SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Avitar, Inc. (File No. 0-20316)
- - ------------------------------------------------------------------------------
(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:
AVITAR, INC.
65 Dan Road
Canton, Massachusetts 02021
May 21, 2001
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 27, 2001 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) a Board of
Directors' proposal to increase the number of authorized shares of Avitar's
Common Stock from 75,000,000 to 100,000,000; (3) a Board of Directors' proposal
to implement an Employee Stock Purchase Plan; (4) the re-appointment of BDO
Seidman, LLP as Avitar's Auditors for the fiscal year ending September 30, 2001;
and (5) 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 27, 2001.
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 27, 2001 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 Board of Directors' proposal to increase the
number of authorized shares of Avitar's Common Stock from 75,000,000 to
100,000,000;
(3) To consider and vote upon a Board of Directors' proposal to implement an
Employee Stock Purchase Plan;
(4) To consider and vote upon a proposal to ratify the selection of BDO
Seidman, LLP as Avitar's independent auditors for the fiscal year ending
September 30, 2001;
(5) 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 15,
2001 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 21, 2001
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 27, 2001
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 21, 2001. 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 15, 2001 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 34,665,840
27
shares of Common Stock and 2,162,036 shares of Preferred Stock, of which
1,967,155 were shares of Series B and C Preferred Stock and 141,333 were shares
of Series D Preferred Stock. Stockholders are entitled to one vote for each
share of Common Stock (including the ten shares of Common Stock underlying each
share of Series D Preferred Stock) and each share of Series B and C Preferred
Stock on the election of members of the Board of Directors; the Board of
Directors' proposal to increase the authorized shares of Common Stock of the
Company from 75,000,000 to 100,000,000; the Board of Directors' proposal to
implement an Employee Stock Purchase Plan; ratification of the re-appointment of
the 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 15, 2001, the directors and executive officers of Avitar together
with their respective affiliates, held 4,785,738 shares of Common Stock and
Series B and C Preferred Stock, representing 12.6 % 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,
for the increase in authorized shares, for the Employee Stock Purchase Plan 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
21, 2001 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 71 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 54 President and Chief Operating Officer/Director
Neil R. Gordon (1)(2) 53 Director
James Groth (1)(2) 62 Director
Charles R. McCarthy, Jr. 62 Director
(1)(2)
- ------------------------------
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 Interactive Technology.Com, Limited. 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 30 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 4 meetings during the fiscal year ended September 30, 2000.
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
2000, each Board member attended 100% of the aggregate number of meetings of the
Board and the Committee of the Board on which he served.
AUDIT COMMITTEE. 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. Management has primary responsibility for financial
statements and the reporting process, including the systems of internal
controls, and has represented to the Audit Committee that Avitar's 2000
consolidated financial statements are in accordance with generally accepted
accounting principles. The Audit Committee, comprised of Mr. Gordon, Mr. Groth
and Mr. McCarthy, held 2 telephone meetings in fiscal year 2000.
AUDIT COMMITTEE REPORT
In connection with the fiscal 2000 audit, the Audit Committee has:
- reviewed and discussed with management Avitar's audited consolidated
financial statements to be included in our annual report on Form
10-KSB for the year ended September 30, 2000,
- discussed with BDO Seidman, LLP the matters required to be discussed
by Statement of Accounting Standards No. 61,
- discussed with BDO Seidman, LLP whether various other services
performed for Avitar during 2000, primarily internal audit and
consulting services, were compatible with BDO Seidman, LLP maintaining
its independence, and
- received from and discussed with BDO Seidman, LLP the written
disclosures and the letter from BDO Seidman, LLP required by
Independence Standards Board Standard No. 1 and discussed with BDO
Seidman, LLP independence.
Based on the review and the discussions described above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in our annual report on Form 10-KSB for the
year ended September 30, 2000 for filing with the Securities and Exchange
Commission.
