SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and 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 Rule 14a-12
RESEARCH FRONTIERS INCORPORATED
(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)(4) 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 fees 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:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 12, 2008
To the Stockholders of Research Frontiers Incorporated:
Notice is hereby given that the Annual Meeting of Stockholders
of Research Frontiers Incorporated (the "Company") will be held at the
Fox Hollow Inn, 7725 Jericho Turnpike, Woodbury, New York 11797,
on June 12, 2008 at 11:00 A.M., local time, for the following purposes:
1. To elect two Class III directors;
2. To ratify the selection of BDO Seidman, LLP as the
independent registered public accountants of the Company for the
fiscal year ending December 31, 2008;
3. To adopt the Research Frontiers Incorporated 2008 Equity
Incentive Plan, which has been approved by the Board of Directors of
the Company;
4. To consider, if properly presented at the meeting, a proposal
submitted by a shareholder of the Company regarding the reporting of
certain production and sales information of third parties; and
5. To transact 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 April
18, 2008 as the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting or any adjournments
thereof.
Management requests all stockholders to sign and date the
enclosed form of proxy and return it in the postage paid, self-addressed
envelope provided for your convenience. Please do this whether or not
you plan to attend the meeting. Should you attend, you may, if you
wish, withdraw your proxy and vote your shares in person. BECAUSE
YOUR BROKER MAY NOT HAVE DISCRETION TO VOTE ON ALL OF THE ABOVE MATTERS,
IT IS IMPORTANT THAT YOU SEND IN YOUR PROXY.
By Order of the Board of Directors,
JOSEPH M. HARARY, Secretary
Woodbury, New York
April 30, 2008
RESEARCH FRONTIERS INCORPORATED
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, June 12, 2008
This Proxy Statement is furnished by the Board of Directors
of Research Frontiers Incorporated (the "Company") in connection
with the solicitation by the Company of proxies to be voted at the
Annual Meeting of Stockholders which will be held at the Fox
Hollow Inn, 7725 Jericho Turnpike, Woodbury, New York 11797,
on June 12, 2008, at 11:00 A.M., local time, and all adjournments
thereof.
Any stockholder giving a proxy will have the right to revoke
it at any time prior to the time it is voted. A proxy may be revoked
by written notice to the Company, Attention: Secretary, by
execution of a subsequent proxy or by attendance and voting in
person at the Annual Meeting of Stockholders. Attendance at the
meeting will not automatically revoke the proxy. All shares
represented by effective proxies will be voted at the Annual
Meeting of Stockholders, or at any adjournment thereof. Unless
otherwise specified in the proxy, shares represented by proxies
will be voted (i) for the election of the nominees for director listed
below, (ii) for the ratification of the selection of the independent
registered public accountants, (iii) for the adoption of the
Company's 2008 Equity Incentive Plan, and (iv) against adoption
of the proposal submitted by a stockholder regarding the reporting
of certain production and sales information of third parties. The
cost of proxy solicitations will be borne by the Company. In
addition to solicitations of proxies by use of the mails, some
officers or employees of the Company, without additional
remuneration, may solicit proxies personally or by telephone. The
Company will also request brokers, dealers, banks and their
nominees to solicit proxies from their clients, where appropriate,
and will reimburse them for reasonable expenses related thereto.
The Company's executive offices are located at 240
Crossways Park Drive, Woodbury, New York 11797-2033.
Research Frontiers encourages you to communicate with your
Company. If you are interested in communicating directly with the
entire Board of Directors of the Company, you may do so by
sending an email to Directors@SmartGlass.com and your email
will be forwarded to each member of the Company's Board of
Directors. On or about May 2, 2008, this Proxy Statement and the
accompanying form of proxy, together with a copy of the Annual
Report of the Company for the year ended December 31, 2007,
including financial statements, are to be mailed to each
stockholder of record at the close of business on April 18, 2008.
