<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
[x] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule
14a-11(c) or Rule 14a-12
U.S. ALCOHOL TESTING OF AMERICA, INC.
(Name of Registrant as Specified in Its Charter)
U.S. ALCOHOL TESTING OF AMERICA, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
___________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
___________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
___________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________
(5) Total fee paid:
___________________________________________________________________
[x] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
_____________________________________________________________
(2) Form, schedule or registration statement no.:
_____________________________________________________________
(3) Filing party:
_____________________________________________________________
(4) Date filed:
_____________________________________________________________
- ------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
U.S. ALCOHOL TESTING OF AMERICA, INC.
10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
U.S. ALCOHOL TESTING OF AMERICA, INC.
The Annual Meeting of Stockholders of U.S. Alcohol Testing of America,
Inc. (the "Company") will be held at the Ontario Airport Marriott located at
2200 East Holt Boulevard, Ontario, California 91761, on Tuesday, October 22,
1996, at 10:00 a.m., Pacific Standard Time (the "Annual Meeting"), for the
following purposes:
1. To elect two directors as Class A Directors of the Company for
a one-year term until the next Annual Meeting of Stockholders
and until their successors are duly elected and qualify.
2. To ratify the appointment of Ernst & Young LLP as independent
public accountants of the Company and its subsidiaries for the
fiscal year ending March 31, 1997.
3. To approve the change of the name of the Company from U.S.
Alcohol Testing of America, Inc. to Substance Abuse
Technologies, Inc.
4. To transact such other business as may come before the Annual
Meeting or any adjournment thereof.
Only stockholders of record at the close of business on September 4, 1996 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
/s/ Robert W. Berend
---------------------
Robert W. Berend
Secretary
September 12, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE PROXY MAY BE REVOKED
IN WRITING PRIOR TO THE MEETING OR, IF YOU ATTEND THE MEETING, YOU MAY REVOKE
THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 3
U.S. ALCOHOL TESTING OF AMERICA, INC.
10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1996
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of U.S. Alcohol Testing of America, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Stockholders (the
"Meeting") to be held on Tuesday, October 22, 1996, or at any adjournment
thereof. The purposes for which the Meeting is to be held are set forth in the
preceding Notice of Annual Meeting. This Proxy Statement and the enclosed form
of proxy are first being mailed on or about September 12, 1996 to holders of
record of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), as of the close of business on September 4, 1996 (the "Record Date"),
which has been fixed as the record date for the determination of the
stockholders entitled to notice of, and to vote at, the Meeting.
VOTING SECURITIES
On the Record Date, 35,603,092 shares of the Common Stock, which is
the only class entitled to vote at the Meeting, were issued and outstanding.
Each stockholder of record is entitled to cast, in person or by proxy, one vote
for each share of the Common Stock held by such stockholder as of the close of
business on the Record Date. A plurality of the votes cast at the Meeting shall
be necessary to elect two Class A Directors. The affirmative vote of the holders
of a majority of the shares represented and entitled to vote at the Annual
Meeting shall be necessary to approve the selection of the independent auditors.
The affirmative vote of a majority of the outstanding shares of the Common Stock
shall be necessary to approve the Company's name change.
Proxies will be voted as indicated in this Proxy Statement and the
enclosed proxy. Shares represented by properly executed proxies, if received in
time, will be voted in accordance with any specifications made therein. A proxy
may be revoked by delivering a written notice of revocation to the Company
(Attention: Linda H. Masterson, President) at its principal executive office or
in person at the Meeting, or by a subsequently dated proxy, at any time prior to
the voting thereof. The principal executive office of the Company is located at
the above address.
Rule 577 of the American Stock Exchange, Inc. permits a member firm to
vote for the directors and/or for the proposals to ratify the selection of
independent auditors and to approve the Company's name change if the member firm
holds the shares of the Common Stock for a beneficial owner and receives no
instructions to the contrary within ten days after receipt by the beneficial
owner of a copy of this Proxy Statement. The Company, accordingly, urges each
beneficial owner to instruct the member firm which holds of record the
stockholder's shares of the Common Stock to vote in favor of all proposals
submitted to the stockholders for a vote.
A stockholder shall have no right to receive payment for his, her or
its shares as a result of stockholder approval of any proposal in the Notice of
Meeting.
<PAGE> 4
PROPOSAL ONE: ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS CLASS A DIRECTORS
Two Class A Directors will be elected at the Meeting to serve for a
three-year term until the third following Annual Meeting of Stockholders and
until their successors are duly elected and qualify.
Proxies received in response to this solicitation will be voted for the
election of Robert Stutman and Michael S. McCord to serve as Class A Directors.
Robert Stutman is currently serving as a director and Michael S. McCord is
currently a consultant to the Board of Directors and they have each consented to
serve as a Class A Director if elected at the Meeting. If a nominee should not
be available for election as contemplated, the management proxy holders will
vote for such lesser number of directors as are available to serve or will vote
for a substitute designated by the current Board of Directors. In no event will
proxies be voted for more than two nominees or other than as Class A Directors.
The following table sets forth certain information, as of the Record
Date, concerning the nominees for election as Class A Directors of the Company,
one of whom is currently serving as a director of the Company. The information
has been furnished to the Company by the individual named. For information as to
the shares of the Common Stock held by each nominee, see the section "Security
Ownership of Certain Beneficial Holders and Management" elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
Year First
Elected
Name of Nominee Age Director Positions and Offices with the Company
- --------------- --- -------- --------------------------------------
<S> <C> <C> <C>
Robert Stutman 53 1996 Chairman, Chief Executive Officer and a director
Michael S. McCord 53 N/A None
</TABLE>
The following table sets forth certain information, as of the Record
Date, with respect to the Class B Directors and the Class C Directors continuing
in office after the Meeting:
<TABLE>
<CAPTION>
Year
Became
Class Name of Directors Age Director Positions and Offices with Company
- ----- ----------------- --- -------- ----------------------------------
<S> <C> <C> <C> <C>
B Alan I. Goldman 59 1995 Director
B Peter M. Mark 50 1995 Director
C John C. Lawn 60 1995 Director
C Linda H. Masterson 45 1995 President, Chief Operating Officer and a Director
C Lee S. Rosen 41 1995 Director
</TABLE>
FAMILY RELATIONSHIPS OF NOMINEES
There are no family relationships among either nominee for election as
a Class A Director and any director or executive officer of the Company.
2
<PAGE> 5
BUSINESS HISTORY OF NOMINEES
Robert Stutman was elected Chairman of the Board and a director of the
Company on April 18, 1996 and designated as its Chief Executive Officer. For
more than five years prior thereto, he has been serving as the President of
Robert Stutman & Associates, Inc. ("RSA"), a provider of corporate "Drug-Free
Workplace" programs. Prior to forming RSA, he was Special Agent in charge of the
New York office of the United States Drug Enforcement Administration (the
"DEA"). He also currently serves as a special consultant in substance abuse for
the CBS News Division. The Company acquired RSA on May 21, 1996. On May 31,
1996, Mr. Stutman was elected as Chairman of the Board and a director of Good
Ideas Enterprises, Inc. ("Good Ideas"), a 60.8%-subsidiary of the Company as of
July 31, 1996, and U.S. Drug Testing, Inc. ("U.S. Drug"), a 67%-owned subsidiary
of the Company as of July 31, 1996, and designated as the Chief Executive
Officer of U.S. Drug.
