SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Check the appropriate box:
/ / Preliminary Proxy Statement
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14a-6(e)(2))
/X/ Definitive Proxy Statement
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/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Avitar, Inc. (File No. 0-20316)
- - ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ No fee required
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<PAGE>
AVITAR, INC.
65 Dan Road
Canton, Massachusetts 02021
May 21, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the
Stockholders of Avitar, Inc., a Delaware corporation ("Avitar") at Avitar's
offices at 65 Dan Road, Canton, Massachusetts 02021, on June 23, 1999 at 11:00
a.m.
At the meeting you will be asked to consider and vote upon (1) the
election of five Directors to Avitar's Board of Directors; (2) a Board of
Directors' proposal to increase the number of authorized shares of Avitar's
Common Stock from 25,000,000 to 75,000,000; (3) appointment of BDO Seidman, LLP
as Avitar's Auditors for the fiscal year ending September 30, 1999; and (4) any
other business that properly comes before the meeting or any adjournments or
postponements thereof.
Your vote is important. We urge you to complete, sign, date and return
the enclosed proxy card promptly in the accompanying prepaid envelope. You may,
of course, attend the Meeting and vote in person, even if you have previously
returned your proxy card.
Sincerely yours,
Peter P. Phildius,
Chairman and Chief Executive Officer
<PAGE>
Avitar, Inc.
65 Dan Road
Canton, Massachusetts 02021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 23, 1999.
To the Stockholders of
Avitar, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Avitar,
Inc., a Delaware corporation ("Avitar") will be held at 11:00 a.m., local time,
on June 23, 1999 at Avitar's offices at 65 Dan Road, Canton, Massachusetts, for
the following purposes:
(1) To consider and vote upon the election of the Board of Directors
consisting of five persons to serve until the next annual meeting of the
stockholders;
(2) To consider and vote upon an amendment to Avitar's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
25,000,000 to 75,000,000;
(3) To consider and vote upon a proposal to ratify the selection of BDO
Siedman, LLP as Avitar's independent auditors for the fiscal year ending
September 30, 1999;
(4) To conduct such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only record holders of Common Stock at the close of business on May 7, 1999
are entitled to notice of and to vote at the Annual Meeting and any adjournments
or postponements thereof.
To ensure that your vote will be counted, please complete, sign, date
and return the Proxy in the enclosed prepaid envelope whether or not you plan to
attend the Annual Meeting. You may revoke your proxy by notifying the Secretary
of the Company in writing at any time before it has been voted at the Annual
Meeting.
By Order of the Board of Directors
Jay C. Leatherman
Secretary, Avitar, Inc.
May 21, 1999
Canton, Massachusetts
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING.
<PAGE>
Avitar, Inc.
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 1999
-----------------------
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF AVITAR, INC.
If properly signed and returned and not revoked, the proxy will be
voted in accordance with the instructions it contains. The persons named in the
accompanying proxy will vote the proxy for the Board of Directors' slate of
directors and for the other matters listed on the proxy as recommended by the
Board of Directors unless contrary instructions are given. At any time before it
is voted, each proxy granted may be revoked by the stockholder by a later dated
proxy, by written revocation addressed to the Secretary of Avitar, Inc. at the
address below or by voting by ballot at the Annual Meeting.
The Company's principal executive offices are located at 65 Dan Road,
Canton, Massachusetts 02021. This proxy statement and the accompanying proxy are
being sent to stockholders on or about May 21, 1999. ANY PROXY MAY BE REVOKED IN
PERSON AT THE ANNUAL MEETING, BY SUBMITTING A PROXY DATED LATER THAN THE PROXY
TO BE REVOKED OR BY NOTIFYING THE SECRETARY OF THE COMPANY IN WRITING AT ANY
TIME PRIOR TO THE TIME THE PROXY IS VOTED.
VOTING SECURITIES
The Board has fixed the close of business on May 7, 1999 as the record
date (the "Record Date") for determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournment thereof. Only
stockholders of record at the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. On the Record Date, the
Company had outstanding 21,264,156 shares of Common Stock and 1,851,437 shares
of Preferred Stock, of which 1,700,987 were shares of Series B Preferred Stock.
Stockholders are entitled to one vote for each share of either Common Stock or
Series B Preferred Stock on the election of members of the Board of Directors,
the amendment of the Certificate of Incorporation to increase the authorized
shares of Common Stock, ratification of the appointment of independent auditors
and other business as may properly come before the meeting or any adjournments
thereof. The holders of a majority of the outstanding voting shares constitute a
quorum. Abstentions from voting and broker non-votes on a particular Proposal
will be counted for purposes of determining the presence of a quorum but will
not be counted as affirmative or negative votes on the Proposals. Accordingly,
abstentions and broker non-votes will not have any effect on the election of
directors, but will have the effect of voting against the other Proposals.
