[LOGO OF Compositech Ltd.]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1999 AT 10:00 a.m.
To the Stockholders of Compositech Ltd.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Compositech Ltd. will be held at the Company's offices located at 120 Ricefield
Lane, Hauppauge, New York on Tuesday, June 22, 1999 at 10:00 a.m., for the
following purposes:
1. To elect a Board of Directors, nine in number, to hold office until
the next Annual Meeting of Stockholders and until their successors are
elected;
2. To approve an increase by 1,000,000 shares of the number of shares of
Common Stock authorized for issuance under Compositech's Amended and
Restated Stock Award Plan;
3. To ratify the appointment of Ernst & Young LLP as Compositech's
independent auditors for the fiscal year ended December 31, 1999; and
4. To transact such other business as may properly be presented at the
meeting and at any adjournments or postponements thereof.
Only holders of record of Compositech's Common Stock and Series A
Convertible Preferred Stock at the close of business on April 28, 1999 are
entitled to notice of, and to vote at, the meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors,
SAMUEL S. GROSS
Secretary
Hauppauge, New York
May 14, 1999
- - --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE ACCOMPANYING
POSTPAID ENVELOPE. YOUR DOING SO MAY SAVE COMPOSITECH THE EXPENSE OF A SECOND
MAILING.
- - --------------------------------------------------------------------------------
<PAGE>
Compositech Ltd.
PROXY STATEMENT
----------
To the Stockholders of Compositech Ltd.:
The accompanying proxy is solicited on behalf of the Board of Directors
(the "Board") of Compositech Ltd. ("Compositech" or the "Company"), a Delaware
corporation, for use at Compositech's 1999 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 10:00 a.m. on Tuesday, June 22, 1999 at
Compositech's offices located at 120 Ricefield Lane, Hauppauge, New York, 11788;
telephone number (516) 436-5200.
Only holders of record of Compositech's Common Stock and Series A
Convertible Preferred Stock ("Series A Stock") as of the close of business on
April 28, 1999 are entitled to notice of, and to vote at, the Annual Meeting and
any adjournments or postponements thereof. At the close of business on that
date, Compositech had outstanding 15,648,694 shares of its Common Stock, par
value $.01 per share and 477,661 shares of Series A Stock, par value $3.00 per
share. Holders of Common Stock are entitled to one vote for each share of Common
Stock held. Holders of Series A Stock are entitled to one vote for each two
shares of Series A Stock held.
Any holder of Common Stock or Series A Stock giving a proxy in the form
accompanying this Proxy Statement has the power to revoke the proxy prior to its
use. A proxy can be revoked (i) by an instrument of revocation delivered prior
to the Annual Meeting to the Secretary of Compositech, (ii) by a duly executed
proxy bearing a later date or time than the date or time of the proxy being
revoked, or (iii) at the Annual Meeting if the stockholder is present and elects
to vote in person. Mere attendance at the Annual Meeting will not serve to
revoke a proxy.
Broker non-votes, and shares held by stockholders present in person or by
proxy at the meeting but abstaining on a vote, will be counted in determining
whether a quorum is present at the Annual Meeting. However, abstentions by
stockholders present in person or by proxy at the meeting are counted as votes
against a proposal for purposes of determining whether or not the proposal has
been approved, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
This Proxy Statement and the accompanying proxy card are being mailed to
Compositech stockholders on or about May 14, 1999. Directors, officers and other
employees of Compositech may solicit proxies by personal interview, telephone or
facsimile, without special compensation. Any costs of such solicitation will be
borne by Compositech.
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Nominees. There are nine nominees for election as directors of the Company
to hold office until the next Annual Meeting and until their successors have
been duly elected and qualified.
If the enclosed proxy is properly executed and received in time for the
meeting, it is the intention of the persons named in the proxy to vote the
shares represented thereby for the persons nominated for election as directors
unless authority to vote shall have been withheld. If any nominee should refuse
or be unable to serve, an event not anticipated, the proxy will be voted for
such person as shall be designated by the Board of Directors to replace such
nominee.
All of the nominees were elected to the Board at the last Annual Meeting
except Christopher F. Johnson who was elected by the Board on June 23, 1998 and
all are currently serving as directors of the Company.
Following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees.
Name Age Position(s) With the Company
- - ---- --- ----------------------------
Jonas Medney 70 Director, Chairman
Fred E. Klimpl 64 Director, Vice Chairman
Christopher F. Johnson 55 Director, President and Chief Executive
Officer
Samuel S. Gross 72 Director, Executive Vice President,
Secretary, Treasurer and Chief Financial
Officer
Willard T. Jackson (1) (2) 71 Director
Pierre Laflamme 52 Director
Robert W. Middleton (2) 60 Director
Heinz-Gerd Reinkemeyer (1) 61 Director
James W. Taylor (1) (2) 80 Director
- - ----------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Jonas Medney, Director and Chairman, has over 40 years of experience
in the composites industry and has more than 50 U.S. patents. Mr. Medney
has been a director and Chairman of the Company since its inception in
1984. He co-founded Lamtex Industries, a public company which was a pioneer
in filament-wound composites, which was acquired by Koppers Company in
1963. He co-founded Fiberglass Resources Corporation, a manufacturer of
filament wound epoxy pipes and conduits, with Mr. Klimpl. This company was
acquired by Koch Industries in 1983. Mr. Medney is a graduate of the
Massachusetts Institute of Technology (B.S. Mechanical Engineering).
