classes of stock of the Company. In no
event may ISO's exercisable for stock having an aggregate fair market
value of $100,000 (together with all ISO's granted under any other stock
option) be granted which first become exercisable in any one calendar year.
Options are not transferable except by will or intestacy on the death of the
optionee. In general, options granted terminate when an optionee ceases
to be employed by the Company or within a specified period after the
termination of such employment depending upon the reason for such
termination.
BOARD OF DIRECTORS:
Robert M. Budin
Bernard D. Gold
Joseph M. Harary
Robert L. Saxe
Employment Arrangements
The Company entered into an employment agreement with Mr.
Robert L. Saxe which automatically renews itself for successive one-year
terms unless either the Company or Mr. Saxe gives the other at least 90
days prior written notice of the intention not to renew the employment
agreement. Pursuant to that agreement, Mr. Saxe received an annual salary
from the Company of $297,589 during 1997 and will receive an annual
salary of $322,912 during the year ending December 31, 1998. The Board
of Directors may, in its discretion, authorize a higher salary for Mr. Saxe.
Pursuant to his employment agreement, Mr. Saxe has agreed not to
compete with the Company for a period of two years following the
termination of his employment thereunder. The Company maintains key-
man life insurance on the life of Mr. Saxe in the amount of $500,000.
Stock Options Granted in 1997
The following table sets forth information regarding all grants of
options to the individuals named in the executive compensation table
appearing on pages 8-9 during the fiscal year ended December 31, 1997,
and the potential realizable value of such options using a 5% and 10%
assumed annual rate of appreciation in the price of the Company's
Common Stock. The particular assumed annual rates of stock price
appreciation used in this table are specified under the rules and regulations
of the Securities and Exchange Commission and are not necessarily
indicative of future stock price performance or the Company's projections
thereof. Over a ten-year option term, the corresponding increase in the
Company's market capitalization over the same period would be (a)
$35,509,803 with an assumed 5% annual rate of stock appreciation, and (b)
$97,591,401 with an assumed 10% annual rate of stock appreciation. Of
the options listed below for each of Mr. Saxe, Mr. Thompson and Mr.
Harary, 16,600 options did not become exercisable until January 1, 1998.
Percent Potential Realizable
of Total Value at Assumed
Options Annual Rates of
Grant Stock Price
Number of to Exercise Appreciation for
Options Employees Price Expira- Term of Option
Name Granted in 1997 Per Share tion Date 5% ($) 10% ($)
Robert L. Saxe 70,000 35.75% $6.00 June 11, 2007 $264,136 $669,372
Robert I. Thompson 49,000 25.03% $6.00 June 11, 2007 $184,895 $468,560
Joseph M. Harary 35,000 17.88% $6.00 June 11, 2007 $132,068 $334,686
Stock Options Exercised in 1997 and Year-End Option Values
The following table sets forth information regarding all exercises of
options by the individuals named in the executive compensation table
appearing on pages 8-9 during the fiscal year ended December 31, 1997
and the value of options realized upon exercise, and of unexercised options
held by such persons on December 31, 1997, measured in terms of the
average trading price of the Company's Common Stock on the date of
exercise and on the last trading day of the year, respectively. A total of
1,021,111 stock options issued by the Company were exercisable at year-
end.
Number of Value of Exerci-
Exercisable sable In-the-Money
Number of Options which Options which
Shares Acquired Value Remain Unexercised Remain Unexercised
Name on Exercise Realized at Dec. 31,1997 at Dec. 31, 1997
Robert Saxe -- $ -- 378,137 $172,209
Robert Thompson -- -- 240,525 $107,670
Joseph Harary -- -- 171,787 $ 67,912
Stock Price Performance
The following table sets forth the range of the high and low selling
prices (as provided by the National Association of Securities Dealers) of
the Company's common stock for each quarterly period within the past two
fiscal years:
Quarter Ended Low High
March 31, 1996 8.500 11.000
June 30, 1996 7.250 11.750
September 30, 1996 7.000 10.625
December 31, 1996 7.000 9.500
March 31, 1997 5.625 9.875
June 30, 1997 4.875 7.875
September 30, 1997 5.875 11.625
December 31, 1997 7.0625 10.125
These quotations may reflect inter-dealer prices, without retail mark-up,
mark-down, or commission, and may not necessarily represent actual
transactions.
The following graph compares the total returns (assuming
reinvestment of dividends) on $100 invested on December 31, 1992 in the
Company's Common Stock (REFR), the NASDAQ Composite (U.S.)
Stock Index, and the NASDAQ Electronic Component Stock Index. The
stock price performance shown on the graph below reflects historical data
provided by the National Association of Securities Dealers, Inc. and is not
necessarily indicative of future price performance.
