SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Avitar, Inc. (File No. 0-20316)
- - ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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AVITAR, INC.
65 Dan Road
Canton, Massachusetts 02021
May 12, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the Stockholders
of Avitar, Inc., a Delaware corporation ("Avitar") at Avitar's offices at 65 Dan
Road, Canton, Massachusetts 02021, on June 14, 2000 at 11:00 a.m.
At the meeting you will be asked to consider and vote upon (1) the election
of five Directors to Avitar's Board of Directors; (2) appointment of BDO
Seidman, LLP as Avitar's Auditors for the fiscal year ending September 30, 2000;
and (3) any other business that properly comes before the meeting or any
adjournments or postponements thereof.
Your vote is important. We urge you to complete, sign, date and return the
enclosed proxy card promptly in the accompanying prepaid envelope. You may, of
course, attend the Meeting and vote in person, even if you have previously
returned your proxy card.
Sincerely yours,
Peter P. Phildius,
Chairman and Chief Executive Officer
Avitar, Inc.
65 Dan Road
Canton, Massachusetts 02021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 14, 2000
To the Stockholders of
Avitar, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Avitar,
Inc., a Delaware corporation ("Avitar") will be held at 11:00 a.m., local time,
on June 14, 2000 at Avitar's offices at 65 Dan Road, Canton, Massachusetts, for
the following purposes:
(1) To consider and vote upon the election of the Board of Directors
consisting of five persons to serve until the next annual meeting of the
stockholders;
(2) To consider and vote upon a proposal to ratify the selection of BDO
Siedman, LLP as Avitar's independent auditors for the fiscal year ending
September 30, 2000;
(3) To conduct such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only record holders of Common Stock at the close of business on May 1, 2000
are entitled to notice of and to vote at the Annual Meeting and any adjournments
or postponements thereof.
To ensure that your vote will be counted, please complete, sign, date and
return the Proxy in the enclosed prepaid envelope whether or not you plan to
attend the Annual Meeting. You may revoke your proxy by notifying the Secretary
of the Company in writing at any time before it has been voted at the Annual
Meeting.
By Order of the Board of Directors
Jay C. Leatherman
Secretary, Avitar, Inc.
May 12, 2000
Canton, Massachusetts
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING.
Avitar, Inc.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 2000
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AVITAR, INC.
If properly signed and returned and not revoked, the proxy will be voted in
accordance with the instructions it contains. The persons named in the
accompanying proxy will vote the proxy for the Board of Directors' slate of
directors and for the other matters listed on the proxy as recommended by the
Board of Directors unless contrary instructions are given. At any time before it
is voted, each proxy granted may be revoked by the stockholder by a later dated
proxy, by written revocation addressed to the Secretary of Avitar, Inc. at the
address below or by voting by ballot at the Annual Meeting.
The Company's principal executive offices are located at 65 Dan Road,
Canton, Massachusetts 02021. This proxy statement and the accompanying proxy are
being sent to stockholders on or about May 12, 2000. ANY PROXY MAY BE REVOKED IN
PERSON AT THE ANNUAL MEETING, BY SUBMITTING A PROXY DATED LATER THAN THE PROXY
TO BE REVOKED OR BY NOTIFYING THE SECRETARY OF THE COMPANY IN WRITING AT ANY
TIME PRIOR TO THE TIME THE PROXY IS VOTED.
VOTING SECURITIES
The Board has fixed the close of business on May 1, 2000 as the record date
(the "Record Date") for determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournment thereof. Only
stockholders of record at the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. On the Record Date, the
Company had outstanding 28,694,147 shares of Common Stock and 2,063,348 shares
of Preferred Stock, of which 2,009,800 were shares of Series B and C Preferred
Stock. Stockholders are entitled to one vote for each share of either Common
Stock or Series B and C Preferred Stock on the election of members of the Board
of Directors, ratification of the appointment of independent auditors and other
business as may properly come before the meeting or any adjournments thereof.
The holders of a majority of the outstanding voting shares constitute a quorum.
Abstentions from voting and broker non-votes on a particular Proposal will be
counted for purposes of determining the presence of a quorum but will not be
counted as affirmative or negative votes on the Proposals.
As of May 1, 2000, the directors and executive officers of Avitar together
with their respective affiliates, held 7,554,780 shares of Common Stock and
Series B and C Preferred Stock,representing 24.6 % of the shares eligible to
vote at the Annual Meeting.
