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
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Avitar, Inc. (File No. 0-20316)(Name of Registrant as Specified In Its Charter)
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(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:
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(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
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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:
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(4) Date Filed:
AVITAR, INC.
65 Dan Road
Canton, Massachusetts 02021
May 13, 2002
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 17, 2002 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) the re-appointment of BDO
Seidman, LLP as Avitar's Auditors for the fiscal year ending September 30, 2002;
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 17, 2002.
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 17, 2002 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
Seidman, LLP as Avitar's independent auditors for the fiscal year ending
September 30, 2002;
(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, 2002
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 13, 2002
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.
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 2002
------------------------------------
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 13, 2002. 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, 2002 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 44,603,647 shares of Common Stock and 1,729,929 shares
of Preferred Stock, of which 1,583,048 were shares of Series B and C Preferred
Stock and 93,333 were shares of Series D Preferred Stock. Stockholders are
entitled to one vote for each share of Common Stock (including 10 shares
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;
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 1, 2002, the directors and executive officers of Avitar together
with their respective affiliates, held 9,002,160 shares of Common Stock and
Series B and C Preferred Stock, representing 18.4 % 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
13, 2002 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 72 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 55 President and Chief Operating Officer/Director
Neil R. Gordon (1)(2) 54 Director
James Groth (1)(2) 63 Director
Charles R. McCarthy, Jr. 63 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 Nighthawk and AmTech 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 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 any time 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, 2001.
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
2001, each Board member attended at least 75% 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, at a
minimum 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 2001
consolidated financial statements are in accordance with generally accepted
accounting principles. The Audit Committee, comprised of Mr. Gordon, Mr. Groth
and Mr. McCarthy, held 1 telephone meeting in fiscal year 2001. In addition, the
Audit Committee reviewed and approved the financial statements that were
included in each of the quarterly reports on Form 10-QSB during the year ended
September 30, 2001.
AUDIT COMMITTEE REPORT
In connection with the fiscal 2001 audit, the Audit Committee has:
- reviewed and discussed with management Avitar's audited consolidated
financial statements included in our annual report on Form 10-KSB for the year
ended September 30, 2001,
- discussed with BDO Seidman, LLP the matters required to be discussed by
Statement of Auditing Standards No. 61,
- discussed with BDO Seidman, LLP whether various other services performed
for Avitar during 2001, 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 the Independence Standards
Board Standard No. 1 and discussed with BDO Seidman, LLP its 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, 2001 for filing with the Securities and Exchange
Commission.
The Board of Directors has approved a written charter, a copy of which was
attached to the 2001 Proxy Statement. 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 2001Audit Firm Fee Summary. During fiscal year 2001, Avitar retained
its principal auditor, BDO Seidman, LLP to provide services in the following
categories and amounts:
Audit Fees, including review of quarterly 10-QSB filings................$70,650
All Other Fees..........................................................$12,465
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 2001.
DIRECTOR COMPENSATION
During Fiscal 2001, the Company compensated its non-management directors
$500 for each Board and Committee meeting, which they attend plus either a
travel fee of $250 or reasonable out-of-pocket travel expenses if they must
travel outside of the area to attend the meeting. On September 25, 2001, the
Company approved a plan whereby its non-management directors will receive a
$5,000 annual retainer, $1,000 for each board meeting attended and $500 for each
committee meeting attended. In addition, this plan provides for each
non-management director to be granted options covering 100,000 shares of the
Company's common stock upon initial election to the Board and 30,000 shares of
the Company's common stock for each year which he/she is selected to serve as a
director. Such options will vest equally over a three-year period and will
expire 10 years from the date of grant. Under the Directors' Plan approved by
the Stockholders in May 1995 (the "1995 Directors' Plan"), non-management
directors received option grants covering 15,000 shares of the Company's common
stock on March 31, 2001. Such options have an exercise price of $.78 per share
and will expire in March 2011. Under the plan approved by the Company on
September 25, 2001, non-management directors received option grants covering
182,500 shares of the Company's common stock on September 25, 2001. These
options have an exercise price of $.94 per share, vest over three years and will
expire in September 2011. In the future, no options will be granted to the
non-management directors under the 1995 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, 2002 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)(10)(14) 4,647,291 10.0
Douglas W. Scott (2)(4)(10)(15) 3,291,680 7.2
Phildius, Kenyon & Scott("PK&S") (2)(10) 1,713,765 3.8
Jay C. Leatherman, Jr.(2)(5) 236,880 *
Douglas Lewis (2)(6)(16) 994,017 2.2
James Groth (2)(7)(17) 184,699 *
Neil R.Gordon (2)(8) 275,597 *
Charles R. McCarthy (2)(9) 171,315 *
GIN99 LLC (11) 6,656,140 13.1
David Brown (12) 7,717,812 15.1
Alan Aker (13) 3,692,814 7.9
All directors and executive officers
as a group (3)(4)(5)(6)(7)(8)(9)(10)(14)(15)(16)
(17) 8,087,714 16.9
* 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 Company's 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 Company's Common Stock, options and
warrants to purchase 1,265,896 shares of the Company's Common Stock and
preferred stock convertible into 70,100 shares of the Company's Common Stock.