[graph with the following data points]
Date Index Index Index
12/31/92 U.S. NASDAQ Electronics REFR Ask
01/29/93 $100.0000 $100.0000 $100.0000
02/26/93 $96.2693 $103.8014 $102.6667
03/31/93 $99.0556 $103.7118 $136.0000
04/30/93 $94.8279 $89.2657 $136.0000
05/31/93 $100.4929 $102.7126 $133.3333
06/30/93 $100.9578 $103.0086 $144.0000
07/30/93 $101.0769 $101.5125 $146.0000
08/31/93 $106.3012 $120.7814 $192.0000
09/30/93 $109.4667 $130.0246 $174.0000
10/29/93 $111.9274 $118.9594 $152.0000
11/30/93 $108.5910 $115.9111 $166.0000
12/31/93 $111.6187 $119.0839 $200.0000
01/31/94 $115.0068 $125.3825 $214.0000
02/28/94 $113.9330 $131.5134 $212.5000
03/31/94 $106.9266 $125.8376 $165.0000
04/29/94 $105.5392 $120.4844 $167.5000
05/31/94 $105.7971 $120.2725 $187.5000
06/30/94 $101.9280 $113.5320 $152.5000
07/29/94 $104.0185 $113.8181 $172.5000
08/31/94 $110.6502 $126.9997 $155.0000
09/30/94 $110.3669 $126.4697 $142.5000
10/31/94 $112.5363 $131.3758 $147.5000
11/30/94 $108.8029 $130.2544 $135.0000
12/30/94 $109.1080 $131.5704 $130.0000
01/31/95 $109.7196 $136.4778 $125.0000
02/28/95 $115.5220 $154.3782 $150.0000
03/31/95 $118.9477 $164.6654 $144.3750
04/28/95 $122.6931 $190.1897 $137.5000
05/31/95 $125.8586 $205.5843 $142.5000
06/30/95 $136.0587 $234.0279 $165.0000
07/31/95 $146.0598 $258.3162 $160.0000
08/31/95 $149.0197 $253.2101 $250.0000
09/29/95 $152.4466 $252.1476 $285.0000
10/31/95 $151.5732 $264.1172 $250.0000
11/30/95 $155.1322 $240.2346 $262.5000
12/29/95 $154.3064 $217.9427 $205.0000
01/31/96 $155.0670 $217.8844 $212.5000
02/29/96 $160.9694 $227.2730 $195.0000
03/29/96 $161.5034 $216.5915 $187.5000
04/30/96 $174.9024 $253.6431 $205.0000
05/31/96 $182.9331 $269.3161 $205.0000
06/28/96 $174.6869 $247.4293 $157.5000
07/31/96 $159.1279 $239.5891 $155.0000
08/30/96 $168.0441 $256.9593 $172.5000
09/30/96 $180.8980 $299.7987 $190.0000
10/31/96 $178.8999 $321.9284 $152.5000
11/29/96 $189.9592 $373.3674 $157.5000
12/31/96 $189.7888 $376.7758 $155.0000
01/31/97 $203.2766 $448.4090 $172.5000
02/28/97 $192.0385 $396.5411 $142.5000
03/31/97 $179.5022 $379.7297 $125.0000
04/30/97 $185.1141 $411.4482 $137.5000
05/30/97 $206.1018 $425.1841 $125.0000
06/30/97 $212.4051 $405.8669 $127.5000
07/31/97 $234.8252 $509.4842 $182.5000
08/29/97 $234.4670 $521.5783 $215.0000
09/30/97 $248.3345 $527.0893 $201.2500
10/31/97 $235.4266 $440.8306 $192.5000
11/28/97 $236.5909 $438.7727 $171.2500
12/31/97 $232.8963 $395.0049 $155.0000
CERTAIN TRANSACTIONS
The following is a description of any transactions involving
indebtedness of management to the Company which exceeded $60,000
during 1997. Robert L. Saxe, the President and Chairman of the Company,
borrowed $200,000 from the Company during 1996 and $925,000 during
1997. Robert I. Thompson, the Company's Executive Vice President
borrowed $50,000 from the Company in 1993, $167,000 in 1994, 55,000
in 1996, and $460,000 in 1997. The Company loaned its Vice President,
Joseph M. Harary, $32,500 in 1994, $95,000 in 1996, and $5,000 in 1997.
During 1997, officers repaid several loans and made aggregate principal
payments of $592,353 of which $39,810 was paid in cash and $552,543
was paid through the surrender of shares of the Company's common stock.
Each of the aforementioned loans relate to the purchase of Common Stock
of the Company, are collateralized by the pledge of shares of Common
Stock of the Company, may be prepaid in part or in full without notice or
penalty, are represented by a promissory note which bears interest at a rate
per annum equal to the broker call rate in effect on the first day of each
calendar quarter, and permit repayment of the loan in cash or by delivery
of securities of the Company having a fair market value equal to the balance
of the loan outstanding.
1999 STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal for action at the
Company's 1999 Annual Meeting of Stockholders, must comply with and
meet the requirements of the Company's By-Laws and of Rule 14a-8 of the
Securities and Exchange Commission. Rule 14a-8 requires, among other
things, that any proposal be received by the Company at its principal
executive office, 240 Crossways Park Drive, Woodbury, New York 11797,
Attention: General Counsel, by December 31, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten
percent of the Company's Common Stock are required to report their initial
ownership of the Company's Common Stock and any subsequent changes
in that ownership to the Securities and Exchange Commission. Specific due
dates for these reports have been established, and the Company is required
to disclose in this Proxy Statement any failure to file by these dates. All of
these filing requirements were satisfied on a timely basis. In making these
disclosures, the Company has relied solely on written representations of its
directors and executive officers and copies of the reports that they have
filed with the Commission.
