<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 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[x] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
AMERICAN BIO MEDICA CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
--------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
<PAGE> 2
AMERICAN BIO MEDICA CORPORATION
122 SMITH ROAD
KINDERHOOK, NEW YORK 12106
800-227-1243
August 16, 2000
Dear Fellow Shareholder:
The Fiscal 2001 Annual Shareholders' Meeting of American Bio Medica
Corporation will be held at 10:00 a.m. on Wednesday, September 20, 2000, at
Herbert's at Birch Hill located at One Celebration Way, Schodack, New York (the
"Annual Meeting"). Enclosed you will find a Notice of Annual Meeting, Proxy
Statement and proxy, detailing the matters which will be acted upon. Directors
and executive officers of the Company will be present to help host the Annual
Meeting and to respond to any questions from our shareholders. I hope you will
be able to attend.
Please sign, date and return the enclosed proxy without delay in the
enclosed envelope. If you attend the Annual Meeting, you may vote in person even
if you have previously mailed a proxy by withdrawing your proxy at the Annual
Meeting. Any shareholder giving a proxy may revoke such proxy at any time prior
to the voting of such proxy by giving written notice of revocation to the
Secretary of the Company, by submitting a later dated proxy or by attending the
Annual Meeting and voting in person. The Company's Annual Report on Form 10-KSB
(including audited financial statements) for the fiscal year ended April 30,
2000 accompanies this Proxy Statement. The Annual Report is not a part of the
proxy soliciting material. All shares represented by proxies will be voted at
the Annual Meeting in accordance with the specifications marked thereon, or if
no specifications are made, (a) as to Proposal 1, the proxy confers authority to
vote "For" all of the six persons listed as nominees for the Board of Directors;
(b) as to Proposals 2 through 5, the proxy confers authority to vote "Against"
the shareholder proposals; and (c) as to any other business which comes before
the Annual Meeting or any adjournments thereof, the proxy confers upon the proxy
holders authority to vote in their discretion.
The Company's Board of Directors believes that a vote in favor of the
election of each nominee for the Board of Directors and a vote against Proposals
2 through 5, the shareholder proposals, are in the best interests of the Company
and its shareholders and unanimously recommends a vote "FOR" all nominees and
"AGAINST" Proposals 2 through 5. Accordingly, we urge you to review the
accompanying material carefully and to return the enclosed proxy promptly.
Thank you for your investment and continued interest in American Bio
Medica Corporation.
Sincerely,
/s/ Stan Cipkowski
-------------------------------------
Stan Cipkowski,
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE> 3
AMERICAN BIO MEDICA CORPORATION
NOTICE OF FISCAL 2001
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 20, 2000
TO THE SHAREHOLDERS OF AMERICAN BIO MEDICA CORPORATION:
NOTICE is hereby given that the Fiscal 2001 Annual Meeting of Shareholders
(the "Annual Meeting") of American Bio Medica Corporation (the "Company") will
be held at 10:00 A.M. on Wednesday, September 20, 2000 at Herbert's at Birch
Hill located at One Celebration Way, Schodack, New York, for the following
purposes:
1. To elect six directors to serve until the Fiscal 2002 Annual Meeting
and until their successors are elected;
2. To act upon a proposal submitted by a Company shareholder with respect
to loans by the Company to officers, directors and employees, if such
proposal is properly presented at the Annual Meeting;
3. To act upon a proposal submitted by a Company shareholder with respect
to corporate investments by the Company, if such proposal is properly
presented at the Annual Meeting;
4. To act upon a proposal submitted by a Company shareholder with respect
to the Company's ability to issue preferred stock, if such proposal is
properly presented at the Annual Meeting;
5. To act upon a proposal submitted by a Company shareholder with respect
to the Company's stock option plans, if such proposal is properly
presented at the Annual Meeting; and
6. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only shareholders of record at the close of business on August 16, 2000 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement regarding matters proposed to be acted upon at the
Annual Meeting.
<PAGE> 4
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT IN THE RETURN ENVELOPE
PROVIDED. YOUR PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS EXERCISE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Edmund Jaskiewicz
-------------------------------------
Edmund Jaskiewicz,
Secretary to the Board of Directors
August 16, 2000
2
<PAGE> 5
PROXY STATEMENT
FOR
FISCAL 2001 ANNUAL MEETING OF SHAREHOLDERS
AMERICAN BIO MEDICA CORPORATION
122 SMITH ROAD
KINDERHOOK, NEW YORK 12106
Solicitation of the enclosed proxy is made by and on behalf of the
Board of Directors (the "Board of Directors") of American Bio Medica Corporation
(the "Company") to be used at the Fiscal 2001 Annual Meeting of Shareholders
(the "Annual Meeting") to be held at 10:00 A.M. on Wednesday, September 20,
2000, at Herbert's at Birch Hill located at One Celebration Way, Schodack, New
York and at any adjournments thereof. The Company intends to mail this Proxy
Statement and the accompanying proxy on or about September 10, 2000.
All properly executed proxies delivered pursuant to this solicitation
will be voted at the Annual Meeting in accordance with any instructions
thereupon. Any person signing and mailing the enclosed proxy may, nevertheless,
revoke the proxy at any time prior to the actual voting thereof by attending the
Annual Meeting and voting in person, by providing written notice of revocation
of the proxy or by submitting a signed proxy bearing a later date. Any written
notice of revocation should be sent to the attention of the Secretary of the
Board of Directors at the Company's address.
A copy of the Company's Annual Report on Form 10-KSB (including audited
financial statements) for the fiscal year ended April 30, 2000 is enclosed with
these materials, but should not be considered proxy solicitation material.
Shareholder nominations for directors and shareholder proposals for the
Fiscal 2002 Annual Meeting should be sent to the Company in writing on or before
May 14, 2002. The Company has received four shareholder proposals for the Annual
Meeting.
The Company has fixed the close of business on August 16, 2000 as the
record date for determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting or any adjournments thereof. As of the record date, the
Company had one class of voting shares outstanding - common shares, $.01 par
value per share ("Common Shares"). As of August 16, 2000, there were 18,045,548
outstanding Common Shares. Each Common Share is entitled to one vote on each
matter to be voted on at the Annual Meeting. The holders of a majority of Common
Shares entitled to vote and represented in person or by proxy at the Annual
Meeting will constitute a quorum for the transaction of business at the Annual
Meeting. In general, Common Shares represented by a properly signed and returned
proxy will be counted as Common Shares present and entitled to vote at the
Annual Meeting for purposes of determining a quorum, without regard to whether
the proxy reflects abstentions (or is left blank) or reflects a "broker
non-vote" on a matter (i.e., a proxy returned by a broker because voting
instructions have not been received and the broker has no discretionary
authority to vote). Holders of Common Shares are not entitled to cumulative
voting rights.
