SCHEDULE 14A
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
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AFP IMAGING CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
AFP IMAGING CORPORATION
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
No fee required.
(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:(1)
(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: __________________________
- --------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
AFP Imaging Corporation
Notice of Annual Meeting of Shareholders
To Be Held On December 18, 1997
To the shareholders of
AFP Imaging Corporation:
You are cordially invited to attend the Annual Meeting of Shareholders of AFP
Imaging Corporation, a New York corporation (the Company), which will be held on
December 18, 1997 at the Company's offices, 250 Clearbrook Road, Elmsford, New
York, at 9:30 a.m., New York time, to consider and act upon the following
matters:
1 To elect five directors of the Company to serve for the ensuing year
and until their successors are duly elected and qualified;
2. To consider and act upon a proposal to amend the Company's 1995 Stock
Option Plan to increase the number of shares available for issuance
upon the exercise of options granted from 600,000 shares of Common
Stock to 1,100,000 shares of Common Stock;
3. To ratify the appointment of Arthur Andersen LLP as the independent
public accountants of the Company's financial statements for the
fiscal year ending June 30, 1998; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only Shareholders of record at the close of business on November 10, 1997 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By order of the Board of Directors
David Vozick,
Secretary
Elmsford, New York
November 20, 1997
Whether or not you plan to attend the Annual Meeting, please sign and date the
enclosed Proxy, which is being solicited by the Board of Directors of the
Company, and promptly return it to the Company in the enclosed postage pre-paid
envelope. The Proxy may be revoked at any time before it is voted and
Shareholders executing proxies may attend the Annual Meeting and vote there in
person should they so desire.
Note that the time and location of the Annual Meeting is: December 18, 1997 at
9:30 a.m.
AFP Imaging Corporation
250 Clearbrook Road
Elmsford, New York 10523
PROXY STATEMENT
The Board of Directors of AFP Imaging Corporation (the "Company") presents this
Proxy Statement to all Shareholders and solicits their proxies for the Annual
Meeting of Shareholders to be held on December 18, 1997. All proxies duly
executed and received will be voted on all matters presented to the Annual
Meeting in accordance with the instructions given by such proxies. In the
absence of specific instructions, proxies so received will be voted for the
named nominees for election to the Company's Board of Directors for the approval
of the amendment to the Company's 1995 Stock Option Plan, and for the
ratification of Arthur Andersen LLP as the Company's independent public
accountants. Shares represented by proxies which are marked "abstain" for Item 3
on the proxy card and proxies which are marked to deny discretionary authority
on all other matters will not be included in the vote totals, and therefore will
have no effect on the vote. In addition, where brokers are prohibited from
exercising discretionary authority for beneficial owners who have not provided
voting instructions (commonly referred to as "broker non-votes"), those shares
will not be included in the vote totals. The Board of Directors does not
anticipate that any of its nominees will be unavailable for election and does
not know of any other matters that may be brought before the Annual Meeting. In
the event that any other matter should come before the Annual Meeting or any
nominee is not available for election, the persons named in the enclosed proxy
have discretionary authority to vote all proxies not marked to the contrary with
respect to such matters in accordance with their best judgment. The proxy may be
revoked at any time before being voted, by written notice of revocation
delivered to the Company prior to the Annual Meeting, or by giving notice at the
Annual Meeting. The Company will pay the entire expense of soliciting these
proxies, which solicitation will be by use of the mails, such mailing to take
place on or about November 20, 1997.
The total number of shares of Common Stock of the Company outstanding as of
November 10, 1997, was 7,634,461. The number of shares of Series A Convertible
Preferred Stock of the Company outstanding as of November 10, 1997 was
1,372,417. The number of shares of Series B Convertible Preferred Stock of the
Company outstanding as of November 10, 1997 was 711,872. The Common Stock and
the Series A and Series B Preferred Stock are the only classes of securities of
the Company entitled to vote at the Annual Meeting or any adjournment thereof.
Each share has one vote and all classes vote together as a single class. Only
Shareholders of record as of the close of business on November 10, 1997 will be
entitled to vote.