GENERAL AND OTHER MATTERS
Management knows of no matter other than the matters described
above which will be presented to the meeting. However, if any other
matters properly come before the meeting, or any of its adjournments, the
person or persons voting the proxies will vote them in accordance with his,
her or their best judgment on such matters.
By Order of the Board of Directors
VICTOR F. KEEN
Secretary
Woodbury, New York
April 30, 1998
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1997, INCLUDING FINANCIAL
STATEMENTS AND ANY SCHEDULES THERETO (EXCEPT
EXHIBITS), TO EACH OF THE COMPANY'S STOCKHOLDERS,
UPON RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO
THE COMPANY'S OFFICES, ATTENTION: ASSISTANT
SECRETARY. REQUESTS FROM BENEFICIAL STOCKHOLDERS
MUST SET FORTH A REPRESENTATION AS TO SUCH OWNERSHIP
ON APRIL 17, 1998.<PAGE>
EXHIBIT A
1998 STOCK OPTION PLAN
OF RESEARCH FRONTIERS INCORPORATED.
1. Purpose. Types of Awards. Construction. The purpose of the 1998
Stock Option Plan of Research Frontiers Incorporated (the "Plan") is to
afford an incentive to executive officers, other employees and
non-employee directors and consultants of Research Frontiers
Incorporated, a Delaware corporation (the "Company"), or any Subsidiary
(as defined below), to acquire a proprietary interest in the Company, to
continue as employees or non-employee directors (as the case may be), to
increase their efforts on behalf of the Company and to promote the success
of the Company's business. To further such purposes the Committee may
grant stock options, stock appreciation rights and restricted stock. The
provisions of the Plan are intended to satisfy the requirements of Section
16(b) of the Securities Exchange Act of 1934, and shall be interpreted in
a manner consistent with the requirements thereof, as now or hereafter
construed, interpreted and applied by regulations, rulings and cases.
2. Definitions. As used in this Plan, the following words and phrases
shall have the meanings indicated:
(a) "Agreement" shall mean an agreement entered into between the
Company and a Grantee in connection with an award under the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any reference to a section of the Code or
regulation promulgated thereunder shall also refer to any successor of such
section or regulation.
(d) "Committee" shall mean a committee established by the Board to
administer the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3 under the Exchange Act.
(e) "Common Stock" shall mean shares of common stock, par value
$.0001 per share, of the Company.
(f) "Company" shall mean Research Frontiers Incorporated, a
corporation organized under the laws of the State of Delaware, or any
successor corporation.
(g) "Disability" shall mean a Grantee's inability to perform his duties
with the Company or any Subsidiary for more than six consecutive months
by reason of any medically determinable physical or mental impairment,
as determined by a physician selected by the Grantee and acceptable to the
Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases, and any reference
to a section of the Exchange Act or rule or regulation promulgated
thereunder shall also refer to any successor of such section, rule or
regulation..
(i) "Fair Market Value" per share as of a particular date shall mean
(i) the average high and low trading prices per share of Common Stock on
the national securities exchange on which the Common Stock is principally
traded for the last preceding date on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock
are then traded in an over-the-counter market, the average high and low
trading prices per share of Common Stock in such over-the-counter market
for the last preceding date on which there was a sale of such Common
Stock in such market, or (iii) if the shares of Common Stock are not then
listed on a national securities exchange or traded in an over-the-counter
market, such value as the Committee, in its sole discretion, shall determine.
(j) "Grantee" shall mean a person who receives a grant of Options,
Stock Appreciation Rights or Restricted Stock under the Plan.
(k) "Incentive Stock Option" shall mean any option intended to be,
and designated as, an incentive stock option within the meaning of Section
422 of the Code.
(1) "Insider" shall mean a Grantee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
(m) "Option" or "Options" shall mean a grant to a Grantee of an
option or options to purchase shares of Common Stock. Options granted
by the Committee to an employee Grantee pursuant to the Plan shall
constitute either Incentive Stock Options or Nonqualified Stock Options.
Options granted to any consultant or non-employee director shall be
Nonqualified Stock Options.
(n) "Option Price" shall mean the exercise price of an Option per
share of Common Stock covered by the Option.
(o) "Option Term" shall mean the period (determined at the Option's
grant) from its date of grant to the last date on which it can be exercised.
The Option Term of any Incentive Stock Option or any Option granted to
any consultant or non-employee director shall not be longer than ten (10)
years. The Option Term of any Incentive Stock Option granted to a Ten
Percent Stockholder shall not be longer than five (5) years.
(p) "Plan" means this 1998 Stock Option Plan of Research Frontiers
Incorporated, as amended from time to time.
(q) "Retirement" shall mean a Grantee's retirement in accordance
with the terms of any pension or retirement plan adopted by the Company
(or any Subsidiary), if any, as the case may be, on the normal retirement
date prescribed from time to time by the Company or such Subsidiary.
(r) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in
effect, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, including any successor to such Rule.
(s) "Stock Appreciation Right" shall mean the right, granted to a
Grantee under Section 9, to be paid an amount measured by the
appreciation in the Fair Market Value of Common Stock from the date of
grant to the date of exercise of the right, with payment to be made in cash
or Common Stock as specified in the award or determined by the
Committee.
(t) "Subsidiary" shall be as defined in Section 424(f) of the Code and
shall include a subsidiary of any subsidiary.