As of May 7, 1999, the directors and executive officers of Avitar
together with their respective affiliates, held 3,681,219 shares of Common Stock
and Series B Preferred Stock, representing 16.1 % of the shares eligible to vote
at the Annual Meeting.
ACTION TO BE TAKEN UNDER PROXY
All proxies for stockholders in the accompanying form that are properly
executed and returned will be voted at the Annual Meeting and any adjournments
thereof in accordance with any specifications thereon or, if no specifications
are made, will be voted for the election of the five nominees described herein,
the proposed increase in the number of authorized shares of Common Stock from
25,000,000 to 75,000,000, and for ratification of the appointment of independent
auditors.
SOLICITATION
Avitar will bear the entire cost of the solicitation of proxies from
its stockholders, including preparation, assembly, printing and mailing of this
Proxy Statement, the proxy card and any additional information furnished to
stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares
beneficially owned by others to forward to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, facsimile,
telegram or personal solicitation by directors, officers or other regular
employees of Avitar. No additional compensation will be paid to such persons for
such services. Avitar may also employ the services of a professional
solicitation company to assist with solicitation of stockholders; but as of May
21, 1999 Avitar has not determined to retain a solicitation company. If such a
company were subsequently retained, Avitar would bear the entire cost.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Five (5) directors will be elected to hold office until the next Annual
Meeting of Stockholders and until their successors have been elected and duly
qualified. The persons named on the accompanying proxy will vote all shares for
which they have received proxies for the election of the nominees named below
unless contrary instructions are given. In the event that any nominee should
become unavailable, shares will be voted for a substitute nominee unless the
number of directors constituting a full board is reduced. Directors are elected
by plurality vote.
NOMINEES
The name, age and position with Avitar of each nominee for
director is listed below, followed by summaries of their background and
principal occupations.
Name Age Title
Peter P. Phildius 69 Chairman of the Board/Chief Executive Officer
Douglas W. Scott (1) 52 President and Chief Operating Officer/Director
Neil R. Gordon (1)(2) 50 Director
James Groth (1)(2) 60 Director
Charles R. McCarthy, Jr.(3) 60 Director
- ------------------------------
1. Member of Audit Committee.
2. Member of Compensation Committee.
3. Elected to the Board on February 19, 1999
PETER P. PHILDIUS
Mr. Phildius has been Chairman of the Board of Directors since October 1990
and Chief Executive Officer since July 1996. He has been a general partner in
Phildius Kenyon & Scott, a partnership ("PKS") since that firm's founding in
1985. Prior to 1985, Mr. Phildius was an independent consultant and Chairman and
co-founder of Nutritional Management, Inc., a company that operates weight loss
clinics (1983 - 1985), President and Chief Operating Officer of Delmed, Inc., a
medical products company (1982 - 1983), President and Chief Operating Officer of
National Medical Care, Inc., a dialysis and medical products company (1979-1981)
and held a variety of senior management positions with Baxter Laboratories, Inc.
("Baxter"), a hospital supply company and the predecessor of Baxter Healthcare
Corporation. During the last eight years of his 18 year career at Baxter (1961 -
1979), Mr. Phildius was Group Vice President and President of the Parenteral
Division, President of the Artificial Organs Division and President of the
Fenwal Division.
DOUGLAS W. SCOTT
Mr. Scott has been the Chief Operating Officer since July 1996, was the
Chief Executive Officer from August 1989 until July 1996 and has been a director
since August 1989. Mr. Scott has been a general partner in PK&S since its
founding in 1985. Prior to 1985, Mr. Scott was Executive Vice President of
Nutritional Management, Inc. (1983 - 1985); Senior Vice President, Operations of
Delmed, Inc. (1982 - 1983); Vice President, Quality Assurance of Frito-Lay,
Inc., a consumer products company (1980 - 1982); and held several senior
positions at Baxter from 1970 - 1980. The last two of these senior positions at
Baxter were General Manager of the Vicra Division and General Manager of Irish
Operations. Mr. Scott is also a director of Candela Laser Corporation, a
publicly-traded company in the business of manufacturing and marketing medical
lasers. Mr. Scott received an M.B.A. from Harvard Business School.
JAMES GROTH
Mr. Groth has served as a director since January 1990. Mr. Groth has been
President of Mountainside Corporation, a provider of corporate sponsored
functions, for over the past 15 years.
NEIL R. GORDON
Mr. Gordon has served as a director since June 1997. He has been President
of N.R. Gordon & Company, Inc., a company that provides a broad range of
financial consulting services, since 1995. From 1981 to 1995, he was associated
with Ekco Group, Inc. and served as its Treasurer from 1987 to 1995. Mr. Gordon
has also served as Director of Financing and Accounting for Empire of Carolina,
Inc. He received a Bachelor of Science Degree from Pennsylvania State
University.