Fred E. Klimpl, Director and Vice Chairman, has over 35 years of
experience in the composites industry and has over 25 patents. Mr. Klimpl
has been a director of the Company since its inception in 1984 and was its
President until June 1998. He was co-inventor and a key manager in the
development and marketing of the fiberglass underground gasoline tank
program for Owens-Corning Fiberglas Corp. He was subsequently responsible
for the start-up and marketing of a fiberglass pipe business for
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<PAGE>
Ciba-Geigy Corporation. Mr. Klimpl is a graduate of Lowell University (B.S.
Textile Engineering) and Stevens Institute of Technology (M.S. Industrial
Management).
Christopher F. Johnson, Director, President and Chief Executive
Officer, joined Compositech Ltd. in June of 1998 as president and CEO
following a career spanning thirty years with suppliers of specialty
materials for printed circuit fabrication. Prior to joining Compositech, he
was a vice president and general manager for Dexter Electronic Materials, a
division of Dexter Corporation where he was employed from 1993 to 1998.
Before that, he held worldwide business management positions with Hercules
Incorporated and sales and marketing positions with DuPont. Mr. Johnson has
been active in The Institute for Interconnecting and Packaging Electronic
Circuits (IPC) serving on the Suppliers Council Steering Committee and a
participant in the Technical/Marketing Research Council (TMRC) of the IPC.
Mr. Johnson is a graduate of Purdue University with a BS in Industrial
Education. He also completed intensive senior management programs at
Northwestern University's Kellogg School of Business and the University of
Virginia's Darden School of Business.
Samuel S. Gross, Director, Executive Vice President, Secretary,
Treasurer and Chief Financial Officer, is a certified public accountant and
has been Executive Vice President and Treasurer of the Company since 1990.
He had been a consultant to the Company and a director since 1987. He was
previously a partner at Ernst & Young LLP where he was responsible for the
Fiberglass Resources Corporation account. Mr. Gross was affiliated with
Ernst & Young LLP and its predecessors for 39 years. He is a director of
the National Mental Health Association, honorary director and former
Chairman of the Board of Directors of the Mental Health Association in New
York State, Inc., and a director and former president of Long Island
Transportation Management, Inc. Mr. Gross is a graduate of City College of
New York (B.B.A.).
Willard T. Jackson, private investor, retired in 1988 as a partner of
Brundage, Story and Rose, a New York investment counseling firm in which he
became a partner in 1969. He has been a director since January 1988. Mr.
Jackson is a graduate of Middlebury College (A.B.) and Columbia University
(M.B.A.). He is a trustee emeritus of Middlebury College.
Pierre Laflamme was elected a director in October 1997. He has been
Vice President Development, High Technology at Societe generale de
financement du Quebec since May 1997. From 1985 to May 1997, he was with
the Solidarity Fund in Montreal, Canada, most recently as Senior Vice
President, Economic Development and Strategic Investments. From 1994 to
1996, he was on loan as Deputy Minister at Executive Council of the
Province of Quebec. He is a graduate of the Universite de Sherbrooke (B.A.)
and the Universite de Montreal (B.A. Architecture). Mr. Laflamme is the
designee of the Quebec Investors (see CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS) to the Board pursuant to terms of agreements in connection
with the joint venture in the greater Montreal area.
Robert W. Middleton was elected as a director in March 1996 and has
acted as an investment banker to the Company in its prior financings and
with respect to the Company's initial public offering. He has been Chairman
of The Middleton Group, LLC, a firm of investment bankers associated with
Gemini Financial Corporation, since October 1998. He was Managing
Director-Corporate Finance of Trautman & Company, Inc., (formerly known as
Trautman Kramer & Company, Inc.), an investment banking firm,
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<PAGE>
from 1993 to October 1998. He attended Princeton University. Mr. Middleton
is the designee of Trautman & Company, Inc. to the Board pursuant to the
terms of a financing agreement.
Heinz-Gerd Reinkemeyer has been a director since 1990. He had been
Director of the Industrial Plastics Division of HT Troplast AG ("HT"), a
German manufacturer and subsidiary of the Rutgers Group, which is an
affiliate of the Veba Group. Currently, he is a consultant for the Rutgers
Group. Mr. Reinkemeyer has a degree in mechanical engineering and from 1961
he had been with Dynamit Nobel, a manufacturer of laminates, until it was
acquired by HT in 1988. Mr. Reinkemeyer is the designee of HT to the Board.
James W. Taylor has been a director since 1987. He has been Chairman
of Reuter Manufacturing Inc. since 1998 and was previously President and
Chief Executive Officer since 1992. He is a certified management
consultant. He has served as a director of Insilco Corporation, Times Fiber
Communications, Inc., The Enterprise Companies, Techalloy, Inc., Amphenol
Inc. and Knogo Corporation. He is a life trustee of Carnegie Mellon
University. He was a trustee of Beaver College and was a vice president and
director of the Association of Consulting Management Engineers and of the
Institute of Management Consultants. He holds a B.S. from Carnegie Mellon
University.
Board Recommendation and Vote Required. The Board recommends that the
stockholders vote "FOR" the election of each of the above named nominees. The
affirmative vote of a majority of the shares of Common Stock and Series A Stock
present or represented and entitled to vote at the meeting is required for the
election of each director.