The Board of Directors has approved a written charter, a copy of which is
attached to the Proxy Statement as Annex A. Two members of the Audit Committee
have been determined to be independent in accordance with the requirements of
Section 121(A) of the American Stock Exchange listing standards.
Fiscal 2000 Audit Firm Fee Summary. During fiscal year 2000, Avitar
retained its principal auditor, BDO Seidman, LLP to provide services in the
following categories and amounts:
Audit Fees.......................................................... $73,662
Financial Information System Design and
Implementation Fees.......................................... $22,154
All Other Fees........................................................$30,510
The Audit Committee has considered whether the provision of non-audit
services by the Company's principal auditor was compatible with maintaining
auditor independence and has determined such services were not incompatible
with maintaining auditor independence.
THE AUDIT COMMITTEE
Neil R. Gordon
James Groth
Charles R. McCarthy, Jr.
The Audit Committee Report shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934 (together, the "Acts"), except to the extent Avitar specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION 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, Mr. Groth and Mr. McCarthy,
held 1 meeting in fiscal year 2000.
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 $0.25 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 $0.25 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. In March 2001, the non-management directors were granted options
to purchase 15,000 shares of the Common Stock at an exercise price of $1.08 per
share. This grant represented the options due to these Directors for 2001 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 15, 2001 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;
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 %
- ---------------------------------------- --------- ------
Peter P. Phildius(2)(3)(5)(14) 4,437,251 12.3
Douglas W. Scott(2)(4)(5)(15) 3,169,640 8.8
Phildius, Kenyon & Scott("PK&S")(2)(5) 1,681,735 4.8
James Groth(2)(6)(9) 184,699 *
Neil R.Gordon(2)(7) 289,333 *
Charles R. McCarthy(2)(10) 163,036 *
GIN99 LLC (11) 9,591,110 21.6
David Brown (12) 5,146,976 13.3
Alan Aker (13) 1,850,910 5.1
All directors and executive officers
as a group(3)(4)(5)(6)(7)(8)(9)
(10)(14)(15)(16) 8,099,490 20.5
* 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 1,089,496 shares of the Common Stock and preferred stock convertible
into 68,490 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 774,504 shares of the Common Stock and preferred stock convertible into
68,490 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, options to
purchase 60,000 shares of the Common Stock, and preferred stock convertible into
253,840 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 110,000
shares of the Common Stock.
(7) Includes 54,833 shares of the Common Stock, of which 47,087 shares are owned
by an affiliate of Mr. Gordon, warrants to purchase 140,000 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 95,000 shares of the
Common Stock.
(8) Includes 924,647 shares of the Common Stock, and options to purchase 240,000
shares of the Common Stock beneficially owned by Jay C. Leatherman, Jr. 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 75,375 shares of the Common Stock, preferred stock convertible
into 72,660 shares of the Common Stock and options to purchase 15,000 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 preferred stock convertible into
7,391,110 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 1,255,346 shares of the Common Stock, preferred stock
convertible into 3,766,630 shares of the Common Stock and warrants to purchase
125,000 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 859,910 shares of
the Common Stock and warrants to purchase 1,000,000 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 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 ("SEC"). 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 2000, 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 3 transactions
was filed late by James Groth. One report (Form 4) covering 3 transactions was
filed late by Charles McCarthy. One report (Form 4) covering 4 transactions was
filed late by Neil Gordon.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PK&S, a 3.4% 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
2000, 1999 and 1998 totaled $460,053, $387,310 and $335,137 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.
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. In March 2001, the Company entered into a
new consulting agreement with N.R. Gordon & Company, Inc. whereby N.R. Gordon
and Company, Inc. provides financial consulting services to Avitar. Under this
agreement, N.R. Gordon & Company, Inc. received warrants to purchase 40,000
shares of Common Stock for $.79 per share until February 28, 2006 and is paid
$100.00 per hour for all services performed.
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 April 30, 2001, along with certain
biographical information (based solely on information supplied by them), are as
follows:
Name Age Title
Peter P. Phildius 71 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 54 President and Chief Operating Officer
Jay C. Leatherman Jr. 57 Vice President, Chief Financial Officer and
Secretary
Douglas Lewis 51 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.