(u) "Ten Percent Stockholder" shall mean an employee Grantee who,
at the time an Incentive Stock Option is granted to such Grantee, owns
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation.
3. Administration. The Plan shall be administered by the Committee.
The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to
it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant Options, Stock
Appreciation Rights and Restricted Stock; to determine which Options
shall constitute Incentive Stock Options and which Options shall constitute
Nonqualified Stock Options; to determine the purchase price of the shares
of Common Stock covered by each Option; to determine the persons to
whom, and the time or times at which awards shall be granted; to
determine the number of shares to be covered by each award; to interpret
the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of the Agreements (which
need not be identical) and to cancel or suspend awards, as necessary; and
to make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Committee may delegate to one or more of its members or to one
or more agents such administrative duties as it may deem advisable, and
the Committee or any person to whom it has delegated duties as aforesaid
may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. All
decisions, determination and interpretations of the Committee shall be final
and binding on all Grantees of any awards under this Plan. The Board
shall fill all vacancies, however caused, in the Committee. The Board may
from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others.
One member of the Committee shall be selected by the Board as chairman.
The Committee shall hold its meetings at such times and places as it shall
deem advisable. All determinations of the Committee shall be made by a
majority of its members either present in person or participating by
conference telephone at a meeting or by written consent. The Committee
may appoint a secretary and make such rules and regulations for the
conduct of its business as it shall deem advisable, and shall keep minutes
of its meetings.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any
award granted hereunder.
4. Eligibility. Awards may be granted to executive officers and other
employees, including officers and directors who are employees, and to
non-employee directors of and consultants to the Company, except as
proscribed by the Exchange Act or the Code. In determining the employees
to whom awards shall be granted and the number of shares to be covered
by each award, the Committee shall take into account the duties of the
respective employees, their present and potential contributions to the
success of the Company and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
5. Stock. The maximum number of shares of Common Stock reserved
for the grant of awards under the Plan shall be 540,000 shares, subject to
adjustment as provided in Section 11 hereof. Such shares may, in whole or
in part, be authorized but unissued shares or shares that shall have been or
may be reacquired by the Company. For purposes of this Section 5, where
the exercise price of an Option is paid in Common Stock pursuant to
Section 6(d) of the Plan, only the net number of additional shares issued
and which remain outstanding in connection with such exercise shall be
deemed "issued" for purposes of the Plan.
If any outstanding award under the Plan should, for any reason
expire, be canceled or be forfeited (other than in connection with the
exercise of a Stock Appreciation Right), without having been exercised in
full, the shares of Common Stock allocable to the unexercised, canceled or
terminated portion of such award shall (unless the Plan shall have been
terminated) become available for subsequent grants of awards under the
Plan; provided, however, that, in the case of the cancellation or forfeiture
of Restricted Stock with respect to which dividends have been paid or
accrued, the number of shares with respect to such Restricted Stock shall
not be available for subsequent grants hereunder unless, in the case of
shares with respect to which dividends were accrued but unpaid, such
dividends are also canceled or forfeited.
6. Terms and Conditions of Options. Each Option granted pursuant
to the Plan shall be evidenced by a written agreement between the
Company and the Grantee (the "Option Agreement"), in such form and
containing such terms and conditions as the Committee shall from time to
time approve, which Option Agreement shall comply with and be subject
to the following terms and conditions, unless otherwise specifically
provided in such Option Agreement.
(a) Number of Shares. Each Option Agreement shall state the number
of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically state
that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option.
(c) Option Price. Each Option Agreement shall state the Option
Price, which, in the case of an Incentive Stock Option, shall not be less
than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock covered by the Option on the date of grant, and in any case
shall not be less than the par value of a share of the Common Stock
covered by the Option. The Option Price shall be subject to adjustment as
provided in Section 11 hereof. The effective date as of which the
Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted.
(d) Medium and Time of Payment. Payment of the Option Price may
be made (as determined by the Board) (i) in cash, (ii) by certified check or
bank cashier's check payable to the order of the Company in the amount of
such Option Price, or, if permitted by the Committee: (iii) by promissory
note issued by the Grantee in favor of the Company in an amount equal to
such Option Price and payable on terms prescribed by the Committee and
which provides for the payment of interest at a fair market rate, as
determined by the Committee, (iv) by delivery of capital stock to the
Company having a Fair Market Value (determined on the date of exercise)
equal to the Option Price, (v) by agreeing with the Company to cancel a
portion of the exercisable Options issued hereunder to such Grantee having
a value (measured as the difference between the current Fair Market Value
(determined on the date of exercise) and the Option Price of the Common
Stock subject to such portion) equal to the Option Price; or (vi) by any
combination of the methods of payment described in (i) through (v) above.
(e) Term and Exercisability of Options. Each Option Agreement shall
provide the exercise schedule for the Option as determined by the
Committee; provided, however, that the Committee shall have the authority
to accelerate the exercisability of any outstanding Option at such time and
under such circumstances as it, in its sole discretion, deems appropriate.
Each Option Agreement shall provide an Option Term which shall be ten
(10) years from the date of the grant of the Option, unless otherwise
provided in Section 2 hereof or otherwise determined by the Committee.
The Option Term shall be subject to earlier expiration as provided in
Sections 6(f )and 6(g) hereof. An Option may be exercised, as to any or all
full shares of Common Stock as to which the Option has become
exercisable, by written notice delivered in person or by mail to any officer
of the Company, specifying the number of shares of Common Stock with
respect to which the Option is being exercised.