Michael S. McCord is the owner of McCord Investments, a sole
proprietorship formed in 1980 which primarily invests in various capital
markets. Mr. McCord is also a stockholder, director and officer of McCord
Brothers, Inc. and a partner of McCord Brothers Partnership, a privately-owned
company and partnership, respectively, each of which invests in oil, gas and
real estate properties. From 1974 to 1980, Mr. McCord served as Financial Vice
President of the Wedge Group, a privately held holding company which acquired
and held control of international multi-industry (including agricultural,
construction, energy, manufacturing and service) companies with aggregate
revenues in excess of $1 billion. He is also a stockholder of the Company and a
consultant to its Board of Directors, a stockholder and a director of Good
Ideas, and a stockholder and director of U.S. Drug.
COMMITTEES AND BOARD MEETINGS
On October 12, 1995, the Board of Directors authorized the
establishment of five standing committees: the Executive Committee, the Audit
and Finance Committee, the Compensation Committee, the Nominating Committee and
the Marketing Committee. On May 20, 1996, the Marketing Committee was abolished
as a result of its Chairperson (Ms. Masterson) becoming the President and Chief
Operating officer of the Company.
Messrs. Rosen and Stutman and Ms. Masterson serve on the Executive
Committee, with Mr. Stutman serving as Chairperson. The Executive Committee acts
on matters which require immediate action in circumstances where it is
impracticable to assemble a quorum of the Board of Directors.
Messrs. Goldman, Mark and Rosen serve on the Audit and Finance
Committee, with Mr. Goldman serving as Chairperson. The Audit and Finance
Committee recommends annually to the stockholders the independent auditors to be
retained by the Company, reviews the scope and procedures to be followed in the
conduct of audits by both the independent auditors and the internal auditors of
the Company, reviews various reports and recommendations with respect to
internal controls and any significant changes in accounting and reviews
financing proposals prior to their submission to the Board of Directors.
Messrs. Goldman, Mark and Rosen serve on the Compensation Committee,
with Mr. Rosen serving as Chairperson. The Compensation Committee approves the
renumeration of key officers of the Company and its subsidiaries, reviews and
recommends to the Board of Directors changes in the Company's stock benefit and
executive, managerial or employee compensatory and benefit plans or programs and
administer stock option, restricted stock or similar plans of the Company.
Messrs. Goldman, Rosen and Stutman and Ms. Masterson serve on the
Nominating Committee, with Mr. Stutman serving as Chairperson. The Nominating
Committee recommends to the Board nominees for election as directors, criteria
as to tenure or retention of directors, a successor to the Chief Executive
Officer of the Company, the selection of Committee members and Chairperson and
as to certain other specified matters.
3
<PAGE> 6
During fiscal 1996, there were seven meetings of the Board of
Directors. Mr. Stutman is the only incumbent director for election as a Class A
Director and he was not elected until after fiscal 1996.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains information concerning the current
directors and executive officers of the Company as of July 31, 1996:
<TABLE>
<CAPTION>
Year First
Elected
Director
Name of Nominee Age or Officer Positions and Offices with the Company
- --------------- --- ---------- --------------------------------------
<S> <C> <C> <C>
Robert Stutman 53 1996 Chairman, Chief Executive Officer and a director
Linda H. Masterson 45 1995 President, Chief Operating Officer and a director
Joseph Bradley 52 1996 Treasurer, Acting Chief Financial Officer and Acting Chief
Accounting Officer
Alan I. Goldman 59 1995 Director
John C. Lawn 60 1995 Director
Peter M. Mark 50 1995 Director
Lee S. Rosen 41 1995 Director
</TABLE>
Directors are generally elected for a classified term of three years or
until his or her successor is elected and shall have qualified, which
classification of directors was initiated at the Annual Meeting of Stockholders
held on February 7, 1996. Each of the above directors other than Mr. Stutman
(who was first elected on April 18, 1996 for a one-year term) was first elected
on September 26, 1996 and was re-elected at the Annual Meeting of Stockholders
held on February 7, 1996, with Messrs. Goldman and Mark to serve for a two-year
term as Class B Directors and Messrs. Lawn and Rosen and Ms. Masterson to serve
for a three-year term as Class C Directors. Mr. Stutman will serve until the
Annual Meeting of Stockholders, at which time he has been designated as a
management nominee for election as a Class A Director which is a precondition
for reelection. At the Annual Meeting of Stockholders on February 7, 1996, James
C. Witham and Karen B. Laustsen were elected for a one-year term, but resigned
on April 18, 1996.
Each officer of the Company is elected by the Board of Directors to
serve at the discretion of the directors. For information as to severance
arrangements relating to two executive officers named in the table, see the
section "Employment Agreements" under this caption "Management."
4
<PAGE> 7
BUSINESS HISTORY
Robert Stutman was elected Chairman of the Board and a director of the
Company on April 18, 1996 and designated as its Chief Executive Officer. For
more than five years prior thereto, he has been serving as the President of RSA,
a provider of corporate "Drug-Free Workplace" programs. Prior to forming RSA, he
was Special Agent in charge of the New York office of the DEA. He also currently
serves as a special consultant in substance abuse for the CBS News Division. The
Company acquired RSA on May 21, 1996. On May 31, 1996, Mr. Stutman was elected
as Chairman of the Board and a director of each of Good Ideas and U.S. Drug and
designated as the Chief Executive Officer of U.S. Drug.
Linda H. Masterson has had substantial experience in marketing, sales
and business development in the medical diagnostics, healthcare and
biotechnology fields. On September 26, 1995, she was elected a director of the
Company. Effective May 13, 1996, she became the President and Chief Operating
Officer of the Company. Until such date, she was employed as the Executive Vice
President of Cholestech, Inc., a start-up diagnostic company, for which she
developed and restructured the company business strategy. In 1993, Ms. Masterson
founded Masterson & Associates, a company of which she was the President and
owner until she joined Cholestech, Inc. in May 1994, engaged in the business of
providing advice to start-up companies, including the preparation of technology
and market assessments and the preparation of strategic and five-year business
plans for biotech, medical device, pharmaceutical and software applications
companies. From 1992 to 1993, Ms. Masterson was employed as the Vice President
of Marketing and Sales of BioStar, Inc., a start-up biotech company focused on
the commercialization of a new detection technology applicable to both
immunoassay and hybridization based systems. From 1989 to 1992, she was employed
as Senior Vice President of Marketing, Sales and Business Development by
Gen-Probe, Inc., a specialized genetic probe biotechnology company focused on
infectious diseases, cancer and therapeutics. Prior to 1989, Ms. Masterson was
employed for 12 years in various domestic and international marketing and sales
positions at Johnson & Johnson, Inc., Baxter International Inc. and Warner
Lambert Co. Ms. Masterson has a BS in Medical Technology from the University of
Rhode Island, a MS in Microbiology/Biochemistry from the University of Maryland
and attended the Executive Advanced Management Program at the Wharton School of
Business at the University of Pennsylvania. On May 31, 1996, Ms. Masterson was
elected as a director of each of Good Ideas and U.S. Drug and, effective on July
31, 1996, designated as the President and Chief Operating Officer of U.S. Drug.