Meetings and Committees of the Board. There were five meetings of the full
Board and the Board took action by unanimous written consent three times during
fiscal 1998. The Board currently has two standing committees: the Compensation
Committee and the Audit Committee. The Compensation Committee, which met four
times during fiscal 1998 and took action by unanimous written consent once
during fiscal 1998, approves all of Compositech's compensation plans, including
the awarding of options under Compositech's stock award plan and the
compensation arrangements for Compositech's senior management. The Audit
Committee, which met twice during fiscal 1998, consults with Compositech's
independent auditors concerning their auditing plan, the results of their audit,
the appropriateness of accounting principles used by Compositech and the
adequacy of Compositech's general accounting controls.
During 1998, each director attended at least 75% of the total meetings of
the full Board and the committees of the Board on which they served, other than
Mr. Reinkemeyer who attended 60% of the meetings of the full Board.
Compensation of Directors. The Company did not provide compensation to its
non-employee directors in 1998. On January 22, 1999 the Company's Board of
Directors approved a compensation plan, payable in cash or stock, at the
Company's option as follows: (i) an annual retainer of $10,000 and (ii) $500 for
each day in attendance at a meeting of the Board. If payable in stock, the
annual retainer will be issued at the beginning of each calendar year, vesting
on a quarterly basis and the meeting fee with respect to the preceding year will
be paid on January 1 of the subsequent year. Additionally, all non-employee
directors are eligible for stock option grants under the Company's Amended and
Restated Stock Award Plan.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid or accrued by the
Company to Jonas Medney, the Company's Chairman, to Fred E. Klimpl, Vice
Chairman and former President and to Samuel S. Gross, Executive Vice President,
Secretary, Treasurer and Chief Financial Officer for services rendered to the
Company in all capacities during the years ended December 31, 1998, 1997 and
1996. The table also sets forth the compensation paid or accrued by the Company
to Mr. Christopher F. Johnson, President and Chief Executive Officer for
services rendered to the Company during the year ended December 31, 1998:
<TABLE>
<CAPTION>
Long-term
Compensation
Annual Compensation Awards
-------------------------------------- ------
Securities
Underlying
Name and Principal Position Year Salary ($)(1) Bonus ($) Options
- - --------------------------- ---- ------------- --------- -------
<S> <C> <C> <C> <C>
Jonas Medney 1998 130,000 -- --
Chairman 1997 130,000 -- --
1996 130,000 -- --
Fred E. Klimpl 1998 100,000 -- --
Vice Chairman and former President 1997 100,000 -- --
1996 100,000 -- --
Christopher F. Johnson (2)
President and Chief Executive Officer 1998 103,846 12,500 350,000
Samuel S. Gross 1998 100,481 -- 150,000
Executive Vice President, Secretary, Treasurer 1997 100,000 -- 4,000
and Chief Financial Officer 1996 100,000 -- 100,000
</TABLE>
(1) Mr. Medney's salary in 1998, 1997 and 1996 includes $130,000, $5,500 and
$17,500, respectively, which had been deferred by agreement of Mr. Medney
with the Company.
Mr. Klimpl's salary in 1998, 1997 and 1996 includes $51,346, $1,932 and
$13,692, respectively, which had been deferred by agreement of Mr. Klimpl
with the Company.
Mr. Gross' salary in 1998, 1997 and 1996 includes $73,077, $4,231 and
$13,692, respectively, which had been deferred by agreement of Mr. Gross
with the Company.
(2) Mr. Johnson became an Executive Officer of the Company in June 1998.
5
<PAGE>
Salary Deferrals. As of December 31, 1998, Messrs. Medney, Klimpl and Gross had
deferred an aggregate of approximately $808,000 of their salaries. The salary
deferrals have been voluntarily undertaken by each of the respective persons in
consideration of the cash position of the Company. These deferred salaries can
only be paid with the prior approval of the Compensation Committee. In
recognition of their salary deferrals, on March 10, 1999, the Compensation
Committee authorized the issuance, to Messrs. Medney, Klimpl and Gross, of stock
options to purchase 37,800, 22,827 and 23,683, respectively, shares of the
Company's common stock at $2.50 per share, the market value of the common stock
on the date of authorization. These options have ten year terms and are
exercisable beginning September 10, 1999.
Additionally, the Company's officers have each agreed with the Company that in
no event will they receive their respective amount of deferred salaries prior to
January 2, 2000 or, thereafter, prior to the date such amounts can be paid with
the consent of the Compensation Committee from cash flow from operations.
Employment Agreements. The Company had employment agreements with Messrs.
Medney, Klimpl and Gross which expired on December 31, 1998. The agreements
provided, among other matters, that the officers not engage in any business
activity in competition with the Company during the term of the agreement and
for two years thereafter.