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, Chief Operating Officer and
other executive officers for fiscal year 2000 and, to the extent required by
applicable Commission rules, the preceding two fiscal years. All of the
compensation in the table below for the Chief Executive Officer and Chief
Operating Officer 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 2000 $170,833 0 0
(Chairman of the Board/ 1999 $150,000 0 1,450,000 (2)
Chief Executive Officer) 1998 $150,000 0 100,000 (3)
Douglas W. Scott 2000 $162,500 0 0
(President/ 1999 $150,000 0 850,000 (2)
Chief Operating Officer) 1998 $150,000 0 100,000 (3)
Jay C. Leatherman, Jr. 2000 $108,239 0 0
(Chief Financial Officer) 1999 (4) 0 437,500 (2)
1998 (4) 0 50,000 (3)
Carl Good 2000 $117,981 0 0
(Vice President of 1999 (4) 0 390,000 (2)
Research & Development) 1998 (4) 0 50,000 (3)
Douglas Lewis 2000 $126,000 0 0
(Vice President/President 1999 (4) 0 250,000 (5)
of USDTL) 1998 Not an officer or employee of the Company
(1) Does not include amounts reimbursed for business-related expenses incurred
by the executive officers on behalf of the Company.
(2) Reflects additional stock options granted to executive officers by the
Company's Board of Directors in January 1999.
(3) Reflects additional stock options granted to executive officers by the
Company's Board of Directors in February 1998.
(4) Compensation did not equal or exceed $100,000.
(5) Reflects stock options granted to executive officer by the Board of
Directors as part of the acquisition of USDTL in July 1999.
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. No stock options
were granted to the executive officers during fiscal year 2000
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES. No stock
options or stock appreciation rights were exercised by the executive officers in
fiscal year 2000.
As of September 30, 2000, the executive officers held options as follows,
all of which are in the money:
Options Value of Options
Total Options Exercisable Exercisable Not Exercisable
Peter Phildius 1,800,000 666,000 $1,801,480 $3,010,770
Douglas Scott 1,200,000 606,000 1,642,180 1,577,070
Jay Leatherman 540,000 146,250 398,806 1,045,406
Carl Good 540,000 189,000 533,545 931,905
Douglas Lewis 250,000 5,000 41,750 375,750
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 (currently $200,000 for Mr. Phildius and $180,000 for Mr. Scott) 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, C and D 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
APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION TO EFFECT AN INCREASE OF
AUTHORIZED SHARES OF COMMON STOCK FROM 75,000,000 TO 100,000,000
The Board of Directors has unanimously approved, and is hereby soliciting
stockholder approval of, an amendment to the Certificate of Incorporation (the
"Amendment"), effecting an increase in the number of authorized shares of Common
Stock from 75,000,000 to 100,000,000.
The Certificate of Incorporation now provides for 75,000,000 authorized
shares of Common Stock, par value $.01 per share, of which 34,665,840 were
issued and outstanding as of the Record Date; and 5,000,000 shares of Preferred
Stock, par value $.01, of which 2,162,036 were issued and outstanding as of the
Record Date. The Amendment would increase the number of authorized shares of
Common Stock to 100,000,000.
REASONS FOR THE INCREASE
The outstanding shares of Preferred Stock are convertible in the aggregate
into approximately 18 million shares of Common Stock. In addition, holders of
outstanding warrants are entitled to purchase approximately 9 million shares of
Common Stock at prices ranging from $0.225 to $6.05. Further, approximately 3
million shares will be reserved for stocks and warrants to be issued for
financial consulting services. Finally, there are outstanding employee stock
options (approximately 25% vested) to purchase approximately 10 million shares
of Common Stock at prices ranging primarily from $0.20 to $0.345 and an
additional 3 million shares have been reserved for future employee stock options
and an additional 1 million shares of Common Stock are to be reserved for the
proposed 2001 Employee Stock Purchase Plan.
