-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EJVbxxkC262ZOou84zHMJScsa+WswhlsBNg+1Ct4c6r117IKX0wRzIzmOdebi4Ya etqu8q+m902JxemJSxeweA== 0000102198-96-000015.txt : 19961121 0000102198-96-000015.hdr.sgml : 19961121 ACCESSION NUMBER: 0000102198-96-000015 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961220 FILED AS OF DATE: 19961119 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPETITIVE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000102198 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 362664428 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08696 FILM NUMBER: 96668846 BUSINESS ADDRESS: STREET 1: 1960 BRONSON ROAD STREET 2: P.O. BOX 340 CITY: FAIRFIELD STATE: CT ZIP: 06430 BUSINESS PHONE: 203-255-6044 MAIL ADDRESS: STREET 1: 1960 BRONSON ROAD STREET 2: P.O. BOX 340 CITY: FAIRFIELD STATE: CT ZIP: 06430 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSITY PATENTS INC DATE OF NAME CHANGE: 19920703 DEF 14A 1 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 Competitive Technologies, Inc. (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: Notes: COMPETITIVE TECHNOLOGIES, INC. 1960 Bronson Road Fairfield, Connecticut 06430 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS to be held on December 20, 1996 To the Stockholders of COMPETITIVE TECHNOLOGIES, INC. Notice is hereby given that the Annual Meeting of Stockholders of COMPETITIVE TECHNOLOGIES, INC. (the "Company") will be held at the Norwalk Inn, 99 East Avenue, Norwalk, Connecticut 06851 on Friday, December 20, 1996 at 9:00 A.M. local time for the following purposes: 1. Electing a Board of Directors to serve until the next annual meeting of stockholders and until their respective successors have been elected and qualified; 2. Considering and acting upon a proposal to approve the 1996 Directors' Stock Participation Plan; and 3. Transacting such other business as may properly come before the meeting or any adjournments thereof. The Board of Directors has fixed the close of business on November 1, 1996 as the record date for determination of the stockholders entitled to notice of and to vote at said meeting and/or adjournments thereof. If you do not expect to be present personally at the meeting, please complete, date, sign and return the accompanying proxy without delay. By Order of the Board of Directors Frank R. McPike, Jr. Secretary November 20, 1996 PROXY STATEMENT COMPETITIVE TECHNOLOGIES, INC. 1960 Bronson Road Fairfield, Connecticut 06430 -------------------------------------- This Proxy Statement is being furnished to stockholders in connection with the solicitation by the Board of Directors of Competitive Technologies, Inc., a Delaware corporation (the "Company"), of proxies in the form enclosed herewith for the Company's annual meeting of stockholders to be held December 20, 1996. Each proxy received will be voted as directed. If no direction is indicated, the proxy will be voted FOR the election of the nominees named below as directors and FOR approval of the 1996 Directors' Stock Participation Plan. Any proxy may be revoked at any time prior to the voting thereof by notifying the Company, there being no formal procedure required. The approximate date on which this Proxy Statement and the form of proxy enclosed herewith are first to be sent or given to the Company's stockholders is intended to be November 20, 1996. Only the holders of record of the Company's 5,905,329 outstanding shares of Common Stock and 2,427 outstanding shares of Preferred Stock at the close of business on November 1, 1996, will be entitled to vote at the meeting. Each share of Common Stock and each share of Preferred Stock is entitled to one vote on each matter to be voted upon. Abstentions will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum but as not voted for purposes of determining the approval of any matters submitted to the stockholders for a vote. Abstentions will have the same effect as negative votes. If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to that matter. ELECTION OF DIRECTORS At the meeting a Board of eight directors is to be elected by plurality vote. Six of the nominees named below are currently directors of the Company, while Messrs. Bigar and Sabin are newly nominated. There is no family relationship between any director or executive officer of the Company or any person nominated by the Company to become a director or executive officer. In the event that any of the nominees for director should be unable to serve, discretionary authority is solicited to vote for the election of other persons. Each director will hold office until the next annual meeting of stockholders and until his successor has been elected and qualified or until his earlier resignation or removal. The Company has no reason to believe that any of the nominees named will not be available for election as directors for their prescribed terms. The following table sets forth information with respect to each nominee for director according to the information furnished the Company by him: Name, Age and Principal Occupation Positions Presently During Past Five Director of Held with Years; Other Public Company Company Directorships Since George C.J. Bigar Private Investor. Not currently 39 a Director Michael G. Bolton Vice President for Advancement September, 53 at Lehigh University. 