6
<PAGE>
1998 OPTION GRANTS
The following table sets forth information relating to options granted in
1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted To
Options Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price ($/sh) Date
---- ------- ----------- ------------ ----
<S> <C> <C> <C> <C>
Jonas Medney -- -- -- --
Fred E. Klimpl -- -- -- --
Christopher F. Johnson 350,000 44% $1.844 6/23/2008
Samuel S. Gross 100,000 12% $1.375 1/20/2008
Samuel S. Gross 50,000 6% $1.188 9/17/2008
</TABLE>
FISCAL YEAR-END OPTION VALUES
The following table provides information concerning the value of
unexercised options held as of December 31, 1998 by the Named Executive Officers
(no options were exercised during such year). The fair market value of the
shares of Common Stock underlying such options (with an exercise price per share
ranging from $1.188 to $5.00) has been calculated based upon the December 31,
1998 closing price of $1.00 per share.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-The-Money
Name Options at Fiscal Year-End Options at Fiscal Year-End
- - ---- -------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jonas Medney 42,050 -- -- --
Fred E. Klimpl 36,500 -- -- --
Christopher F. Johnson -- 350,000 -- --
Samuel S. Gross 205,917 183,333 -- --
</TABLE>
7
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Compositech's
directors and executive officers, and persons who own more than 10% of
Compositech's Common Stock, to file reports of ownership and changes in
ownership of such stock with the SEC. Directors, executive officers and greater
than 10% stockholders are required by SEC regulations to furnish Compositech
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
Compositech or written representations that no Forms 5 were required,
Compositech believes that during 1998, its directors, executive officers and
greater than 10% stockholders complied with all Section 16(a) filing
requirements.
BENEFICIAL STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's voting capital stock as of April 28, 1999, by (i)
each director of the Company, (ii) each person known to the Company to be the
beneficial owner of more than 5% of the Common Stock of the Company, (iii) the
executive officers named in the Summary Compensation Table, and (iv) all
executive officers and directors as a group. Except as otherwise indicated, the
address of each person is care of Compositech Ltd., 120 Ricefield Lane,
Hauppauge, New York 11788.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address Beneficial Ownership (1) Class (1)
- - --------------------------------------- ------------------------ -----------
<S> <C> <C>
Jonas Medney (2) 1,281,488 8.0%
Fred E. Klimpl (3) 668,849 4.2%
Willard T. Jackson (4) 591,263 3.6%
Samuel S. Gross (5) 248,151 1.5%
Christopher F. Johnson (6) 121,667 *
Robert W. Middleton (7) 21,805 *
Heinz-Gerd Reinkemeyer (8) 13,073 *
James W. Taylor (9) 12,073 *
Pierre Laflamme (10) 3,407 *
All executive officers and directors as
a group (9 persons) (11) 2,961,776 17.7%
HT Troplast AG (12) 828,834 5.2%
Kaiserstrasse
53840 Troisdorf
Federal Republic of Germany
</TABLE>
- - ----------
* Indicates less than 1%
8
<PAGE>
(1) The shares of Common Stock and voting rights owned by each person or by all
directors and executive officers as a group, and the shares included in the
total number of shares of Common Stock and votes outstanding used to
determine the percentage of shares of Common Stock and voting rights owned
by each person and such group, have been adjusted in accordance with Rule
13d-3 under the Securities Exchange Act of 1934 to reflect the ownership of
shares issuable upon exercise of outstanding options, warrants or other
common stock equivalents which are exercisable within 60 days. As provided
in such Rule, such shares issuable to any holder are deemed outstanding for
the purpose of calculating such holder's beneficial ownership but not any
other holder's beneficial ownership.
(2) Includes warrants to purchase 35,295 shares of Common Stock and options to
purchase 42,050 shares of Common Stock under the Company's stock option
plans. Includes Series A Stock convertible into 4,166 shares of Common
Stock held by Mr. Medney's wife, as to all of which shares Mr. Medney
disclaims beneficial ownership.
(3) Includes warrants to purchase 32,359 shares of Common Stock and options to
purchase 36,500 shares of Common Stock under the Company's stock option
plans.
(4) Includes Series A Stock convertible into 37,500 shares of Common Stock,
warrants to purchase 296,190 shares of Common Stock, stock awards of 1,740
shares and options to purchase 20,833 shares of Common Stock under the
Company's stock option plans. Includes securities held as nominee and
trustee of Trust created for the benefit of Willard T. Jackson and members
of his family.
(5) Includes warrants to purchase 6,401 shares of Common Stock and options to
purchase 239,250 shares of Common Stock under the Company's stock option
plans.
(6) Includes options to purchase 116,667 shares of Common Stock under the
Company's stock option plans.
(7) Robert W. Middleton is the designee of Trautman & Company, Inc. on the
Board of Directors. He has disclaimed beneficial ownership of all
securities owned by employees or principals of Trautman & Company, Inc.
Includes warrants to purchase 16,732 shares of Common Stock, stock awards
of 1,740 shares and options to purchase 3,333 shares of Common Stock under
the Company's stock option plans.
(8) Heinz-Gerd Reinkemeyer is the designee of HT on the Board of Directors. He
has disclaimed beneficial ownership of all shares held by HT. Includes
stock awards of 1,740 shares and options to purchase 8,333 shares of Common
Stock under the Company's stock option plans.
(9) Includes stock awards of 1,740 shares and options to purchase 8,333 shares
of Common Stock under the Company's stock option plans.
(10) Pierre Laflamme is the designee of each of Industries Devma, Inc., Societe
Innovatech du Grand Montreal, Fonds Regional de Solidarite Ile de Montreal
and Fonds de Solidarite des Travailleurs du Quebec on the Board of
Directors. He has disclaimed ownership of all securities held by each
entity. Includes stock awards of 1,740 shares and options to purchase 1,667
shares of Common Stock under the Company's stock option plans.