A list of Shareholders entitled to vote at the Annual Meeting will be available
at the Company's office, 250 Clearbrook Road, Elmsford, New York, for a period
of ten (10) days prior to the Annual Meeting for examination by any Shareholder.
In October 1997, Robert L. Rosen and New Ballantrae Partners, L.P. entered into
an agreement with the Company, David Vozick and Donald Rabinovitch whereunder,
among other things, the parties agreed to terminate the shareholders' agreement
among such parties and New Ballantrae Partners, L.P., agreed to a timetable to
convert its Series A and B Preferred Shares of the Company and distribute such
shares to its partners. Furthermore, pursuant to such agreement, Robert L. Rosen
agreed to resign from the Board, if so requested by a majority of the Board, on
the earlier of October 12, 1998 and the date, if ever, when Mr. Rosen's
beneficial ownership of the Company's capital shares is less than fifty percent
(50%) of the number of the Company's capital shares he would be entitled to upon
the liquidation of New Ballantrae Partners, L.P.
ANNUAL REPORT
An Annual Report for the year ended June 30, 1997, containing financial and
other information about the Company and its subsidiary companies, is being
mailed at this time to all Shareholders of record entitled to vote at the Annual
Meeting on December 18, 1997.
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
The Company's Board of Directors has nominated David Vozick, Donald Rabinovitch,
Robert L. Rosen, Jack Becker and Robert A. Blatt for election as Directors at
the Annual Meeting to hold office for a one-year term or until their successors
shall be elected and duly qualified. It is intended that the accompanying form
of Proxy will be voted for the election as Directors of the five (5) nominees
named above, unless the Proxy contains contrary instructions. Proxies which
direct the Proxy holders to abstain and do not direct the Proxy holders to vote
for or withhold authority in the matter of electing Directors will be voted for
the election of the five (5) nominees named below. Proxies cannot be voted for a
greater number of persons than the number of nominees named in the Proxy
Statement.
In the event any one or more of the aforesaid nominees is unable to serve, it is
the intention of the persons named in the Proxy to vote for the election of
substitutes proposed by the Board of Directors or, if no substitute is proposed,
for the remaining nominees. Management has no reason to believe that any of the
nominees will be unable to serve and each nominee has advised the Company that
he can and will serve as a Director of the Company in the event he is so
elected.
Pursuant to the above agreement, Messrs. Vozick and Rabinovitch and New
Ballantrae Partners, L.P., have agreed to vote their respective shares for
Proposal One. The aforementioned persons own in excess of 50% of the number of
shares entitled to vote at the Annual Meeting.
The following table sets forth as to each nominee for election: (1) such
person's name; (2) the year in which such person was first elected a Director of
the Company; (3) biographical information for the last five years; (4) certain
other directorships, if any, held by such person; (5) positions and offices held
with the Company; and (6) such person's age. The information regarding the
Company's executive officers is also set forth in the following table.
1
Year First
Elected
Name & Age Director Position
David Vozick (57) 1978 Chairman of the Board of Directors,
Secretary and Treasurer
Donald Rabinovitch (51) 1978 President and Director
Robert Rosen (50) 1995 Vice - Chairman of the Board of Directors
Robert Blatt (56) 1995 Director
Jack Becker (62) 1997 Director
David Vozick has been Chairman of the Board of Directors, Secretary and
Treasurer since the Company was founded in October 1978. He is a co-founder of
the Company.
Donald Rabinovitch has been President since the Company was founded in October
1978. He is a co-founder of the Company.
Robert L. Rosen is the Chief Executive Officer of RLR Partners, L.L.C. a private
investment fund, which is the general partner of New Ballantrae. From 1987 to
1993, Mr. Rosen had been Chairman of the Board and Chief Executive Officer of
Damon Corporation and its predecessor which operated one of the leading clinical
laboratory testing networks in the United States. Damon Corporation was acquired
by Corning, Inc. in 1993. Mr. Rosen has been a Director of the Municipal
Advantage Fund, Inc., Municipal Partners Fund Inc., Municipal Partners Fund II,
Inc. and the Spring Mountain Group, since 1993, a Director of the Samonsite
Corporation and Dialysis Centers of America, Inc. since 1994, a Director of
Culligan Water Technologies, Inc. since 1995 and a director of the Jewish
Television Network since 1996.