1994 Bruce E. Langton Retired financial executive; July, 1987 65 prior to August, 1987 Assistant Treasurer of IBM Corporation (manufacturer of data process- ing equipment and systems). Currently consultant in invest- ment management and Director of Institutional Mutual Funds, Bankers Trust Co. H.S. Leahey Director, Industrial Contracts March, 1994 47 and Licensing, Washington University in St. Louis. Frank R. McPike, Jr. Secretary since August, 1989; July, 1988 47, Vice President, Treasurer since July, 1988; Finance, Treasurer Vice President, Finance and and Secretary Chief Financial Officer of the Company since December, 1983. John M. Sabin Vice President-Finance and Not currently 41 Assistant Treasurer, Manor a Director Care, Inc. and Choice Hotels International, Inc. since December, 1993; Vice President- Mergers and Acquisitions, Choice Hotels International, Inc. since June, 1995; Vice President- Corporate Mergers and Acquisitions, Marriott Corporation, 1988 to December, 1993. George M. Stadler President and Chief Executive December, 1993 49, President and Officer of the Company since Chief Executive December, 1993; President and Officer Chief Operating Officer of the Company since September, 1992; President, Competitive Techno- logies of PA, Inc. (a wholly- owned technology transfer sub- sidiary of Lehigh University prior to the sale of 80% of its stock to the Company in February, 1993) since April, 1991. Harry Van Benschoten Retired accounting executive; July, 1987 68 Vice President, Accounting of Newmont Mining Corporation from 1967-1986. Also a Director of Canada Life Insurance Co. of New York, and Trustee of Bankers Trust Company Pyramid and BT Advisor Fund Series. Messrs. McPike, Langton and Van Benschoten (Chairman) are members of the audit committee. Messrs. Bolton (Chairman), Leahey and Stadler are members of the nominating committee. Messrs. Bolton, Langton (Chairman), and Van Benschoten are members of the compensation and stock option committee. The compensation committee also serves as the incentive compensation committee. BENEFICIAL OWNERSHIP OF SHARES The following information is furnished to indicate the beneficial ownership of the Company's Common Stock by each director and nominee, by certain executive officers of the Company, and by each person known to the Company to be the beneficial owner of more than 5% of the Company's outstanding Common Stock. Such information has been furnished to the Company by the indicated owners as of October 1, 1996. Name (and Address if more than 5%) of Beneficial Amount Beneficially Owners Owned (A) Percent (B) Directors and Nominees George C.J. Bigar 37,300 -- Michael G. Bolton 1,294 (C) -- Bruce E. Langton 10,350 -- H.S. Leahey 1,194 -- Frank R. McPike, Jr. 88,597 (D) 1.5% John M. Sabin None -- George M. Stadler 160,006 (E) 2.6% Harry Van Benschoten 7,000 -- All directors and executive officers as a group 305,741 (F) 5.0% Additional 5% Owners Dimensional Fund Advisors, Inc. 312,300 (G) 5.2% 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 (A) Except as indicated in the notes which follow, the designated person or group has sole voting and investment power. (B) Percentages of less than 1% are not shown. (C) Does not include 74,302 shares of Common Stock held by Lehigh University of which Mr. Bolton is a Vice President. Mr. Bolton disclaims beneficial ownership of all the shares held by Lehigh University. (D) Consists of 11,097 shares of Common Stock, plus 77,500 stock options deemed exercised solely for purposes of showing total shares owned by Mr. McPike. Includes 1,559 shares of Common Stock held by Sachem Trust as Trustee under the Company's Employees' Common Stock Retirement Plan, as to which Mr. McPike has shared investment power. Does not include 8,362 shares of Common Stock allocated to Mr. McPike under said Retirement Plan; Trustee has sole voting and investment power with regard thereto. (E) Consists of 6 shares of Common Stock plus 160,000 stock options deemed exercised solely for purposes of showing total shares owned by Mr. Stadler. Does not include 6,977 shares of Common Stock allocated to Mr. Stadler under the Company's Employees' Common Stock Retirement Plan; these shares are held by Sachem Trust as Trustee and said Trustee has sole voting and investment power with regard thereto. (F) Consists of 68,241 shares of Common Stock plus 237,500 stock options to purchase shares of Common Stock deemed exercised solely for purposes of showing total shares owned by such group. (G) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 312,300 shares of the Company's Common Stock as of June 30, 1996, all of which shares are held in portfolios of DFA Investment Dimensions Group Inc., a registered open-end investment company or in series of The DFA Investment Trust Company, a Delaware business trust, or the DFA Group Trust and the DFA Participating Group Trust, investment vehicles for qualified employee benefit plans, all of which Dimensional Fund Advisors, Inc. serves as investment manager. Dimensional disclaims beneficial ownership of such shares. At October 1, 1996, the stock transfer records maintained by the Company with respect to its Preferred Stock showed that the largest holder of Preferred Stock owned 500 shares. The following table sets forth information with respect to the common stock, $.001 par value per share, of University Optical Products Co. ("UOP"), a subsidiary of the Company, beneficially owned by each director and nominee for director, by certain executive officers of the Company, and by each person known to the Company to be the beneficial