(11) Consists of all the shares of Series A Stock and Common Stock (or shares of
Common Stock underlying options and warrants) held by Messrs. Medney,
Klimpl, Jackson, Gross, Johnson, Middleton, Reinkemeyer, Taylor and
Laflamme as described in notes (2)-(10) above.
(12) Includes warrants to purchase 30,000 shares of Common Stock.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 7, 1999, the Company completed the final phase of a borrowing of
$456,417 under a credit facility through Credit Bancorp, which was
collateralized by approximately 1.7 million shares of the Company's common stock
owned by Messrs. Medney and Klimpl, which were loaned to the Company. The loan
is due in one year and bears interest at the rate of 6.01%, payable quarterly. A
default would occur if the Company fails to supplement the collateral or
partially repay the loan in the event the collateral falls in value by 25% or
more from the value as of the loan date. The Company has agreed with Messrs.
Medney and Klimpl to issue replacement shares to them in the event of any
liquidation of the collateral by the lender and provide them with registration
rights, where necessary.
On October 23, 1998, the due dates on 10% Secured Notes and notes payable,
totaling $1,495,000, held by Messrs. Medney, Klimpl, Gross and Jackson were
extended to January 2, 2000. On March 10, 1998, the due dates on 10% Secured
Notes totaling $470,000 held by Messrs. Medney, Klimpl and Jackson were extended
to January 2, 1999. The notes are collateralized by a first or second priority
lien on patents and certain equipment.
On October 16, 1997, the Company closed its transaction with four Quebec
investors ("the Quebec Investors"), consisting of Industries Devma, Inc.
("Devma"), Fonds de Solidarite des Travailleurs du Quebec ("F.S.T.Q."), Societe
Innovatech du Grand Montreal ("Innovatech") and Fonds Regional de Solidarite Ile
de Montreal ("Fonds Regional"), to form a 50/50 joint venture for the
establishment of a plant in the greater Montreal area to manufacture
Compositech's laminates. The project cost is estimated to be approximately $24.5
million with an initial capitalization by the parties of approximately $11
million with the balance to be in debt financing from banks and governmental
agencies. The Company's approximately $5.4 million capital investment in the
joint venture was funded out of the proceeds of the Quebec Investors' purchase
of 1,066,192 shares of the Company's Common Stock. The Quebec Investors have an
option to sell their 50% interest in the joint venture to the Company for a like
number of shares and, under certain circumstances, the Company has an option to
purchase the interest for the same number of shares. The plant is planned to
start production in 2000 with an anticipated annual production capacity of
approximately 12 million square feet. The Company, the Quebec Investors, Fred
Klimpl and Jonas Medney agreed that the Company would use its best efforts to
elect one person designated by the Quebec Investors, and each of Messrs. Klimpl
and Medney agreed, subject to certain limitations and solely in his capacity as
a shareholder of the Company, to vote his shares to give effect to such
agreement. Pierre Laflamme, a director of Devma, was elected a director of the
Company in October 1997 and is the Quebec Investors' designee to the Board of
Directors of the Company.
10
<PAGE>
PROPOSAL NO. 2:
APPROVAL OF INCREASE IN
THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE COMPOSITECH LTD. AMENDED AND
RESTATED STOCK AWARD PLAN BY 1,000,000 SHARES
Background. Since 1988, Compositech has granted options to employees to
purchase shares of its Common Stock. Compositech considers its option program to
be an important tool to help Compositech attract, retain and motivate employees,
directors and consultants. The program also generates cash for Compositech when
options are exercised and, in the case of nonqualified stock options ("NSOs") or
disqualifying dispositions of incentive stock options ("ISOs"), tax deductions
and possible tax credits. The Amended and Restated Stock Award Plan (the "Award
"Plan"), which provides for the grant of options and restricted stock, was first
approved by the stockholders in 1994 to supplement the then-existing
Nonqualified Stock Option Plan, which terminated April 12, 1998. Since the
inception of the Award Plan, a total of 1,675,000 shares have been authorized
for issuance under the Award Plan. As of April 26, 1999, employees, directors
and consultants held stock awards and unexercised options (granted under both
the Award Plan and the Nonqualified Stock Option Plan) covering 1,605,494 shares
of Common Stock, with stock option exercise prices per share ranging from $1.188
to $5.75. As of that date, a total of 171,006 shares remained available for the
grant of options under the Award Plan.
Proposal. Subject to stockholder approval, on April 22, 1999, the Board
approved an amendment to the Award Plan to increase the number of shares
available for issuance under the Award Plan by 1,000,000 shares, to 2,675,000
shares, of Compositech Common Stock. Without this increase, only 171,006 shares
remain available for the grant of options under the Award Plan. The purpose of
the increase in the shares available for issuance under the Award Plan is to
assure continuity of Compositech's option program to help Compositech attract,
retain and motivate employees, directors and consultants. Compositech uses its
stock option program as a critical tool in motivating and retaining employees by
aligning their long term interests with those of the stockholders. Options
generally are granted annually, each grant generally vesting at the end of each
of the three years after the date of grant.