Robert Blatt is Chairman and majority owner of CRC Group Inc., a developer,
owner and operator of commercial real estate, and a member of the New York Stock
Exchange since 1985. Mr. Blatt has been a consultant to the Company since 1991.
Mr. Blatt is also the Chief Executive Officer of Championship Golf Enterprises
LLC, Larchmont, New York, Island Golf Resorts in St. John's, Antigua BWI, and is
a Director of MTR Gaming Group, Inc. and its subsidiary, Mountaineer Race Track
and Gaming Resort.
Jack Becker has been a practicing attorney in New York State since 1960 and is a
principal of Snow Becker Krauss P.C., general counsel to the Company. Such firm
has been retained by the Company for more than the past three years and will be
retained by the Company for the current fiscal year. Mr. Becker is a recognized
authority in public and private securities financings.
He has been a member of the Board of Directors of PAXAR Corporation since 1969.
Mr. Vozick and Mr. Rabinovitch are first cousins.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is information concerning stock ownership of each class of
equity securities of the Company owned by each director and nominee of the
Company, individually, by each executive officer named in the Summary Executive
Compensation Table below, by all executive officers and directors of the Company
as a group, and all persons known by the Company to own beneficially 5% or more
of the Company's voting securities based upon the respective number of shares of
Common Stock and Series A and B Preferred Stock outstanding as of November 10,
1997. Beneficial ownership as reported in the following table has been
determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934.
Accordingly, all shares over which the directors, nominees and executive
officers named in the group directly or indirectly have or share voting or
investment power have been deemed to be beneficially owned by such person.
2
Name and Address of Amount and Nature of Percent of Class Title of Class
Beneficial Owner Beneficial Ownership (1),(4) --------------
- ------------------- -------------------- ----------------
David Vozick 1,861,963 (2)(4) 23.5% Common Stock
250 Clearbrook Road
Elmsford, NY 10523
Donald Rabinovitch 1,693,863 (3)(4) 21.4% Common Stock
250 Clearbrook Road
Elmsford, NY 10523
Robert Blatt 703,963 9.2% Common Stock
1890 Palmer Avenue
Larchmont, NY 10538
New Ballantrae Partners, L.P. 1,371,461 99.9% Preferred Stock Series A
825 Third Avenue 711,872 100 % Preferred Stock Series B
New York, NY 10022
Robert L. Rosen 1,371,461 (5) 99.9% Preferred Stock Series A
825 Third Avenue 711,872 (5) 100 % Preferred Stock Series B
New York, NY 10022 150,000 (7) 1.9% Common Stock
Jack Becker 32,022 (6) .5% Common Stock
605 Third Avenue
New York, NY 10158
Frank O'Bryan 1,371,461 (5) 99.9% Preferred Stock Series A
825 Third Avenue 711,872 (5) 100 % Preferred Stock Series B
New York, NY 10020
Steven Roth 1,371,461 (5) 99.9% Preferred Stock Series A
825 Third Avenue 711,872 (5) 100 % Preferred Stock Series B
New York, NY 10020
Executive Officers and Directors 4,444,811 (4) 53.3% Common Stock
as a Group (5 Persons) 1,371,461 99.9% Preferred Stock Series A
711,872 100 % Preferred Stock Series B
(1) Based on 7,634,461 shares of Common Stock, 1,372,417 Shares of Series A
Preferred Stock and 711,872 shares of Series B Preferred Stock outstanding as of
November 10, 1997. Common Stock and Preferred Stock vote as a single class on a
share-for-share basis, but are considered as separate classes for purposes of
this table. Unless otherwise noted, the Company believes that all persons named
in the table have sole voting and investment power with respect to all Common
Stock beneficially owned by them. A person is deemed to be the beneficial owner
of securities that can be acquired by such person within 60 days from the date
hereof upon the exercise of options. Each beneficial owner's percentage
ownership is determined by assuming that options that are held by such person
(but not those held by any other person) and which are exercisable within 60
days from the date hereof have been exercised.