CHARLES R. McCARTHY, JR.
Mr. McCarthy was elected as a director in February 1999. He has been a
counsel in the Washington D.C. law firm, O'Connor & Hannan, since 1993. He is
currently a director of Virtual Gaming Tech Inc. and Am Tech Group. Previously,
Mr. McCarthy was General Counsel to the National Association of Corporate
Directors, served as a trial attorney with the Securities and Exchange
Commission, was Blue Sky Securities Commissioner for the District of Columbia
and was a law professor teaching securities law topics and served as a Board
member of and counsel to a number of public companies over the last 20 years.
NUMBER OF DIRECTORS
The Company's Bylaws allow the Board to fix the number of Board members
between 3 and 7. The number has been fixed, at present, at 5, but the Board can
increase the number to 7 at anytime without stockholder approval. There are no
family relationships between any Director or Executive Officer of Avitar and any
other Director or Executive Officer of Avitar.
TERM
Directors hold office for a period of one year from the Annual Meeting
of Stockholders at which they are elected or until their successors are duly
elected and qualified. Officers are appointed by the Board of Directors and hold
office at the will of the Board.
BOARD MEETINGS AND COMMITTEES
The Board held 2 meetings during the fiscal year ended September 30, 1998.
The Board has two standing committees: the Audit Committee and the
Compensation Committee. The Board does not have a standing nominating committee
or any committee performing the function of such a committee. During fiscal year
1998, each Board member attended 100% of the aggregate number of meetings of the
Board and the Committee of the Board on which he served.
The Audit Committee meets with the independent auditors usually annually to
review the results of the annual audit and discuss the financial statements;
recommends to the Board the independent auditors to be retained; and receives
and considers the accountants' comments as to controls, adequacy of staff and
management performance and procedures in connection with audit and financial
records. The Audit Committee, comprised of Mr. Scott, Mr. Gordon and Mr. Groth,
did not hold a meeting in fiscal year 1998; but held one meeting in January
1999.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation, awards stock options to employees and
consultants and otherwise determines compensation levels and performs such other
functions regarding compensation as the Board may delegate. The Compensation
Committee, comprised of Mr. Gordon and Mr. Groth, did not hold a meeting in
fiscal year1998; but held one meeting in January 1999.
DIRECTOR COMPENSATION
The Company presently pays its non-management directors $500 for each Board
and Committee meeting which they attend plus a travel fee of $250 if they must
travel outside of the area to attend the meeting. In consideration of the fact
that Avitar does not pay its non-management directors an annual retainer, Avitar
adopted a directors' plan (the "Directors' Plan"), which was approved by the
Stockholders on May 18, 1995. Under the Directors' Plan, each non-management
director is to be granted options covering 5,000 shares of the Common Stock
initially upon election of the Board, and each year in which he/she is selected
to serve as a director. In March 1997, each non-management director received a
grant of 5,000 options for calendar year 1997 with an exercise price of $0.83
per share, representing the fair market value of the Common Stock on the date of
such grant. During fiscal year 1998, all options described above were canceled
and replaced with options that have an exercise price of $.25 per share with no
change in the expiration dates. Also during fiscal year 1998, the non-management
directors were each granted options to purchase 70,000 shares of the Common
Stock at an exercise price of $.25 per share until February 4, 2008. These new
options vest and become exercisable on the basis of 50% on February 4, 1999 and
50% on February 4, 2000.
For information on compensation to management directors, see
"Management-Executive Compensation" below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Common Stock
beneficially owned as of May 7, 1999 by (i) each person believed by Avitar to be
the beneficial owner of more than 5% of the Common Stock; (ii) each director;
(iii) the Chief Executive Officer and its four most highly compensated executive
officers (other than the Chief Executive Officer) who earn over $100,000 a year
(of which there was one); and (iv) all directors and executive officers as a
group. Beneficial ownership by the stockholders has been determined in
accordance with the rules promulgated under Section 13(d) of the Securities
Exchange Act of 1934, as amended. All shares of the Common Stock are owned both
of record and beneficially, unless otherwise indicated.
Name and Address of Beneficial Owner(1) No. Owned %
- ---------------------------------------- --------- ------
Peter P. Phildius(2)(3)(5)(14) 4,118,822 18.3
Douglas W. Scott(2)(4)(5) 2,986,215 13.4
Phildius, Kenyon & Scott("PK&S")(2)(5) 1,342,460 6.3
James Groth(2)(6)(9) 129,699 *
Neil R.Gordon(2)(7) 203,333 *
Charles R. McCarthy(2)(10) 172,620 *
GIN99 LLC (11) 9,764,500 31.7
David Brown (12) 4,950,000 19.0
Alan Aker (13) 1,439,160 6.4
All directors and executive officers
as a group(3)(4)(5)(6)(7)(8)(9) 6,674,457 27.1
* Indicates beneficial ownership of less than one (1%) percent.