ACTION TO BE TAKEN UNDER PROXY
All proxies for stockholders in the accompanying form that are properly
executed and returned will be voted at the Annual Meeting and any adjournments
thereof in accordance with any specifications thereon or, if no specifications
are made, will be voted for the election of the five nominees described herein,
and for ratification of the appointment of independent auditors.
SOLICITATION
Avitar will bear the entire cost of the solicitation of proxies from its
stockholders, including preparation, assembly, printing and mailing of this
Proxy Statement, the proxy card and any additional information furnished to
stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares
beneficially owned by others to forward to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, facsimile,
telegram or personal solicitation by directors, officers or other regular
employees of Avitar. No additional compensation will be paid to such persons for
such services. Avitar may also employ the services of a professional
solicitation company to assist with solicitation of stockholders; but as of May
12, 2000 Avitar has not determined to retain a solicitation company. If such a
company were subsequently retained, Avitar would bear the entire cost.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Five (5) directors will be elected to hold office until the next Annual
Meeting of Stockholders and until their successors have been elected and duly
qualified. The persons named on the accompanying proxy will vote all shares for
which they have received proxies for the election of the nominees named below
unless contrary instructions are given. In the event that any nominee should
become unavailable, shares will be voted for a substitute nominee unless the
number of directors constituting a full board is reduced. Directors are elected
by plurality vote.
NOMINEES
The name, age and position with Avitar of each nominee for director is
listed below, followed by summaries of their background and principal
occupations.
Name Age Title
Peter P. Phildius 70 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 53 President and Chief Operating Officer/Director
Neil R. Gordon (1)(2) 52 Director
James Groth (1)(2) 61 Director
Charles R. McCarthy, Jr.(1) 61 Director
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1. Member of Audit Committee.
2. Member of Compensation Committee.
PETER P. PHILDIUS
Mr. Phildius has been Chairman of the Board of Directors since October 1990
and Chief Executive Officer since July 1996. He has been a general partner in
Phildius Kenyon & Scott, a partnership ("PKS"), since that firm's founding in
1985. Prior to 1985, Mr. Phildius was an independent consultant and Chairman and
co-founder of Nutritional Management, Inc., a company that operated weight loss
clinics (1983 - 1985), President and Chief Operating Officer of Delmed, Inc., a
medical products company (1982 - 1983), President and Chief Operating Officer of
National Medical Care, Inc., a dialysis and medical products company (1979-1981)
and held a variety of senior management positions with Baxter Laboratories, Inc.
("Baxter"), a hospital supply company and the predecessor of Baxter Healthcare
Corporation. During the last eight years of his 18 year career at Baxter (1961 -
1979), Mr. Phildius was Group Vice President and President of the Parenteral
Division, President of the Artificial Organs Division and President of the
Fenwal Division.
DOUGLAS W. SCOTT
Mr. Scott has been the Chief Operating Officer since July 1996, was the
Chief Executive Officer from August 1989 until July 1996 and has been a director
since August 1989. Mr. Scott has been a general partner in PK&S since its
founding in 1985. Prior to 1985, Mr. Scott was Executive Vice President of
Nutritional Management, Inc. (1983 - 1985); Senior Vice President, Operations of
Delmed, Inc. (1982 - 1983); Vice President, Quality Assurance of Frito-Lay,
Inc., a consumer products company (1980 - 1982); and held several senior
positions at Baxter from 1970 to 1980. The last two of these senior positions at
Baxter were General Manager of the Vicra Division and General Manager of Irish
Operations. Mr. Scott is also a director of Candela Corporation, a
publicly-traded company in the business of manufacturing and marketing medical
lasers. Mr. Scott received an M.B.A. from the Harvard Business School.
JAMES GROTH
Mr. Groth has served as a director since January 1990. Mr. Groth has been
President of Mountainside Corporation, a provider of corporate sponsored
functions, for over the past 15 years.
NEIL R. GORDON
Mr. Gordon has served as a director since June 1997. He has been President
of N.R. Gordon & Company, Inc., a company that provides a broad range of
financial consulting services, since 1995. From 1981 to 1995, he was associated
with Ekco Group, Inc. and served as its Treasurer from 1987 to 1995. Mr. Gordon
has also served as Director of Financing and Accounting for Empire of Carolina,
Inc. He received a Bachelor of Science Degree from the Pennsylvania State
University.