owner of more than 5% of the Company's outstanding Common Stock at October 1, 1996. Shares of Common Percent Name Stock of UOP (A) of Class (B) George C.J. Bigar None -- Michael G. Bolton None -- Bruce E. Langton None -- H.S. Leahey None -- Frank R. McPike, Jr. 14,000 -- John M. Sabin None -- George M. Stadler None -- Harry Van Benschoten None -- All directors and executive officers of the Company as a group 14,000 -- (A) Does not include 1,333,333 shares of UOP class A stock (which have four votes per share and are convertible into an equal number of shares of UOP common stock) and 2,757,735 shares of UOP common stock owned by the Company and 1,927 shares of UOP common stock owned by Genetic Technology Management, Inc., a wholly-owned subsidiary of the Company. (B) Percentages of less than 1% are not shown. EXECUTIVE COMPENSATION Summary Compensation The following table summarizes the total compensation paid by the Company for services rendered during each of the fiscal years ended July 31, 1996, 1995 and 1994 to the Chief Executive Officer of the Company and each of the other executive officers of the Company who had annual compensation for the fiscal year ended July 31, 1996 in excess of $100,000 (the "Specified Executives"): SUMMARY COMPENSATION TABLE Annual Compensation (1) Long Term Compensation Awards Securities All Other Name and Principal Fiscal Underlying Compensation Position Year Salary ($) Bonus ($) Options (#) ($)(2) George M. Stadler, 1996 $172,923 -- 30,000 $15,874 President and 1995 153,845 -- 52,500 14,799 Chief Executive 1994 133,078 -- 27,500 15,857 Officer (3) Frank R. McPike, 1996 149,076 -- 15,000 14,977 Jr., Vice Presi- 1995 140,765 -- 20,000 14,136 dent, Finance and 1994 130,000 -- 7,500 15,875 Chief Financial Officer (1) The aggregate amount of any perquisites or other personal benefits was less than 10% of the total of annual salary and bonus and is not included in the above table. (2) Consists principally of amounts contributed for the above executive officers to the Competitive Technologies, Inc. Employees' Common Stock Retirement Plan. The dollar amounts are converted into shares of Company Common Stock valued at the mean between the high and the low price on the American Stock Exchange on the last day of the fiscal year. Also includes premiums paid for term life insurance policies (see below). (3) Mr. Stadler became Chief Executive Officer on December 17, 1993. Prior thereto he was Chief Operating Officer and continues in that position. Option Grants The following table summarizes the stock options granted by the Company during the fiscal year ended July 31, 1996 to the Specified Executives: OPTION GRANTS IN LAST FISCAL YEAR
Individuals Grants Potential % of Realizable Total Value Number Options at Assumed of Granted Annual Securities to Rates of Underlying Employees Stock Price Options in Exercise Appreciation Granted Fiscal Price Expiration for Name (#)(1) Year ($/Sh) Date Option Term 5% ($) 10% ($) George M. Stadler 30,000 34.9% 9.0625 12/15/05 170,981 433,298 Frank R. McPike, 15,000 17.4% $ 9.0625 12/15/05 $ 85,491 $216,650 Jr.
(1) Options become exercisable six months after date of grant. Option Exercises and Year End Value The following table summarizes the stock options exercised during the fiscal year ended July 31, 1996 and stock options held at the end of the fiscal year ended July 31, 1996 by the Specified Executives: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options Options at Shares Value at FY-End (#) FY-End ($) Acquired on Realized Exercisable/ Exercisable/ Name Exercise (#) ($) Unexercisable Unexercisable George M. Stadler -- -- 160,000 /-0- $328,125 / N/A Frank R. McPike, Jr. 6,500 $32,451 77,500 /-0- 175,625 / N/A Employment Agreements On August 1, 1995, the Company entered into an employment contract with George M. Stadler providing for his employment as President and Chief Executive Officer of the Company for a term ending on August 1, 1999 and for the payment of compensation to him at a minimum rate of $160,000 per year. The agreement provides for automatic one-year renewals beginning in 1999 unless terminated by either party and for a one-year period of noncompetition following termination by Mr. Stadler. The agreement contains provisions for termination in the event of death or disability and gives the Company the right to terminate for cause, which is defined as any criminal act by Mr. Stadler for which he is convicted. On September 15, 1993, the Company entered into an employment contract with Frank R. McPike, Jr. providing for his employment as Vice President, Finance and Chief Financial Officer of the Company for a term ending on September 14, 1996 and for the payment of compensation to him at a minimum rate of $130,000 per year. The agreement provides for automatic one-year renewals beginning in 1996 unless terminated by either party and for a two-year period of noncompetition following termination by Mr. McPike. The agreement contains provisions for termination in the event of death or disability and gives the Company the right to terminate for cause, which is defined as any criminal act by Mr. McPike. Other Arrangements The Company provides term life insurance for certain of its officers. The policy amount in the event of death is $500,000 for Mr. Stadler and $250,000 for Mr. McPike. Premiums of $1,245 for Mr. Stadler's policy in 1996 (there was no policy prior to this) and $460 for Mr. McPike's policy in each of 