Joseph Bradley was elected as the Treasurer of the Company effective
July 3, 1996 and simultaneously designated as its Acting Chief Financial Officer
and Chief Accounting Officer. He had previously been serving the Company as its
Controller, joining the Company in September 1995. Prior thereto, Mr. Bradley
was Chief Financial Officer of Bocchi Laboratories, Inc., a contract
manufacturer of personal care products, from October 1994 to August 1995. He was
Controller and Chief Financial Officer of Pacific Clay Products, Inc., a
manufacturer of building products, from April 1991 to October 1994. From 1979 to
1991, Mr. Bradley held several positions with Kimstock, Inc., a manufacturer of
plumbing products, including Executive Vice President and Chief Operating
Officer, Vice President-General Manager and Vice President-Finance. Previously,
he held various financial positions at Cordon International Corporation,
Atlantic Richfield Company and Tridair Industries, Inc. and was an auditor and
consultant with the accounting firm of Arthur Andersen & Co. Mr. Bradley is a
certified public accountant and earned a B.A. in Accounting and Business
Economics from Claremont McKenna College and an E.M.B.A. from The Claremont
Graduate School in 1995.
The following persons were all elected as directors of the Company on
September 26, 1995:
Alan I. Goldman has had over 35 years of experience in corporate
finance, investment banking, commercial banking and central banking. From
February 1985 to the present, Alan I. Goldman has been engaged in investment
banking and consulting on financial and management matters, specializing in
mergers and acquisitions, private placements and business and organization
consulting. From October 1986 to July 1990, he was a consultant to Goldmark
Partners Ltd., an investment banking firm specializing in mergers and
acquisitions. From June 1987 to
5
<PAGE> 8
March 1988, he was also the President of Goldmark Capital, Ltd., a private
investment firm. From May 1975 to January 1985, Mr. Goldman held the position of
Senior Vice President, Finance and Chief Financial Officer of Management
Assistance Inc. ("MAI"), then a $450 million multinational computer
manufacturing, marketing and maintenance company listed on the New York Stock
Exchange. In January 1985, MAI discontinued its operations when it sold its
Sorbus Service Division to a subsidiary of Bell Atlantic Corporation and its
Basic Four Computer Division to a corporation now called MAI Systems, Inc. From
June 1970 to May 1974, he was Vice President, Finance, Treasurer and Chief
Financial Officer of Interway Corporation, then a New York Stock
Exchange-listed, $200 million international company engaged in piggy-back
trailer and containing leasing and fleet management and now a part of
Transamerica Corporation. From 1969 to 1970, he was at Lehman Brothers where he
participated in investment banking and corporate finance activities; from 1962
to 1969, he was at Bankers Trust Company, where he managed several offices; and
from 1958 to 1962, he served in various positions at the Federal Reserve Bank of
New York. Mr. Goldman currently serves as a director of Production Systems
Acquisition Corporation, a public company in the production systems business.
From December 8, 1994 to date, John C. Lawn has been serving as the
Chairman and Chief Executive Officer of The Century Council ("Century"), which
is a national not-for-profit organization dedicated to fighting alcohol abuse
which is supported by more than 800 concerned brewers, vintners, distillers and
wholesalers. From 1990 to 1994, Mr. Lawn served as Vice President and Chief of
Operations of the New York Yankees. From 1985 to 1990 he served as Chief
Administrator at the DEA, having previously served as Deputy Administrator from
1982 to 1985, and was awarded the President's Medal, the highest honor for
civilian service. Prior to joining the DEA, Mr. Lawn served with the Federal
Bureau of Investigation from 1967 to 1982.
In December 1994 Peter M. Mark formed Mark Energy Capital Group, Ltd.
("MECG"), a private investment group for which through a wholly-owned
corporation he served as the General Partner from December 1994 to the present.
The primary interest of MECG is to acquire proven producing oil and gas
properties in the United States. In April 1981, he formed Mark Resources
Corporation, a private oil and gas company whose operations were primarily
located in the Appalachian Basin, and served as its President, its Chief
Executive Officer and a director from April 1981 until December 1993 when it was
sold to Lomak Petroleum, Inc. ("Lomak"). Mr. Mark then served as a director and
the Vice Chairman of Lomak until December 1994 when he formed MECG. Between 1976
and 1991, Mr. Mark organized and managed 30 limited partnerships and numerous
joint ventures which explored and developed approximately 700 wells for oil and
gas.
Lee S. Rosen has been a financial consultant with registered
broker-dealer firms for the past six and a half years, as follows: He is
currently employed by Donald & Co. Securities Inc., which firm he joined in July
1995. From April 1994 until June 1995, he was employed by Kidder Peabody & Co.,
Incorporated ("Kidder") or, after Kidder was acquired by PaineWebber
Incorporated ("PaineWebber") in January 1995, by PaineWebber. Prior to working
for Kidder, from April 1993 until April 1994, Mr. Rosen was employed by
Shearson, Lehman, Hutton & Co., Inc. ("Shearson") or, after Shearson was
acquired by Smith Barney, Inc. ("Smith Barney") in September 1993, by Smith
Barney. From September 1991 until April 1993, he was employed by Raymond James &
Associates, Inc. From February 1989 until September 1991, Mr. Rosen worked for
A.G. Edwards, Co., Inc.
FAMILY RELATIONSHIPS
There are no family relationships among the directors and executive
officers of the Company.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation and certain other
components of the compensation of James C. Witham, the Chairman, President and
Chief Executive Officer of the Company until April 18, 1996, and the only two
other executive officers of the Company who received compensation in excess of
$100,000 in the fiscal year ended March 31, 1996 ("fiscal 1996"):
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------- ---------------------------------
Other All
Name and Annual Securities Other
Principal Compen- Underlying Compen-
Position Year Salary Bonus sation Options sation
-------- ---- ------ ----- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
James C. Witham (1) 1996 $412,500(2) $50,000 -- -- --
Chairman, President and 1995 $301,154 $50,000 -- 180,000(3) --
Chief Executive Officer 1994 $244,327 $50,000 -- -- --
Gary S. Wolff (1) 1996 $203,077(2) $25,000 -- -- --
Treasurer and Chief 1995 $160,615 $25,000 -- 80,000(3) --
Financial Officer 1994 $112,769 $25,000 -- -- --
Karen B. Laustsen (1) 1996 $159,923(2) $25,000 -- 100,000(3) --
Executive Vice 1995 $120,461 $15,000 -- 100,000(3) --
President 1994 $ 89,396 $25,000 -- -- --
</TABLE>
(1) The Company had three-year employment agreements with these officers which
were scheduled to terminate on December 31, 1996 and which provided
minimum aggregate salaries for the three officers amounting to $638,000
per year plus reimbursement for related business expenses. On April 18,
1996, James C. Witham and Karen B. Laustsen resigned their officerships
and directorships in the Company; however, they continued to serve the
Company as employees until May 31, 1996. On July 3, 1996, Mr. Wolff
resigned his officership in the Company. See the section "Employment
Agreements" under this caption "Management."