Also includes the securities of the Company beneficially owned by PK&S as
described below in Note 10.
(4) Includes 644,911 shares of the Company's Common Stock, options and warrants
to purchase 862,904 shares of the Company's Common Stock and preferred stock
convertible into 70,100 shares of the Company's Common Stock. Also includes the
securities of the Company beneficially owned by PK&S as described below in Note
10.
(5) Includes 5,630 shares of the Company's Common Stock, and options and
warrants to purchase 231,250 shares of the Company's Common Stock.
(6) Includes 919,017 shares of the Company's Common Stock, and options and
warrants to purchase 75,000 shares of the Company's Common Stock.
(7) Includes 74,699 shares of the Company's Common Stock and options to purchase
110,000 shares of the Company's Common Stock.
(8) Includes 90,597 shares of the Company's Common Stock, warrants to purchase
90,000 shares of the Company's Common Stock granted to such director under a
consulting agreement to provide services to the Company and options to purchase
95,000 shares of the Company's Common Stock.
(9) Includes 75,375 shares of the Common Stock, preferred stock convertible into
80,940 shares of the Common Stock and options to purchase 15,000 shares of the
Common Stock.
(10) Represents ownership of 1,367,895 shares of the Company's Common Stock,
options and warrants to purchase 60,000 shares of the Company's Common Stock and
preferred stock convertible into 285,870 shares of the Company's Common Stock.
PK&S is a partnership of which Mr. Phildius and Mr. Scott are general partners.
(11) The address for such entity is c/o Clifford Chance, Rogers & Wells LLP, 200
Park Avenue, New York, NY 10166. Represents 333,210 shares of the Company's
Common Stock and preferred stock convertible into 6,322,930.
(12) The business address for such person is 4101 Evans Avenue, Fort Meyers, FL
33901. Represents 1,255,346 shares of the Company's Common Stock, preferred
stock convertible into 5,087,466 shares of the Common Stock and warrants to
purchase 1,375,000 shares of the Common Stock.
(13) The business address for such person is 1445 Northwest Boca Raton, Boca
Raton, FL 33432. Represents ownership of 1,347,014 shares of the Company's
common stock, preferred stock convertible into 895,800 shares of the Common
Stock and warrants to purchase 1,450,000 shares of the Common Stock.
(14) Does not include 33,600 shares of the Common Stock owned by Mr. Phildius'
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 1,036,868 shares of the Common Stock owned by Mr. Lewis'
wife, all of which he disclaims beneficial ownership.
(17) Does not include 10,929 shares of the Company's Common Stock owned by a
trust established for Mr. Groth's children, 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 2001, 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):
o Two reports (Form 4) covering 2 transactions were filed late by Neil
Gordon.
o Two reports (Form 4) covering 2 transactions were filed late by Charles
McCarthy.
o Two reports (Form 4) covering 2 transactions were filed late by James
Groth.
o One report (Form 4) covering 1 transaction was filed late by Peter
Phildius.
o One report (Form 4) covering 1 transaction was filed late by Douglas Scott.
o Two reports (Form 4) covering 2 transactions were filed late by Jay
Leatherman.
o One report (Form 4) covering 1 transaction was filed late by GIN99, LLC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PK&S, a 3.8 % beneficial owner of the Company, provided consulting services
to the Company from September 1989 to May 1995. On May 28, 1992, the Company
entered into a written consulting agreement with PK&S, which reflected the
provisions of a previous oral agreement approved by the Company's Board of
Directors in October 1990. Pursuant to its arrangement with the Company, PK&S
provided the services of each of Messrs. Phildius and Scott to the Company for
approximately 20 hours per week.
On May 19, 1995, the Company's Consulting Agreement ended and was replaced
by the Employment Agreements with Messrs. Phildius and Scott (See "Employment
Agreements"). As requested by Messrs. Phildius and Scott and approved by the
Company's Board of Directors, the salary and benefits provided under the
Employment Agreements will be paid directly to PK&S. Under the terms of the
current employment agreements with Peter Phildius and Douglas Scott described
above, the Company pays their salaries and related expenses directly to PK&S.