(f) Termination of Employee Grantee. Except as provided in this
Section 6(f) and in Section 6(g) hereof, an Incentive Stock Option granted
to an employee of the Company or a Subsidiary thereof may be exercised
only if the employee Grantee is then in the employ of the Company or a
Subsidiary thereof (or a corporation issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies (or a parent or
subsidiary corporation of such corporation)), and the Grantee has remained
continuously so employed since the date of grant of the Option. Unless a
shorter period is specified in the Option Agreement, in the event that the
employment of an employee Grantee shall terminate (other than by reason
of death, Disability or Retirement), all Incentive Stock Options of such
Grantee that are exercisable on the date of such termination shall continue
to be exercisable for three months after the date of such termination (or
such longer period as the Committee shall prescribe in the case of
Nonqualified Stock Options). Notwithstanding the foregoing provisions
of this Section 6(f), no Option may be exercised later than the expiration
of its Option Term. To the extent that any Option is not exercisable on the
date of such termination of employment, its Option Term shall expire on
such date.
(g) Termination of Employee Grantee by Death, Disability or
Retirement. If an employee Grantee shall die while employed by the
Company or a Subsidiary thereof, or within three months after the date of
termination of such Grantee's employment (or within such longer period
as the Committee may have provided for exercise of the Grantee's Options
after termination of the Grantee's employment pursuant to Section 6(f)
hereof, or if the employee Grantee's employment shall terminate by reason
of Disability, all Incentive Stock Options theretofore granted to such
Grantee (to the extent such Options are exercisable on the date the
Grantee's employment is terminated by such death or Disability) may be
exercised by the Grantee or by the Grantee's estate or by a person who
acquired the right to exercise such Options by bequest or inheritance or
otherwise by reason of death or Disability of the Grantee, at any time
within six months after the death or Disability of the Grantee. In the event
that an Option granted hereunder shall be exercised by the legal
representatives of a deceased or Disabled Grantee, written notice of such
exercise shall be accompanied by a certified copy of letters testamentary
or equivalent proof of the right of such legal representatives to exercise
such Option. In the event that the employment of an employee Grantee
shall terminate on account of such Grantee's Retirement, all Incentive
Stock Options of such Grantee (to the extent such Options are exercisable
on the date of the Grantee's retirement) may be exercised at any time
within three months after the date of such Retirement. Notwithstanding the
foregoing provisions of this Section 6(g), no Option may be exercised later
than the expiration of its Option Term. To the extent that any Option is not
exercisable on the date of such termination of employment by reason of
death, Disability or Retirement, its Option Term shall expire on such date.
(h) Other Provisions. The Option Agreements evidencing awards
under the Plan shall contain such other terms and conditions not
inconsistent with the Plan as the Committee may determine.
7. Nonqualified Stock Options. Options granted pursuant to this
Section 7 are intended to constitute Nonqualified Stock Options and shall
be subject only to the general terms and conditions specified in Section 6
hereof. At the discretion of the Committee, the early termination
provisions contained in Section 6 hereof may be waived by the Committee
as evidenced by their exclusion from any Option Agreement.
8. Incentive Stock Options. Options granted pursuant to this Section
8 are intended to constitute Incentive Stock Options and shall be subject to
the following special terms and conditions, in addition to the general terms
and conditions specified in Section 6 hereof.
(a) Value of Shares. The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the shares of Common
Stock with respect to which Incentive Stock Options granted under this
Plan (and all other plans of an employee Grantee's employer corporation
and its parent and subsidiary corporations) become exercisable for the first
time by the Grantee during any calendar year shall not exceed $100,000.
To the extent that the grant of an Option results in the aggregate Fair
Market Value (determined at the time of grant) of the Common Stock (or
other capital stock of the Company or any subsidiary) with respect to
which Incentive Stock Options are exercisable for the first time by a
Grantee during any calendar year (under all plans of the Company and
subsidiary corporations) to exceed $100,000, such Option shall be treated
as a Nonqualified Stock Option to the extent of such excess. The
provisions of this subsection shall be construed and applied in accordance
with Section 422(d) of the Code and the regulations, if any, promulgated
thereunder. Nothing contained in the Plan shall be construed to limit the
right of the Committee to grant an Incentive Stock Option and a
Nonqualified Stock Option concurrently under a single stock option
Agreement so long as each Option is clearly identified as to its status.
(b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one-hundred-ten percent (110%) of the Fair Market Value of a share
of Common Stock on the date of grant of such Incentive Stock Option, and
(ii) the Option Term shall not exceed five (5) years from the date of grant
of such Incentive Stock Option.
(c) Disqualifying Dispositions of Incentive Stock Options. If
Common Stock acquired upon exercise of any Incentive Stock Option is
disposed of in a disposition that, under Section 422 of the Code,
disqualifies the Grantee from the application of Section 421(a) of the Code,
the Grantee immediately before such disposition of Common Stock shall
comply with any requirements imposed by the Company in order to enable
the Company to secure the related income tax deduction to which it is
entitled in such event.