1994, 1995 and 1996 were paid by the Company. The Company maintains a simplified employee pension ("SEP") plan for employees of the Company pursuant to the Internal Revenue Code. Under the SEP plan, an eligible employee may elect to make a salary reduction of up to 15% of his compensation as defined in the plan, with the Company then contributing that amount to the plan for the employee. Employee contributions for any calendar year are limited to a specific dollar amount that is indexed to reflect inflation ($9,500 for 1996). For fiscal 1996, the Company contributed $9,235 for Mr. Stadler, and $10,885 for Mr. McPike. The amount contributed for Mr. McPike in fiscal 1996 covered two annual periods and did not exceed the limitation as prescribed by the Internal Revenue Service. Effective August 1, 1990, the Company adopted the Competitive Technologies, Inc. Employees' Common Stock Retirement Plan (the "Retirement Plan"). The Retirement Plan is a "stock bonus plan" that is intended to be tax qualified under the Internal Revenue Code. All employees of the Company are eligible to participate in the Retirement Plan. Annually, a committee of independent directors determines the number of shares of the Company's Common Stock, if any, to be contributed to the Retirement Plan. These shares are allocated among participants who are employed on the last day of the year and who performed at least 1,000 hours of service during the year in proportion to their relative compensation in a manner that is integrated with the Company's Social Security contribution on behalf of employees; that is, the contribution made with respect to compensation in excess of the Social Security wage base will generally be twice as large in proportionate terms as the contribution made with respect to compensation below the wage base. The Company's contributions are held in trust with a separate account established for each participant. The maximum amount of Company Common Stock that can be contributed to the Retirement Plan in any year is the number of shares with fair market value equal to 15% of that year's compensation reduced by the SEP plan contribution paid to Retirement Plan participants, but in no event more than 1% of the Company's outstanding shares at the end of the previous year. There is no minimum or required contribution. The maximum number of shares that can be allocated to any individual participant's account in any year is the number of shares with a fair market value equal to the lesser of $30,000 or 25% of his compensation for that year reduced by the SEP plan contribution. Participants become entitled to a distribution of the shares allocated to their accounts upon disability, death or other termination of employment. They are entitled to receive their vested account balance. Participants obtain a 100% vested interest in their accounts upon completing 5 years of service with the Company. If the Retirement Plan becomes "top heavy" as defined by the Internal Revenue Code, participants become 20% vested after 2 years of service, 40% vested after 3 years of service, 60% vested after 4 years of service, and 100% vested after 5 years of service. Company stock that is contributed to the Retirement Plan is held in the custody of the Retirement Plan's trustee, Sachem Trust National Association in Westport, Connecticut. The trustee has the power to vote Company shares that are owned by the Retirement Plan. For the fiscal year ended July 31, 1996, the Board authorized a contribution of 8,688 shares. Shares allocated to Messrs. Stadler and McPike under the Retirement Plan for the year ended July 31, 1996, were 1,427 and 1,416, respectively, and were 2,843 shares for all executive officers as a group. See also Summary Compensation Table - "All Other Compensation" for dollar values ascribed to Messrs. Stadler and McPike. The Company has an incentive compensation plan pursuant to which an amount not to exceed 10% of the operating income of the Company (defined and adjusted as provided in said plan) may be credited each year to an incentive fund, from which cash awards may be made to key employees of the Company by a committee, none of whose members is eligible to receive awards. No amounts may be credited to the incentive fund until such time, if ever, as the Company experiences a fiscal year in which operating income (as defined in said plan) has been earned. No such operating income has yet been earned. The Company has in effect a Key Employees' Stock Option Plan ("Company Option Plan") with respect to its Common Stock, $.01 par value, which provides for the grant of either incentive stock options under Section 422 of the Internal Revenue Code or nonqualified options. (Incentive options must be granted at not less than 100% of fair market value at time of grant. Nonqualified options may be granted at not less than 85% of fair market value at time of grant.) Stock appreciation rights may also be granted under the Company Option Plan. In certain instances, stock options which are vested or become vested upon the happening of an event or events specified by the Company's Stock Option Committee, may continue to be exercisable through up to 10 years after the date of grant, irrespective of the termination of the optionee's employment with the Company. DIRECTOR COMPENSATION The Company pays each director who is not an employee of the Company or a subsidiary of the Company the sum of $750 (increased from $500 on March 1, 1996) for