(2) Includes 231,000 shares held in trust for Mr. Vozick's three children.
(3) Includes 156,000 shares owned by Mr. Rabinovitch's three children.
(4) In the case of both Messrs. Vozick and Rabinovitch, the amount includes
275,060 stock options issued to each of them of which all are currently
exercisable. It also includes 150,000 shares of Common Stock owned of record by
Mr. Vozick's family foundation and 140,000 shares of Common Stock owned of
record by Mr. Rabinovitch's family foundation. Messrs. Vozick and Rabinovitch
disclaim beneficial ownership with respect to the shares owned by their
respective family foundations. (See "Executive Compensation")
(5) Such shares are held by New Ballantrae Partners, L.P., a limited partnership
of which RLR Partners, L.L.C. ("RLR") is sole general partner. Mr. Rosen is the
managing member and Chief Executive Officer of RLR. Messrs. O'Bryan and Roth are
the managing members of RLR. Messrs. Rosen, O'Bryan and Roth disclaim beneficial
ownership in these shares for purposes of Rule 16a-1(a) promulgated under the
Securities Exchange Act of 1934, as amended, except as to shares representing
their indirect pro-rata interests in New Ballantrae Partners, L.P.
(6) Includes 25,000 shares held by Snow Becker Krauss P.C., counsel to the
Company, of which Mr. Becker is a principal.
(7) Consists of stock options to acquire 150,000 shares of the Company, all of
which are currently exercisable. Such options were issued in consideration for
consulting services to be provided at a future date.
3
SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth for the fiscal years ended June 30, 1997, 1996
and 1995, the cash and certain other compensation paid by the Company to the
executive officers of the Company, each whose annual salary and bonus earned
exceeded $100,000 during each year.
Annual Compensation Long Term Compensation
------------------------------------------ ------------------------------------------------
Other Annual Restricted LTIP All Other
Salary Bonus Compensation Stock Options/SARS Payouts Compensation
Name and Position Year ($) (1) ($) (2) ($) (3) Awards (#) (4) (#) (4) (#) (4)
- ----------------- ---- -------- ------- -------- ------ ------- ------- -------
David Vozick 1997 $297,870 $0 $41,827 - - - -
Chairman of the Board 1996 $310,350 $0 $38,673 - 216,975 - -
Secretary, and Treasurer 1995 $269,240 $0 $38,610 - 6,633 - -
Donald Rabinovitch 1997 $297,870 $0 $31,829 - - - -
President and Director 1996 $310,350 $0 $29,081 - 216,975 - -
1995 $269,240 $0 $30,530 - 6,633 - -
(1) Amounts shown include cash compensation earned and accrued by the executive
officers. 1996 includes an amount accrued in the prior fiscal year 1995 and
paid in 1996.
(2) No cash bonuses were paid during the past three fiscal years.
(3) The total amounts for each fiscal year consist of premiums paid by the
Company for life and disability insurance policies for their personal
benefit and an automobile allowance.
(4) No restricted stock awards, stock appreciation rights ("SARS") or long-term
incentive payouts ("LTIP") were granted during the fiscal years ended June
30, 1995, 1996 and 1997. Messrs. Vozick and Rabinovitch were each granted,
12,060 incentive stock options at $.55 per share in October 1994, and
263,000 incentive stock options at $.825 per share in July 1995.
Stock Options held at end of Fiscal 1997
The following table indicates the total number and value of exercisable and
unexercisable stock options held by each of the executive officers as of June
30, 1997. No SARs were granted or exercised in the 1997 fiscal year.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
----------------------------------------------------------------------------- ----------------------------
Number of
Securities % of Total
Underlying Options/SARs
Options/ Granted to Exercise
SARs Employees of Base Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date 5%($) 10%($)
---- ----------- -------------- ------------ ---- ----- ------
- --- --- --- --- --- --- --- ---
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
The following table sets forth for the fiscal year ended June 30, 1997, the
options exercised and the value of unexercised options at fiscal year end for
the executive officers.