The majority of the proposed increase to 100,000,000 authorized shares of
Common Stock will be shares reserved for the conversion of the outstanding
Preferred Stock, exercises of the outstanding warrants and options, future
financings to grow the business and completion of acquisitions as described
below.
Proceeds from the recently completed private placements of Common Stock and
Series D Preferred Stock ($4 million) and proceeds from any exercises of
outstanding warrants and options are anticipated to be used primarily to provide
the necessary working capital and capital equipment funding to operate Avitar
and expand its business. For the balance of fiscal year 2001, Avitar's cash
requirements are expected to include primarily the funding of operating capital
to grow Avitar's rapid diagnostic testing and other lines of business, the
funding of operating losses, the payment of outstanding accounts payable and the
repayment of certain notes payable.
The Board of Directors determined to increase the authorized Common Stock
to 100,000,000 shares to ensure that sufficient shares of Common Stock were
authorized and available to cover then outstanding convertible Preferred Stock,
warrants and options and any additional shares of Common or Preferred Stock and
warrants or options which it may determine to issue or grant in the future.
Avitar is actively exploring possible acquisitions, which would likely involve
the issuance of some or all of the additional authorized shares of Common Stock
as all or a portion of the purchase prices of any acquisitions of companies,
businesses and/or assets it may effect in the future. In such an event, Avitar's
stockholders would not need to be solicited for any specific acquisitions if
they approve the current proposal to increase Avitar's authorized Common Stock.
Accordingly, Avitar's stockholders' only opportunity to specifically vote on and
approve any such acquisitions could be their vote on the current proposal to
increase Avitar's authorized Common Stock. Except as disclosed above, Avitar
does not believe that the increase in its authorized Common Stock will have any
significant effects on the stockholders of Avitar, nor does it believe that such
increase will have any significant benefits to the officers, directors or
affiliates of Avitar.
In order to effect the increase, the stockholders are being asked to
approve the Amendment. The Board of Directors believes that the increase is in
the best interests of Avitar and has unanimously approved the increase. The
Board of Directors may make any and all changes to the Amendment that it deems
necessary in order to file the Amendment with the Delaware Secretary of State
and give effect to the increase.
NO DISSENTERS' RIGHTS
Dissenting stockholders have no appraisal rights under Delaware law or
under the Company's Certificate of Incorporation or Bylaws in connection with
the increase.
REQUIRED VOTE
Pursuant to the Delaware General Corporation Law, the approval of the
Amendment to Avitar's Certificate of Incorporation to provide for the increase
in number of authorized shares of Common Stock requires the affirmative vote of
the holders of a majority of the outstanding shares of Avitar Common Stock and
Series B, C and D Preferred Stock.
BOARD RECOMMENDATION
The Board of Directors of Avitar unanimously recommends a vote FOR the
Amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock from 75,000,000 to 100,000,000.
PROPOSAL NO. 3
APPROVAL OF THE BOARD OF DIRECTORS PROPOSAL TO ESTABLISH AND IMPLEMENT THE 2001
EMPLOYEE STOCK PURCHASE PLAN.
At the meeting, the shareholders will be requested to approve the 2001
Employee Stock Purchase Plan (the "Purchase Plan"). The Board recommends
approval of the Purchase Plan in order to allow the Company to offer its
employees the ability to invest in the Company's common stock at an attractive
price. A copy of the Purchase Plan may be obtained upon request to the Company's
Investor Relations Department at the address listed on the cover.
DESCRIPTION OF THE PLAN
The Purchase Plan, if approved by the shareholders, will allow all
employees working more than 20 hours a week and more than five months a year to
authorize payroll deductions at any non-fractional percentage rate between and
including 1% and 10% of base pay (including overtime or bonuses) to be applied
toward the purchase of the Company's common stock. There will be 1 million
shares of common stock reserved for issuance under the Purchase Plan. As of
April 30, 2001, there were approximately 100 employees eligible to participate
in the Purchase Plan. The Purchase Plan, which is to be administered by the
Board, will terminate on June 30, 2007, or earlier at the discretion of the
Board or in the event all shares reserved under the plan have been purchased.