<PAGE> 6
Each of Proposals 2 through 5 in this Proxy Statement will be approved
if it receives a majority of the votes present, either in person or by proxy, at
the Annual Meeting. Proposal 1, the election of directors, is somewhat
different: the six nominees who receive the most votes will be elected to the
six available memberships on the Board. If you return a signed proxy form or
attend the Annual Meeting but choose to abstain from voting on any proposal, you
will be considered present at the Annual Meeting and not voting in favor of the
proposal. Since most proposals pass only if they receive favorable votes from a
majority of votes present at the Annual Meeting, the fact that you are
abstaining and not voting in favor of a proposal will have the same effect as if
you had voted against the proposal. (In contrast, a "broker non-vote," where a
broker withholds authority to cast a vote as to a certain proposal, is deemed
not present at the Annual Meeting with regard to that proposal.)
SOLICITATION OF PROXIES
The cost of the soliciting of proxies on behalf of the Board of
Directors will be borne by the Company. In addition to the use of the mails,
proxies may be solicited by the directors, officers and employees of the
Company, without additional compensation, by telephone, other electronic means
or in person. Arrangements may also be made with brokerage firms or other
custodians, nominees or fiduciaries for the forwarding of soliciting material to
the beneficial owners of Common Shares of the Company held of record by such
persons; and the Company will reimburse such respective brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith. ADP has been retained to assist in soliciting
proxies at a fee of $4,600 plus distribution costs and other costs and expenses.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
As of August 16, 2000, there were 18,045,548 Common Shares outstanding
and entitled to vote at the Annual Meeting. Each Common Share is entitled to one
vote on each of the matters to be voted on at the Annual Meeting. The following
table sets forth, as of August 16, 2000, the beneficial ownership of the
Company's Common Shares by (i) each nominee for director, (ii) each of the
executive officers named in the Summary Compensation Table; (iii) all directors
and executive officers of the Company as a group; and (iv) each shareholder,
known to management of the Company, to beneficially own more than five percent
of the outstanding Common Shares.
2
<PAGE> 7
Number of
Beneficial Owner Common Shares Percent of Total
---------------- ------------- ----------------
Stan Cipkowski 2,693,000 (1) 14.6%
122 Smith Road
Kinderhook, New York 12106
Edmund Jaskiewicz 2,148,155 (2) 11.8%
1730 M Street, NW
Washington, DC 20036
Jay Bendis 774,999 (3) 4.2%
John F. Murray 221,666 (4) 1.2%
Douglas Casterlin 289,500 (5) 1.6%
Robert Aromando 0 *
Gerald Moore 20,000 (6) *
Denis O'Donnell, M.D. 0 (7) *
Seaside Partners, L.P. 1,408,450 7.8%
623 Ocean Avenue
Sea Girt, New Jersey
Directors and executive officers as a
group (8 persons) 6,147,320 (8) 32.0%
--------------------------------
* Less than one percent (1%).
(1) Includes 363,500 Common Shares subject to stock options exercisable within
60 days of July 12, 2000.
(2) Includes 161,500 Common Shares subject to stock options exercisable within
60 days of July 12, 2000.
(3) Includes 219,000 Common Shares subject to stock options exercisable within
60 days of July 12, 2000.
(4) Includes 221,666 Common Shares subject to stock options exercisable within
60 days of July 12, 2000.
(5) Includes 175,000 Common Shares subject to stock options exercisable within
60 days of July 12, 2000.
(6) Includes 20,000 Common Shares subject to stock options exercisable within
60 days of July 12, 2000.
(7) Dr. O'Donnell may be deemed to indirectly beneficially own 1,408,450 Common
Shares because he is a member of Seaside Advisors, LLC which is the general
partner of Seaside Partners, L.P. Dr. O'Donnell specifically disclaims
beneficial ownership of these securities.
(8) Includes an aggregate of 1,160,666 Common Shares subject to stock options
exercisable within 60 days of July 12, 2000. Does not include the 1,408,450
Common Shares beneficially owned by Seaside Partners, L.P. which Dr.
O'Donnell may be deemed to indirectly beneficially own.
3
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards
------
Restricted Securities
Name and Principal Position Year Salary Bonus Stock Awards Underlying Options
--------------------------- ---- ------ ----- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Stan Cipkowski 2000 $96,000 $77,010 $ 0 100,000
Chairman, President 1999 96,000 64,992 0 0
And Chief Executive Officer 1998 97,231 23,080 0 0
Jay Bendis 2000 $84,000 $77,010 0 100,000
Vice-President Sales 1999 84,000 64,992 0 0
And Marketing 1998 85,077 23,080 2,356,000 0
Douglas Casterlin 2000 $84,000 $67,010 0 100,000
Vice-President Operations 1999 84,000 54,992 0 0
1998 73,807 11,540 540,000 0
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUME ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1)
----------------- -------------------------------
PERCENTAGE OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR(2) ($/SHARE) DATE(3) 5% 10%
---- --------------- -------------- --------- ------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Stan Cipkowski 100,000 6.8 % $2.50 11-22-09 $ 27,000 $ 212,000
Jay Bendis 100,000 6.8 % $2.50 11-22-09 $ 27,000 $ 212,000
Douglas Casterlin 100,000 6.8 % $2.50 11-22-09 $ 27,000 $ 212,000
</TABLE>
------------------------------
(1) Potential realizable value is based on an assumption that the price of the
Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
calculated based on the requirements of the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
performance.
(2) The Company granted options representing 1,473,250 shares to employees in
fiscal 2000.
(3) The options become exercisable in 25% increments on November 22, 1999.
4
<PAGE> 9
AGGREGATED OPTIONS EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money Options at
Options at Fiscal Year-End Fiscal Year-End
-------------------------- ---------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stan Cipkowski 0 $ 0 363,500 75,000 $ 0 $ 0
Jay Bendis 0 0 219,000 75,000 0 0
Douglas Casterlin 0 0 175,000 75,000 0 0
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are not employees or officers of the Company ("Outside
Directors") are granted an option to purchase 10,000 Common Shares at the time
of election and are granted an additional option to purchase 10,000 Common
Shares annually on the date of the Company's Annual Meeting of Shareholders.
Outside Directors are also granted an option to purchase 2,000 Common Shares for
service on the Audit Committee or the Compensation Committee annually on the
date of the Company's Annual Meeting of Shareholders. Outside Directors who
serve on both committees are granted an option to purchase 4,000 Common Shares
annually. Outside Directors receive a fee of $1,000 for attending meetings of
the Board, and are reimbursed for out-of-pocket expenses incurred in attending
such meetings.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers and key managers
("executives") is reviewed and approved annually by the Board of Directors. The
Board of Directors has established a Compensation/Option Committee. In addition
to reviewing and approving executives' salaries and bonus arrangements, the
Board of Directors establishes policies and guidelines for other benefits and
administers the awards of stock options pursuant to the Company's stock option
plans.