each Board meeting attended. The $500 rate had been in effect since March, 1980. Directors also receive $250 for attending each committee meeting that coincides with a Board meeting and $500 for attendance at a committee meeting that does not coincide with a Board meeting. Directors who participate in telephonic board and/or committee meetings are paid one half the fee for attendence at such meetings. Out-of-pocket expenses involved in attendance are also reimbursed. Commencing January 1, 1997, in addition to meeting fees, outside directors will be paid an annual cash retainer of $5,000, payable in quarterly installments. The Company had a Director's Stock Participation Plan pursuant to which, on the first business day of January through January 1996, the Company issued, to each nonemployee director who has been elected by the stockholders and has served at least one full year, a number of shares of the Company's Common Stock equal to the lesser of (i) $10,000 divided by the per share fair market value of such stock on the date of issuance, or (ii) 2,000 shares. During fiscal 1996, an aggregate of 4,776 shares were issued under this plan (1,194 shares each to Messrs. Bolton, Leahey, Langton, and Van Benschoten). See "Proposal to Approve the 1996 Directors' Stock Participation Plan" below for a description of the proposed 1996 Directors' Stock Participation Plan submitted for shareholder approval. The Company has entered into indemnity agreements with each of its directors indemnifying them against certain possible claims and expenses and has created an escrow fund in the aggregate sum of $325,000 for the indemnification of directors, all as authorized by the stockholders at the 1986 annual meeting. The escrow terminates at July 31, 1997. The Company recently obtained a policy for directors' and officers' liability insurance. REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE This report of the Compensation and Stock Option Committee (the "Committee") shall not be deemed incorporated by reference by any general statement incorporating the Proxy Statement by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Acts"), except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. The Committee is responsible for making recommendations to the Company's Board of Directors concerning the compensation of the Company's Chief Executive Officer and, based upon recommendations received from the Company's Chief Executive Officer, the compensation of the Company's other executive officers, consistent with employment contracts. The Company has a compensation program that consists of salary, performance bonus and stock options. The overall executive compensation philosophy is based upon the premise that compensation should be aligned with and support the Company's business strategy and long-term goals. The Company believes it is essential to maintain an executive compensation program which provides overall compensation competitive with that paid executives with comparable qualifications and experience. This is critical to attract and retain competent executives. The Company has an incentive compensation plan which is intended to provide a pool of dollars and is based upon the Company's achieving specific levels of profitability; however, no amounts have been paid pursuant to the plan (see page 7). In addition, the Committee from time to time may award individual executives bonuses based upon specific events that enhance the value of the Company. The Committee determines the granting of options under the Company Option Plan. This plan provides additional incentive to maximize shareholder value. The plan may also utilize vesting periods to encourage recipients of options to continue in the employ of the Company. The Company grants stock options to its executive officers and to a number of additional key employees. COMPENSATION AND STOCK OPTION COMMITTEE Michael G. Bolton Bruce E. Langton, Chairman Harry Van Benschoten PERFORMANCE GRAPH The performance graph below shall not be deemed incorporated by reference by any general statement incorporating this Proxy Statement by reference into any filing under the Acts, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. The graph below compares cumulative total return (assuming reinvestment of dividends, if any) on the Company's Common Stock for the five year period shown, compared with the American Stock Exchange Market Index and a SIC code index made up of all public companies whose four- digit standard industrial code number (6794) includes patent owners and lessors and who have been public for the period covered by the graph, all for the fiscal years ended July 31, assuming $100 invested on August 1, 1991 in the Company's Common Stock, the American Stock Exchange Market Index and a published SIC code index of public companies. Fiscal Year Ending July 31, 1991 1992 1993 1994 1995 1996 Competitive Technologies, Inc. $100 $180.85 $142.55 $127.66 $103.19 $174.47 Industry Index 6794 100 127.08 114.62 123.32 235.91 467.34 Broad Market AMEX 100 107.85 117.77 120.70 146.38 149.82 CERTAIN TRANSACTIONS As of April 1, 1992, the Company entered into an employment agreement with A. Sidney Alpert (a former CEO of the Company and a former Director of the Company whose term as a director ended at the Company's annual meeting held December 15, 1995) providing for his employment as President and Chief Executive Officer of the Company for a term ending on March 31, 1996. The