CHARLES R. McCARTHY, JR.
Mr. McCarthy was elected as a director in February 1999. He has been a
counsel in the Washington D.C. law firm, O'Connor & Hannan, since 1993. He is
currently a director of Virtual Gaming Tech Inc. and Am Tech Group. Previously,
Mr. McCarthy was General Counsel to the National Association of Corporate
Directors, served as a trial attorney with the Securities and Exchange
Commission, was Blue Sky Securities Commissioner for the District of Columbia
and was a law professor teaching securities law topics and served as a Board
member of and counsel to a number of public companies over the last 20 years.
NUMBER OF DIRECTORS
The Company's Bylaws allow the Board to fix the number of Board members
between 3 and 7. The number has been fixed, at present, at 5. The Board can
increase the number to 7 at anytime without stockholder approval. There are no
family relationships between any Director or Executive Officer of Avitar and any
other Director or Executive Officer of Avitar.
TERM
Directors hold office for a period of one year from the Annual Meeting of
Stockholders at which they are elected or until their successors are duly
elected and qualified. Officers are appointed by the Board of Directors and hold
office at the will of the Board.
BOARD MEETINGS AND COMMITTEES
The Board held 3 meetings during the fiscal year ended September 30, 1999.
The Board has two standing committees: the Audit Committee and the
Compensation Committee. The Board does not have a standing nominating committee
or any committee performing the function of such a committee. During fiscal year
1999, each Board member attended 100% of the aggregate number of meetings of the
Board and the Committee of the Board on which he served.
The Audit Committee meets with the independent auditors, usually annually,
to review the results of the annual audit and discuss the financial statements;
recommends to the Board the independent auditors to be retained; and receives
and considers the accountants' comments as to controls, adequacy of staff and
management performance and procedures in connection with audit and financial
records. The Audit Committee, comprised of Mr. Scott, Mr. Gordon and Mr. Groth,
held 1 meeting in fiscal year 1999. As of April 25, 2000, Mr. McCarthy replaced
Mr. Scott as a member of the Audit Committee
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation, awards stock options to employees and
consultants and otherwise determines compensation levels and performs such other
functions regarding compensation as the Board may delegate. The Compensation
Committee, comprised of Mr. Gordon and Mr. Groth, held 1 meeting in fiscal year
1999.
DIRECTOR COMPENSATION
The Company presently pays its non-management directors $500 for each Board
and Committee meeting which they attend plus a travel fee of $250 if they travel
from outside of the area to attend the meeting. Since Avitar does not pay its
non-management directors an annual retainer, Avitar adopted a directors' plan
(the "Directors' Plan"), which was approved by the Stockholders on May 18, 1995.
Under the Directors' Plan, each non-management director is granted options
covering 5,000 shares of the Common Stock initially upon election of the Board,
and each year in which he/she is selected to serve as a director. In March 1997,
each non- management director received a grant of 5,000 options for calendar
year 1997 with an exercise price of $0.83 per share, representing the fair
market value of the Common Stock on the date of such grant. During fiscal year
1998, all options described above were canceled and replaced with options that
have an exercise price of $.25 per share with no change in the expiration dates.
Also during fiscal year 1998, the non-management directors were each granted
options to purchase 70,000 shares of the Common Stock at an exercise price of
$.25 per share until February 4, 2008. These new options vested and became
exercisable on the basis of 50% on February 4, 1999 and 50% on February 4, 2000.
In March 2000, the non-management directors were granted options covering 45,000
shares of the Common Stock at an average exercise price of $1.57 per share. Such
grants represent options owed to these Directors for 1998, 1999 and 2000 under
the Directors Plan.
For information on compensation to management directors, see
"Management-Executive Compensation" below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Common Stock
beneficially owned as of May 1, 2000 by (i) each person believed by Avitar to be
the beneficial owner of more than 5% of the Common Stock; (ii) each director;
(iii) the Chief Executive Officer and its four most highly compensated executive
officers (other than the Chief Executive Officer) who earn over $100,000 a year
(of which there was one); and (iv) all directors and executive officers as a
group. Beneficial ownership by the stockholders has been determined in
accordance with the rules promulgated under Section 13(d) of the Securities
Exchange Act of 1934, as amended. All shares of the Common Stock are owned both
of record and beneficially, unless otherwise indicated.