VOTING SECURITIES
Only stockholders of record at the close of business on April
18, 2008 are entitled to vote at the meeting. As of April 18, 2008,
the Company had issued and outstanding and entitled to vote
15,440,434 shares of common stock, par value $0.0001 per share
(the "Common Stock"), the Company's only class of voting
securities outstanding. Each share of Common Stock entitles the
holder thereof to one vote.
As a shareholder of record, you may vote in person at the
Annual Meeting or you may vote by proxy without attending the
Meeting. If you are a registered shareholder, you may vote your
shares by giving a proxy via mail, telephone or Internet. To vote
your proxy by mail, indicate your voting choices, sign and date
your proxy card and return it in the postage-paid envelope
provided. You may vote by telephone or Internet by following the
instructions on your proxy card. If you hold your shares through
a broker, bank or other nominee, that institution will send you
separate instructions describing the procedure for voting your
shares.
If you provide a properly executed proxy before voting at the
Annual Meeting is closed, the persons listed on the Proxy card will
vote the proxy in accordance with your directions. If you do not
indicate how your shares are to be voted, the persons listed on the
Proxy card will vote your shares as recommended by the Board of
Directors. The persons listed on the Proxy card will also have the
discretionary authority to vote on your behalf on any other matter
that is properly brought before the Annual Meeting. If you wish to
give a proxy to someone other than the persons listed on the Proxy
card, please cross out the names of the people listed on the Proxy
card and add the name of the person holding your proxy.
If we receive a valid proxy before voting at the Annual
Meeting is closed, your shares are voted as indicated on the proxy
card. If you indicate on your proxy card that you wish to "abstain"
or "withhold," as the case may be, from voting on an item, your
shares will not be voted on that item. Abstentions will be counted
to determine whether there is a quorum present.
If you do not provide voting instructions to your broker or
nominee at least ten days before the Annual Meeting, that person
has discretion to vote your shares on matters that the New York
Stock Exchange has determined are routine. However, a broker or
nominee cannot vote shares on non-routine matters without your
instructions, and this is referred to as a "broker non-vote." Broker
non-votes are only counted in determining whether a quorum is
present. Because your broker may not have discretionary
authority to vote yours shares on your behalf on some of the
proposals presented at this Annual Meeting, it is important
that you vote your shares and send in your proxy.
The Annual Meeting cannot conduct business unless a
quorum is present. In order to have a quorum, a majority of the
shares of the Company's common stock that are outstanding and
entitled to vote at the meeting must be represented in person or by
proxy. If a quorum is not present, the Annual Meeting will be
rescheduled for a later date.
Directors are elected by a plurality of the votes cast. The
management and shareholder proposals described in the Proxy
Statement must be approved by the affirmative vote of a majority
of the shares present or represented by proxy and entitled to vote
on this proposal. Abstentions will have the same effect as votes
against the proposal. Broker non-votes will have no effect on the
outcome of the vote.
The following table sets forth certain information with respect
to those persons or groups known to the Company who
beneficially own more than 5% of the Company's Common Stock,
and for all directors and executive officers of the Company
individually and as a group.