(2) The amounts shown in the table exceed the salary amounts shown below in
the section "Employment Agreements" under this caption "Management" as a
result of the March 1996 company-wide payments of several years of unused
vacation accruals, of which $95,192.25, $33,846.20 and $32,999.98 was paid
to Mr. Witham, Mr. Wolff and Ms. Laustsen, respectively.
(3) In August 1994, the Company granted non-qualified stock options expiring
August 1, 2004 (the "Options") under the 1990 Restricted Stock,
Non-Qualified and Incentive Stock Option Plan (the "1990 Option Plan") to
purchase an aggregate of 450,000 shares of the Common Stock as follows:
James C. Witham - 180,000 shares, Gary S. Wolff - 80,000 shares, Karen B.
Laustsen - 100,000 shares, Glenn Bergenfield - 12,500 shares, William
DiTuro - 12,500 shares, Michael J. Witham - 60,000 shares and George
Berger - 5,000 shares. At the date of grant, all of the foregoing
optionees were directors and/or officers of the Company. All of the
Options are exercisable at $2.375 per share. The Company terminated the
1990 Option Plan subsequent to the grants. All of the options, except for
Mr. Bergenfield's which has been exercised, will expire on the later of
(a) 30 days after the effective date of a post-effective amendment to a
registration statement under the Securities Act relating to the underlying
shares of the Common Stock or (b) 90 days after (i) the optionee's
employment terminated or terminates or (ii), if the optionee is not an
employee, the directorship terminated.
7
<PAGE> 10
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1996
AND OPTION VALUES AT MARCH 31, 1996
The following table sets forth certain information concerning stock option
exercises by the three individuals named in the Summary Compensation Table
during fiscal 1996. In addition, this table includes the number of shares
covered by exercisable options as of March 31, 1996. Also reported are the
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the closing market
price of the Common Stock at March 31, 1996.
<TABLE>
<CAPTION>
=================================================================================================================
Number of
Shares Value Unexercised Value of Unexercised
Acquired On Realized Options In-The-Money Options
Name Exercise March 31, 1996 At March 31, 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James C. Witham - 0 - - 0 - 677,500 $1,197,388
- -----------------------------------------------------------------------------------------------------------------
Gary S. Wolff - 0 - - 0 - 105,000 $ 114,688
- -----------------------------------------------------------------------------------------------------------------
Karen B. Laustsen - 0 - - 0 - 235,000 $ 376,075
=================================================================================================================
</TABLE>
OTHER COMPENSATION
The Company currently has no pension plan in effect and has no stock
option plan, restricted stock plan, stock appreciation rights nor any other
long-term incentive plan under which grants or awards may be made in fiscal 1997
or thereafter. The Board is, however, considering adoption of a stock option
plan for directors, officers and key employees of the Company and its
subsidiaries.
EMPLOYMENT AGREEMENTS
The Company had entered into employment agreements (the "Employment
Agreements") with each of James C. Witham, Karen B. Laustsen and Gary S. Wolff
providing for a three-year term commencing January 1, 1994 and terminating
December 31, 1996. On April 18, 1996, Mr. Witham and Ms. Laustsen resigned their
directorships and officerships, but agreed to continue to serve the Company as
employees until May 31, 1996. Mr. Wolff resigned as the Treasurer, the Chief
Financial Officer and the Chief Accounting Officer of the Company on July 3,
1996. As a result of these resignations, the Employment Agreements terminated on
May 31, 1996 as to Mr. Witham and Ms. Laustsen and on July 3, 1996 as to Mr.
Wolff, except that the Company made a $25,000 severance payment to Mr. Wolff and
is continuing medical benefits for the three former executive officers until
December 31, 1996, the original expiration date of the Employment Agreements.
Mr. Wolff is, however, continuing to assist the Company in its efforts to sell
the stock or assets of Good Ideas. The resignations of Messrs. Witham and Wolff
and Ms. Laustsen also related to their directorships and, where applicable,
officerships of subsidiaries of the Company.
Pursuant to his Employment Agreement, Mr. Witham was employed as the
President and Chief Executive Officer of the Company at an annual base salary of
$330,000. Pursuant to her Employment Agreement, Ms. Laustsen was employed as an
Executive Vice President at an annual base salary of $132,000. Pursuant to his
Employment Agreement, Mr. Wolff was employed as the Treasurer and Chief
Financial Officer at an annual base salary of $176,000 per year. Each of such
salaries reflected a 10% increase effective July 1, 1995, which increase was the
first in 18 months. Mr. Witham and Ms. Laustsen were each required to devote
substantially all of his or her time to the business of the Company, while Mr.
Wolff was only required to devote a majority of his time.
8
<PAGE> 11
The Employment Agreements contained standard provisions for participation
by the executive in the Company's benefit programs, whether relating to the
Common Stock, bonuses or medical, life and disability insurance or otherwise.
Mr. Witham and Ms. Laustsen were each provided with a company car, which have
been returned to the Company. The Employment Agreements also provided for
termination in the event of disability for six or more consecutive months and
termination "for cause" which means conviction for embezzlement, theft or other
criminal act constituting a felony or failure to comply with the terms and
conditions of the Agreement if such breach is not cured within seven days after
written notice is given to the executive by the Board of Directors.
Michael J. Witham, who is the son of James C. Witham and who was the Vice
President of Manufacturing of the Company, had an employment agreement similar
to the Employment Agreements providing for an annual base salary of $115,500.
Effective September 26, 1995, Michael J. Witham agreed to terminate his
employment agreement in consideration of a payment to him of $50,000 and an
assignment to him of a company car. He resigned as an executive officer of the
Company and no longer serves the Company in any capacity.
Effective April 18, 1996, Robert Stutman, the President and a principal
shareholder of RSA, became the Chief Executive Officer of the Company. Mr.
Stutman's annual base salary is $225,000. He will receive a cash bonus of
$100,000 if the Company breaks even or is profitable in the fiscal year ending
March 31, 1997 ("fiscal 1997") and an additional $150,000 if the Company has net
earnings of $2,000,040 in fiscal 1997. Cash bonuses will be discretionary in
subsequent years. He will also receive a one-time cash bonus of $50,000 upon the
Company's subsidiary ProActive Synergies, Inc. ("ProActive") satisfying certain
performance standards. In the event that Mr. Stutman is terminated without cause
(as defined) during the first three years that he is employed by the Company, he
shall receive severance pay in an amount equal to the base salary that would
have been paid to him after the date of termination had Mr. Stutman not been
terminated and had he been employed by the Company for a period of three years.
Effective May 13, 1996, Linda H. Masterson, a member of the Company's
Board of Directors, was employed as the President and Chief Operating Officer of
the Company. Ms. Masterson's annual base salary is $175,000. Ms. Masterson was
granted a Common Stock purchase warrant to purchase 600,000 shares of the Common
Stock. If the Company adopts a stock option plan, then the Common Stock purchase
warrant will be converted to a stock option subject to such plan. In either
case, the exercise price is $3.125 per share and the option or warrant became
exercisable over a four-year period as follows: 50,000 shares upon commencement
of the term of employment (i.e., May 13, 1996), 100,000 shares at the end of the
first year, 150,000 shares at the end of the second year, 150,000 shares at the
end of the third year and 150,000 shares at the end of the fourth year. The
expiration dates of the stock option will be in accordance with the terms of the
stock option plan and the expiration dates of the warrant will be four years
from the respective dates on which the warrant becomes exercisable. A
discretionary cash and/or stock bonus may be paid commencing with the fiscal
year after the fiscal year in which the Company first has positive earnings. A
bonus in the form of stock options pursuant to an employee stock option plan or
warrants, if no such plan is adopted, shall be granted in respect of fiscal 1997
as follows: 33,000 shares if the Company breaks even in fiscal 1997 and an
additional 50,000 shares if the Company has net earnings of $2,000,040 for
fiscal 1997. In the event that Ms. Masterson is terminated without cause (as
defined), she shall be paid severance equal to her annual base salary.