(1) Information with respect to holders of more than five (5%) percent of the
outstanding shares of the Common Stock was derived from, to the extent
available, Schedules 13D and the amendments thereto on file with the Commission
and the Company's records regarding Preferred Stock issuances.
(2) The business address of such persons, for the purpose hereof, is c/o Avitar,
Inc., 65 Dan Road, Canton, MA 02021.
(3) Includes 1,577,530 shares of the Common Stock, options and warrants to
purchase 1,007,492 shares of the Common Stock and preferred stock convertible
into 191,340 shares of the Common Stock. Also includes the securities of the
Company beneficially owned by PK&S as described below in Note 5.
(4) Includes 639,911 shares of the Common Stock, options and warrants to
purchase 812,504 shares of the Common Stock and preferred stock convertible into
191,340 shares of the Common Stock. Also includes the securities of Avitar
beneficially owned by PK&S as described below in Note 5.
(5) Represents ownership of 1,099,895 shares of the Common Stock and options and
warrants to purchase 242,565 shares of the Common Stock. PK&S is a partnership
of which Mr. Phildius and Mr. Scott are general partners.
(6) Includes 74,699 shares of the Common Stock and options to purchase 55,000
shares of the Common Stock.
(7) Includes 68,333 shares of the Common Stock, warrants to purchase 100,000
shares of the Common Stock granted to such director under a consulting agreement
to provide services to the Company and options to purchase 35,000 shares of the
Common Stock.
(8) Includes 82,738 shares of the Common Stock, options and warrants to purchase
255,000 shares of the Common Stock and Preferred Stock convertible into 68,490
shares of the Common Stock beneficially owned by Jay C. Leatherman, Jr., Carl
Good and William Martin, executive officers of the Company.
(9) Does not include 10,929 shares of the Common Stock owned by a trust
established for Mr. Groth's children, all of which he disclaims beneficial
ownership.
(10) Represents 2,000 shares of the Common Stock, preferred stock convertible
into 70,620 shares of the Common Stock and warrants to purchase 100,000 shares
of the Common Stock.
(11) The address for such entity is c/o Rogers & Wells LLP, 200 Park Avenue, New
York, NY 10166. Represents preferred stock convertible into 7,364,500 shares of
the Common Stock and warrants to purchase 2,400,000 shares of the Common Stock.
(12) The business address for such person is 4101 Evans Avenue, Fort Meyers, FL
33901. Represents preferred stock convertible into 3,750,000 shares of the
Common Stock and warrants to purchase 1,200,000 shares of the Common Stock.
(13) The business address for such person is 1445 Northwest Boca Raton, Boca
Raton, FL 33432. Represents preferred stock convertible into 839,160 shares of
the Common Stock and warrants to purchase 600,000 shares of the Common Stock.
(14) Does not include 100,000 shares of the Common Stock owned by Mr. Phildius's
wife, all of which he disclaims beneficial ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act ("SEC") of 1934 requires the
officers and directors, and persons who own more than 10% of a registered class
of equity securities to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish Avitar with copies of all
Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, Avitar believes that, during fiscal year 1998, all filing
requirements applicable to its officers, directors and greater than 10 %
stockholders were complied with except the following failures to file timely
reports required by Section 16(a):
* Two reports (Form 4) covering 4 transactions were filed late by Peter
Phildius.
* Two reports (Form 4) covering 5 transactions were filed late by Douglas Scott.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PK&S, a 6.3% beneficial owner of Avitar, provided consulting services to
predecessors of Avitar from September 1989 to May 1995. On May 28, 1992, PK&S
entered into a written consulting agreement pursuant to which PK&S provided the
services of each of Messrs. Phildius and Scott for approximately 20 hours per
week. Under the terms of the current employment agreements with Peter Phildius
and Douglas Scott described below, Avitar pays their salaries and related
expenses directly to PK&S. The aggregate of consulting fees, salaries, fringe
benefits and reimbursement of expenses paid to PK&S by Avitar for fiscal years
1998, 1997 and 1996 totaled $335,137, $318,160 and $311,371 respectively.
In connection with bridge loans totaling $375,000 made by PK&S to Avitar,
PK&S, on September 30, 1995, exchanged its bridge note, and accrued interest
thereon, for 388,856 shares of Series A Convertible Preferred Stock. Each share
of Series A Convertible Preferred Stock entitled PK&S to convert it at any time
into three shares of Common Stock and receive dividends in an amount equal to
110% of any dividends paid on the Common Stock into which each share is
convertible. These shares of Series A Convertible Preferred Stock were converted
into 1,166,568 shares of Common Stock in February 1997.