Name and Address of Beneficial Owner(1) No. Owned %
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Peter P. Phildius(2)(3)(5)(14) 4,362,826 13.2
Douglas W. Scott(2)(4)(5)(15) 3,155,215 9.9
Phildius, Kenyon & Scott("PK&S")(2)(5) 1,610,460 5.3
James Groth(2)(6)(9) 179,699 *
Neil R.Gordon(2)(7) 258,333 *
Charles R. McCarthy(2)(10) 177,620 *
GIN99 LLC (11) 9,764,500 25.4
David Brown (12) 5,075,000 15.0
Alan Aker (13) 1,639,160 5.4
All directors and executive officers
as a group(3)(4)(5)(6)(7)(8)(9)
(10)(14)(15)(16) 7,952,750 21.7
* Indicates beneficial ownership of less than one (1%) percent.
(1) Information with respect to holders of more than five (5%) percent of the
outstanding shares of the Common Stock was derived from, to the extent
available, Schedules 13D and the amendments thereto on file with the Commission
and the Company's records regarding Preferred Stock issuances.
(2) The business address of such persons, for the purpose hereof, is c/o Avitar,
Inc., 65 Dan Road, Canton, MA 02021.
(3) Includes 1,597,530 shares of the Common Stock, options and warrants to
purchase 963,496 shares of the Common Stock and preferred stock convertible into
191,340 shares of the Common Stock. Also includes the securities of the Company
beneficially owned by PK&S as described below in Note 5.
(4) Includes 644,911 shares of the Common Stock, options and warrants to
purchase 708,504 shares of the Common Stock and preferred stock convertible into
191,340 shares of the Common Stock. Also includes the securities of Avitar
beneficially owned by PK&S as described below in Note 5.
(5) Represents ownership of 1,367,895 shares of the Common Stock and options and
warrants to purchase 242,565 shares of the Common Stock. PK&S is a partnership
of which Mr. Phildius and Mr. Scott are general partners.
(6) Includes 74,699 shares of the Common Stock and options to purchase 105,000
shares of the Common Stock.
(7) Includes 68,333 shares of the Common Stock, of which 7,246 shares are owned
by an affiliate of Mr. Gordon, warrants to purchase 100,000 shares of the Common
Stock granted to an affiliate of such director under a consulting agreement to
provide services to the Company and options to purchase 90,000 shares of the
Common Stock.
(8) Includes 1,094,267 shares of the Common Stock, and options to purchase
335,250 shares of the Common Stock beneficially owned by Jay C. Leatherman, Jr.,
Carl Good and Douglas Lewis, executive officers of the Company.
(9) Does not include 10,929 shares of the Common Stock owned by a trust
established for Mr. Groth's children, all of which he disclaims beneficial
ownership.
(10) Represents 2,000 shares of the Common Stock, preferred stock convertible
into 70,620 shares of the Common Stock and options and warrants to purchase
110,000 shares of the Common Stock.
(11) The address for such entity is c/o Clifford Chance Rogers & Wells LLP, 200
Park Avenue, New York, NY 10166. Represents 200,000 shares of Common Stock,
preferred stock convertible into 7,364,500 shares of the Common Stock and
warrants to purchase 2,200,000 shares of the Common Stock.
(12) The business address for such person is 4101 Evans Avenue, Fort Meyers, FL
33901. Represents preferred stock convertible into 3,750,000 shares of the
Common Stock and warrants to purchase 1,325,000 shares of the Common Stock.
(13) The business address for such person is 1445 Northwest Boca Raton, Boca
Raton, FL 33432. Represents preferred stock convertible into 839,160 shares of
the Common Stock and warrants to purchase 800,000 shares of the Common Stock.
(14) Does not include 67,000 shares of the Common Stock owned by Mr. Phildius's
wife, all of which he disclaims beneficial ownership.
(15) Does not include 15,000 shares of the Common Stock owned by Mr. Scott's
children, all of which he disclaims beneficial ownership.