The aggregate of salaries, fringe benefits and reimbursement of expenses paid to
PK&S by the Company on behalf of Messrs. Phildius and Scott for fiscal years
2001 and 2000 totaled $467,344 and $460,053 respectively.
In October 1996, the Company entered into a consulting agreement with N.R.
Gordon & Company, Inc. Neil Gordon, a member of the Company's Board of
Directors, is the President of N.R. Gordon and 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 is paid $100.00 per hour for all services performed. In addition, N.R.
Gordon & Company, Inc. was entitled to receive commissions for certain capital
raising services. During Fiscal 1998, the Company canceled the 50,000 warrants
granted to N.R. Gordon & Company in 1996 and replaced them with 100,000 warrants
(of which 50,000 where exercised in October 2001 and the remaining 50,000 do not
expire until 2003) to purchase the Company's Common Stock for $.25 per share. No
services were provided to the Company under this Agreement during Fiscal 1999
and Fiscal 2000. In March 2001, the Company entered into a new consulting
agreement with N.R. Gordon & Company, Inc. for financial consulting services.
Under this new agreement, N.R. Gordon and Company, Inc. received warrants to
purchase 40,000 shares of the Company's common stock at an exercise price of
$.79 per share until February 2006 and it is to be paid $100.00 per hour for
services rendered to the Company.
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, 2002, along with
certain biographical information (based solely on information supplied by them),
are as follows:
Name Age Title
Peter P. Phildius 72 Chairman of the Board/Chief Executive Officer
Douglas W. Scott 55 President and Chief Operating Officer
Jay C. Leatherman Jr. 58 Vice President, Chief Financial Officer
and Secretary
Douglas Lewis 58 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 2001 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 2001 $200,000 0 252,000 (2)
(Chairman of the Board/ 2000 $170,833 0 0
Chief Executive Officer) 1999 $150,000 0 1,450,000 (3)
Douglas W. Scott 2001 $180,000 0 132,000 (2)
(President/ 2000 $162,500 0 0
Chief Operating Officer) 1999 $150,000 0 850,000 (3)
Jay C. Leatherman, Jr. 2001 $125,000 0 87,500(2)
(Chief Financial Officer) 2000 $108,239 0 0
1999 (4) 0 437,500 (3)
Douglas Lewis 2001 $126,000 0 0
(Vice President/President 2000 $126,000 0 0
of USDTL) 1999 (4) 0 250,000 (5)
(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 September 2001.
(3) Reflects additional stock options granted to executive officers by the
Company's Board of Directors in January 1999.
(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. On June 27, 2001, the Outside Directors
of the Company's Board of Directors granted options to purchase the Company's
common stock in the amount of 252,000 (representing 8.9% of total options
granted in Fiscal 2001) to Peter Phildius, 132,000 (representing 4.7% of total
options granted in Fiscal 2001) to Douglas Scott and 87,500 (representing 3.1%
of total options granted in Fiscal 2001) to Jay Leatherman. Such options, which
have an exercise price of $.66 per share, will become exercisable at the rate of
20% per year for five years and will expire on June 27, 2011.
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 2001.
As of September 30, 2001, the executive officers held options as follows, all of
which were in the money:
Options Value of Options
Total Options Exercisable Exercisable Not Exercisable
Peter Phildius 2,052,000 792,000 $ 720,720 $1,146,600
Douglas Scott 1,332,000 672,000 611,520 600,600
Jay Leatherman 607,500 170,000 154,700 398,125
Douglas Lewis 250,000 50,000 45,500 182,000
EMPLOYMENT AGREEMENTS. Messrs. Phildius and Scott are covered by Employment
Agreements (the "Employment Agreements") which commenced on May 19, 1995.
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 ($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 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) or alternative net income objectives established
by the Board of Directors.
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
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, 2002, 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, LLP as auditors for the fiscal year ending
September 30, 2002.
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 2003 Annual Meeting of Avitar Stockholders must be
received by the close of business on March 1, 2003 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, C
or D Preferred Stock of Avitar held of record by the undersigned on May 1, 2002
at the annual meeting of stockholders of Avitar to be held on June 17, 2002 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
2001 and of the Notice of Annual Meeting of Stockholders and attached Proxy
Statement dated May 13, 2002.
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 , 2002
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 listed below (except as marked to the contrary
listed below) [ _ ]
Withhold Authority to vote for all nominees marked to the contrary 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, 2002.
For Against Abstain
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