Number of unexercised Value of unexercised
Options/SARS at In-the-money Options/SARS
Shares Acquired Value Fiscal Year-End (#) at Fiscal Year End ($) (1)
Name on exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ------------ ------------------------- --------------------------
David Vozick - $0 275,060/ $309,321/
0 $0
Donald Rabinovitch - $0 275,060/ $309,321/
0 $0
(1) The closing bid price for the Company's Common Stock on June 30, 1997, was
quoted at $1.9375 per share on NASDAQ SmallCap Market.
4
Compensation Committee Interlocks and Insider Participation
As the Board of Directors does not have a Compensation Committee, executive
compensation is determined according to Company philosophy by the Board of
Directors itself. None of the executive officers of the Company has served on
the Board of Directors or Compensation Committee during the last fiscal year of
any other entity, any of whose officers served on the Board of Directors of the
Company.
Report of the Board of Directors on Executive Compensation
Executive Compensation
The Company's executive compensation philosophy is to provide competitive levels
of compensation, integrate management's pay with the achievement of the
Company's performance goals, recognize individual initiative and achievement,
and assist the Company in attracting and retaining management with the skills
critical to the long-term success of the Company. Management compensation is
intended to be set at levels that the Board of Directors believes is consistent
with that of other companies in the Company's industry. The Company's executive
compensation has three major components: base salaries, performance incentive,
and incentive stock options.
Executive Base Salaries
Base salaries are determined by evaluating the responsibilities of the position
held, the experience of the individual, and by reference to base salaries for
comparable positions at companies within similar industries. The Board of
Directors reviews base salaries and determines increases based upon an officer's
contribution to corporate performance, the rate of inflation, and competitive
market conditions.
Performance Incentive
The Board of Directors has a performance incentive program based upon corporate
performance criteria relating to revenues, income and operating goals to augment
the base salaries received by executive officers. No performance incentives have
been paid or granted to the executive officers for the past three years.
Incentive Stock Options
The Company uses incentive stock options issued under its 1992 and 1995 Employee
Stock Option Plans as a means to align management's and shareholders' interests
in the enhancement of shareholder value. Incentive stock options are typically
granted at the commencement of employment of key personnel and are augmented by
subsequent grants periodically. All incentive stock option grants are reviewed
and approved by the Board of Directors.
Benefits
The Company offers a life, health and disability benefit package to its
executive officers, which is similar to the package offered to all of its
employees.
Retirement and Post Retirement Benefits
The Company does not offer a post-retirement health plan to its executive
officers or employees. The Company does offer a 401(k) retirement savings plan
to its executive officers which is the identical plan offered to all of its
employees.
The Company maintains a profit sharing plan and trust pursuant to which
participants receive certain benefits upon retirement, death, disability and, to
a limited extent, upon termination of employment for other reasons. Allocation
among participants' interests, including officers and directors who are
employees, is in accordance with current Internal Revenue Service regulations.
The aggregate amount contributed by the Company each fiscal year is determined
by the Board of Directors following a review of the profits of such fiscal year.
The plan requires no minimum contribution by the Company. For the year ended
June 30, 1997, the Company contributed $50,000 to the plan.