COMPENSATION POLICIES AND PROCEDURES
APPLICABLE TO EXECUTIVES FOR FISCAL 2000
General. Compensation of the Company's executives is intended to
attract, retain and reward persons who are essential to the corporate
enterprise. The fundamental policy of the Company's executive compensation
program is to offer
5
<PAGE> 10
competitive compensation to executives that appropriately rewards the individual
executive's contribution to corporate performance. The Board of Directors
utilizes subjective criteria for evaluation of individual performance and relies
substantially on the executives in doing so. The Board focuses on two primary
components of the Company's executive compensation program, each of which is
intended to reflect individual and corporate performance: base salary
compensation and long-term incentive compensation. The Company also paid cash
incentive bonuses during fiscal 2000.
Cash Compensation. Executives' base salaries are determined primarily
by reference to compensation packages for similarly situated executives of
companies of similar size or in comparable lines of business with which the
Company expects to compete for executive talent and with reference to the
revenues, gross profits and other financial criteria of the Company. The Board
also assesses subjective qualitative factors to discern a particular executive's
relative value to the corporate enterprise in establishing base salaries. During
fiscal 2000, the salaries of the two named executive officers other than the
Chairman and Chief Executive Officer (the "Other Executive Officers") were
established in their employment agreements. The bonuses paid to the Other
Executive Officers were established in their employment agreements at a
specified percentage of net sales.
Long-Term Incentive Compensation. It is the Board's philosophy that
significant stock ownership by management creates a powerful incentive for
executives to build long-term shareholder value. Accordingly, the Board believes
that an integral component of executive compensation is the award of
equity-based compensation, which is intended to align executives' long-term
interests with those of the Company's shareholders. Awards of stock options to
executives have historically been at then-current market prices. The Board
believes that option grants should be considered on an annual basis.
The Company's Fiscal 1997, 1998, and 2000 Nonstatutory Stock Option
Plans (the "Option Plans") authorizes the Board or the Compensation/Option
Committee to grant nonstatutory stock options to employees of the Company. The
Committee will determine the prices and terms at which such options are granted.
The Committee uses stock options as a significant element of the compensation
package of executives, because it believes options provide an incentive to
executives to maximize stockholder value and because they compensate executives
only to the extent that the Company's shareholders receive a return on their
investment. In determining the total number of Common Shares to be covered by
option grants to executives in a given year, the Committee will take into
account the number of outstanding Common Shares, the number of Common Shares
reserved for issuance under the Company's Option Plans, recommendations of
management concerning option grants to employees below executive level, and the
Company's projected hiring needs for the coming year. In making individual stock
option grants to executives, the Committee will consider the same factors
considered in the determination of base salary levels, as well as the stock and
option holdings of each executive and the remaining vesting schedule of such
executive's options.
Compensation of the CEO. In reviewing and approving Mr. Cipkowski's
fiscal 2000 compensation, the Board of Directors considered the same criteria
detailed
6
<PAGE> 11
herein with respect to executives in general. Mr. Cipkowski's base salary for
fiscal 2000 was established in his employment agreement at $96,000 which is
below the midpoint of base compensation for CEOs of comparable companies. This
amount represented no change over the base salary received by Mr. Cipkowski in
fiscal 1999. The bonus paid to Mr. Cipkowski in fiscal 2000 was also established
in his employment agreement at 2% of net sales.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. This Committee makes recommendations to the Board of
Directors with respect to the Company's financial statements and the appointment
of independent auditors, reviews significant audit and accounting policies and
practices, meets with the Company's independent public accountants concerning,
among other things, the scope of audits and reports, and reviews the performance
of the overall accounting and financial controls of the Company. The Audit
Committee met four times in fiscal 2000. Members of the Audit Committee are
Gerald Moore, Robert Aromando, and Dr. Denis O'Donnell.
Compensation/Option Committee. This Committee makes recommendations to
the Board of Directors relating to salaries, bonuses and other compensation and
benefits of executive officers, reviews and advises management regarding
benefits and other terms and conditions of compensation of management and
administers the Company's stock option plans. The Compensation/Option Committee
met four times in fiscal 2000. Members of the Compensation/Option Committee are
Gerald Moore, Robert Aromando, and Dr. Denis O'Donnell.
The Board of Directors does not have a standing nominating committee.
Nominations for election to the Board of Directors may be made by the Board of
Directors, or by any shareholder entitled to vote for the election of directors.
Nominations made by shareholders must be made by written notice received by the
Secretary of the Company by May 14th of the year preceding the annual meeting.
Special meetings are held from time to time to consider matters for
which approval of the Board of Directors is desirable or is required by law.
Four meetings of the Board of Directors were held during fiscal 2000. The Audit
Committee and the Compensation Committee met four times each. All of the
Directors attended 100% of the meetings of the Board of Directors and the
committees on which they served.
PERFORMANCE GRAPH
The following graph compares the cumulative total return for the
periods indicated for each of (a) the Company Common Shares, (b) the Standard &
Poors 500 Stock Index (the "S&P 500") and (c) the NASDAQ Medical Device Index.
7
<PAGE> 12
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/26/96 04/30/97 04/30/98 04/30/99 04/30/00
<S> <C> <C> <C> <C> <C>
S&P 500 $ 100.00 $ 106.74 $ 150.95 $ 183.81 $ 202.98
Nasdaq Medical Device Index $ 100.00 $ 91.69 $ 126.95 $ 148.70 $ 168.77
American Bio Medica Corporation $ 100.00 $ 98.39 $ 103.23 $ 48.39 $ 40.34
</TABLE>
Registration of the Company's Common Shares under Section 12 of the Securities
Exchange Act of 1934 (the "1934 Act") became effective on December 26, 1996.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Directors elected at the Annual Meeting will serve until the next
Annual Meeting of Shareholders and until their successors are elected and
qualified. The Board of Directors of the Company has nominated Stan Cipkowski,
Edmund Jaskiewicz, Jay Bendis, Robert Aromando, Gerald Moore, and Dr. Denis
O'Donnell.
STAN CIPKOWSKI (52) founded the predecessor of the Company in 1982 and
has been an executive officer and Director of the Company since its
incorporation in April 1986. From 1982 to 1986, he was sole proprietor of
American Micro Media, the predecessor, which was acquired by the Company. In
addition, from 1983 to 1987, Mr. Cipkowski was a general partner of Florida
Micro Media, a Fort Lauderdale-based marketer of educational software and was a
principal shareholder and Chief Financial Officer of Southeast Communications
Group, Inc., a publisher of direct response media. In 1982, he became a
consultant to Dialogue Systems, Inc., a New York-based developer of training and
communications materials, where he served as Vice-President of Sales and
Marketing. From 1977 to 1982, he was employed by Prentice-Hall Publishing
Company, reaching the position of National Sales Manager. Prior to 1977 he was
employed as an accountant for the New Seabury Corporation and as Mid-West Area
Manager for the Howard Johnson Company.