Separate six-month offerings commence on January 1 and July 1 of each year.
No employee may purchase more than 8,000 shares of stock during any single
offering.
An employee must authorize a payroll deduction before the start of an
offering in order to participate in that offering. On the last business day of
the offering, the employee will be deemed to have exercised the option to
purchase as many shares as the employee's payroll deduction will allow, at the
option price. The option price is 85% of the lesser of (i) the fair market value
of the stock on the first business day of the offering, or (ii) the fair market
value of the stock on the last business day of the offering. The closing price
of the Company's common stock as reported on the American Stock Exchange on May
9, 2001 was $0.89.
An employee may withdraw from an offering at any time. Upon withdrawal, the
amount in the employee's account will be refunded. An employee who has withdrawn
from an offering may not again participate in the Purchase Plan until the next
offering commences.
No employee shall be permitted to purchase any shares under the Purchase
Plan if such employee, immediately after such purchase, owns shares possessing
five percent or more of the total combined voting power or value of all classes
of stock of the Company. The fair market value of all shares purchased by an
employee under the Purchase Plan during any calendar year may not exceed
$25,000.
Because the purchase of shares under the Purchase Plan is discretionary
with all eligible employees, it would not be meaningful to include information
as to the amount of shares which would have been distributable during fiscal
2000 to all employees, or to groups of employees, or to any particular employee
of the Company had the Purchase Plan been in effect during the year.
The Board of Directors may at any time amend or terminate the Purchase
Plan, provided that no employee's existing rights under any offering already
commenced may be adversely affected thereby. No amendment may be made to the
Purchase Plan without prior approval of the shareholders of the Company if such
amendment would increase the number of shares reserved thereunder, materially
modify the eligibility requirements, or materially increase the benefits that
may accrue to participants.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PURCHASE PLAN
The federal income tax consequences of an employee's purchases under the
Purchase Plan will vary. The following discussion is only a summary of the
general federal income tax rules applicable to the Purchase Plan. Employees
should consult their own tax advisors since a taxpayer's particular situation
may be such that some variation of the rules described below will apply.
The Purchase Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Section 421 and 423
of the Code. Under those provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. However, a participant
may become liable for tax upon dispositions of shares acquired under the
Purchase Plan (or if he or she dies holding such shares), and the tax
consequences will depend on how long a participant has held the shares prior to
disposition.
If the shares are disposed of (a) at least two years after the date of the
beginning of the offering period and (b) at least one year after the stock is
purchased in accordance with the Purchase Plan (or if the employee dies while
holding the shares), the following tax consequences will apply.
In this event, the lesser of (a) the excess of fair market value of the
shares at the time of such disposition over the purchase price of the shares
(the "option price"), or (b) the excess of the fair market value of the shares
at the time the option was granted over the option price (which option price
will be computed as of the offering date) will be treated as ordinary income to
the participant. Any further gain upon disposition generally will be taxed at
long-term capital gain rates. If the shares are sold and the sales price is less
than the option price, there is no ordinary income and the participant has a
long-term capital loss equal to the difference. If an employee holds the shares
for this period, no deduction in respect of the disposition of such shares will
be allowed to the Company.
If the shares are sold or disposed of (including by way of gift) before the
expiration of either the two year or the one year holding periods described
above, the following tax consequences will apply.
In this event, the amount by which the fair market value of the shares on
the date the option is exercised (which is the last business day of the offering
period and which is hereafter referred to as the "termination date") exceeds the
option price will be treated as ordinary income to the participant. This excess
will constitute ordinary income in the year of sale or other disposition even if
no gain is realized on the sale or a gratuitous transfer of the shares is made.