No employment agreements will be executed with Mr. Stutman or Ms.
Masterson; however, written agreements have been prepared evidencing the
severance provisions.
DIRECTORS' COMPENSATION
Prior to the change on September 26, 1995 in the composition of the Board,
directors of the Company who were not employees were eligible to receive 10,000
shares of the Common Stock in the current fiscal year, in addition to being
reimbursed for their travel and other expenses. On September 26, 1995, 10,000
shares of the Common Stock were allocated to each of Glenn Bergenfield and
William DiTuro, then directors.
9
<PAGE> 12
On November 16, 1995, as modified on December 11, 1995, the Board approved
the following compensation arrangements for directors who are not employees of
the Company: (1) each year the director will receive a Common Stock purchase
warrant to purchase 10,000 shares of the Common Stock exercisable at the closing
sales price on the date of grant (the Common Stock purchase warrants were
granted to five directors (i.e., Alan I. Goldman, John C. Lawn, Peter M. Mark,
Linda H. Masterson and Lee S. Rosen to purchase an aggregate of 50,000 shares at
$1.9375, the closing sales price on November 16, 1995); (2) an annual payment of
$10,000 and (3) a quarterly payment of $2,500 provided that the director attends
at least 75% of the meetings during the year. The Board also authorized an
annual payment of $1,000 for a director serving as the Chairman of a Board
committee and $500 for serving as a member of a Board committee. The Board
approved the following compensation for all directors: the issuance of a Common
Stock purchase warrant to purchase 10,000 shares of the Common Stock at an
exercise price for each share equal to the closing sales price as reported on
each anniversary date of November 16, 1995 for each $1.00 rise over the closing
sales price of the Common Stock on November 16th of each year (which would be
$1.9375 for November 16, 1995), the rise to be calculated on the basis of the
average of the closing sales prices during the 90-day period preceding the 30th
day after the date on which the results of operations for the fiscal year are
announced either through a press release or the filing of the Annual Report on
Form 10-K under Section 13 of the Exchange Act. Based on the fact that the
results of operations for fiscal 1996 were reported in a press release dated
June 14, 1996, each of the current directors will not receive a Common Stock
purchase warrant in 1996 because the average sales price during the 90 calendar
days prior to July 14, 1996 was $2.9308 per share or less than a $1.00 rise over
$1.9375 per share.
As of this date, because Mr. Stutman and Ms. Masterson are employees of
the Company, they are not eligible for any of the directors' compensation
described in the preceding paragraph except the Common Stock purchase warrant
based on an annual rise in the market price of the Common Stock.
PERFORMANCE GRAPH
See tables on pages 11 and 12.
10
<PAGE> 13
TOTAL SHAREHOLDER RETURNS
Dividends Reinvested
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
Years Ending
-------------------------------------
Company Name/Index Mar92 Mar93 Mar94 Mar95 Mar96
- ------------------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
U.S. ALCOHOL TESTING 307.76 -62.07 63.64 -11.11 68.75
S&P 500 INDEX 11.04 15.23 1.47 15.57 32.10
PEER GROUP 3.07 -2.14 22.03 -0.76 80.70
</TABLE>
<TABLE>
<CAPTION>
INDEXED RETURNS
Base Years Ending
Period -------------------------------------
Company Name/Index Mar91 Mar92 Mar93 Mar94 Mar95 Mar96
- ------------------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
U.S. ALCOHOL TESTING 100 407.76 154.67 253.09 224.97 379.64
S&P 500 INDEX 100 111.04 127.95 129.84 150.05 198.22
PEER GROUP 100 103.07 100.86 123.08 122.15 220.72
</TABLE>
<TABLE>
<CAPTION>
Peer Group Companies
- ----------------------------------------------------------------------
<S> <C>
ANDROS INC. MEDIA LOGIC INC.
IMC INDUSTRIES INC. MODERN CONTROLS INC.
INPUT/OUTPUT INC. MTS SYSTEMS CORP.
INSTRON CORP. NDC AUTOMATION INC.
LIBERTY TECHNOLOGIES INC. RHEOMETRICS SCIENTIFIC INC.
MEASUREMENT SPECIALTIES INC. U.S. ALCOHOL TESTING
</TABLE>
11
<PAGE> 14
TOTAL SHAREHOLDER RETURNS
Dividends Reinvested
<TABLE>
<CAPTION>
Mar 91 Mar 92 Mar 93 Mar 94 Mar 95 Mar 96
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
US Alcohol Testing 100 408 155 253 225 380
S & P 500 Index 100 111 128 130 150 198
Peer Group 100 103 101 123 122 221
</TABLE>
[TOTAL SHAREHOLDER RETURNS CHART]
12
<PAGE> 15
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based only upon a review of Forms 3, 4 and 5 filed under Section 16(a)
of the Exchange Act, the Company is aware of the following: Alan I. Goldman,
John C. Lawn, Peter M. Mark, Linda H. Masterson and Lee S. Rosen, all of whom
are directors of the Company and Ms. Masterson is currently also an executive
officer of the Company, each failed to file reports on a timely basis as
required by Section 16(a) of the Exchange Act during fiscal 1996. Each of these
individuals has already completed filing the requisite Forms. Additionally, the
Company has instituted procedures to ensure that all filings are made on a
timely basis in the future. For fiscal 1996, Mr. Goldman filed one late report
and one transaction was not reported on a timely basis. For fiscal 1996, Mr.
Lawn filed one late report and one transaction was not reported on a timely
basis. For fiscal 1996, Mr. Mark filed three late reports and six transactions
were not reported on a timely basis. For fiscal 1996, Ms. Masterson filed one
late report and one transaction was not reported on a timely basis. For fiscal
1996, Mr. Rosen filed one late report and four transactions were not
reported on a timely basis.
CERTAIN TRANSACTIONS
On October 12, 1995, the Board of Directors appointed Michael S. McCord, a
stockholder of the Company (as of the Record Date, he beneficially owned 403,808
shares of the Common Stock) and a former member of the Committee engaged in the
consent solicitation settled in September 1995, as a consultant to the Company
to serve at the discretion of the Board. For such services he was granted on
November 16, 1995 a Common Stock purchase warrant to purchase 10,000 shares of
the Common Stock at $1.9375, the closing sales price on the date of grant. He is
also to receive an annual payment of $10,000 in quarterly installments of $2,500
assuming he is still rendering services as a consultant.