(16) Does not include 1,123,243 shares of the Common Stock owned by Mr. Lewis'
wife, all of which he disclaims beneficial ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act ("SEC") of 1934 requires the
officers and directors, and persons who own more than 10% of a registered class
of equity securities to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish Avitar with copies of all
Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, Avitar believes that, during fiscal year 1999, all filing
requirements applicable to its officers, directors and greater than 10 %
stockholders were complied with except the following failures to file timely
reports required by Section 16(a): One report (Form 4) covering 2 transactions
were filed late by Peter Phildius. One report (Form 4) covering 3 transactions
were filed late by Douglas Scott. Two reports (Form 4) covering 3 transactions
were filed late by Carl Good. One report (Form 3) covering 1 transaction was
filed late by Douglas Lewis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PK&S, a 5.3% beneficial owner of Avitar, provided consulting services to
predecessors of Avitar from September 1989 to May 1995. On May 28, 1992, PK&S
entered into a written consulting agreement pursuant to which PK&S provided the
services of each of Messrs. Phildius and Scott for approximately 20 hours per
week. Under the terms of the current employment agreements with Peter Phildius
and Douglas Scott described below, Avitar pays their salaries and related
expenses directly to PK&S. The aggregate of consulting fees, salaries, fringe
benefits and reimbursement of expenses paid to PK&S by Avitar for fiscal years
1999, 1998 and 1997 totaled $387,310, $335,137 and $318,160 respectively.
In connection with its consulting arrangement with the Company, PK & S was
granted options to purchase an aggregate of 1.6 million shares of the Company
Common Stock prior to the one for 54.9 stock split effected by the Company in
November 1991 (the "Stock Split"). In December 1991, following the Stock Split,
the Company's Board of Directors canceled these previously granted options and
replaced them with five-year options covering an aggregate of 120,000 shares of
the Company Common Stock, of which options covering 60,000 shares were
exercisable at $0.80 per share and options covering an additional 60,000 shares
were exercisable at $2.00 per share. Such options were granted to PK&S as
compensation for services rendered to the Company. The number of shares of
Company Common Stock covered by such options was approximately 91,000 more than
those which PK&S would have received pursuant to the Stock Split alone, and the
exercise prices and other terms of
such options were more favorable than those of the options that they replaced.
On June 16, 1994, the Company's Board of Directors canceled the options covering
60,000 shares with an exercise price of $2.00 per share and replaced them with
options covering a like number of shares, at $0.59 per share, the fair market
value of the Company Common Stock as of June 16, 1994. The options covering
60,000 shares of common stock at the exercise price of $0.80 per share expired
in December 1996. The remaining 60,000 shares of Company Common Stock covered by
such options are subject to certain demand registration rights granted to PK&S.
Pursuant to these registration rights, PK&S has the right, which commenced on
September 18, 1993, to cause the Company to register the shares of the Company
Common Stock underlying these options.
In connection with bridge loans totaling $375,000 made by PK&S to Avitar,
PK&S, on September 30, 1995, exchanged its bridge note, and accrued interest
thereon, for 388,856 shares of Series A Convertible Preferred Stock. Each share
of Series A Convertible Preferred Stock entitled PK&S to convert it at any time
into three shares of Common Stock and receive dividends in an amount equal to
110% of any dividends paid on the Common Stock into which each share is
convertible. These shares of Series A Convertible Preferred Stock were converted
into 1,166,568 shares of Common Stock in February 1997.
On May 19, 1995, the PK&S Consulting Agreement ended and was replaced by
the Employment Agreements with Messrs. Phildius and Scott
(See"Management-Employment Agreements" below). As requested by Messrs. Phildius
and Scott and approved by the Board of Directors, the salary and benefits
provided under the Employment Agreements are paid directly to PK&S.
In July 1995, Avitar entered into a consulting agreement with Richard
Freemen, M.D., the son-in-law of Avitar's Chairman and Chief Executive Officer.
Under this agreement, Dr. Freemen was to act as Chairman of the Medical Advisory
Board of a subsidiary and was compensated $5,000 per month for the duration of
the agreement. In addition, Dr. Freemen received options to purchase 20,000
shares of Common Stock. The consulting portion of this agreement was canceled in
February 1997 and an issuance of 100,000 shares of Common Stock was made to Dr.
Freeman to cover the total compensation earned under this agreement.
From April-to-October 1997, officers and affiliates of the Company made
loans to Avitar totaling $428,723 with interest payable at 10% per annum. Of
these loans, $368,723 was due on or before September 30, 1997 with the balance
of $60,000 due on or before January 31, 1998. In November 1997, loans in the
total amount of $60,000 (plus the accrued interest thereon) due on or before
January 31, 1998 were repaid. In March 1998, the remaining loans totaling
$368,723 plus accrued interest thereon of approximately $31,000 were repaid by
Avitar with 1,818,020 shares of Common Stock and warrants to purchase 400,000
shares of Common Stock for $.28 per share until March 2003.