8
<PAGE> 13
EDMUND JASKIEWICZ (77) is a lawyer-engineer. He has practiced
international patent and corporate law as a sole practitioner since 1963 and
served as Chairman of the Board of Directors from 1992 until 1999. He currently
serves as Secretary of the Company. From 1953 to 1963, Mr. Jaskiewicz was
associated with Toulmin and Toulmin, Esqs., Washington, D.C. From 1960 to 1962,
he resided in Frankfurt, Germany managing that firm's local office. From 1952 to
1953 he was with the Patent Section of the Bureau of Ordinance of the Department
of the Navy working on patent infringement and licensing matters. He received
his J.D. in 1952 from George Washington University Law School and his B.S. in
Engineering from the University of Connecticut in 1947.
JAY BENDIS (53) has been Vice-President of Sales and Marketing and a
Director of the Company since 1995. He was an independent consultant to
biomedical companies from 1990 to 1995, specializing in commercializing new
concept products in both domestic and international markets. From 1990 to 1992,
he was a principal of and served as Vice-President of Sales and Marketing for
Scientific Imaging Instruments. From 1985 to 1990, Mr. Bendis served as National
Sales Manager of the XANAR Laser Corp., a division of Johnson & Johnson, where
he directed its national sales force and developed its marketing strategy for
integrating high power lasers into the hospital market. From 1979 to 1984, he
was the Eastern Area Sales and Marketing Manager for the IVAC Corp., a division
of Eli Lilly. Prior to 1979, Mr. Bendis held sales management positions with
Xerox Corporation and A.M. International. Mr. Bendis earned his B.A. in
Marketing/Management from Kent State University and is currently a member of the
Edison BioTechnology Center Advisory Council for the State of Ohio.
ROBERT AROMANDO (44) has been a Director of the Company since May 2000.
Mr. Aromando is currently the Director of Global Marketing of Covance, Inc., a
global clinical research organization. He has over 20 years experience in sales
and marketing. Mr. Aromando was Director of Global Marketing of Roche
Diagnostics from 1992 until 1999. In this capacity, he had the responsibility
for the business development and marketing for Roche Diagnostics' global on-site
drugs of abuse business. From 1988 until 1992 he was Product Manager for
American Home Products where he organized a new infectious disease business
unit. From 1984 to 1988, he was Director of Sales and Marketing at Diagnostic
Technology Inc. where he reorganized the hematology sales and marketing
department. From 1978 to 1984, he was a Regional Sales Manager for Litton
Bionetics, responsible for a field sales district.
GERALD MOORE (62) has been a Director of the Company since May 1999.
Gerald Moore currently serves as President and CEO of Med-Ox Diagnostics of
Canada and BioSys, Inc. Mr. Moore was President of UNIPATH (North America) from
1990 to 1998 when he reached parent-company Unilever's mandatory retirement age.
Brooke Bond, Inc. took a majority equity position in MED-OX in 1978 and renamed
it Oxoid. In 1980, Mr. Moore opened Oxoid US in Columbus, MD and was appointed
President and Chief Executive Officer of both Oxoid CANADA and Oxoid USA.
Unilever acquired all of Oxoid International's holdings and subsidiaries in 1984
and changed its name to UNIPATH in 1990. Mr. Moore is a member of the Board of
Directors of the Canadian Assoc. of Clinical Microbiology and Infectious
Diseases (CACMID); is a Director of the Canadian Clinical Standards
Organization, serves on the National Committee for
9
<PAGE> 14
Clinical Laboratory Standards (NCCLS), is a member of the NCCLS Committee for
Antimicrobial Susceptibility testing and Veterinary Diagnostics, is an advisor
to the NCCLS Committee on Culture Media, and is a liaison to the Board of
Exhibitors of the Interscience Conference on Antimicrobial Agents and
Chemotherapy (ICAAC) of the American Society of Microbiology. Mr. Moore received
his degree in chemistry and mathematics from Strathclyde University in Glascow,
Scotland in 1961.
DENIS O'DONNELL, M.D. (46) has been a Director of the Company since May
2000. Dr. O'Donnell is currently a Managing Director of Seaside Partners, L.P.,
the firm which purchased $2,000,000 of Common Shares from the Company in a
private placement on April 28, 2000. Since 1986, Dr. O'Donnell has been a
Clinical Instructor of Health Science at Northeastern University. From 1984 to
1985 he was a Resident in Surgery at Tufts New England Medical Center. From 1986
to 1991 he served as Director of the Clinical Research Center of Medical and
Technical Research Associates, Inc. From 1991 through 1995 he was Vice President
of IGI, Inc. From 1995 until 1997 he was President of Novavax, Inc., a company
in which he still holds the seat of Chairman of the Board. In addition to the
Novavax, Inc. board seat, Dr. O'Donnell is currently a director of ELXSI
Corporation (NASDAQ:ELXS), Columbia Laboratories, Inc. (AMEX:COB), Ampersand
Medical Corporation (NASDAQ:AMPM), and is also a member of the Associates of
Clinical Pharmacology Scientific Advisory Board. He has written and contributed
to numerous medical manuscripts, abstracts, and papers. Dr. O'Donnell graduated
from Harvard University (A.B./Biology) and from AUC Medical School (M.D.).
It is the intention of the persons named as proxies in the accompanying
proxy, unless instructed otherwise, to vote for the persons nominated by the
Board of Directors. If any nominee should become unavailable to serve, the proxy
may be voted for the election of such substitute nominee as may be designated by
the Board of Directors. The Board of Directors has no reason to believe that any
of the nominees will be unable to serve if elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINEES FOR THE BOARD OF DIRECTORS.
PROPOSAL 2
SHAREHOLDER PROPOSAL
WITH RESPECT TO LOANS BY THE COMPANY
TO OFFICERS, DIRECTORS AND EMPLOYEES
William S. Wright, whose address is P.O. Box 121967, Fort Worth, Texas
76121, has requested that the following proposal be included in this Proxy
Statement. Mr. Wright has advised the Company that he is the beneficial owner of
34,000 Common Shares of the Company. Mr. Wright's proposal and his related
supporting statement are followed by a recommendation of the Board of Directors.
The Board of Directors disclaims any responsibility for the content of the
proposal and the statement in support of the proposal, which are presented in
the form received from the shareholder.
10
<PAGE> 15
RESOLVED that the shareholders request the Board of Directors to adopt
a corporate policy of not granting loans of corporate funds to officers,
directors or employees; not giving a company guarantee to any third party for
any loans granted to officers, directors or employees; and to cause any such
loans presently outstanding to be repaid within sixty days.
SUPPORTING STATEMENT: The Company's FY 1998 balance sheet shows a loan
of $235,000 to an officer, which at the time represented 4.8% of stockholder
equity and 5.2% of working capital. By FY 1999 this loan had increased to
$280,000, then representing 9.4% of stockholder equity and 11.7% of working
capital. At January 31, 2000 this loan had increased to $338,000, then
representing 11.8% of stockholder equity and 15.7% of working capital. Interest
of 6% in arrears is not being paid, but is being added to loan principal. In FY
1999 management negligence resulted in a late registration penalty of $225,000,
settled by paying $100,000 in cash plus a $125,000 promissory note with an
interest rate of 14%. Thus, the directors allowed, and continue to allow, the
Company to be in the position of loaning money at 6% while borrowing at 14%.