agreement provided for a two-year period of noncompetition following termination by Mr. Alpert. The agreement also provided that at such time as the Company receives Retin- A royalties, a bonus of $50,000 payable out of 25% of Retin-A royalties would be paid to Mr. Alpert, whether or not he is still employed by the Company. Through October 1, 1996 royalties of $23,204 were paid to Mr. Alpert. The agreement provided for conversion into a consulting agreement at Alpert's election. Effective December 17, 1993, Mr. Alpert exercised the conversion. The term of the consulting agreement is three years during which the Company pays Mr. Alpert $80,000 per year and Mr. Alpert devotes up to 100 consulting hours per quarter. The agreement contains provisions for termination in the event of death or disability and gives the Company the right to terminate for cause, which is defined as any criminal felony act by Mr. Alpert for which he is convicted. An individual long-term disability policy has been provided to Mr. Alpert pursuant to his consulting agreement providing payment of $7,000 per month in the event of Mr. Alpert's disability. In addition the Company provides Mr. Alpert with term life insurance which provides $400,000 in the event of his death. The premium for this policy was $1,506 in 1996, 1995 and 1994. Knowledge Solutions, Inc. ("KSI"), a development stage company, was formed in June, 1994 to develop and deliver interactive multimedia training using a process model developed at Lehigh University. The Company has a 33.7% voting interest in KSI. Messrs. Stadler and McPike are two of KSI's directors. Mr. Stadler is serving on a part-time interim basis as the chief executive officer of KSI and Mr. McPike is serving on a similar basis as the chief financial officer of KSI while a full-time management team is being sought for KSI. During KSI's most recent fiscal year, the Company entered into a $30,000 contract (which exceeded 5% of KSI's annual revenues) for the delivery of a CD-ROM version of a handbook which was produced in connection with a government contract. The Company's premises at 1465 Post Road East, Westport, CT were leased from a partnership in which Mr. Alpert, L.W. Miles, Robert I. Siegel, and David N. Koffsky (former executive officers of the Company) each owns a 25% interest. Monthly lease rental payments by the Company consisted of basic minimum annual rent in an amount equal to the monthly payment of principal and interest due under a mortgage note of the landlord in the amount of $1,890,000, with principal and interest based upon a twenty-year amortization schedule. In addition, the Company paid additional rent of $78,000 per year, subject to annual consumer price index adjustments, and all taxes which may be levied against the premises. The lease expired on August 8, 1996. The Company presently leases these premises from the partnership on a month to month tenancy at $3,844 per month. Arthur M. Lieberman, an attorney, was a director of The Company whose term as a director ended at the Company's Annual meeting on December 15, 1995. When the Company has believed it prudent to limit its liability for legal fees and expenses in connection with litigation, it has entered into contingent fee arrangements with Mr. Lieberman's law firm. Such an arrangement was entered into in October, 1991 in connection with the Retin-A litigation. During fiscal 1992, fees of approximately $67,000 were incurred by Mr. Lieberman's firm and are payable only out of proceeds from the settlement of this litigation. The Company has agreed to pay one half of the proceeds, if any, up to a limit of three times the contingent fees incurred, or approximately $202,000. During fiscal 1996 the Company paid $8,078 to Mr. Lieberman's firm pursuant to this arrangement and an additional $155,369 remains payable. In February, 1993, the Company acquired 80% of the stock of Competitive Technologies of PA, Inc. ("CTI-PA") from Lehigh University ("Lehigh") in exchange for unregistered shares of Common Stock of the Company. The exchange involved $750,000 worth of the Company's stock, priced in relation to average market value. An exclusive technology management contract has been entered into between CTI and Lehigh through September 1997. In addition, Lehigh will provide spouses and children of certain employees of CTI-PA, including Mr. Stadler, with full Lehigh tuition waivers at no cost to CTI-PA. BOARD MEETINGS AND COMMITTEES During the last full fiscal year four (4) meetings of the Board of Directors of the Company were held. During the same period the compensation and stock option committee met twice, the audit committee met twice, and the nominating committee met once. No incumbent director attended fewer than 75% of the aggregate number of meetings of the Board and committees of which he was a member. The function of the audit committee is to review with the Company's auditors the scope and adequacy of the audit and the accounting practices, procedures and policies of the Company and to advise the management of the Company concerning the purchase, sale and retention of interest-bearing securities. The function of the compensation and stock option committee is to make recommendations to the Board of Directors with respect to compensation of officers and other employees of the Company and to exercise all of the powers of the incentive compensation committee as well as to grant options under and administer the Company