During March 1999, the Chairman of the Board and the President of Avitar
converted notes payable (including the accrued interest thereon) and accrued
salaries totaling approximately $200,000 into 24,570 shares of Avitar's Series B
Preferred Stock (which are convertible into 245,700 shares of the Common Stock)
and warrants exercisable for one year to purchase 400,000 shares of the Common
Stock at $1.22 per share. In March 2000, warrants to purchase 268,000 shares of
the Common Stock were exercised.
In October 1996, Avitar entered into a consulting agreement with N.R.
Gordon & Company, Inc. Neil Gordon, a member of the Board of Directors, is the
President of N.R. Gordon & Company, Inc. Under this agreement, N.R. Gordon &
Company, Inc. provided financial consulting services for which it received
50,000 warrants at an exercise price of $0.93 per share and was paid $100.00 per
hour for all services performed. In addition, N.R. Gordon & Company, Inc. was
entitled to receive fees for certain capital raising services. During fiscal
year 1998, Avitar amended its consulting agreement with N.R. Gordon & Company,
Inc. to eliminate any fees associated with raising capital. As compensation for
this amendment, Avitar canceled the 50,000 warrants granted to N.R. Gordon &
Company in 1996 and replaced them with 100,000 warrants to purchase Common Stock
for $.25 per share until October 2001.
Management believes each of the foregoing transactions was entered into on
terms at least as favorable to the Company as could be obtained from unrelated
parties negotiating at arms-length.
MANAGEMENT
The directors and executive officers of the Company and their respective
ages and positions with the Company, as of March 31, 2000, along with certain
biographical information (based solely on information supplied by them), are as
follows:
Name Age Title
Peter P. Phildius 70 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 53 President and Chief Operating Officer
Jay C. Leatherman Jr. 56 Chief Financial Officer and Secretary
Carl M. Good, III 56 Vice President, Research and Development
Douglas Lewis 50 Vice President, President of USDTL
PETER P. PHILDIUS
Biographical information of Mr. Phildius is included under "Proposal No. 1,
Election of Directors -- Nominees" in this Proxy Statement.
DOUGLAS W. SCOTT
Biological information of Mr. Scott is included under "Proposal No. 1,
Election of Directors -- Nominees" in this Proxy Statement.
JAY C. LEATHERMAN, JR.
Mr. Leatherman has served as the Company's Chief Financial Officer since
October 1992 and its Secretary since July 1994. He has over 16 years experience
in financial management in the health care field. Mr. Leatherman served as Vice
President and Chief Financial Officer of 3030 Park, Inc. and 3030 Park
Management Company from 1985 to 1992, responsible for financial, management
information services and business development functions for this continuing care
retirement community and management company. He served as Director of Finance
and Business Services for the Visiting Nurses Association of New Haven, Inc.
from 1977 to 1985. In addition, he served in a variety of accounting and
financial positions with Westinghouse Electric Corporation from 1969 to 1977.
Mr. Leatherman has a Bachelor's Degree in Business Administration from the
University of Hawaii.
CARL M. GOOD, III
Dr. Good has served as the Company's Vice President of Research and
Development since February 1997 and as a consultant and member of the Company's
Scientific Board since October 1996. He has over 30 years of experience in
product development and operating management experience in the medical
diagnostics industry. Dr. Good has held technology management positions with
Millipore Corporation and most recently worked in the development of
sophisticated medical diagnostic products at Cambridge Biotech Corporation. He
has received a Ph. D. in Microbial Genetics from Iowa State University and has
completed Postdoctoral Study in Enzymology at the University of Wisconsin
Medical School and the University of Massachusetts.