Description of Stock Award Plan. The Award Plan permits the granting of
restricted stock awards and stock options to employees, directors and
consultants of the Company. Stock options granted under the Award Plan may be
ISOs, meeting the requirements of Section 422 of the Internal Revenue Code of
1986, as amended, or NSOs which do not meet the requirements of Section 422. The
Award Plan is administered by the Compensation Committee of the Board of
Directors. The Award Plan gives broad powers to the Compensation Committee to
administer and interpret the Award Plan, including the authority to select the
individuals to be granted options, and to prescribe the particular form and
conditions of each option granted. The above description is qualified in its
entirety by reference to the specific provisions of the Award Plan, the full
text of which is set forth as Exhibit 1 to this Proxy Statement.
Federal Income Tax Consequences of Options. The following is a general
summary of the typical federal income tax consequences of the issuance and
exercise of options under the Award Plan. It does not describe state or other
tax consequences of the issuance and exercise of options or the tax consequences
of a grant of restricted stock.
The grant of an ISO has no federal income tax effect on the optionee. Upon
exercise, the optionee does not recognize income for "regular" tax purposes;
however, the excess of the fair
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market value of the stock subject to an option over the exercise price of such
option (the "option spread") is includable in the optionee's "Alternative
Minimum Taxable Income" for purposes of the Alternative Minimum Tax. If the
optionee does not dispose of the stock acquired upon exercise of an ISO until
more than two years after the option grant date and more than one year after
exercise of the option, any gain upon sale of the shares will be a capital gain.
If shares are sold or otherwise disposed of before both of these periods have
expired (a "disqualifying disposition"), the option spread at the time of
exercise of the option (but not more than the amount of the gain on the sale or
other disposition) is ordinary income in the year of such sale or other
disposition. If gain on a disqualifying disposition exceeds the amount treated
as ordinary income, the excess is taxable as capital gain. Compositech is not
entitled to a federal income tax deduction in connection with ISOs, except to
the extent that the optionee has taxable ordinary income on a disqualifying
disposition.
The grant of a NSO has no federal income tax effect on the optionee. Upon
the exercise of a NSO, the optionee has taxable ordinary income (and Compositech
is entitled to a corresponding deduction) equal to the option spread on the date
of exercise. Upon the disposition of stock acquired upon exercise of a NSO, the
optionee recognizes either long-term or short-term capital gain or loss,
depending on how long such stock was held.
In the case of both ISOs and NSOs, special federal income tax rules apply
if Compositech Common Stock is used to pay all or part of the option price.
Special rules may also apply when a transferable option is transferred.
Board Recommendation and Vote Required. The Board believes that approval of
the proposal to amend the Award Plan will allow Compositech to continue to
provide incentives to attract, retain and motivate personnel through the grant
of stock options. Accordingly, the Board recommends that stockholders vote "FOR"
the amendment of the Award Plan. The affirmative vote of a majority of the
shares of Common Stock and Series A Stock present or represented and entitled to
vote at the meeting is required to approve the proposal.
PROPOSAL NO. 3:
RATIFICATION OF INDEPENDENT AUDITORS
The Board recommends that the stockholders ratify its appointment of Ernst
& Young LLP as independent auditors to audit the financial statements of
Compositech for the year ending December 31, 1999. Ernst & Young LLP has acted
as Compositech's auditor since Compositech's inception. A representative of
Ernst & Young LLP will be present at the Annual Meeting, will have an
opportunity to make a statement if he or she desires to do so, and will be
available to respond to appropriate questions. A affirmative vote of a majority
of the shares of Common Stock and Series A Stock present or represented and
entitled to vote at the meeting is required to ratify the appointment of Ernst &
Young LLP.
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ANNUAL REPORT TO STOCKHOLDERS
Compositech's Annual Report to Stockholders for the year ended December 31,
1998, containing the audited balance sheets as of December 31, 1998 and 1997 and
the related statements of operations, stockholders' equity and cash flows for
the years then ended, is being mailed with this Proxy Statement to stockholders
entitled to notice of the Annual Meeting.
STOCKHOLDER PROPOSALS
Compositech will, in future proxy statements of the Board, include
stockholder proposals complying with the applicable rules of the SEC and the
procedures set forth in Compositech's Bylaws. In order for a proposal by a
stockholder to be included in the proxy statement of the Board relating to the
annual meeting of stockholders to be held in 2000, that proposal must be
received in writing by the Secretary of Compositech no later than January 15,
2000.
OTHER MATTERS
The Board know of no other matters that will be presented at the Annual
Meeting. If, however, any other matter is properly presented at the Annual
Meeting, the proxy solicited hereby will be voted in accordance with the
judgment of the proxyholders.
By Order of the Board of Directors,
SAMUEL S. GROSS
Secretary
Hauppauge, New York
May 14, 1999
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Exhibit 1
COMPOSITECH LTD.
AMENDED AND RESTATED STOCK AWARD PLAN
1. Purpose
The purpose of this Stock Award Plan (the "Plan") is to provide to selected
officers, directors, employees and consultants and other non-employee
individuals providing or expected to provide valuable services contributing to
the growth and success of Compositech Ltd. (the "Company"), an opportunity to
obtain or increase a proprietary interest in the Company, or to benefit from the
appreciation in the value of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), as an incentive to such persons to continue and to
increase their efforts to benefit the Company and to continue their relationship
with the Company.