On May 19, 1995, the PK&S Consulting Agreement ended and was replaced by
the Employment Agreements with Messrs. Phildius and Scott
(See"Management-Employment Agreements" below). As requested by Messrs. Phildius
and Scott and approved by the Board of Directors, the salary and benefits
provided under the Employment Agreements are paid directly to PK&S.
In July 1995, Avitar entered into a consulting agreement with Richard
Freemen, M.D., the son-in-law of Avitar's Chairman and Chief Executive Officer.
Under this agreement, Dr. Freemen was to act as Chairman of the Medical Advisory
Board of a subsidiary and was compensated $5,000 per month for the duration of
the agreement. In addition, Dr. Freemen received options to purchase 20,000
shares of Common Stock. The consulting portion of this agreement was canceled in
February 1997 and an issuance of 100,000 shares of Common Stock was made to Dr.
Freeman to cover the total compensation earned under this agreement.
From April-to-October 1997, officers and affiliates of the Company made
loans to Avitar totaling $428,723 with interest payable at 10% per annum. In
November 1997, loans in the total amount of $60,000 (plus the accrued interest
thereon) due on or before January 31, 1998 were repaid. In March 1998, the
remaining loans totaling $368,723 plus accrued interest thereon of approximately
$31,000 were repaid by Avitar with 1,818,020 shares of Common Stock and warrants
to purchase 400,000 shares of Common Stock for $.28 per share until March 2003.
During March 1999, the Chairman of the Board and the President of Avitar
converted notes payable (including the accrued interest thereon) and accrued
salaries totaling approximately $200,000 into 24,570 shares of Avitar's Series B
Preferred Stock (which are convertible into 245,700 shares of the Common Stock)
and warrants exercisable for one year to purchase 400,000 shares of the Common
Stock at $1.22 per share.
In October 1996, Avitar entered into a consulting agreement with N.R.
Gordon & Company, Inc. Neil Gordon, a member of the Board of Directors, is the
President of N.R. Gordon & Company, Inc.. Under this agreement, N.R. Gordon &
Company, Inc. provided financial consulting services for which it received
50,000 warrants at an exercise price of $0.93 per share and is paid $100.00 per
hour for all services performed. In addition, N.R. Gordon & Company, Inc. is
entitled to receive commissions for certain capital raising services. During
fiscal year 1998, Avitar amended its consulting agreement with N.R. Gordon &
Company, Inc. to eliminate any fees associated with raising capital. As
compensation for this amendment, Avitar canceled the 50,000 warrants granted to
N.R. Gordon & Company in 1996 and replaced them with 100,000 warrants to
purchase Common Stock for $.25 per share until October 2001.
Management believes each of the foregoing transactions was entered into on
terms at least as favorable as could be obtained from unrelated parties
negotiating at arms-length.
MANAGEMENT
The directors and executive officers of the Company and their respective
ages and positions with the Company, as of March 31, 1999, along with certain
biographical information (based solely on information supplied by them), are as
follows:
Name Age Title
Peter P. Phildius 69 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 52 President and Chief Operating Officer
Jay C. Leatherman Jr. 55 Chief Financial Officer and Secretary
Carl M. Good, III 55 Vice President, Research and Development
William Martin 51 Controller for ATI
PETER P. PHILDIUS
Biographical information of Mr. Phildius is included under "Proposal No. 1,
Election of Directors -- Nominees" in this Proxy Statement.
DOUGLAS W. SCOTT
Biological information of Mr. Scott is included under "Proposal No. 1,
Election of Directors -- Nominees" in this Proxy Statement.
JAY C. LEATHERMAN, JR.
Mr. Leatherman has served as the Company's Chief Financial Officer since
October 1992 and its Secretary since July 1994. He has over 16 years experience
in financial management in the health care field. Mr. Leatherman served as Vice
President and Chief Financial Officer of 3030 Park, Inc. and 3030 Park
Management Company from 1985 to 1992, responsible for financial, management
information services and business development functions for this continuing care
retirement community and management company. He served as Director of Finance
and Business Services for the Visiting Nurses Association of New Haven, Inc.
from 1977 to 1985. In addition, he served in a variety of accounting and
financial positions with Westinghouse Electric Corporation from 1969 to 1977.
Mr. Leatherman has a Bachelor's Degree in Business Administration from the
University of Hawaii.
CARL M. GOOD, III
Dr. Good has served as the Company's Vice President of Research and
Development since February 1997 and as a consultant and member of the Company's
Scientific Board since October 1996. He has over 30 years of experience in
product development and operating management experience in the medical
diagnostics industry. Dr. Good has held technology management positions with
Millipore Corporation and most recently worked in the development of
sophisticated medical diagnostic products at Cambridge Biotech Corporation. He
has received a Ph. D. in Microbial Genetics from Iowa State University and has
completed Postdoctoral Study in Enzymology at the University of Wisconsin
Medical School and the University of Massachusetts.