DOUGLAS LEWIS
Mr. Lewis had been the President of USDTL since 1990 and was appointed Vice
President of the Company upon the acquisition of USDTL by the Company. He has
over 25 years experience in the operation and management of laboratories, which
specialize in diagnostic testing for drugs of abuse. Mr. Lewis has held senior
level management and consulting positions with various hospital and private
laboratories in the Chicago, Illinois area. He received a Bachelor of Arts
Degree in Chemistry from Grinnell College and was a Pre-Doctoral Fellow at the
University of Illinois.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth compensation earned
by or paid to the Chief Executive Officer and Chief Operating Officer for fiscal
year 1999 and, to the extent required by applicable Commission rules, the
preceding two fiscal years. No other executive officers of Avitar received
annual salary and bonus in excess of $100,000 during fiscal years 1997, 1998 or
1999. All of the compensation in the table below represents management
consulting fees and salary paid by Avitar to PK&S for the services of Mr.
Phildius and Mr. Scott.
Annual Compensation
Long-Term Compensation
Name/Position Year Salary(1) Bonus Options
- --------------- ------ --------- ------ -----------
Peter P. Phildius 1999 $150,000 0 1,145,000(2)
(Chairman of the Board 1998 $150,000 0 100,000(3)
Chief Executive Officer 1997 $150,000 0 0
- -July 1996)
Douglas W. Scott 1999 $150,000 0 850,000(2)
(President/ 1998 $150,000 0 100,000(3)
Chief Operating Officer 1997 $150,000 0 0
- -July 1996/Chief Executive
Officer-Until July 1996)
(1) Does not include $18,160, $10,417 and $62,589 reimbursed to PK&S for fiscal
years 1997, 1998 and 1999, respectively, for business-related expenses incurred
by Mr. Phildius and Mr. Scott on behalf of the Company.
(2) Reflects additional stock options granted to Mr. Phildius and Mr. Scott by
the Company's Board of Directors in January 1999. (3) Reflects additional stock
options granted to Mr. Phildius and Mr. Scott by the Company's Board of
Directors in February 1998.
PK&S is a partnership, two of whose general partners are Messrs. Phildius
and Scott. PK&S provided management consulting services to the Company through
May 18, 1995 pursuant to a written consulting agreement effective May 28, 1992.
Under this agreement, Messrs. Phildius and Scott each devoted approximately 20
hours per week to the Company's affairs for which the Company paid a monthly
consulting fee of $14,500 and reimbursed expenses. Since May 19, 1995, the
Company has paid PK&S the salary and employee benefit amounts provided under the
terms of the Company's employment agreements with Messrs. Phildius and Scott.
See "Employment Agreements" below and "Certain Relationships and Related
Transactions" above.
STOCK OPTION GRANTS IN LAST FISCAL YEAR. On January 18, 1999, the non-
management members of the Board of Directors granted additional options to
purchase Common Stock in the amount of 1,450,000 to Mr. Phildius and 850,000 to
Mr. Scott. Such options have an exercise price of $.345 per share and will
expire on January 18, 2009. Of the 2,300,000 options granted to Mr. Phildius and
Mr. Scott, 380,000 are vested and exercisable, 960,000 options vest and become
exercisable on the earlier of meeting certain performance objectives, retirement
of optionee who has attained 65 years of age, or July 18, 2009. See "Employment
Agreements" below.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES. No stock
options or stock appreciation rights were exercised by Mr.Phildius and Mr. Scott
in fiscal year 1999.
As of May 1, 2000, Mr. Phildius held options covering 1,800,000 shares of
Common Stock, 660,000 of which were exercisable, but all of which were in the
money. Mr. Scott, as of May 1, 2000, held options covering 1,200,000 shares of
Common Stock, 606,000 of which were exercisable, but all of which were in the
money.
EMPLOYMENT AGREEMENTS. In 1993, Messrs. Phildius and Scott entered into
Employment Agreements (the "Employment Agreements") with the Company. These
Employment Agreements commenced May 19, 1995. Under these Employment Agreements,
Messrs. Phildius and Scott each receive an annual salary of $150,000 (subject to
cost of living increases). Pursuant to the Employment Agreements, if Messrs.
Phildius and/or Scott are terminated without "Cause" (as such term is defined in
the Employment Agreements) by the Company or if Messrs. Phildius and/or Scott
terminate their employment as a result of a breach by the Company of its
obligations under such Agreements, he will be entitled to receive his annual
base salary for a period of up to 18 months following such termination. In
addition, if there is a "Change of Control" of the Company (as such term is
defined in the Employment Agreements) and, within two years following such
"Change of Control", either of Messrs. Phildius or Scott is terminated without
Cause by the Company or he terminates his employment as a result of a breach by
the Company, such executive will be entitled to certain payments and benefits,
including the payment, in a lump sum, of an amount equal to up to two times the
sum of (i) the executive's annual base salary and (ii) the executive's most
recent annual bonus (if any). In addition, pursuant to the Employment
Agreements, which have a three-year term (subject to extension), Messrs.