In February 1996, Lee S. Rosen, a director of the Company, received (1)
$100,000 and (2)(a) a Common Stock purchase warrant expiring November 15, 1998
to purchase 400,000 shares of the Common Stock at $1.9375 per share, (b) a
Common Stock purchase warrant expiring November 15, 2000 to purchase 150,000
shares of the Common Stock at $3.00 per share and (c) a Common Stock purchase
warrant to purchase 150,000 shares of the Common Stock at $4.00 per share for
services performed in connection with the Company's offering of 2,000,000 shares
of the Common Stock pursuant to Regulation D of the Securities Act. The latter
two warrants can only be exercised as to 50,000 shares of the Common Stock
subject thereto in proportion to the shares issued upon the exercise of Common
Stock purchase warrants expiring December 17, 1999 to purchase 2,000,000 shares
of the Common Stock at $2.00 per share issued to the purchasers in such private
placement. During May and June 1996, Mr. Rosen was paid an additional $400,000
for services rendered to the Company in connection with the exercise of
outstanding Common Stock purchase warrants to purchase shares of the Common
Stock. The payments to Mr. Rosen have been charged to Additional Paid-In
Capital. Mr. Rosen also received a Common Stock purchase warrant expiring April
17, 1999 to purchase 300,000 shares of the Common Stock at $3.125 per share for
such services.
On May 21, 1996, the Company completed its acquisition of RSA, a provider
of corporate "Drug-Free Workplace" programs, and RSA became a wholly-owned
subsidiary of the Company. Since January 1996, RSA has been designing policies
and programs on substance abuse prevention for customers of the ProActive
subsidiary. Recognizing that RSA could bring potential revenues to the Company
in what the Board deemed to be the Company's core businesses, especially if RSA
were part of the Company and not just a consultant, and that Robert Stutman,
RSA's President and founder, was a recognized authority in the area of substance
abuse prevention programs, four of the independent directors of the Company
negotiated with Mr. Stutman on April 17, 1996 the terms for a possible
acquisition of RSA. When Mr. Witham joined the discussions the next day, he
favored naming Mr. Stutman as Chief Executive Officer of the Company and offered
to resign so that there would be no question as to Mr. Stutman's authority,
believing that this would be in the best interests of the Company and all of the
Company's stockholders. Ms. Laustsen subsequently also offered to resign for the
same reason. Recognizing that, as a result of these offers, the Company would
lose two of its principal executive officers, the remaining
13
<PAGE> 16
directors and Mr. Stutman then negotiated with Ms. Masterson the terms of her
becoming President and Chief Operating Officer of the Company.
The Company paid $2,100,000 to the RSA shareholders for their shares of
RSA (including $1,078,920 paid to Mr. Stutman for his 52.8% of the RSA shares
and $721,080 paid to Brian Stutman, son of Mr. Stutman and now Director of Sales
and Marketing of the Company, for his 35.3% of the RSA shares) and issued to the
RSA stockholders an aggregate of 500,000 shares of the Common Stock (including
263,750 shares issued to Mr. Stutman and 176,250 shares to Brian Stutman), and
Common Stock purchase warrants expiring May 20, 1999 to purchase an aggregate of
900,000 shares of the Common Stock (including a warrant to purchase 474,750
shares issued to Mr. Stutman and a warrant to purchase 317,250 shares issued to
Brian Stutman). The Company also issued two promissory notes aggregating
$400,000 in principal amount (the "RSA Notes") to two RSA shareholders (one of
whom is Mr. Stutman who received a RSA Note for $239,760 and Brian Stutman
received a note for the balance). The RSA Notes bear interest at the rate of
7.5% per annum and become due in one year from the May 21, 1996 closing date. In
addition, Common Stock purchase warrants to purchase an aggregate of 400,000
shares of the Common Stock originally issued to Mr. Stutman and RSA (each to
purchase 200,000 shares) for consulting services, remain outstanding, except
that upon consummation of the RSA acquisition the RSA warrant was distributed to
the RSA shareholders in an amount proportionate to their former ownership
interest in RSA (including a warrant to purchase 127,500 shares issued to Mr.
Stutman and a warrant to purchase 72,500 shares issued to Brian Stutman, each
expiring on December 27, 1998).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth certain information, as of the Record Date,
with respect to (1) any person who owned beneficially more than 5% of the Common
Stock; (2) each director of the Company; (3) the Chief Executive Officer of the
Company; (4) each executive officer of the Company (including the then Chief
Executive Officer) who was paid more than $100,000 in fiscal 1996, whether or
not he or she was still an executive officer on the Record Date; and (5) all
directors and executive officers as a group. Each beneficial owner has advised
the Company that he or she has sole voting and investment power as to the shares
of the Common Stock reported in the table, except that the Common Stock purchase
warrants and stock options described in the notes below do not have any voting
power until exercised and may not be sold or otherwise transferred except in
compliance with the Securities Act.
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned Percentage(1)
- ---------------- ------------------ ----------
<S> <C> <C>
S.A.C Capital Advisers, LLC (2) ....... 2,083,800 5.9%
- ---------------------
New York, New York 10
---
Robert Stutman (3) .................... 971,500(4) 2.7%
c/o Robert Stutman &
Associates, Inc.
450 Washington Street
Dedham, MA 02026
Linda H. Masterson (5) ................ 60,000(6) nil
10410 Trademark Street
Rancho Cucamonga, CA 91730
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned Percentage(1)
- ---------------- ------------------ ----------
<S> <C> <C>
Gary S. Wolff (7) ..................... 249,226(8) nil
190 Sylvan Avenue
Englewood Cliffs, NJ 07632
James C. Witham (9) ................... 1,058,500(10) 3.0%
27 La Costa Drive
Rancho Mirage, CA 92270
Karen B. Laustsen (11) ................ 204,500(12) nil
3000 C La Paz Lane
Diamond Bar, CA 91765
Alan I. Goldman (13) .................. 10,000(14) nil
497 Ridgewood Avenue
Glen Ridge, NJ 07028
John C. Lawn (13) ..................... 10,000(14) nil
c/o The Century Council
550 South Hope Street
Suite 1950
Los Angeles, CA 90071-2604
Peter M. Mark (13) .................... 567,600(14) 1.6%
5531 Sugar Hill
Houston, TX 77056
Lee S. Rosen (13) ..................... 1,478,648(15) 4.1%
Donald & Co. Securities, Inc.
5200 Tower Center Circle
Boca Center, Suite 207
Boca Raton, FL 33486
All directors and ..................... 3,107,748(4)(6) 8.4%
executive officers (14)(15)(16)
as a group (seven
persons)
</TABLE>
(1) The percentages computed in this column of the table are based upon
35,337,335 shares of the Common Stock outstanding on the Record Date and
effect being given, where appropriate, pursuant to Rule 13d-3(d)(1) under
the Exchange Act, to shares issuable upon the exercise of the Common
Stock purchase warrants and stock options which are currently exercisable
or exercisable within 60 days of the Record Date.
(2) The information appearing in the table as to this stockholder is based on
a Schedule 13-D dated July 5, 1996, and as amended on July 30, 1996, by
S.A.C. Capital Advisors, LLC ("Advisors") and Steven A. Cohen, the
Managing Member, President and Chief Executive Officer of Advisors. The
Shares beneficially owned by Advisors are directly owned by S.A.C.
Capital Associates, LLC, an Anguillian limited liability company
15
<PAGE> 18
("Associates"). Associates is not listed as a Reporting Person on the
Schedule 13D because all voting power and investment power (as defined in
Rule 13-d) has been vested with Advisors pursuant to an Investment
Management Agreement between Advisors and Associates entered into as of
January 2, 1996.