This penalty could have been settled in its entirety by calling the loan to the
officer, which is payable on demand, thereby avoiding an additional $100,000
drain on corporate liquidity. The directors' failure to properly address this
issue can hardly be disputed. Adoption of this proposal will remedy that
failure.
In view of the Company's desperate need for working capital, as
evidenced by continued losses and repeated infusions of fresh equity capital on
highly dilutive terms, utilizing double-digit portions of stockholder equity and
Company working capital for the purpose of loans to management is a luxury the
Company simply cannot afford. This practice is emphatically NOT in the best
interest of the Company and its stockholders. The Company is not in business to
make loans, particularly at below-market rates and at less than one-half the
rate it must pay on its borrowed funds. The very existence of such a loan and
its generous terms sets a bad precedent. The situation should be set to rights
by making it Company policy to refuse to engage in any way in private financial
transactions with officers, directors or employees.
The stockholders are urged to vote IN FAVOR of this proposal.
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL. The loans referred to in the shareholder proposal were made to Stan
Cipkowski, the Chairman, President and Chief Executive Officer of the Company.
The loans are evidenced by a note and bear interest at the rate of 11.5% per
annum. The note is payable on demand. Mr. Cipkowski owns 2,329,500 Common Shares
of which he has agreed to pledge 1,500,000 Common Shares to the Company as
collateral for repayment of this note. Recognizing Mr. Cipkowski's contributions
to the Company and that his base salary is below the midpoint of the base
compensation for CEOs of comparable companies, each loan was approved by the
Board of Directors as part of Mr. Cipkowski's total compensation package. The
Company made the loans to Mr. Cipkowski to provide him with the liquidity to
meet certain financial obligations without requiring him to sell a significant
number of Common Shares into the market.
11
<PAGE> 16
The Board of Directors believes that making such loans to Mr. Cipkowski was in
the Company's shareholders best interests because such loans enabled Mr.
Cipkowski to retain his significant ownership interest in the Company continuing
the strong alignment between Mr. Cipkowski's financial interests and the
financial interests of the Company's shareholders. Further such loans avoided
the possible market disruption and corresponding decrease in the market price of
the Common Shares that may have been caused by the sale of a significant number
of Common Shares by Mr. Cipkowski. The Company's Board of Directors is currently
evaluating forms of repayment of this loan which may include cash repayment or
repayment through the redemption by the Company of certain of Mr. Cipkowski's
Common Shares.
The Board of Directors relies on the Company's executives and believes
that restrictions that decrease the Board's flexibility with respect to
executive compensation packages would have a negative effect on long term
earnings. The compensation of senior officers is determined by a Compensation
Committee of the Board, consisting entirely of independent directors. The Board
believes that its compensation policies and programs are fair and reasonable for
both employees and shareholders, as described in its report included in this
proxy statement.
In establishing its executive compensation programs, the Company is
guided by the basic principles that the Company must offer competitive
compensation packages to attract, retain and motivate highly-qualified and
experienced executives and other management personnel and that the financial
interests of the Company's senior executives should be aligned with the
financial interests of stockholders. The Board of Directors believes that the
Company's current compensation program is in line with these principles.
The Board believes that the Company's executive compensation program
needs to be competitive with those of companies with which the Company competes
for executive talent. If it is not, the Company will be less successful in
attracting and retaining the executive talent it needs to become a market
leader. To locate and hire qualified individuals, the Company's compensation
packages must be both comprehensive and flexible. While such a compensation
package will not always attract or retain qualified executives, the Company
believes that loans are a necessary and appropriate tool to selectively use in
seeking to maximize shareholder value. Although the Board does not currently
anticipate making additional loans to Mr. Cipkowski or making similar loans to
other executive officers in the future, the Board believes that the discretion
to make such loans when the Board deems it in the Company's best interests
supports the rejection of the shareholder proposal.
Accordingly, the Board of Directors UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL. The affirmative vote of a majority of Common Shares
participating in the voting on this proposal is required for the adoption of
this proposal. Proxies will be voted "AGAINST" this proposal unless instructed
otherwise. Abstentions indicated on such a proxy card will not be counted as
either "for" or "against" this proposal. "Broker non-votes" specified on proxies
returned by brokers holding shares for beneficial owners who have not provided
instructions as to voting on this issue will be treated as not present for
voting on this issue.
12
<PAGE> 17
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST"
PROPOSAL 2.
PROPOSAL 3
SHAREHOLDER PROPOSAL WITH RESPECT
TO CORPORATE INVESTMENTS BY THE COMPANY
William J. Peters, whose address is 22 Heather Drive, Clifton Park, New
York 12065, has requested that the following proposal be included in this Proxy
Statement. Mr. Peters has advised the Company that he is the beneficial owner of
10,800 Common Shares of the Company. Mr. Peters' proposal and his related
supporting statement are followed by a recommendation of the Board of Directors.
The Board of Directors disclaims any responsibility for the content of the
proposal and the statement in support of the proposal, which are presented in
the form received from the shareholder.
RESOLVED that the shareholders request the Board of Directors to
institute a corporate policy under which corporate assets will be used strictly
for corporate operational purposes and will in no way be used for securities
speculation, meaning no purchase of equity securities other than company shares
or long-term investment in subsidiaries or joint ventures, no margin accounts in
company name and no pledging of company assets to secure loans of any type made
to third parties. Such policy would limit corporate investments carried as
current assets to interest-bearing money market instruments of fixed term.
SUPPORTING STATEMENT: Note B-Investments, page F-9, in the FY 1999
Annual Report reveals that $634,000 or 83% of current asset investments (at
cost) consisted of, at the time, unspecified common stock and mutual fund
shares. The unrealized loss on these holdings is unclear, being either $46,000
as shown in Note B or $56,000 as shown on the Balance Sheet on page F-3.
Realized losses on investments in FY 1999, from the Income Statement, were
$68,000, making total losses for the year from current asset investments at
least $114,000. The note also refers to $100,000 used to collateralize a margin
account loan, the amount and recipient of the loan proceeds being unspecified.
The unaudited financials for 9 mos. January 2000 show an increase of unrealized
loss on investments to $60,000 versus cost of $410,000. A company's current
asset investments are supposed to be short-term, interest bearing, and
essentially riskless assets designed to provide liquidity in financing company
operations. Such investments should be deployed to decrease stockholders' risk
in owning company shares. It should not be company policy to use such funds for
securities speculation, creating an additional level of risk. Stockholder funds
have been provided in the hope of achieving profitable operations, which should
be the sole and entirely focused effort of management. These funds have not been
provided for the purpose of dabbling in the securities markets, particularly on
margin.
The stockholders are urged to vote IN FAVOR of this proposal.
13
<PAGE> 18
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL.