9. Stock Appreciation Rights. The Committee shall have authority to
grant a Stock Appreciation Right to the employee Grantee of any Option
under the Plan with respect to all or some of the shares of Common Stock
covered by such related Option. A Stock Appreciation Right shall, except
as provided in this Section 9, be subject to the same terms and conditions
as the related Option. Each Stock Appreciation Right granted pursuant to
the Plan shall be evidenced by a written Agreement between the Company
and the Grantee in such form as the Committee shall time to time approve.
(a) Time of Grant. A Stock Appreciation Right may be granted either
at the time of grant, or at any time thereafter during the term of the Option;
provided, however, that Stock Appreciation Rights related to Incentive
Stock Options may only be granted at the time of grant of the related
Option.
(b) Payment. A Stock Appreciation Right shall entitle the holder
thereof, upon exercise of the Stock Appreciation Right or any portion
thereof, to receive payment of an amount computed pursuant to Section
9(d).
(c) Exercise. A Stock Appreciation Right shall be exercisable at such
time or times and only to the extent that the related Option is exercisable,
and will not be transferable except to the extent the related Option may be
transferable. A Stock Appreciation Right granted in connection with an
Incentive Stock Option shall be exercisable only if the Fair Market Value
of a share of Common Stock on the date of exercise exceeds the purchase
price specified in the related Incentive Stock Option.
(d) Amount Payable. Upon the exercise of a Stock Appreciation
Right, the Grantee shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Common
Stock on the date of exercise of such Stock Appreciation Right over the
Option Price under the related Option, by (ii) the number of shares of
Common Stock as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right
by including such a limit at the time it is granted.
(e) Treatment of Related Options and Stock Appreciation Rights
Upon Exercise. Upon the exercise of a Stock Appreciation Right, the
related Option shall be canceled to the extent of the number of shares of
Common Stock as to which the Stock Appreciation Right is exercised and
upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the Stock Appreciation Right shall be canceled to the
extent of the number of shares of Common Stock as to which the Option
is exercised or surrendered.
(f) Method of Exercise. Stock Appreciation Rights shall be exercised
by a Grantee only by a written notice delivered in person or by mail to the
Secretary of the Company, specifying the number of shares of Common
Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and
the Option Agreement evidencing any related Option to the President or
any Vice President of the Company who shall endorse thereon a notation
of such exercise and return such Agreements to the Grantee.
(g) Form of Payment. Payment of the amount determined under
Section 9(d), may be made solely in whole shares of Common Stock in a
number determined based upon their Fair Market Value on the date of
exercise of the Stock Appreciation Right or, alternatively, at the sole
discretion of the Committee, solely in cash, or in a combination of cash and
shares of Common Stock as the Committee deems advisable. If the
Committee decides to make full payment in shares of Common Stock, and
the amount payable results in a fractional share, payment for the fractional
share will be made in cash. Notwithstanding the foregoing, to the extent
required by Rule 16b-3 no payment in the form of cash may be made upon
the exercise of a Stock Appreciation Right pursuant to Section 9(d) to an
Insider, unless the exercise of such Stock Appreciation Right is made
during the period beginning on the third business day and ending on the
twelfth business day following the date of release for publication of the
Company's quarterly or annual statements of earnings.
10. Restricted Stock. The Committee may award shares of Restricted
Stock to any eligible employee. Each award of Restricted Stock under the
Plan shall be evidenced by a written Agreement between the Company and
the Grantee, in such form as the Committee shall from time to time
approve, and shall comply with the following terms and conditions (and
with such other terms and conditions not inconsistent with the terms of this
Plan as the Committee, in its discretion, shall establish):
(a) Number of Shares. Each Agreement shall state the number of
shares of Restricted Stock to be subject to an award.
(b) Restrictions. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of,
except by will or the laws of descent and distribution, for such period as
the Committee shall determine from the date on which the award is granted
(the "Restricted Period"). The Committee may also impose such other
restrictions and conditions on the shares as it deems appropriate including
the satisfaction of performance criteria. Certificates for shares of stock
issued pursuant to Restricted Stock awards shall bear an appropriate legend
referring to such restrictions, and any attempt to dispose of any such shares
of stock in contravention of such restrictions shall be null and void and
without effect. During the Restricted Period, such certificates shall be held
in escrow by an escrow agent appointed by the Committee. In determining
the Restricted Period of an award, the Committee may provide that the
foregoing restrictions shall lapse with respect to specified percentages of
the awarded shares on successive anniversaries of the date of such award.
(c) Forfeiture. Subject to such exceptions as may be determined by
the Committee, if the Grantee's continuous employment with the Company
or any Subsidiary shall terminate for any reason prior to the expiration of
the Restricted Period of an award, any shares remaining subject to
restrictions (after taking into account the provisions of Section 10(e) hereof
shall thereupon be forfeited by the Grantee and transferred to, and
reacquired by, the Company or a Subsidiary at no cost to the Company or
Subsidiary.
(d) Ownership. During the Restricted Period the Grantee shall
possess all incidents of ownership of such shares, subject to Section 10(b)
hereof, including the right to receive dividends with respect to such shares
and to vote such shares.
(e) Accelerated Lapse of Restrictions. The Committee shall have the
authority (and the Agreement may, but need not, so provide) to cancel all
or any portion of any outstanding restrictions prior to the expiration of the
Restricted Period with respect to any or all of the shares of Restricted
Stock awarded on such terms and conditions as the Committee shall deem
appropriate.