(3) Mr. Stutman was elected Chairman of the Board and a director of the
Company and designated as its Chief Executive Officer on April 18, 1996.
(4) The shares reported in the table include (a) 127,500 shares of the Common
Stock issuable upon the exercise at $2.00 per share of a Common Stock
purchase warrant expiring December 27, 1998 issued to him for his
consulting services, (b) 105,500 shares of the Common Stock issuable upon
the exercise at $2.00 per share of a Common Stock purchase warrant
expiring March 31, 1999 issued to him when the Common Stock purchase
warrant to purchase 200,000 shares issued to RSA was divided among the
RSA shareholders and (c) 474,750 shares of the Common Stock issuable upon
the exercise at $3.125 per share of a Common Stock purchase warrant
expiring May 20, 1999 issued to him in exchange for his ownership
interest in RSA.
(5) Ms. Masterson, a director of the Company, became its President and Chief
Operating Officer effective May 13, 1996.
(6) The shares reported in the table reflect (a) 10,000 shares of the Common
Stock issuable upon the exercise at $1.9375 per share of a Common Stock
purchase warrant expiring November 15, 1998 issued to her as a director
of the Company on the same basis as described in note (13) to the table
and (b) 50,000 shares of the Common Stock expiring May 12, 1999 issuable
upon the exercise at $3.125 per share of a Common Stock purchase warrant
issued pursuant to Ms. Masterson's terms of employment, which 50,000
shares are the only shares as to which the warrant to purchase an
aggregate of 600,000 shares is currently exercisable or exercisable
within 60 days of the Record Date.
(7) Mr. Wolff was the Treasurer, Chief Financial Officer and Chief Accounting
Officer of the Company until he resigned on July 3, 1996.
(8) The shares reported in the table include (a) 15,000 shares of the Common
Stock issuable upon the exercise at $1.06 per share of a Common Stock
purchase warrant expiring September 30, 1996, (b) 10,000 shares issuable
upon the exercise at $4.00 per share of a Common Stock purchase warrant
expiring May 17, 1997 and (c) 80,000 shares issuable upon the exercise at
$2.375 per share of a stock option expiring the later of (a) 30 days
after the effective date of a post-effective amendment to a registration
statement under the Securities Act relating to the underlying shares or
(b) October 1, 1996.
(9) Mr. Witham was the Chairman, the President, the Chief Executive Officer
and a director of the Company until April 18, 1996.
(10) The shares reported in the table include 180,000 shares of the Common
Stock issuable upon the exercise at $2.375 per share of a stock option
expiring the later of (a) 30 days after the effective date of a
post-effective date of a registration statement under the Securities Act
relating to the underlying shares of the Common Stock or (b) August 29,
1996.
(11) Ms. Laustsen was an Executive Vice President and a director of the
Company until April 18, 1996.
(12) The shares reported in the table include 100,000 shares of the Common
Stock issuable upon the exercise at $2.375 per share of a stock option
expiring the later of (a) 30 days after the effective date of a
post-effective date of a registration statement under the Securities Act
relating to the underlying shares of the Common Stock or (b) August 29,
1996.
16
<PAGE> 19
(13) A director of the Company.
(14) The shares reported in this table include or reflect 10,000 shares of the
Common Stock issuable upon the exercise at $1.9375 per share of a Common
Stock purchase warrant expiring November 15, 1998 issued to the holder as
a director of the Company who is not employed by the Company or any
subsidiary thereof.
(15) The shares reported in the table include (a) 10,000 shares of the Common
Stock issuable upon the exercise at $1.9375 per share of a Common Stock
purchase warrant expiring November 15, 1998 issued to Mr. Rosen on the
same basis as those described in note (13) to this table; (b) 400,000
shares of the Common Stock issuable upon the exercise at $1.9375 per
share of a Common Stock purchase warrant expiring November 15, 1998; (c)
150,000 shares upon the exercise at $3.00 per share of a Common Stock
purchase warrant expiring November 15, 2000; (d) 150,000 shares upon the
exercise at $4.00 per share of a Common Stock purchase warrant expiring
November 15, 2000; and (e) 300,000 shares of the Common Stock issuable
upon the exercise at $3.125 per share of a Common Stock purchase warrant
expiring April 17, 1999 issued to Mr. Rosen as consideration for
assisting in the exercise of Common Stock purchase warrants. The Common
Stock purchase warrants described in (b), (c) and (d) were issued to Mr.
Rosen as consideration for his services, including those related to the
private placement consummated in February 1996. 50,000 of the shares
subject to each of the warrants described in (c) and (d) may be forfeited
if none of the Common Stock purchase warrants issued to the purchasers in
such private placement are exercised and may be reduced in the number of
shares which may be exercised pro rata to the exercise of the private
placement warrants.
(16) The shares reported in the table include 10,000 shares issuable upon the
exercise at $1.875 per share of a Common Stock purchase warrant expiring
January 2, 1999 held by an executive officer of the Company.
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending May 31,
1997. Ernst & Young served as independent auditors for the Company for the first
time in fiscal 1996 and such firm's appointment was ratified by the Company's
stockholders at the Annual Meeting of Stockholders held on February 7, 1996.
Stockholder approval requires the affirmative vote of the holders of a majority
of the shares represented and entitled to vote at the Annual Meeting.
The Board is seeking stockholder approval of its selection of Ernst &
Young. The General Corporation Law of the State of Delaware does not require the
approval of the selection of independent auditors by the Company's stockholders;
however, in view of the importance of the financial statements to stockholders,
the Board of Directors deems it desirable that stockholders pass upon the
selection of auditors. In the event that stockholders disapprove of the
selection, the Board of Directors will consider the selection of other auditors.
A representative of Ernst & Young LLP will be present at the meeting.
The Company has been informed that the representative does not intend to make
any statement to the stockholders at the Meeting, but will be available to
respond to appropriate questions from stockholders.
PROPOSAL THREE: APPROVAL OF THE CHANGE OF THE NAME OF THE COMPANY
The Board of Directors of the Company deems it advisable and in the
best interest of the Company that the Company change its name from U.S. Alcohol
Testing of America, Inc. to Substance Abuse Technologies, Inc. and pursuant to a
unanimous consent of the Board dated August 23, 1996, the Board adopted the
following resolution:
17
<PAGE> 20
"RESOLVED, that, subject to stockholder approval at the Annual
Meeting of Stockholders to be held on October 22, 1996, the
name of the Company be changed from U.S. Alcohol and Testing
of America, Inc. to Substance Abuse Technologies, Inc.; that
counsel to the Corporation be, and such firm hereby is,
authorized to prepare the Certificate of Amendment of the
Certificate of Incorporation of the Company setting forth such
name change in the form complying with the General Corporation
Law of the State of Delaware; and that the proper officers of
the Company be, and they hereby are, authorized and directed
to execute and cause said Certificate to be filed with the
Secretary of State of Delaware with such changes thereto that
they deem necessary and appropriate in order to effect this
Resolution."