WILLIAM MARTIN
Mr. Martin has served as Controller of ATI since August 1991. He has over
25 years of accounting and financial management experience, primarily in
manufacturing environments. He served as Manufacturing Controller for Delmed,
Inc. from 1984 to 1986 with responsibility for the financial and planning
functions of the company's four domestic and foreign manufacturing facilities.
He was Director of Finance for Microsomics, Inc., a high tech manufacturer of
electronic components for several major defense contractors, from 1986 to 1987.
Prior to joining ATI, Mr. Martin was the Controller for Barcolene, Inc., a
consumer products manufacturer. He also held a variety of accounting and
financial positions with Fram Corporation (1970 to 1974) and with Ludlow
Corporation (1974 to 1983). Mr. Martin received his Bachelor of Science Degree
in Business Administration from Bryant College.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth compensation earned
by or paid to the Chief Executive Officer and Chief Operating Officer for fiscal
year 1998 and, to the extent required by applicable Commission rules, the
preceding two fiscal years. No other executive officers of Avitar received
annual salary and bonus in excess of $100,000 during fiscal years 1996, 1997 or
1998. All of the compensation in the table below represents management
consulting fees and salary paid by Avitar to PK&S for the services of Mr.
Phildius and Mr. Scott.
Annual Compensation
Long-Term Compensation
Name/Position Year Salary(1) Bonus Options
Peter P. Phildius 1998 $150,000 0 100,000(2)
(Chairman of the Board 1997 $150,000 0 0
Chief Executive Officer 1996 $150,000 0 0
- - -July 1996)
Douglas W. Scott 1998 $150,000 0 100,000(2)
(President/ 1997 $150,000 0 0
Chief Operating Officer 1996 $150,000 0 0
- - July 1996/Chief Executive
Officer-Until July 1996)
(1) Does not include $11,371, $18,160 and $10,417 reimbursed to PK&S for fiscal
years 1996, 1997 and 1998, respectively, for business-related expenses incurred
by Mr. Phildius and Mr. Scott on behalf of the Company.
(2) Reflects additional stock options granted to Mr. Phildius and Mr. Scott by
the Company's Board of Directors in February 1998.
PK&S is a partnership, two of whose general partners are Messrs. Phildius
and Scott. PK&S provided management consulting services to the Company through
May 18, 1995 pursuant to a written consulting agreement effective May 28, 1992.
Under this agreement, Messrs. Phildius and Scott each devoted approximately 20
hours per week to the Company's affairs for which the Company paid a monthly
consulting fee of $14,500 and reimbursed expenses. Since May 19, 1995, the
Company has paid PK&S the salary and employee benefit amounts provided under the
terms of the Company's employment agreements with Messrs. Phildius and Scott.
See "Employment Agreements" below and "Certain Relationships and Related
Transactions" above.
STOCK OPTION GRANTS IN LAST FISCAL YEAR. On February 4, 1998, the non-management
members of the Board of Directors granted additional options to purchase Common
Stock in the amount of 100,000 to Mr. Phildius and 100,000 to Mr. Scott. Such
options have an exercise price of $.25 per share and will expire on February 4,
2008. These options vest and become exercisable on the basis of 50% on February
4, 1999 and 50% on February 4, 2000. Also on February 4, 1998, the
non-management members of the Board of Directors canceled options to purchase
440,000 shares of Common Stock that were granted to each of Messrs. Phildius and
Scott under the terms of their employment agreements. Such options were replaced
with options to purchase the same number (an aggregate of 880,000) shares of
Common Stock at an exercise price of $.25 per share. See "Employment Agreements"
below.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES. No stock
options or stock appreciation rights were exercised by Mr.Phildius and Mr. Scott
in fiscal year 1998.
As of September 30, 1998, Mr. Phildius and Mr. Scott each held options
covering 540,000 shares of Common Stock, 440,000 of which were exercisable, but
none of which were in the money.
In January 1999, Avitar granted to Messrs. Phildius and Scott options to
purchase 1,260,000 and 660,000, respectively, shares of Common Stock at an
exercise price of $0.345 per share. As of April 15, 1999, Mr. Phildius held
options covering 1,800,000 shares of Common Stock, 490,000 of which were
exercisable, but all of which were in the money. Mr. Scott, as of April 15,
1999, held options covering 1,200,000 shares of Common Stock, 490,000 of which
were exercisable, but all of which were in the money.
EMPLOYMENT AGREEMENTS. In 1993, Messrs. Phildius and Scott entered into
Employment Agreements (the "Employment Agreements") with the Company. These
Employment Agreements commenced May 19, 1995. Under these Employment Agreements,
Messrs. Phildius and Scott each receive an annual salary of $150,000 (subject to
cost of living increases). Pursuant to the Employment Agreements, if Messrs.