Option Plan and to determine the number of shares of the Company's Common Stock to be contributed to the Company's Retirement Plan. The function of the nominating committee is to make recommendations to the Board with respect to candidates for director of the Company. (The nominating committee will consider nominees recommended by stockholders; no special procedures need to be followed in submitting such recommendations.) PROPOSAL TO APPROVE THE 1996 DIRECTORS' STOCK PARTICIPATION PLAN The Board of Directors has adopted, subject to stockholder approval, the 1996 Directors' Stock Participation Plan (the "1996 Participation Plan") which would provide for issuance of shares of the Company's Common Stock to non-employee directors of the Company (currently four in number). An aggregate of 100,000 shares will be reserved for issuance under the 1996 Participation Plan and the Company expects to register these shares under the Securities Act of 1933 if the 1996 Participation Plan is approved by shareholders. This 1996 Participation Plan replaces a prior plan (described above at page 7) which expired on January 2, 1996. Under the 1996 Participation Plan on the first business day of January of each year for a period of ten years commencing in 1997, the Company will issue to each non-employee director who has been elected by the stockholders and has served continuously as such a director for a period of at least one full year prior to the date of issuance, a number of shares of the Company's Common Stock (rounded to the nearest whole share) equal to the lesser of (i) $15,000 divided by the per share fair market value of such stock on the date of issuance or (ii) 2,500 shares. These provisions are increases from the prior plan, in effect since December 1986 which provided for the lesser of $10,000 in stock or 2,000 shares. If a non-employee director were to leave the Board after serving at least one full year but prior to the January issuance date, the annual stock compensation described above shall be payable in shares on a pro- rata basis up to the time of termination. This is a change from the prior plan, under which no shares were issued to a director who ceased to be a director prior to the January issuance date. Provision is made in the 1996 Participation Plan for adjustments for such matters as stock dividends and stock splits to prevent dilution or enlargement of rights. Any amendment to the 1996 Participation Plan which would increase the number of shares reserved for issuance, change the eligibility provisions or the formula for determining the number of shares to be issued, or extend the term of the 1996 Participation Plan would require stockholder approval. A complete copy of the 1996 Participation Plan is attached to this Proxy Statement as Exhibit A and attention is directed to said Exhibit for a more complete understanding. The 1996 Participation Plan will be in addition to cash fees paid to non-employee directors for attendance at board and committee meetings as described above under "Director Compensation." Had the 1996 Participation Plan been in effect on January 2, 1996, the first business day of January, 1996, on which day the fair market value of the Company's Common Stock was $8.375 per share, the following shares would have been issued under the 1996 Participation Plan: Number of Dollar Name and Position Shares Value Specified Executives 0 $ 0 Specified Executives as a Group 0 0 Non-Executive Directors and Former Directors as a Group 12,224 (1) $102,376 Non-Executive Officers and Employees as a Group 0 0 (1) Comprised of an aggregate of 7,164 shares (1,791 shares each) to four persons who were eligible directors on January 2, 1996, plus an aggregate of 5,060 shares on a pro-rata basis to three persons who left the Board prior to January 2, 1996, but had served at least one full year prior to leaving the Board. The Board of Directors believes that it is desirable to approve the 1996 Participation Plan to enable the Company to attract and retain qualified non-employee directors. The increase will also serve to give non-employee directors a greater proprietary interest in and closer identity with the Company through increased stock ownership. The vote required for approval of this proposal is the affirmative votes of the holders of a majority of the Common and Preferred Stock (voting as a single class) present, or represented, and entitled to vote at a meeting at which a quorum (the holders of a majority of the Company's outstanding shares of Common and Preferred Stock) is present in person or by proxy. The Board of Directors recommends a vote FOR approval of the proposed 1996 Participation Plan. INFORMATION REGARDING INDEPENDENT PUBLIC ACCOUNTANTS Coopers & Lybrand L.L.P. served as independent public accountants for the fiscal year ended July 31, 1996 and has been selected by the Board of Directors to serve for the current year. It is expected that a representative of said firm will be present at the annual meeting with the opportunity to make a statement if he desires to do so and that such representative will be available to respond to appropriate questions. PROPOSALS OF STOCKHOLDERS Proposals of stockholders intended to be presented at the next annual meeting must be received by the Company for inclusion in the Company's proxy statement and form of proxy relating to that meeting not later than July 23, 1997. GENERAL The Company will bear the cost of solicitation of proxies. In