Phildius and Scott are each entitled to annual bonus payments of up to $150,000
if the Company achieves certain levels of Pre-tax Income (as such term is
defined in such Agreements).
REQUIRED VOTE
Election of each of the five nominees for director requires, under Avitar's
Bylaws, the affirmative vote of the holders of a majority of the Avitar Common
Stock and Series B and C Preferred Stock present in person or by proxy at the
Avitar Annual Meeting (assuming a quorum exists) and entitled to vote thereon.
BOARD RECOMMENDATION
The Avitar Board of Directors unanimously recommends a vote FOR election of
all of the five nominees for director.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of Avitar selected BDO Seidman LLP as auditors for
the fiscal year ending September 30, 2000, subject to stockholder approval by
ratification. BDO Seidman has been the independent auditors for Avitar since
December 1992. A representative of BDO Seidman is expected to be present at the
Annual Meeting, at which time he or she will be afforded an opportunity to make
a statement, and will be available to respond to questions.
The Board of Directors of Avitar may, in its discretion, direct appointment
of new independent auditors at any time during the fiscal year if the Board
believes such change would be in the best interests of Avitar and its
stockholders. No such change is anticipated.
REQUIRED VOTE
Approval of ratification of BDO Seidman requires the affirmative vote of
the holders of a majority of the Avitar Common Stock and Series B and C
Preferred Stock present in person or by proxy at the Avitar Annual Meeting
(assuming a quorum exists) and entitled to vote thereon.
BOARD RECOMMENDATION
The Board of Directors of Avitar unanimously recommends a vote FOR the
ratification of BDO Seidman as auditors for the fiscal year ending September 30,
2000.
OTHER BUSINESS
The proxy confers discretionary authority on the proxies with respect to
any other business which may come before the Annual Meeting. The Board of
Directors of Avitar knows of no other matters to be presented at the Annual
Meeting. The persons named in the proxy will vote the shares for which they hold
proxies according to their best judgment if any matters not included in this
Proxy properly come before the meeting.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be included in the proxy statement and form of
proxy relating to the 2001 Annual Meeting of Avitar Stockholders must be
received by the close of business on March 1, 2001 and must comply in all other
respects with the rules and regulations of the Securities and Exchange
Commission. Proposals should be addressed to: Corporate Secretary, Avitar, Inc.,
65 Dan Road, Canton, Massachusetts 02021.
SHARES AVITAR, INC. PROXY NO.
65 Dan Road, Canton, Massachusetts 02021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter P. Phildius and Douglas W. Scott as
Proxies, each with the power to appoint his substitute and hereby authorizes
them to represent and to vote, as designated below and on the reverse hereof,
all shares of common stock of Avitar, Inc. ("Avitar") or shares of Series B
Preferred Stock of Avitar held of record by the undersigned on May 1, 2000 at
the annual meeting of stockholders of Avitar to be held on June 14, 2000 or any
adjournments thereof.
The undersigned hereby revokes any proxies heretofore given to vote said
shares.
The undersigned hereby acknowledges receipt of Avitar's Annual Report for
1999 and of the Notice of Annual Meeting of Stockholders and attached Proxy
Statement dated May 12, 2000.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposals 1 and 2.
Please sign exactly as your name appears to the left
hereof. When signing as corporate officer, partner,
attorney, administrator, trustee or guardian, please give
your full title as such.
Dated , 2000
Authorized Signature
Title
Please mark boxes on reverse hereof in blue or black ink. Please date, sign
and return this Proxy Card promptly using the enclosed envelope.
1. Election of Directors. For all nominees Withhold Authority
listed below (except as to vote for all nominees
marked to the below [ _]
contrary listed
below) [ _]
(Instruction: To withhold authority to vote for any individual nominee strike a
line through the nominee's name below.)
Peter P. Phildius Douglas W. Scott Neil R.Gordon
James Groth Charles R. McCarthy, Jr.
2. To ratify the appointment of BDO Seidman LLP as independent public
accountants for Avitar for the fiscal year ending September 30, 2000.
For Against Abstain__________
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