11. Effect of Certain Changes. In the event of any extraordinary
dividend, stock dividend, recapitalization, merger, consolidation, stock
split, warrant or rights issuance, or combination or exchange of such
shares, or other similar transactions, the number of shares of Common
Stock available for awards, the number of such shares covered by
outstanding awards, and the price per share of Options or the applicable
market value of Stock Appreciation Rights shall be equitably adjusted by
the Committee to reflect such event and preserve the value of such awards;
provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. If the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or substantially
all of the assets of the Company shall be sold or exchanged, a Grantee shall
at the time of issuance of the stock under such a corporate event, be
entitled to receive upon the exercise of his award the same number and
kind of shares of stock or the same amount of property, cash or securities
as he would have been entitled to receive upon the occurrence of any such
corporate event as if he had been, immediately prior to such event, the
holder of the number of shares covered by his award and that his award
shall have been fully vested at the time of such event; provided, however,
that in any of such events the Committee shall have the discretionary
power to take any action necessary or appropriate to prevent Incentive
Stock Options granted hereunder from being disqualified as Incentive
Stock Options. Any adjustment under this Section shall apply
proportionately to only the unexercised portion of any award granted
hereunder. If fractions of a share would result from any such adjustment,
the adjustment shall be revised to the next lower whole number of shares.
12. Surrender and Exchange of Awards. The Committee may permit
the voluntary surrender of all or a portion of any Option granted under the
Plan to an employee or any option granted under any other plan, program
or arrangement of the Company or any Subsidiary ("Surrendered Option"),
to be conditioned upon the granting to the employee Grantee of a new
Option for the same number of shares of Common Stock as the
Surrendered Option, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Grantee. Subject to
the provisions of the Plan, such new Option may be an Incentive Stock
Option or a Nonqualified Stock Option and shall be exercisable at the
price, during such period and on such other terms and conditions as are
specified by the Committee at the time the new Option is granted. The
Committee may also grant Restricted Stock in exchange for Surrendered
Options to any holder of such Surrendered Option.
13. Period During Which Awards May Be Granted. Awards may be
granted pursuant to the Plan from time to time within a period of ten (10)
years from the date the Plan is adopted by the Board, or the date the Plan
is approved by the stockholders of the Company, whichever is earlier.
14. Nontransferability of Awards. Unless otherwise agreed to by the
Company, Awards granted under the Plan shall not be transferable
otherwise than by will or by the laws of descent and distribution, and
awards may be exercised or otherwise realized, during the lifetime of the
Grantee, only by the Grantee or by his guardian or legal representative. No
award granted under the Plan shall be subject to execution, attachment or
other process.
15. Approval of Shareholders. The Plan shall take effect as of the
date determined by the Board in its adoption of the Plan but the Plan (and
any grants of awards made prior to the shareholder approval described in
this sentence shall be subject to the approval of the holder(s) of a majority
of the shares of voting securities of the Company present, or represented,
and entitled to vote at the Company's next Annual Meeting of
Stockholders, which approval must occur within twelve months of the date
the Plan is adopted by the Board.
16. Agreement by Employee Grantee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of exercise of an Option
or Stock Appreciation Right or the expiration of the Restricted Period
(each a "Tax Event"), each employee Grantee shall agree that, no later than
the date of the Tax Event, the Grantee will pay to the Company or make
arrangements satisfactory to the Committee regarding payment of any
federal, state or local taxes of any kind required by law to be withheld upon
the Tax Event. Alternatively, the Committee may provide that an employee
Grantee may elect, to the extent permitted or required by law, to have the
Company deduct federal, state and local taxes of any kind required by law
to be withheld upon the Tax Event from any payment of any kind due to
the Grantee. The withholding obligation may be satisfied by the
withholding or delivery of Common Stock.
17. Amendment and Termination of the Plan.
(a)The Board at any time and from time to time may suspend,
terminate, modify or amend the Plan; provided, however, that an
amendment which requires stockholder approval in order for the Plan to
continue to comply with Rule 16b-3 or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the
requisite vote of stockholders. Except as provided in Section 11 hereof, no
suspension, termination, modification or amendment of the Plan may
adversely affect any award previously granted, unless the written consent
of the Grantee is obtained.
(b) The Plan may from time to time be terminated, modified or
amended by the affirmative vote of the holders of a majority of the shares
of the Company's Common Stock present, or represented, and entitled to
vote at a meeting of stockholders duly held in accordance with applicable
state law.
(c) The Board of the Company may at any time terminate the Plan
or from time to time make such modifications or amendments of the Plan
as it may deem advisable; provided, however, that the Board shall not (i)
modify or amend the Plan in any way that would disqualify any Option
issued pursuant to the Plan as an Incentive Stock Option, or (ii) without
approval by the affirmative vote of the holders of a majority of the shares
of the Company's Common Stock present, or represented, and entitled to
vote at a meeting of stockholders duly held in accordance with applicable
state law increase (except as provided by Section 11) the maximum number
of Common Shares as to which awards may be granted under the Plan or
change the class of persons eligible to receive an award under the Plan.
(d) No termination, modification or amendment of the Plan may
adversely affect the rights conferred by any awards without the consent of
the Grantee thereof.