Phildius and/or Scott are terminated without "Cause" (as such term is defined in
the Employment Agreements) by the Company or if Messrs. Phildius and/or Scott
terminate their employment as a result of a breach by the Company of its
obligations under such Agreements, he will be entitled to receive his annual
base salary for a period of up to 18 months following such termination. In
addition, if there is a "Change of Control" of the Company (as such term is
defined in the Employment Agreements) and, within two years following such
"Change of Control", either of Messrs. Phildius or Scott is terminated without
Cause by the Company or he terminates his employment as a result of a breach by
the Company, such executive will be entitled to certain payments and benefits,
including the payment, in a lump sum, of an amount equal to up to two times the
sum of (i) the executive's annual base salary and (ii) the executive's most
recent annual bonus (if any). In addition, pursuant to the Employment
Agreements, which have a three-year term (subject to extension), Messrs.
Phildius and Scott are each entitled to annual bonus payments of up to $150,000
if the Company achieves certain levels of Pre-tax Income (as such term is
defined in such Agreements). REQUIRED VOTE
Election of each of the five nominees for director requires, under Avitar's
Bylaws, the affirmative vote of the holders of a majority of the Avitar Common
Stock and Series B Preferred Stock present in person or by proxy at the Avitar
Annual Meeting (assuming a quorum exists) and entitled to vote thereon.
BOARD RECOMMENDATION
The Avitar Board of Directors unanimously recommends a vote FOR election of
all of the five nominees for director.
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION TO EFFECT AN INCREASE OF
AUTHORIZED SHARES OF COMMON STOCK FROM 25,000,000 TO 75,000,000
The Board of Directors has unanimously approved, and is hereby soliciting
stockholder approval of, an amendment to the Certificate of Incorporation (the
"Amendment"), effecting an increase in the number of authorized shares of Common
Stock from 25,000,000 to 75,000,000.
The Certificate of Incorporation now provides for 25,000,000 authorized
shares of Common Stock, par value $.01 per share, of which 21,264,156 were
issued and outstanding as of the Record Date; and 5,000,000 shares of Preferred
Stock, par value $.01, of which 1,851,437 were issued and outstanding as of the
Record Date. The Amendment would increase the number of authorized shares of
Common Stock to 75,000,000.
REASONS FOR THE INCREASE
The outstanding shares of Preferred Stock are convertible in the aggregate
into approximately 17.5 million shares of Common Stock. In addition, holders of
outstanding warrants are entitled to purchase approximately 7.8 million shares
of Common Stock at prices ranging from $0.22 to $2.39. Further, approximately
2.7 million shares will be reserved for stocks and warrants to be issued for
financial consulting services. Finally, there are outstanding employee stock
options (approximately 30% vested) to purchase approximately 5.8 million shares
of Common Stock at prices ranging primarily from $0.20 to $0.345 and an
additional 2.1 million shares have been reserved for future employee stock
options.
The majority of the proposed increase to 75,000,000 authorized shares of
Common Stock will be shares reserved for the conversion of the outstanding
Preferred Stock and exercises of the outstanding warrants and options.
Proceeds from the recently completed private placement of Series B
Preferred Stock ($3.4 million principal amount, with the majority in cash and
the remainder in notes due on various dates from May through July 1999) and
proceeds from any exercises of outstanding warrants and options are anticipated
to be used primarily to provide the necessary working capital and capital
equipment funding to operate Avitar and expand its business. For the balance of
fiscal year 1999, Avitar's cash requirements are expected to include primarily
the funding of operating capital to grow Avitar's rapid diagnostic testing and
other lines of business, the funding of operating losses, the payment of
outstanding accounts payable and the repayment of certain notes payable.
The Board of Directors determined to increase the authorized Common Stock
to 75,000,000 shares to ensure that sufficient shares of Common Stock were
authorized and available to cover then outstanding convertible Preferred Stock,
warrants and options and any additional shares of Common or Preferred Stock and
warrants or options which it may determine to issue or grant in the future.
Avitar is actively exploring possible acquisitions, which would likely involve
the issuance of some or all of the additional authorized shares of Common Stock
as all or a portion of the purchase prices of any acquisitions of companies,
businesses and/or assets it may effect in the future. In such an event, Avitar's
stockholders would not need to be solicited for any specific acquisitions if
they approve the current proposal to increase Avitar's authorized Common Stock.
Accordingly, Avitar's stockholders' only opportunity to specifically vote on and
approve any such acquisitions could be their vote on the current proposal to
increase Avitar's authorized Common Stock. Except as disclosed above, Avitar
does not believe that the increase in its authorized Common Stock will have any
significant effects on the stockholders of Avitar, nor does it believe that such
increase will have any significant benefits to the officers, directors or
affiliates of Avitar.