Beginning in June 1998 and continuing through July 1999, the Company
purchased shares in one closed-end fund with an aggregate purchase price of
$463,000 and shares of common stock in five publicly traded companies with an
aggregate purchase price of $243,000. The Company, with the advice of an
investment advisor, purchased the shares in the closed-end fund in an attempt to
increase its rate of return as compared to the rate then being paid on
certificates of deposit while minimizing interest rate risks. The Company, again
with the advice of an investment advisor, purchased the shares of common stock
in the five publicly traded companies in an attempt to realize capital
appreciation during the period it held the investments. During the 1999 and 2000
fiscal years, the Company incurred a loss on sale of marketable securities of
$68,000 and $122,000, respectively. At April 30, 1999 and 2000, the Company had
an unrealized loss with respect to marketable equity securities of $46,000 and
$77,000, respectively. At April 30, 2000, the Company had marketable equity
securities with a cost of $119,000 and a fair market value of $74,000.
The Company did not borrow funds under its margin account to purchase
equity securities. This margin account was used to advance funds to the Company
from the date the Company sold equity securities through the settlement date of
the transaction. The advance was then repaid from the proceeds of the sale of
the equity securities.
Although the Company does not currently intend to purchase additional
closed-end fund shares or additional equity securities in the market and no
longer uses investments to collateralize borrowings under a margin account, the
Board of Directors believes that adoption of the Shareholder Proposal is not in
the best interests of the Company's shareholders. The Board believes that the
adoption of the Shareholder Proposal would unnecessarily restrict the Company's
ability to make future strategic investments and might restrict the Company's
ability to enter into strategic joint venture or partnering relationships. The
Board of Directors exercising its fiduciary duty to act in the best interests of
the Company and its shareholders will review, and if appropriate, approve any
future material investments in equity securities to be made by the Company.
Accordingly, the Board of Directors UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL. The affirmative vote of a majority of Common Shares
participating in the voting on this proposal is required for the adoption of
this proposal. Proxies will be voted "AGAINST" this proposal unless instructed
otherwise. Abstentions indicated on such a proxy card will not be counted as
either "for" or "against" this proposal. "Broker non-votes" specified on proxies
returned by brokers holding shares for beneficial owners who have not provided
instructions as to voting on this issue will be treated as not present for
voting on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST"
PROPOSAL 3.
14
<PAGE> 19
PROPOSAL 4
SHAREHOLDER PROPOSAL WITH RESPECT
TO THE COMPANY'S ABILITY TO ISSUE PREFERRED STOCK
Michael Drury, whose address is 718 Sachem Circle, Slingerlands, New
York 12159, has requested that the following proposal be included in this Proxy
Statement. Mr. Drury has advised the Company that he is the beneficial owner of
15,000 Common Shares of the Company. Mr. Drury's proposal and his related
supporting statement are followed by a recommendation of the Board of Directors.
The Board of Directors disclaims any responsibility for the content of the
proposal and the statement in support of the proposal, which are presented in
the form received from the shareholder.
RESOLVED that the shareholders request the Board of Directors to amend
the Company's Certificate of Incorporation so as to cancel the presently
authorized five million shares of preferred stock and remove them from the
Company's capitalization, the new capitalization to consist only of common
stock.
SUPPORTING STATEMENT: The authorized preferred stock has no
restrictions on its terms of issue. The Board, at its complete discretion and
without reference to the stockholders, has the authority to issue preferred
stock in more than one series or class at any stated value and to fix the terms
of each series or class, i.e. dividend rights and rates, conversion or exchange
rights, voting rights, terms of redemption and liquidation preference. Let us
examine how this reliance on the Board's discretion has worked in practice.
The 1996 8% Convertible Series A Preferred raised $1.4 million with an
initial conversion price of $6.07, equivalent to 247,000 shares. This issue was
eventually converted into 633,000 shares, or an equivalent price of $2.22. The
1997 8% Convertible Series B and Series C Preferred issues raised $950,000 with
an initial conversion price of $3.50, equivalent to 301,000 shares. These two
issues were eventually converted into 386,000 shares, or an equivalent share
price of $2.73. The 1998 Series D Convertible Preferred (2500 shares) raised
$2.3 million with an initial conversion price of $4.625, equivalent to 541,000
shares. At FY 1999 year-end, 1,093 shares of this issue had been converted to
588,000 shares, an equivalent share price of $1.86. The remaining 1,407 shares
may be now have been converted at an even lower share price. Considering only
completed conversions, the Board raised $3.3 million with the expectation of
issuing 784,000 shares, an equivalent share price of $4.28. In the event,
1,600,000 shares were issued at an equivalent share price of $2.06, causing the
common stockholders to suffer substantial unanticipated dilution. Why? Because
the terms of all four issues included a "reverse conversion" feature, such that
the lower the market price of the common shares, the more shares the preferred
holders were entitled to receive upon conversion.
It is in the interest of the common stock owner to see the price of the
stock move up. It is in the interest of the reverse conversation holder to see
the price of the stock collapse, and convertible buyers who insist on this
feature know well how to
15
<PAGE> 20
serve their interests, as is well illustrated by the outcomes above. Financings
of this type pit one class of shareholder against the other. The devastating
experience with the Series A Preferred should have been enough, but management
went on to do three more of the same. And the original five million preferred
shares are still in place, an inexhaustible well. Events suggest that complete
Board discretion with this item in the capitalization is unjustified and that
both should be abolished.
The stockholders are urged to vote IN FAVOR of this proposal.
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL. The Company's certificate of incorporation authorizes the Company's
Board of Directors, without the necessity of further shareholder approval, to
cause the Company to issue up to 5,000,000 shares of preferred stock from time
to time in one or more series, and with such dividend rates and rights,
liquidation preferences, voting rights, conversion rights, and redemption rights
and such other terms and rights as determined by the Board of Directors.
The purpose of authorizing preferred stock is to give the Board of
Directors greater flexibility in connection with possible future financing
requirements and other corporate matters. The Board of Directors believes that
the complexity of modern business financing and possible future transactions
require greater flexibility in the Company's capital structure than exists when
only one class of common shares is authorized. The Board of Directors is
permitted to issue preferred stock from time to time for any proper corporate
purpose including acquisitions of other businesses or properties and raising of
additional capital. Shares of preferred stock can be issued publicly or
privately, in one or more series, and each series of preferred stock will rank
senior to the Common Shares with respect to various rights. The Company does not
currently have any agreements, understandings or arrangements regarding the
possible issuance of any preferred stock.
Possible overall effects on the Company's current shareholders of the
issuance of preferred stock include the dilution of such shareholders' ownership
in the Company, the prevention of mergers with or business combinations by the
Company and in the discouragement of possible tender offers for the Company's
Common Shares. On the conversion into Common Shares of shares of preferred stock
issued with conversion rights, the common shareholders' voting power and
percentage ownership of the Company would be diluted and such issuances could
have an adverse effect on the market price of the Company's Common Shares. In
addition, the issuance of shares of preferred stock with certain rights,
preferences and privileges senior to those held by the Common Shares could
diminish the common shareholders' rights to receive dividends declared by the
Board of Directors and to receive payments upon the liquidation of the Company.