18. Rights as a Shareholder. Except as provided in Section 10(d)
hereof, a Grantee of an award (or any individual acquiring rights under
such award from the Grantee) shall have no rights as a shareholder with
respect to any shares covered by the award until the date of the issuance of
a stock certificate for such shares to the Grantee (or such individual). No
adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property) or distribution of other rights for
which the record date is prior to the date such stock certificate is issued,
except as provided in Section 11 hereof.
19. No Rights to Employment. Nothing in the Plan or in any award
granted or Agreement entered into pursuant hereto shall confer upon any
Grantee the right to continue in the employ of, or a consultant relationship
with, the Company or any Subsidiary or to be entitled to any remuneration
or benefits not set forth in the Plan or such Agreement or to interfere with
or limit in any way the right of the Company or any such Subsidiary to
terminate such Grantee's employment or retention as a consultant. Awards
granted under the Plan shall not be affected by any change in duties or
position of a Grantee as long as such Grantee continues to be employed by,
or in a consultant relationship with, the Company or any Subsidiary.
20. Beneficiary. A Grantee may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation.
If no designated beneficiary survives the Grantee, the executor or
administrator of the Grantee's estate shall be deemed to be the Grantee's
beneficiary.
21. Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Delaware.
22. Effective Date and Duration of the Plan. This Plan shall be
effective as of the date determined by the Company, subject to the approval
of the Plan by the stockholders of the Company, and shall terminate on the
tenth anniversary of such date, unless earlier terminated pursuant to
Section 17 hereof. No awards shall be granted after termination of the Plan.
23. Leave of Absence. For purposes of the Plan, an individual who
is on military or sick leave or other bona fide leave of absence (such as
temporary employment by the United States or any state government) shall
be considered as remaining in the employ of the Company or of a
subsidiary corporation, if any, for 90 days or such longer period as shall be
determined by the Committee.
24. Further Conditions of Exercise.
(a) Unless prior to the exercise of an award, the Common Stock
issuable upon such exercise are the subject of a registration statement filed
with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), and there is then in effect
a prospectus filed as part of such registration statement meeting the
requirements of Section 10(a)(3) of the Securities Act, the acceptance of
such award and the notice of exercise with respect to such award shall be
accompanied by a representation or agreement deemed hereunder to have
been made by the Grantee to the Company to the effect that such shares
are being acquired for investment only and not with a view to the resale or
distribution thereof, or such other documentation as may be required by the
Company, unless, in the opinion of counsel to the Company, such
representation, agreement or documentation is not necessary to comply
with the Securities Act.
(b) Anything in subsection (a) of this Section 24 to the contrary
notwithstanding, the Company shall not be obligated to issue or sell any
Common Stock until they have been listed on each securities exchange on
which the Common Stock may then be listed and until and unless, in the
opinion of counsel to the Company, the Company may issue such shares
pursuant to a qualification or an effective registration statement, or an
exemption from registration, under such state and federal laws, rules or
regulations as such counsel may deem applicable. The Company shall use
reasonable efforts to effect such listing, qualification and registration, as
the case may be.
25. Formula Grants and Certain Restrictions under 1992 Stock
Option Plan. The Company's obligation to issue stock options pursuant to
the formula specified in Section 4(c) of the Company's Amended and
Restated 1992 Stock Option Plan, and any prohibition on making
discretionary grants of stock options to members of the Company's Stock
Option Committee contained in Section 4(d) of the Company's Amended
and Restated 1992 Stock Option Plan, are hereby terminated , as of the
date that this Plan becomes effective.<PAGE>
[PROXY CARD - FRONT]
PROXY RESEARCH FRONTIERS INCORPORATED
240 Crossways Park Drive, Woodbury, New York 11797-2033
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - June 11, 1998
The undersigned hereby appoints Robert L. Saxe and Joseph
M. Harary, or either of them, as Proxy or Proxies of the undersigned
with full power of substitution to attend and to represent the
undersigned at the Annual Meeting of Stockholders of Research
Frontiers Incorporated to be held on June 11, 1998, and at any
adjournments thereof, and to vote thereat the number of shares of
stock of the Company the undersigned would be entitled to vote if
personally present, in accordance with the instructions set forth on
the reverse side hereof. Any proxy heretofore given by the
undersigned with respect to such stock is hereby revoked.
Dated:____________________________________________________, 1998
__________________________________________________________
__________________________________________________________
Please sign exactly as name
appears above. For joint
accounts, each joint owner
must sign. Please give full title
if signing in a representative
capacity.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE<PAGE>
[PROXY CARD - BACK]
1. ELECTION OF CLASS II DIRECTOR
NOMINEE: Bernard D. Gold
[ ] FOR nominee listed above.
[ ] WITHHOLD AUTHORITY to vote for nominee listed above.
2. RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.
[ ] FOR RATIFICATION [ ] AGAINST RATIFICATION [ ] ABSTAIN
3. ADOPTION OF THE COMPANY'S 1998 STOCK OPTION PLAN.
[ ] FOR ADOPTION [ ] AGAINST ADOPTION [ ] ABSTAIN
4. In their discretion, upon such other matters as may
properly come before the meeting. If no specification is
made, this proxy will be voted FOR the nominee listed
above and FOR APPROVAL of Proposals 2 and 3.
Please indicate whether or not you plan to attend the Annual
Meeting on Thursday, June 11, 1998.
Yes [ ] No [ ]