addition to being solicited by mail, proxies may be solicited personally or by telephone or telegraph. The Company will reimburse brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy materials to principals in obtaining their proxies. The Company will provide without charge (except for exhibits) to any record or beneficial owner of its securities, on written request, a copy of the Company's annual report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended July 31, 1996, including the financial statements and schedules thereto. Exhibits to said report will be provided upon payment of fees limited to the Company's reasonable expenses in furnishing such exhibits. Written requests should be directed to Frank R. McPike, Jr., Secretary of the Company, at 1960 Bronson Road, Post Office Box 340, Fairfield, Connecticut 06430. The Board of Directors is not aware of any matter which is to be presented for action at the meeting other than the matters set forth herein. Should any other matters requiring a vote of the stockholders arise, the proxies in the enclosed form confer upon the person or persons entitled to vote the shares represented by such proxies discretionary authority to vote the same in respect of any such other matters in accordance with their best judgment in the interest of the Company. Frank R. McPike, Jr. Secretary Dated: November 20, 1996 EX-10.1 2 EXHIBIT A COMPETITIVE TECHNOLOGIES, INC. 1996 DIRECTORS' STOCK PARTICIPATION PLAN 1. Definitions. (a) "Plan" means this 1996 Directors' Stock Participation Plan. (b) "Company" means Competitive Technologies, Inc. (c) "Director" means a person who is a director of the Company and is not an employee of the Company or any subsidiary of the Company. 2. Purpose. The purpose of the Plan is to attract and retain qualified Directors and to promote the best interests of the Company by giving them a proprietary interest in and closer identity with the Company through increased stock ownership. 3. Stock Subject to Plan. An aggregate of 100,000 shares of the Company's Common Stock shall be reserved for issuance under the Plan. Adjustment in the shares subject to the Plan shall be made as provided in Paragraph 6. 4. Issuance of Stock. On the first business day in January of each year for a period of ten years commencing in 1997 and ending in 2006, the Company shall issue to each Director who has been elected by the stockholders of the Company and who has served as a Director for a period of at least one year in consideration of the services rendered to the Company by such Director, an annual number of shares of the Company's Common Stock (rounded to the nearest whole share) equal to the lesser of (i) $15,000 divided by the per share fair market value of such Common Stock on the date of issuance, or (ii) 2,500 shares. In situations where a Director leaves the Board after completing a full year of service but before the January 1st issuance date, the annual stock compensation as described above shall be payable on a pro-rata basis up to the time of termination. Shares issued under the Plan may be either authorized but unissued shares or treasury shares. The Company shall in every case have a reasonable time to cause certificates for shares to be prepared and delivered. 5. Agreement of Director. As a condition to issuance and receipt of shares, if the Company in its sole discretion determines that such agreement is necessary in order to comply with Federal or State securities laws or other applicable laws, such Director shall agree that he takes the shares issued to him under the Plan for investment and not with any present intention to resell or distribute the same, and he shall sign and deliver to the Company a certificate to such effect at the time of such issuance. In such event the certificates evidencing such shares shall be appropriately legended and stop transfer instructions shall be placed with the Transfer Agent for the Company's Common Stock. The Company shall have no liability for failure to issue shares pending the meeting of any requirements which the Company is advised by counsel must be met under Federal or State securities laws or other applicable laws before such shares may be issued under the Plan. 6. Change in Shares. If any change is made in the Company's outstanding shares of Common Stock by reason of stock dividend in excess of 3% in the aggregate during any fiscal year of the Company, change in par value, stock split-up, recapitalization, reclassification or combination of shares, appropriate adjustment, disregarding fractional shares, shall be made to the kind and number of shares issuable under the Plan. 7. Effective Date; Term of Plan. The Plan shall become effective when approved by the stockholders of the Company and shall terminate following the close of business on the first business day of January, 2006. 8. Amendments. No amendment to the Plan shall be made, except upon approval of the stockholders of the Company, which will increase the number of shares reserved for issuance under the Plan, change the eligibility provisions or the formula for determining the number of shares to be issued as provided in Paragraph 4, or extend the term of the Plan; and no amendment to Plan provisions specifying the eligibility provisions or the formula for determining the amount, price and timing of shares to be issued shall be made more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. -----END PRIVACY-ENHANCED MESSAGE-----