The balance of any gain will be treated as capital gain and will qualify for
long-term capital gain treatment if the shares have been held for more than one
year following the exercise of the option. Even if the shares are sold for less
than their fair market value on the termination date, the same amount of
ordinary income is attributed to a participant and a capital loss is allowed
equal to the difference between the sales price and the value of such shares on
such termination date. The Company, in the event of an early disposition, will
be allowed a deduction for federal income tax purposes equal to the ordinary
income realized by the disposing employee.
REQUIRED VOTE
Approval of the Board of Directors' proposal to establish and implement the
Purchase Plan requires the affirmative vote of the holders of a majority of the
Avitar Common Stock and Series B, C and D 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 approval
of the 2001 Employee Stock Purchase Plan.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of Avitar selected BDO Seidman LLP as auditors for
the fiscal year ending September 30, 2001, 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, C and D
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,
2001.
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 Statement properly come before the meeting.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be included in the proxy statement and form of
proxy relating to the 2002 Annual Meeting of Avitar Stockholders must be
received by the close of business on March 1, 2002 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.
APPENDIX A
AVITAR, INC.
AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the board of directors known as the audit
committee. The audit committee shall be comprised of directors, the majority of
whom are independent (as defined in the American Stock Exchange Listing
Standards) of the management of the corporation and are free of any relationship
that, in the opinion of the board of directors, would interfere with their
exercise of independent judgment as a committee member.
Statement of Policy
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibilities to the shareholders, potential shareholders
and investment community relating to corporate accounting, reporting practices
of the corporation, and the quality and integrity of the financial reports of
the corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
independent auditors and the financial management of the corporation.
Responsibilities
The audit committee believes its policies and procedures should remain flexible,
in order to best react to changing conditions and ensure to the directors and
shareholders that the accounting and reporting practices of the corporation are
in accordance with all requirements and are of the highest quality.
In carrying out its responsibilities, the audit committee will:
o Review and make a recommendation to the directors regarding the independent
auditors to be selected to audit the financial statements of the
corporation and its subsidiaries.
o Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comment or recommendations of the
independent auditors.
o Review with the independent auditors and the corporation's internal
financial and accounting personnel the adequacy and effectiveness of the
accounting and financial controls procedures of the corporation, and elicit
any recommendations for the improvement of such internal control procedures
or particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions or procedures that
might be deemed illegal or otherwise improper.
o Review the audited financial statements to be included in the annual report
to shareholders and the annual report filed with Securities and Exchange
Commission ("SEC") on Form 10KSB with management and the independent
auditors to determine that the independent auditors are satisfied with the
disclosure and content of the financial statements to be presented to the
shareholders and filed with the SEC. Make a recommendation to the board of
directors regarding the inclusion of the audited financial statements in
such annual reports. Any changes in accounting principles should be
reviewed.
o Review the financial information included in the corporations' Quarterly
Reports on Form 10QSB prior to the corporation filing such reports with
Securities and Exchange Commission.
o Provide sufficient opportunity for the independent auditors to meet with
members of the audit committee without members of management present. Among
the items to be discussed in these meetings are the independent auditors'
evaluation of the corporation's financial and accounting personnel, and the
cooperation that the independent auditors received during the course of the
audit.
o Review the matters discussed at each committee meeting with the board of
directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
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, C
or D Preferred Stock of Avitar held of record by the undersigned on May 15, 2001
at the annual meeting of stockholders of Avitar to be held on June 27, 2001 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
2000 and of the Notice of Annual Meeting of Stockholders and attached Proxy
Statement dated May 21, 2001.
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, 2, 3 and 4. 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 , 2001
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 contrary below [ _]
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 approve the Board of Directors' proposal to increase the number of
authorized shares of Avitar's Common Stock from 75,000,000 to 100,000,000:
For Against Abstain__________
---------------- ----------------
3. To approve the Board of Directors' proposal to establish and implement the
2001 Employee Stock Purchase Agreement and the reservation of 1 million shares
of Common Stock thereunder:
For Against Abstain__________
---------------- ----------------
4. 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__________
---------------- ----------------