2. Administration
The Plan shall be administered by, and all decisions and determinations
concerning the Plan shall be made solely by, the Award Committee or any
successor committee (the "Committee") appointed by the Board of Directors of the
Company (the "Board"). The Committee shall consist of no less than three
"non-employee directors," as such term is defined in Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Committee
may establish, modify or rescind any rules or regulations for the conduct of its
business and the administration of the Plan, in any case, not inconsistent with
the express provisions of the Plan, the By-laws or the Restated Certificate of
Incorporation of the Company or any resolutions of the Board. Any decision of
the Committee in the administration of the Plan, shall be final, conclusive and
binding on all persons. Any action of the Committee shall be taken by a vote or
written consent of a majority of its members except that the members of the
Committee may authorize any one or more of their number to execute and deliver
documents on behalf of the Committee. No member of the Committee shall be liable
for any action taken, or determination made, in good faith.
3. Eligibility and Participation
Officers, directors and employees of the Company shall be eligible for
selection to participate in the Plan. Non-employee individuals, providing or
expected to provide valuable services to the Company, as the Committee may
determine, also shall be eligible for selection to participate in the Plan.
Notwithstanding the foregoing, only persons employed by the Company (or any
subsidiary thereof) shall be eligible to receive options intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
("Incentive Stock Options" or "ISOs"), hereunder.
4. Awards under the Plan
(a) "Awards" under the Plan shall mean and include any one or a
combination of ISOs, nonqualified stock options ("NQSOs," and together with
ISOs, "Options") and shares of Common Stock subject to restrictions
("Restricted Stock"). Awards shall be represented by, or issued pursuant
to, agreements in such form as the Committee may from time to time approve,
which agreements need not contain uniform terms and conditions but shall
comply with and be subject to all the terms, conditions and restrictions of
the Plan ("Award Agreements"). The Committee shall have the authority to
accelerate the vesting periods for all Options granted by the Committee
under the Plan.
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(b) Subject to adjustment as provided in paragraph 7 below, there may
be issued under the Plan pursuant to Awards an aggregate of not more than
Two Million Six Hundred Seventy-Five Thousand (2,675,000) shares of Common
Stock; provided, however, that if an Option shall expire or terminate
without having been exercised in full, or if any shares of Restricted Stock
shall be forfeited by a recipient thereof, any unissued shares of Common
Stock which were covered by that Award may be added to the shares otherwise
available for Awards to be granted pursuant to the Plan. The Company hereby
reserves Two Million Six Hundred Seventy-Five Thousand (2,675,000) shares
of Common Stock for issuance under the Plan.
(c) A participant who has been awarded an Option hereunder (an
"Optionee") (and any person succeeding to the Optionee's rights pursuant
hereto) shall not have any rights as a stockholder with respect to any
shares of Common Stock issuable pursuant to any Option until the date of
the issuance of a stock certificate to the Optionee for the shares. Except
as provided in paragraph 7 below, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which
the record date is prior to the date a stock certificate is issued. A
participant who has been awarded Restricted Stock hereunder shall, except
for the restrictions on transfer, be the owner of such Restricted Stock and
shall have all the rights of a stockholder.
5. Options
Each Option granted under the Plan shall comply with the following terms
and conditions:
(a) An Option exercise price shall be determined by the Committee in
its sole discretion, but in the case of an ISO, such exercise price shall
be not less than the Fair Market Value, as hereinafter defined, of the
Common Stock on the date of grant.
(b) The term of an Option shall be determined by the Committee, but in
no event shall any ISO be exercisable more than ten years after the date on
which it was granted.
(c) An Option shall not be transferable by the Optionee otherwise than
by will or the applicable laws of descent and distribution and shall be
exercisable during the Optionee's lifetime only by the Optionee.
(d) An Option shall not be exercisable:
(i) prior to six months from the date it is granted;
(ii) unless payment in full is made for the shares of Common
Stock being acquired thereunder at the time of exercise (A) in United
States dollars by cash or check, (B) by tendering to the Company
shares of Common Stock owned by the person exercising the Option and
having a Fair Market Value equal to the cash price applicable to the
Option, (C) by a combination of United States dollars and shares of
Common Stock as aforesaid, or (D) with the prior approval of the
Committee, by tendering to the Company a promissory note on which such
person exercising the Option is personally liable and which is in a
form satisfactory to the Committee; and
(iii) unless the person exercising the Option fulfills the
eligibility requirements in paragraph 3 above at all times during the
period beginning with the date of grant of the Option and ending on
the date of such exercise, except that each Award Agreement with
respect to an Option may specify the
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conditions and circumstances under which an unexercised Option may or
may not be exercised in the event that the relationship between the
Company and the Optionee is terminated prior to the expiration date of
the Option.
(e) An outstanding, unexercised and unexpired Option shall become
exercisable in full in the event of a "change in control" of the Company
and the Committee may in its discretion provide that in such event such
outstanding, unexercised and unexpired Options may be surrendered for cash
in the amount by which the fair market value of the Company's Common Stock
subject to such Options immediately prior to the "change in control" as
determined by the Committee exceeds the exercise price of such Common Stock
at such time. The Committee also has the discretion to provide that Options
will continue to be exercisable following the change in control for the
consideration that would have been receivable at the time of the change in
control if the options had been exercised immediately prior thereto. A
"change in control" means generally (i) the merger or consolidation of the
Company as a result of which the Company is not the surviving entity, (ii)
the sale of all or substantially all of the assets of the Company, (iii)
the acquisition by another person of 80% or more of the then outstanding
shares of Common Stock or (iv) the recapitalization, reorganization,
dissolution or liquidation of the Company.