If shares of preferred stock are issued, approval by such shares,
voting as a separate class, could be required prior to certain mergers with or
business combinations by the Company. These factors could discourage attempts to
purchase or control the Company even if a change in control might be beneficial
to the common shareholders. Moreover, the issuance of voting preferred stock to
persons friendly to
16
<PAGE> 21
existing management could make it more difficult to remove incumbent management
and managers from office even if such changes might be favorable to the
shareholders generally.
The Board of Directors feels that the flexibility offered by the
authorization of preferred stock outweighs its disadvantages. To the extent that
the authorization of preferred stock may have anti-takeover effects, the
authorization of preferred stock may encourage persons seeking to acquire the
Company to negotiate directly with the Board of Directors, enabling the Board to
consider the proposed transaction in a nondisruptive atmosphere and to discharge
effectively the obligation to act on the proposed transaction in a manner that
best serves all of the shareholders' interests. It is the view of the Board of
Directors that the authorization of blank check preferred stock should not
discourage anyone from proposing a merger or other transaction at a price
reflective of the true value of the Company and which is in the best interests
of all of the shareholders.
Accordingly, the Board of Directors UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL. The affirmative vote of a majority of Common Shares
participating in the voting on this proposal is required for the adoption of
this proposal. Proxies will be voted "AGAINST" this proposal unless instructed
otherwise. Abstentions indicated on such a proxy card will not be counted as
either "for" or "against" this proposal. "Broker non-votes" specified on proxies
returned by brokers holding shares for beneficial owners who have not provided
instructions as to voting on this issue will be treated as not present for
voting on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST"
PROPOSAL 4.
PROPOSAL 5
SHAREHOLDER PROPOSAL WITH RESPECT
TO THE COMPANY'S STOCK OPTION PLANS
Joanne M. Peters, whose address is 22 Heather Drive, Clifton Park, New
York 12065, has requested that the following proposal be included in this Proxy
Statement. Ms. Peters has advised the Company that she is the beneficial owner
of 10,000 Common Shares of the Company. Ms. Peters' proposal and her related
supporting statement are followed by a recommendation of the Board of Directors.
The Board of Directors disclaims any responsibility for the content of the
proposal and the statement in support of the proposal, which are presented in
the form received from the shareholder.
RESOLVED that the shareholders request the Board of Directors to amend
the terms of all existing stock option plans of the Company such that (1) the
exercise price of any option may not be less than the current market price of
the Company shares; (2) options exercised shall be settled only for full payment
in cash at the time the shares are issued, (3) only officers, directors and
employees are eligible for option grants.
17
<PAGE> 22
SUPPORTING STATEMENT: Note H (6), page F-15 in the FY 1999 Annual
Report explains a FY 1998 charge of $342,000 resulting from issuance of options
at less than fair value, as well as a charge of $139,000, or $1.56 per share for
89,000 options issued to a consultant. The high-low range of sales prices for
the common stock in FY 1998 was $6.50-$2.69 (see page 14), indicating a windfall
for the consultant. In FY 1999, charges connected with options issued to
employees, directors, consultants and distributors at less than fair market
value amounted to $91,000. This practice is contrary to stockholder interest, is
producing no tangible stockholder value and should be abandoned. In fact,
current thinking about option pricing holds that options priced at 110%-125% of
fair market value provide the best incentive.
The Company's Fiscal 2000 Non-Statutory Stock Option Plan, Para 6.(d),
provides that payment for options exercised may be made "by any means acceptable
to the Board". This wording leaves the door open to all manner of abuse of the
settlement process and even invites alternatives other than full cash payment at
the time of share issuance. An entire industry has sprung up to serve the needs
of persons who need cash to exercise options, so there is no reason to provide
for means other than full payment in cash for the settlement of options
exercised.
The Company has outgrown the period when issuing options to other than
employees, officers or directors is necessary or desirable. The standard for
option eligibility, "parties who have made a significant contribution to the
business and success of the Company", is far too subjective a measure to justify
the dilution stockholders suffer by unfettered option issuance to third parties,
who will certainly not subordinate their own interest in favor of company's for
the sake of a few options. Even with an issuer's best intentions, issuing
options to third parties with no formal ties or allegiance to the Company is a
practice too easily subject to fraud and abuse to have a place in corporate
policy.
The stockholders are urged to vote IN FAVOR of this proposal.
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL.
The purpose and objectives of the Company's Fiscal Year 1997, 1998 and 2000
Non-Statutory Stock Option Plans (the "Option Plans") is to assist the Company
in attracting, retaining, and motivating highly qualified talent. The Board of
Directors believes that it is becoming increasingly difficult for public
companies, especially those in the biotechnology sector, to attract qualified
directors, officers, employees, consultants and other advisors (the
"Participants") without the flexibility to compensate such individuals by
granting stock options.
The Option Plans provide an economical means of compensating
Participants because the grant of stock options requires no cash expenditures by
the Company. The Board of Directors does not currently intend to grant options
with an exercise price that is less than current market price, and in fact,
options have never been
18
<PAGE> 23
granted with an exercise price that was less than the then current market price.
Because all of the options granted under the Option Plans have been granted with
an exercise price equal to or greater than the current market price of the
Company's Common Shares on the date of grant, no value inures to the
Participants until the market price of the Common Shares increases, which also
benefits the Company's shareholders. Stock options provide the opportunity for
the Participants to identify more closely with the financial interests of the
Company's shareholders and to share in the financial risks and rewards of stock
ownership.
Each of the Option Plans has been duly approved by the Company's
shareholders. Management opposes establishing mandatory restrictions on the
Option Plans because such restrictions might seriously impair the flexibility
and, in turn, the effectiveness of the Option Plans. The Board of Directors
believes that one of the best incentives Participants can be given to increase
shareholder value is the grant of stock options. To encourage Participants to
exercise their options, the Board of Directors has in the past, and may in the
future, permit Participants to exercise their options through a cashless
exercise. The Board believes that encouraging Participants to exercise their
options and increase their ownership of Common Shares will more closely align
the financial interests of the Participants and the Company's shareholders.
Such option grants have the added benefit of not requiring any cash
expenditures by the Company. From time to time, the Company engages consultants
and other advisors who provide valuable knowledge and expertise on a
project-by-project basis. The ability to compensate consultants and advisors
with stock options provides the Company with the necessary flexibility to engage
such individuals without incurring significant cash expenditures. The Board of
Directors relies on its ability to allocate scarce resources in a way that the
Board believes best serves long term shareholder value. Further, the Board
believes that the restrictions suggested in the shareholder proposal would
affect its ability to allocate the Company's resources and could negatively
effect the Company's long term earnings.