Total Exercisable
Name of Beneficial Warrants Percent
Beneficial Owner Ownership(1) and Options of Class
Robert L. Saxe . . . . . . . . . . 1,496,265(2) 1,079,030 9.06
Joseph M. Harary . . . . . . . . . 509,174(3) 396,000 3.22
Robert M. Budin. . . . . . . . . . 291,988 249,200 1.86
M. Philip Guthrie. . . . . . . . . 25,000 25,000 0.16
Richard Hermon-Taylor. . . . . . . 25,000 25,000 0.16
Victor F. Keen . . . . . . . . . . 453,599 202,200 2.90
Michael R. LaPointe. . . . . . . . 149,459(4) 144,500 0.96
Steven M. Slovak . . . . . . . . . 86,384 85,500 0.56
All directors and officers
as a group (8 persons) . . . . . . 2,885,272(5) 2,206,430 16.35
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(1) All information is as of April 18, 2008 and was determined in
accordance with Rule 13d-3 under the Securities Exchange
Act of 1934 based upon information furnished by the persons
listed or contained in filings made by them with the Securities
and Exchange Commission or otherwise known to the
Company. Unless otherwise indicated, beneficial ownership
disclosed consists of sole voting and dispositive power, and
also includes options and warrants held by the listed persons
that are presently exercisable or exercisable within the next
60 days. Shares of Common Stock of the Company acquired
by officers, directors and employees through the exercise of
stock options or otherwise are subject to restrictions on their
transfer, including restrictions imposed by applicable
securities laws, as well as additional restrictions imposed by
the Company in accordance with written agreements and
policy statements. The mailing address for the above
individuals is c/o Research Frontiers Incorporated, 240
Crossways Park Drive, Woodbury, NY 11797.
(2) Includes (i) 2,687 shares of Common Stock owned by Mr.
Saxe's wife, Marie Saxe; (ii) 66,042 shares owned by a trust
u/w Leonard S. Saxe for which Mr. Saxe serves as a co-
trustee, and has a beneficial interest in one-half of the income
from such trust; and (iii) 11,250 shares of Common Stock
owned by a trust for the children of the late George Backer
and certain others for which Mr. Saxe serves as sole trustee.
Mr. Saxe disclaims beneficial ownership to all securities
described in items (i) and (iii) above.
(3) Includes 22,560 shares of Common Stock owned by Mr.
Harary's children, as to which shares Mr. Harary disclaims
beneficial ownership.
(4) Includes 898 shares of Common Stock owned by Mr.
LaPointe's wife, as to which shares Mr. LaPointe disclaims
beneficial ownership.
(5) Includes the securities described above in footnotes (2)
through (4).
ELECTION OF DIRECTORS
(Item 1)
Pursuant to the Company's By-Laws, six Directors constitute
the entire Board of Directors of the Company. A majority of the
Board of Directors of the Company are independent directors. The
Board of Directors is divided into three classes, as nearly equal in
number as possible. Each class serves three years, with the terms
of office of the respective classes expiring in successive years. The
term of office of the directors in Class III expires at the 2008
Annual Meeting of Stockholders. The Board of Directors proposes
that each of the nominees described below be elected to hold office
for a three-year term expiring at the 2011 Annual Meeting of
Stockholders, and until the election and qualification of his
respective successor. If no other choice is specified in the
accompanying proxy, the persons named therein have advised
management that it is their present intention to vote the proxy for
the election of the nominees set forth below. Each of the members
of the Board of Directors of the Company, including the nominees
listed below, is presently a director of the Company, and was
elected to such office by the stockholders of the Company, except
for Mr. Guthrie and Mr. Hermon-Taylor who were appointed to
the Board of Directors in December 2007 after the board was
expanded. Should a nominee become unable to accept nomination
or election, it is intended that the persons named in the
accompanying proxy will vote for the election of such other person
as management may recommend in the place of such nominee.
There is no indication at present that any nominee will be unable
to accept nomination.
The following biographical information is provided with
respect to each director:
Directors Standing for Election
Robert L. Saxe
Mr. Saxe, age 72, is a founder of the Company and has been
Chairman of the Board of Directors of the Company since its
inception in 1965, was its President from 1966 to February 2002,
and Treasurer from 1966 to 2005. He graduated from Harvard
College in 1956 with an A.B. degree, Cum Laude in General
Studies (with a major in physics). Mr. Saxe also received an
M.B.A. degree from Harvard Business School in 1960.
Robert M. Budin
Mr. Budin, age 75, has been a director of the Company since 1987.
Mr. Budin was a Senior Vice President of Harold C. Brown & Co.,
Inc. until his retirement in 1990. Mr. Budin was a stockbroker and
had been employed at Harold C. Brown & Co., Inc. since 1963.