Respectfully submitted,
David Vozick
Donald Rabinovitch
Robert Rosen
Frank O'Bryan
Robert Blatt
5
[Performance Graph]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG AFP IMAGING CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
AND A PEER GROUP
AFP IMAGING NASDAQ STOCK S & P HEALTH CARE
CORPORATION PEER GROUP MARKET (U.S.) (MEDICAL PRODUCTS & SUPPLIES)
----------- ---------- ------------ -----------------------------
6/92 100
6/93 92 148 126 82
6/94 79 167 127 79
6/95 100 190 169 121
6/96 192 252 218 159
6/97 258 294 265 211
Assumes $100 invested on June 30, 1992 in the Company's Common Stock, the NASDAQ
Stock Index, the Dental Peer Group Index, and Standard and Poor's Medical
Products and Supplies Index. Total return assumes reinvestment of dividends. The
Dental Peer Group comprises companies nationwide which compete against the
Company in its industry segment of dental products manufacturers and
distributors. The Company believes that this is more representative of its
present industry base. The performances of each company have been weighted
according to their respective stock market capitalization for purposes of
arriving at a peer group average. Each member of the peer group has been
publicly traded for at least five years.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934 requires the Company's
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 with the Securities and Exchange Commission.
Officers, directors and greater than ten percent shareholders are required by
regulation to furnish the Company with copies of all Section 16 (a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that, during the period from
July 1, 1996 through June 30, 1997, all filing requirements applicable to its
officers, directors, and greater than ten percent beneficial owners were
complied with.
PROPOSAL TWO - AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN
The AFP Imaging Corporation 1995 Stock Option Plan (the "Plan") was adopted by
the Board of Directors of the Corporation in 1995 and approved by the
shareholders of the Company at the December 1995 Annual Meeting of Shareholders.
By unanimous written consent, the Board of Directors agreed to amend the Plan to
increase from 600,000 to 1,100,000 the aggregate number of shares of common
stock of the Company reserved for issuance under the Plan. A copy of the Plan
was originally filed with the Company's 1995 Annual Report on Form 10K.
Paragraph 2 is amended to read 1,100,000 Common Shares in the aggregate. The
increase in the number of authorized shares is subject to approval by the
Company's shareholders.
As of September 30, 1997, there were 102,500 shares of common Stock available
for future awards under the Plan. The purpose of Proposal Two is to continue the
Plan by increasing by 500,000 shares the aggregate number of shares of common
stock that may be issued under the Plan. If the Proposal is adopted, one or more
of the employees, directors, independent contractors and consultants of the
Company could receive more benefits under the Plan than they could if the
Proposal is not adopted.
All other attributes, terms and conditions of the AFP Imaging Corporation 1995
Stock Option Plan remain the same. Paragraph 10C of the Plan allows the Board of
Directors, subject to approval by the affirmative vote of the holders of a
majority of the outstanding shares of
6
Common Stock of the Company entitled to vote thereon, to increase the maximum
number of common shares that may be granted under the Plan.
The affirmative vote of at least a majority of the shares of common stock of the
Company entitled to vote at the Annual Meeting is required to approve the
Proposal to amend the Plan. If not approved, the amendment will not become
effective and there will remain 102,500 shares eligible for issuance under the
Plan. The Board of Directors recommends a vote for the Proposal to amend the
Plan.
PROPOSAL THREE - RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been independent auditors of the Company's accounts
since October 1980. Such firm has no financial interest, either direct or
indirect, in the Company. Selection of the auditors for the fiscal year ending
June 30, 1998, will be made by the Board of Directors subject to Shareholder
approval. A representative of Arthur Andersen LLP is expected to attend the
meeting and have an opportunity to make a statement and/or respond to
appropriate questions from Shareholders. Management recommends voting "FOR" the
ratification of the appointment of the auditors.
OTHER TRANSACTIONS
The Company maintains directors and officer's liability insurance with RLI
Insurance Company which insures the Company and the directors and officers of
the Company in accordance with the indemnification provisions of the New York
Business Corporation Law. This policy is renewed each year in May and currently
costs the Company $25,000 per annum.
In October 1997, the Company entered into a consulting agreement with Robert L.
Rosen whereunder Mr. Rosen agreed to provide advisory services to the Company
for a one year term commencing upon his resignation as a director of the
Company. In consideration for such services, he will receive $200,000, payable
in 12 equal monthly payments, commencing on the first business day of the term
and has received a four-year option to purchase 150,000 common shares of the
Company equal to the average of the closing prices of the Company's common
shares during each of the ten trading days ending in October 12, 1997 and each
of the ten trading days commencing on the first day after October 12, 1997.