The Company was incorporated on April 15, 1987 to design, manufacture
and market instruments which measure blood alcohol concentration by breath
sample and analyzation. During the ensuing years the Company incorporated or
acquired subsidiaries which operate in different businesses, thereby making its
corporate name not inclusive of all of the operations. In January 1992, the
Company acquired a license from the United States Navy to use its patent to
develop drug testing products, which operations, since January 1993, have been
conducted by U.S. Drug. In June 1992, the Company acquired a majority interest
in a toy company, which operations, since December 1993, have been conducted by
Good Ideas. In November 1992, the Company's wholly-owned subsidiary U.S. Rubber
Recycling, Inc. ("USRR") acquired the assets of a company and began to
manufacture and market floor covering products for office and industrial use
from used truck and bus tires. In March 1995, the Company acquired Alconet,
Inc., a company engaged in the computer software networking business which had
developed an alcohol testing network to upload test results and information from
various alcohol breath testing devices. In June 1995, the Company incorporated
ProActive Synergies, Inc. ("ProActive") to provide single source services to
assist corporations in their hiring practices ranging from substance abuse
testing and background screening to total program management. On May 21, 1996,
the Company completed its acquisition of RSA, a provider of corporate drug-free
work place programs.
The Board of Directors believes that the revenues of the Company and
its subsidiaries can best be maximized and profitability ultimately obtained if
they concentrated as their core businesses on (1) alcohol testing, (2) drug
testing, (3) furnishing laboratory testing services, (4) ProActive's human
resource provider services and (5) RSA's substance abuse program developing
services, all of which have a synergy with each other. There can be no assurance
that concentration on these core businesses will result in greater revenues or
profitability. In order to implement this concentration, on April 30, 1996, the
Company sold the assets of USRR and thereafter ceased to be in the floor
covering products business. The Company is currently seeking to sell Good Ideas
or its assets so as to cease operations in the toy industry and, if no
acceptable offer is received by December 31, 1996, will liquidate Good Ideas. As
a result, the Company and its subsidiaries will be left with synergistic
operations, but the corporate name will still not be indicative of what they do.
If the proposals to take Good Ideas and U.S. Drug private are
consummated, the Board intends to initiate actions to merge RSA, ProActive and
all other subsidiaries which are not sold or liquidated into the Company and to
operate thereafter through five divisions, one conducting alcohol testing
operations, one conducting drug testing operations (if and when the products are
developed), one conducting laboratory alcohol and drug testing, one conducting
human resource provider operations and the fifth developing substance abuse
programs. The Board believes that this form of operation will result in cost
savings and more efficient operations. However, there can be no assurance that
this reorganization will achieve the results the Board anticipates.
Whether or not the reorganization described in the preceding paragraph
is effected, the Board believes that a new name - such as Substance Abuse
Technologies, Inc. - will better describe the future operations of the Company
or the Company and its subsidiaries.
18
<PAGE> 21
The Board recommends a vote FOR the foregoing resolution in order that
the Company's corporate name better reflect the business it conducts. Approval
of the name change requires the affirmative vote of a majority of all of the
outstanding shares entitled to vote at the Annual Meeting and proxies not marked
to the contrary will be so voted at the Annual Meeting.
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors does
not know of any matters to be presented to the Meeting other than the first
three proposals set forth in the attached Notice of Annual Meeting. If any other
matters properly come before the Meeting, it is intended that the holders of the
management proxies will vote thereon in their discretion.
MISCELLANEOUS
The solicitation of proxies on the enclosed form of proxy is made by
and on behalf of the Board of Directors of the Company and the cost of this
solicitation is being paid by the Company. In addition to the use of the mails,
proxies may be solicited personally, or by telephone or telegraph, by the
officers or directors of the Company.
Stockholder proposals for inclusion in the Company's Proxy Statement
for the 1997 Annual Meeting of Stockholders must be received no later than a
reasonable time before the solicitation is made.
A copy of the Annual Report to Stockholders is being mailed to all
stockholders as of the Record Date who did not previously receive the Report. A
copy of the Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1996, including financial statements and schedule, may be obtained by
written or oral request to Robert Stutman, Chairman and Chief Executive Officer
of the Company, at the following address: 4517 Northwest 31st Avenue, Ft.
Lauderdale, Florida 33309 or telephone number: (954) 739-9600. A reasonable fee
for duplicating and mailing will be charged if a copy of any exhibit is
requested.
By Order of the Board of Directors
/s/Robert W. Berend
-------------------
Robert W. Berend
Secretary
September 12, 1996
19
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Notice of the Annual Meeting
of Stockholders N/A
Proxy Statement:
Voting Securities 1
Proposal One: Election of Directors 2
Nominees for Election as Class A Directors 2
Family Relationships of Nominees 2
Business History of Nominees 3
Committees and Board Meetings 3
Management 4
Directors and Executive Officers 4
Business History 5
Family Relationships 6
Executive Compensation 7
Summary Compensation Table 7
Aggregate Option Exercises in
Fiscal Year 1996 and Option
Values at March 31, 1996 8
Other Compensation 8
Employment Agreements 8
Directors' Compensation 9
Performance Graph 10
Compliance with Section 16(a) of the
Exchange Act 13
Certain Transactions 13
Security Ownership of Certain Beneficial
Holders and Management 14
Proposal Two: Appointment of Independent
Auditors 17
Proposal Three: Approval of the Change of
the Name of the Company 17
Other Matters Coming Before the Meeting 19
Miscellaneous 19
</TABLE>
U.S. ALCOHOL TESTING OF
AMERICA, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND
OCTOBER 22, 1996
<PAGE> 23
PROXY U.S. ALCOHOL TESTING OF AMERICA, INC.
10410 TRADEMARK STREET, RANCHO CUCAMONGA, CA 91730
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 22, 1996
The undersigned hereby appoints Robert Stutman and Linda H. Masterson, or
either of them, as Proxy or Proxies of the undersigned with full power of
substitution or revocation to attend and to represent the undersigned at the
Annual Meeting of Stockholders of U.S. Alcohol Testing of America, Inc. (the
"Company") to be held on October 22, 1996, and at any adjournments thereof, and
to vote thereat the number of shares of stock of the Company the undersigned
would be entitled to vote if personally present, in accordance with the
directions indicated below.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
1. Election of Robert Stutman and Michael S. McCord as Class A Directors of the
Company.
/ / FOR all nominees listed above / / FOR all nominees listed above
EXCEPT:
(INSTRUCTION: To withhold authority to vote on any individual nominee, write his
name in the space above.)
/ / WITHHOLD AUTHORITY to vote for all nominees listed above
2. Ratification of Ernst & Young LLP as independent auditors of the Company for
the fiscal year ending March 31, 1997.
/ / FOR the ratification of Ernst & Young LLP
/ / AGAINST the ratification of Ernst & Young LLP
/ / ABSTAIN
3. Approval of the corporate name change.
/ / FOR the name change / / AGAINST the name change / / ABSTAIN
<PAGE> 24
4. On such other matters as may properly come before the meeting.
If no specification is made, this proxy will be voted FOR the election of
the above named directors and FOR Proposals 2 and 3 listed above.
Dated:
------------------
Name:
------------------
------------------------
Please sign exactly as
name appears above. For
joint accounts, each
joint owner must sign.
Please give full title if
signing in a
representative capacity.
Please check if you plan
to attend the meeting
/ /