Accordingly, the Board of Directors UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" THIS PROPOSAL. The affirmative vote of a majority of Common Shares
participating in the voting on this proposal is required for the adoption of
this proposal. Proxies will be voted "AGAINST" this proposal unless instructed
otherwise. Abstentions indicated on such a proxy card will not be counted as
either "for" or "against" this proposal. "Broker non-votes" specified on proxies
returned by brokers holding shares for beneficial owners who have not provided
instructions as to voting on this issue will be treated as not present for
voting on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST"
PROPOSAL 5.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership
19
<PAGE> 24
with the Securities and Exchange Commission ("SEC"). Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on a review of the copies of such forms furnished to the
Company during, and with respect to, fiscal 2000, the Company believes that
during fiscal 2000 its executive officers, directors and greater than ten
percent beneficial owners complied with all Section 16(a) filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At August 16, 2000, the Company had provided loans aggregating $415,000
to Stan Cipkowski, the Company's Chairman of the Board, President and Chief
Executive Officer. These loans are evidenced by a note and bear interest at the
rate of 11.5% per annum. The note is payable on demand. Mr. Cipkowski has agreed
to pledge 1,500,000 of the Company's Common Shares to the Company as collateral.
The Company's Board of Directors is currently evaluating forms of repayment of
this loan which may include cash repayment or repayment through the redemption
by the Company of certain of Mr. Cipkowski's Common Shares.
The Company has collateralized a bank loan totaling $115,000 for Mr.
Cipkowski with a $112,000 certificate of deposit in the bank.
As of August 16, 2000, the Company has provided a loan in the amount of
$380,000 to BioSys, Inc. ("BioSys"). BioSys is a development stage company
focusing on developing, manufacturing, marketing and selling proprietary new
products for the industrial microbiology testing market. Gerald Moore, a
director of the Company, is a stockholder and officer of BioSys. This loan is
convertible into shares of common stock of BioSys based on the percentage of the
funds provided by the Company through this loan during the two year period
ending July 14, 2001 compared to the total amount of funds provided to BioSys by
all other investors during this period. The Company's percentage ownership of
the outstanding shares of common stock of BioSys is limited to a maximum of 20%
based on a maximum of $400,000 that may be provided to BioSys by the Company.
PROPOSALS OF SHAREHOLDERS
A proposal submitted by a shareholder in accordance with applicable
rules and regulations for presentation at the Company's Fiscal 2002 Annual
Meeting of Shareholders and received at the Company's executive offices no later
than May 14, 2002, will be included in the Company's Proxy Statement and form of
proxy relating to the Fiscal 2002 Annual Meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Annual Meeting other than the matters set forth herein. Should any
other matter requiring a vote of shareholders arise, the proxies confer upon the
person or persons
20
<PAGE> 25
entitled to vote the shares represented by such proxies the authority to vote
the proxies in their discretion.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Edmund Jaskiewicz
------------------------------------
Edmund Jaskiewicz,
Secretary to the Board of Directors
August 16, 2000
21
<PAGE> 26
PROXY
FISCAL 2001 ANNUAL MEETING OF SHAREHOLDERS
AMERICAN BIO MEDICA CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF THE CORPORATION
The undersigned shareholder of American Bio Medica Corporation, having
received the Notice dated August 16, 2000, of the Fiscal 2001 Annual Meeting of
Shareholders, hereby nominates, constitutes, appoints and authorizes Stan
Cipkowski and Edmund Jaskiewicz, and each of them with full power to act alone,
as proxies with full power of substitution, for me and in my name, place and
stead, to vote all the Common Shares of said corporation standing in my name on
its books on August 16, 2000, at the Fiscal 2001 Annual Meeting of Shareholders
to be held at 10:00 A.M. on Wednesday, September 20, 2000 at Herbert's at Birch
Hill located at One Celebration Way, Schodack, New York, or at any adjournments
thereof, with all the power the undersigned would possess if personally present,
as follows:
1. The election of the six (6) nominees listed in the Proxy Statement for the
Fiscal 2000 Annual Meeting as directors to serve until the Fiscal 2002
Annual Meeting and until their successors are elected.
IF YOU WISH YOUR VOTES TO BE CAST FOR ALL OF THE SIX (6) NOMINEES LISTED
BELOW, PLACE AN "X" IN THIS BOX [ ]
IF YOU DO NOT WISH TO VOTE FOR ALL OF THE NOMINEES, LINE OUT THE NAMES OF
PERSONS FOR WHOM YOU DO NOT CHOOSE TO VOTE:
DIRECTORS: Stan Cipkowski
Edmund Jaskiewicz
Jay Bendis
Robert Aromando
Gerald Moore
Denis O'Donnell, M.D.
2. The Shareholder Proposal with respect to loans by the Company to officers,
directors and employees.
FOR / / AGAINST / / ABSTAIN / /
3. The Shareholder Proposal with respect to corporate investments by the
Company.
FOR / / AGAINST / / ABSTAIN / /
4. The Shareholder Proposal with respect to the Company's ability to issue
preferred stock.
FOR / / AGAINST / / ABSTAIN / /
5 The Shareholder Proposal with respect to the Company's stock option plans.
FOR / / AGAINST / / ABSTAIN / /
<PAGE> 27
6. Upon such other business as may properly come before the Annual Meeting or
any adjournments thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE FOR ALL OF THE SIX NOMINEES LISTED
EVEN THOUGH THE BLOCK IN ITEM 1 IS NOT MARKED UNLESS THE NAMES OF ONE OR MORE
PERSONS ARE LINED OUT. THIS PROXY WILL BE VOTED "AGAINST" PROPOSALS 2 THROUGH 5
ABOVE UNLESS "FOR" OR "ABSTAIN" IS INDICATED. IF ANY OTHER BUSINESS IS PRESENTED
AT THE ANNUAL MEETING, THIS PROXY SHALL BE VOTED IN THE DISCRETION OF THE PROXY
HOLDERS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND THE COST OF
SAME IS BORNE BY THE CORPORATION. THIS PROXY MAY BE REVOKED BY WRITING TO THE
SECRETARY TO THE BOARD, AMERICAN BIO MEDICA CORPORATION, 122 SMITH ROAD,
KINDERHOOK, NEW YORK 12106 OR IN PERSON AT THE FISCAL 2000 ANNUAL MEETING OF
SHAREHOLDERS AT ANY TIME PRIOR TO ITS EXERCISE.
Date: ________________________________________
Name: ________________________________________
Beneficial Shareholder (Please Print)
Address: ________________________________________
________________________________________
________________________________________
Signature(s) ________________________________________
________________________________________
(All Shareholders must sign)
NUMBER OF SHAREHOLDERS VOTING _____________________________
IF SHARES ARE NOT REGISTERED IN YOUR NAME, PLEASE GIVE THE NAME AND ADDRESS
OF THE PERSON OR ENTITY IN WHOSE NAME THEY ARE REGISTERED.
________________________________________
________________________________________
________________________________________
(This must be completed if applicable)
Please date, fill in your complete name and address and sign above exactly
as your name or names appear hereon, and return this proxy promptly in the
enclosed envelope. When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If there is more than one fiduciary, all
should sign. All joint owners must sign.