MEETING OF THE BOARD OF DIRECTORS AND INFORMATION REGARDING COMMITTEES
The Board of Directors of the Company held four regular meetings and one special
meeting during the fiscal year ended June 30, 1997. All Directors either
attended or gave their written consent for all the Board meetings.
The Board of Directors has an Executive Committee but does not have any other
standing committees. The Executive Committee did not hold any meetings during
the fiscal year ended June 30, 1997. The Company does not pay any fees to
Directors for attendance at meetings of the Board of Directors, except that Jack
Becker's compensation for serving as a director is $2,500 per meeting of the
Board and the grant per meeting of ten year options under the Company's 1995
Stock Option Plan to acquire 3,000 shares of the Company's common stock, having
an exercise price equal to the closing price of the Company's common stock at
the date of said meeting.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company which are intended to be presented at
the next Annual Meeting must be received by the Company no later than July 20,
1998 in order that they may be included in the proxy statement and form of proxy
relating to that meeting.
COSTS OF SOLICITATION
The costs of soliciting proxies will be borne by the Company. The Company will
also reimburse brokerage firms and other custodians, nominees and fiduciaries,
if any, for reasonable out-of-pocket expenses incurred by them in connection
with forwarding solicitation materials to beneficial owners of Common Stock and
Preferred Stock held of record by such persons.
Solicitation by the Company will be primarily by mail.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
Upon the written request of a Shareholder of the Company, addressed to David
Vozick, Secretary of the Company, AFP Imaging, 250 Clearbrook Road, Elmsford,
New York, 10523, the Company will provide without charge to such Shareholder a
copy of the Company's Annual Report on Form 10-K for its fiscal year ended June
30, 1997, including all statements and schedules to be filed with the Securities
Exchange Commission pursuant to Rule 13a-1 under the Securities Exchange Act of
1934.
By Order of the Board of Directors
Elmsford, New York David Vozick,
November 20, 1997 Secretary
7
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
AFP IMAGING CORPORATION
The undersigned Shareholder of AFP Imaging Corporation, a New York corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated November 20, 1997 and hereby appoints David Vozick
and Donald Rabinovitch, and each of them with full power of substitution,
proxies and attorneys-in-fact, on behalf and in the name of the undersigned at
the 1997 Annual Meeting of Shareholders of AFP Imaging Corporation, to be held
on December 18, 1997 at 9:30 a.m., local time, at the Company's offices, 250
Clearbrook Road, Elmsford, New York 10523, and at any adjournments thereof, and
to vote all shares of Common Stock and Preferred Stock which the undersigned
would be entitled to vote if then and there personally present, on the matters
set forth on the reverse:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
Please mark your
[ X ] Votes as in this
example.
FOR all
nominees listed Withhold
at right authority Nominees:
David Vozick
1. ELECTION OF DIRECTORS: [ ] [ ] Donald Rabinovitch
Robert L. Rosen
(If you wish to withhold authority to vote Jack Becker
for any individual nominee, strike a line Robert A. Blatt
through that nominee's name in list at right.)
2. Proposal to amend the Company's 1995 Stock Option Plan to increase the
number of shares available for issuance upon the exercise of options granted
thereunder from 600,000 to 1,100,000 shares of Common Stock.
For [ ] Against [ ] Abstain [ ]
3. Proposal to ratify the appointment of Arthur Andersen LLP as the independent
public accountants of the Company.
For [ ] Against [ ] Abstain [ ]
4. Upon such other matters which may properly come before the meeting or any
adjournment or adjournments thereof.
For [ ] Against [ ] Abstain [ ]
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTOR NOMINATED AND RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE ANNUAL
MEETING.
A majority of such attorneys or substitutes as shall be present and shall act at
said Annual Meeting or any adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact, hereunder.
SIGNATURE __________________________DATE____________ _____________________
Please Print
Note: (This proxy should be marked, dated and signed by the shareholder(s)
exactly as the name appears hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign. If the signer is a corporation, please sign in the full corporate
name and give the title of the signing officer.)