In order to effect the increase, the stockholders are being asked to
approve the Amendment. The Board of Directors believes that the increase is in
the best interests of Avitar and has unanimously approved the increase. The
Board of Directors may make any and all changes to the Amendment that it deems
necessary in order to file the Amendment with the Delaware Secretary of State
and give effect to the increase.
NO DISSENTERS' RIGHTS
Dissenting stockholders have no appraisal rights under Delaware law or
under the Company's Certificate of Incorporation or Bylaws in connection with
the increase.
REQUIRED VOTE
Pursuant to the Delaware General Corporation Law, the approval of the
Amendment to Avitar's Certificate of Incorporation to provide for the increase
in number of authorized shares of Common Stock requires the affirmative vote of
the holders of a majority of the outstanding shares of Avitar Common Stock and
Series B Preferred Stock.
BOARD RECOMMENDATION
The Board of Directors of Avitar unanimously recommends a vote FOR the
Amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock from 25,000,000 to 75,000,000.
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of Avitar selected BDO Seidman LLP as auditors for
the fiscal year ending September 30, 1999, subject to stockholder approval by
ratification. BDO Seidman has been the independent auditors for Avitar since
December 1992. A representative of BDO Seidman is expected to be present at the
Annual Meeting, at which time he or she will be afforded an opportunity to make
a statement, and will be available to respond to questions.
The Board of Directors of Avitar may, in its discretion, direct appointment
of new independent auditors at any time during the fiscal year if the Board
believes such change would be in the best interests of Avitar and its
stockholders. No such change is anticipated.
REQUIRED VOTE
Approval of ratification of BDO Seidman requires the affirmative vote of
the holders of a majority of the Avitar Common Stock and Series B Preferred
Stock present in person or by proxy at the Avitar Annual Meeting (assuming a
quorum exists) and entitled to vote thereon.
BOARD RECOMMENDATION
The Board of Directors of Avitar unanimously recommends a vote FOR the
ratification of BDO Seidman as auditors for the fiscal year ending September 30,
1999.
OTHER BUSINESS
The proxy confers discretionary authority on the proxies with respect to
any other business which may come before the Annual Meeting. The Board of
Directors of Avitar knows of no other matters to be presented at the Annual
Meeting. The persons named in the proxy will vote the shares for which they hold
proxies according to their best judgment if any matters not included in this
Proxy properly come before the meeting, unless the contrary is indicated.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be included in the proxy statement and form of
proxy relating to the 2000 Annual Meeting of Avitar Stockholders must be
received by the close of business on March 1, 2000 and must comply in all other
respects with the rules and regulations of the Securities and Exchange
Commission. Proposals should be addressed to: Corporate Secretary, Avitar, Inc.,
65 Dan Road, Canton, Massachusetts 02021.
<PAGE>
SHARES AVITAR, INC. PROXY NO.
65 Dan Road, Canton, Massachusetts 02021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter P. Phildius and Douglas W. Scott
as Proxies, each with the power to appoint his substitute and hereby authorizes
them to represent and to vote, as designated below and on the reverse
hereof, all shares of common stock of Avitar, Inc. ("Avitar") or shares of
Series B Preferred Stock of Avitar held of record by the undersigned on May 7,
1999 at the annual meeting of stockholders of Avitar to be held on June 23, 1999
or any adjournments
thereof.
The undersigned hereby revokes any proxies heretofore given to vote
said shares.
The undersigned hereby acknowledges receipt of Avitar's Annual
Report on Form 10-KSB for 1998 and of the Notice of Annual Meeting of
Stockholders and attached Proxy Statement dated May 21, 1999.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Proposals 1, 2 and 3.
Please sign exactly as your name appears to the left hereof.
When signing as corporate officer, partner, attorney,
administrator, trustee or guardian, please give your full
title as such.
Dated , 1999
Authorized Signature
Title
Please mark boxes on reverse hereof in blue or black ink. Please date,
sign and return this Proxy Card promptly using the enclosed envelope.
- - ------------------------------------------------------------------------------
1. Election of Directors. For all nominees Withhold Authority
listed below (except as to vote for all
marked to the contrary listed nominees below[ _]
below) [ _]
(Instruction: To withhold authority to vote for any individual nominee strike a
line through the nominee's name below.)
Peter P. Phildius Douglas W. Scott James Groth
Neil R.Gordon Charles R. McCarthy, Jr.
2. To ratify the Amendment of the Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 25,000,000 to 75,000,000.
For Against Abstain__________
3. To ratify the appointment of BDO Seidman LLP as independent public
accountants for Avitar for the fiscal year ending September 30, 1999.
For Against Abstain__________