Mr. Budin serves on the Company's Nominating and Corporate
Governance, Compensation, and Audit Committees.
Directors Continuing in Office
Class I - Term Expires at the 2009 Annual Meeting of Stockholders
Joseph M. Harary
Mr. Harary, age 47, became Vice President and General Counsel
to the Company in April 1992 and has been a director of the
Company since February 1993. In December 1999, Mr. Harary
was promoted to the position of Executive Vice President and
General Counsel, and in February 2002 was promoted to the
position of President and Chief Operating Officer of the Company.
Mr. Harary has also been the Treasurer and Chief Financial Officer
of the Company since 2005 and its corporate Secretary since 2007.
Prior to joining Research Frontiers, Mr. Harary's corporate law
practice emphasized technology, licensing, mergers and
acquisitions, securities law, and intellectual property law at three
prestigious New York City law firms. Mr. Harary graduated
Summa Cum Laude from Columbia College in 1983 with an A.B.
degree in economics, and received a Juris Doctor degree from
Columbia Law School in 1986 where he was a Harlan Fiske Stone
Scholar. Prior to attending law school, Mr. Harary was an
economist with the Federal Reserve Bank of New York.
Richard Hermon-Taylor
Richard Hermon-Taylor, age 66, has been a director of the
Company since December 2007. Mr. Hermon-Taylor serves as
Chairman of the Company's Nominating and Corporate
Governance Committee, and also serves on the Company's Audit
and Compensation Committees. His prior Board of Director
experience includes Harley-Davidson, a $5 billion manufacturer
of motorcycles, clothes, and the licensor of the Harley-Davidson
trademark. During his over 15-year tenure on the Harley-Davidson
Board, he served on its Audit, Compensation, and Nominating
Committees. He also served on the Board of Galileo
Electro-Optics, a public company that was acquired by Corning,
Inc. From 1970-1986 he was with the Boston Consulting Group
and managed the firm's offices in Boston and Milan. Mr.
Hermon-Taylor received a B.A. in Chemical Engineering from
Cambridge University in England and an MBA from the Harvard
University Graduate School of Business, where he was a Baker
Scholar. He is currently President and Co-Founder of Bio-Science
International, Inc. This company specializes in technology
development and licensing agreements for the life sciences
industry.
M. Philip Guthrie
M. Philip Guthrie, age 63, has been a director of the Company
since December 2007. Mr. Guthrie serves as Chairman of the
Company's Audit Committee, and also serves on the Company's
Compensation and Nominating and Corporate Governance
Committees. Mr. Guthrie was Chief Financial Officer of two
public companies in the airline industry - Southwest Airlines
during its formative and high-growth years, and Braniff
International during its initial restructure and successful
reorganization. His other aerospace experience includes CEO of
InTech Aerospace Group, which provided a full range of interior
service and maintenance to the commercial airline industry and to
the US Government. He was Managing Director of Mason Best
Company and served in board and management roles in many of
its, and other private equity firms', portfolio companies. He has
also served as Chairman of the Board for Westmark/Tracor, a
maker of military electronic systems. He currently serves on the
Boards of Ariel Reinsurance (Bermuda) and is also a member of
its Audit Committee, Direct General Corporation where he is also
Chairman of its Audit Committee, Bristol Group (Argentina), and
Neuro Resource Group, Inc. He is CEO of Neuro Holdings
International, an international distributor of leading-edge medical
devices for pain management. Mr. Guthrie has a CPA and began
his career at Price Waterhouse. He has an MBA from the
University of Michigan where he was a Paton Scholar and a BBA
Summa Cum Laude in accounting from Louisiana Tech University.
He is CEO of Denham Partners, LLC, a private investment firm.