For purposes hereof "Fair Market Value" shall mean the fair market value
per share of the Company's Common Stock as determined by the Committee in good
faith; provided, however, that if the Company's Common Stock is listed or
admitted to trading on a securities exchange registered under the Exchange Act,
or as a national market security on the National Association of Securities
Dealers, Inc., Automated Quotations System ("NASDAQ") or any similar system then
in use, the Fair Market Value per share shall be the average of the reported
high and low sales price on the date in question (or if there was no reported
sale on such date, on the last preceding date on which any reported sale
occurred) on the principal securities exchange or system on which such share is
listed or admitted to trading, or if a share is not listed or admitted to
trading on any such exchange and is not listed as national market security on
NASDAQ but is quoted on NASDAQ or any similar system then in use, the Fair
Market Value per share shall be the average of the closing high bid and low
asked quotations on such system for such share on the date in question.
6. Restricted Stock
An Award of Restricted Stock hereunder shall entitle the holder thereof to
receive shares of Common Stock which shall be forfeited if the relationship
between the Company and such holder terminates during the Restricted Period, as
defined below, for any reason other than those set forth in the related Award
Agreement. For purposes hereof, "Restricted Period" shall mean that period as
determined by the Committee during which the shares of Restricted Stock awarded
to a participant may be forfeited. The Committee may at any time provide that a
Restricted Period shall terminate upon the attainment of any performance
objective established by the Committee. Upon termination of the Restricted
Period, the shares of Restricted Stock shall be delivered to the recipient free
and clear of all such restrictions.
7. Dilution and Other Adjustment
In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar event, the number or kind of shares issued, or that may be issued under
the Plan pursuant to paragraph 4 above shall be automatically adjusted to give
effect to the occurrence of such event (and, in the case of an Option, the
number or kind of shares subject to, or the Option price per share under, any
outstanding Option shall be automatically adjusted) so that the
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proportionate interest of the participant shall be maintained as before the
occurrence of such event. Any adjustment in outstanding Options pursuant to this
paragraph 7 shall be made without change in the total Option exercise price
applicable to the unexercised portion of such Options and with a corresponding
adjustment in the Option exercise price per share. No fractional shares of
Common Stock shall be issued pursuant to any adjustment referred to herein, and
any fractions resulting from any such adjustment shall be eliminated in each
case by rounding downward to the nearest whole share. Any adjustment made
pursuant to this paragraph 7 shall be conclusive and binding for all purposes of
the Plan.
8. Miscellaneous
(a) No person shall have any claim or right to be granted an Award
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any person any right to be retained in any way in the
service of the Company.
(b) No shares of Common Stock shall be issued hereunder unless counsel
for the Company shall be satisfied, that such issuance will be in
compliance with applicable federal, state and other securities laws.
(c) It shall be a condition to the obligation of the Company to issue
shares of Common Stock upon exercise of an Option, or deliver shares upon
termination of a Restricted Period, as the case may be, that the
participant (or any beneficiary or person entitled to act under paragraph 9
below) pay to the Company, upon its demand, any taxes required to be
withheld.
(d) The expenses of the Plan shall be borne by the Company.
(e) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under the Plan by the Company or the
Committee.
9. Total Disability or Death
(a) Except as otherwise provided in the Award Agreement, if an
employee Optionee terminates employment with the Company as the result, in
the sole judgment of the Committee, of his becoming totally disabled, the
Optionee shall be entitled to exercise any Option to the extent his right
to exercise such Option had accrued at the date of termination of
employment and had not previously been exercised, for a period of three
months after such termination, subject, in any case, to all other
provisions of the Plan.
(b) Except as otherwise provided in the Award Agreement, if the
employee Optionee should die either (i) while employed by the Company, or
(ii) during any period in which the Optionee may exercise the Option
following termination of employment, then the person or persons to whom the
Optionee's rights under the Option shall pass by will or by the applicable
laws of descent and distribution (including, without limitation, the
executors, administrators or other personal representatives of the Optionee
or his or her estate) shall be entitled to exercise the Option to the
extent his right to exercise such Option had accrued at the date of
termination of employment and had not previously been exercised, for a
period of twelve months from the date of such death, subject, in any case,
to all other provisions of the Plan.
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10. Amendment or Termination
The Plan may be terminated at any time or amended at any time or from time
to time by the Committee as the Committee shall deem advisable; provided,
however, that except as provided in paragraph 7 above, the Committee may not,
without further approval by the stockholders of the Company, increase the
maximum number of shares of Common Stock as to which Options may be granted, or
awarded as Restricted Stock, under the Plan, materially increase the benefits
accruing to participants under the Plan or change the class of persons eligible
to receive Awards under the Plan. No amendment or termination of the Plan shall
materially and adversely affect any right of any participant with respect to any
Award theretofore granted without such participant's written consent. No ISO may
be granted after the tenth anniversary of the effective date of the Plan.
11. Effectiveness
The Plan shall not be effective and no Award granted hereunder shall have
effect unless and until the Plan has been approved and adopted by a majority in
voting power of the stockholders of the Company.
Amended June 22, 1999
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