Class II - Term Expires at the 2010 Annual Meeting of Stockholders
Victor F. Keen
Victor F. Keen, age 67, has been a director of the Company since
June 2001, and served as the Company's corporate Secretary from
1987 to 2007. Mr. Keen is Of Counsel to the law firm of Duane
Morris LLP, one of the 100 largest law firms in the world with
more than 650 lawyers. He has served prior thereto as a partner
and chairman of Duane Morris' tax department. Mr. Keen is a
graduate of Trinity College (1963) and Harvard Law School
(1966). Mr. Keen serves as Chairman of the Company's
Compensation Committee, and also serves on the Company's
Audit, and Nominating and Corporate Governance Committees.
Mr. Keen is also a member of the board of directors of 3DIcon
Corporation, a development-stage technology company developing
3-D projection and display technologies. Mr. Keen serves on
3DIcon's Audit Committee, Nominating/Corporate Governance
Committee and Compensation Committee and is Chairman of its
Compensation Committee. Mr. Keen is also a Managing Member
of Chelsea/Village Associates, LLC and Ninth Avenue Associates,
LLC, both of which own and manage real estate in Manhattan.
Board Composition, Committees and Meetings
The Board of Directors has an Executive Committee
composed of Robert L. Saxe, Joseph M. Harary and Robert M.
Budin. The Board of Directors also has an Audit Committee, a
Compensation Committee, and a Nominating and Corporate
Governance Committee. The members of each of these three latter
committees, Robert M. Budin, M. Philip Guthrie, Richard
Hermon-Taylor, and Victor F. Keen, consist solely of the
Company's four non-management directors, each of whom the
Board has determined meets the independence requirements under
the applicable listing standards of the NASDAQ Capital Market
governing the independence of directors. During fiscal 2000, the
Audit Committee of the Board of Directors developed a written
charter for the Committee that was approved by the Board of
Directors which was updated in 2004. The complete text of the
Audit Committee's current charter is available on Company's
website at www.SmartGlass.com. The Compensation Committee
and the Nominating and Corporate Governance Committee are not
required to, and do not have, written charters.
The Audit Committee reviews and reports to the Board of
Directors with respect to various auditing and accounting matters,
including the nomination of the Company's independent registered
public accountants, the scope of audit procedures, general
accounting policy matters, and the performance of the Company's
independent registered public accountants.
The Compensation Committee reviews and reports to the
Board of Directors its recommendations for compensation of all
employees and sets the compensation of the management of the
Company.
The Nominating and Corporate Governance Committee is
responsible for overseeing the governance practices of the
Company and for making recommendations to the Board for any
modifications to such practices. It also identifies individuals
qualified to become Board members and recommends to the Board
the director nominees for the next annual meeting of stockholders
and candidates to fill vacancies on the Board. Additionally, the
committee recommends to the Board the directors to be appointed
to Board committees. Because the Board of Directors of the
Company has a majority of independent directors, these
independent directors control the Board of Directors' selection of
nominees for director.
The Nominating and Corporate Governance Committee
considers candidates for Board membership suggested by its
members and by other Board members. Additionally, in selecting
nominees for directors, the Nominating and Corporate Governance
Committee will review candidates recommended by stockholders
in the same manner and using the same general criteria as
candidates recruited by the committee and/or recommended by the
Board. The Nominating and Corporate Governance Committee
will also consider whether to nominate any person nominated by
a shareholder on a timely basis and in accordance with the
provisions of the Company's by-laws relating to shareholder
nominations and as described in "2009 Stockholder Proposals and
Director Nominations" below.
Once the Nominating and Corporate Governance Committee
has identified a prospective nominee, it or a subcommittee of the
Nominating and Corporate Governance Committee makes an
initial determination as to whether to conduct a full evaluation of
the candidate. This initial determination is based on the
information provided to the subcommittee with the
recommendation of the prospective candidate, as well as the
subcommittee's own knowledge of the prospective candidate,
which may be supplemented by inquiries of the person making the
recommendation or others. The preliminary determination is based
primarily on the need for additional Board members to fill
vacancies or expand the size of the Board and the likelihood that
the prospective nominee can satisfy the evaluation factors
described below. Based on the recommendation of the
subcommittee, the full committee then evaluates the prospective
nominee and his or her qualifications, as well as other factors
which may include such things as whether the prospective
nominee meets the independence requirements and other
qualifications or criteria set forth under applicable listing standards
of the NASDAQ Capital Market, or other requirements defined
under applicable Securities and Exchange Commission rules and
regulations; the extent to which the prospective nominee's skills,
experience and perspective add to the range of talent appropriate
for the Board and whether such attributes are relevant to the
Company's industry; the prospective nominee's ability to dedicate
the time and resources sufficient for the diligent performance of
Board duties; and the extent to which the prospective nominee
holds any position that would conflict with responsibilities to the
Company.
If the Nominating and Corporate Governance Committee's
internal evaluation is positive, the subcommittee and possibly
others will interview the candidate. Upon completion of this
evaluation and interview process, the Nominating and Corporate
Governance Committee makes a recommendation and report to the
full Board as to whether the candidate should be nominated by the
Board and the Board determines whether to approve the nominee
after considering this recommendation and report.
During 2007, the Company's Board of Directors had nine
formal meetings and also met thirteen additional times informally
as a Board, the Board's Audit Committee met four times, and the
Board's Compensation Committee met ten times. The Company's
Nominating and Corporate Governance Committee met once in
2007. No incumbent director attended less than 75% of meetings
of the Board of Directors during 2007. The Company encourages
and expects all of its directors to attend its Annual Meeting of
Stockholders, and all of the Company's directors attended last
year's Annual Meeting of Stockholders.
Executive Officers
In addition to Robert L. Saxe and Joseph M. Harary, whose
biographical information is provided above, the only other
executive officers of the Company are Michael R. LaPointe and
Steven M. Slovak. Michael R. LaPointe, age 49, who is the
Company's Vice President - Marketing since March 2002, joined
the Company as its Director of Marketing for Architectural
Windows and Displays in March 2000. Mr. LaPointe, a graduate
of Brown University with a B.A. in Organizational Behavior &
Management and a B.A. in Psychology, worked in a marketing
capacity for IBM Corporation in the early 1980s. He subsequently
founded and developed several companies involved in the
application and licensing of new technologies for various
consumer products. During that period Mr. LaPointe also worked
as a management consultant, where in 1994 he began his
relationship with Research Frontiers, assisting the Company with
its marketing strategy. Steven M. Slovak, age 46, joined Research
Frontiers in January 1989 as a chemist and was promoted to
various positions. In November 2005 Mr. Slovak became Research
Frontiers' Director of Film Development, and in January 2008 was
promoted to his current position as Vice President-Technology
where he oversees a growing team of chemists. Steve Slovak is an
inventor on numerous patents and patent applications held by
Research Frontiers worldwide on SPD-Smart light-control
technology, and is a member of various scientific organizations
including the ASTM International and the National Fenestration
Ratings Council (NFRC).
The Board of Directors recommends a vote FOR election
of the two nominees listed above and it is intended that proxies
not marked to the contrary will be so voted.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
(Item 2)
The Audit Committee has selected the firm of BDO Seidman,
LLP to serve as our independent registered public accountants for
the fiscal year ending December 31, 2008. BDO Seidman, LLP has
been the Company's independent registered public accountants
since 2005, and is considered by management to be well-qualified
to serve as the Company's independent registered public
accountants. We expect that representatives of BDO Seidman, LLP
will attend the meeting, have the opportunity to make a statement
if they so desire, and be available to respond to appropriate
questions.
Audit and Other Fees
The following table presents fees paid or accrued for professional
audit services rendered by BDO Seidman, LLP for the audit of our
annual financial statements for the years ended December 31, 2007
and 2006, and fees billed to us for other services rendered by BDO
Seidman, LLP during that period:
2007 2006
Audit Fees (1) $149,500 $ 89,400
Audit-Related Fees 0 0
Tax Fees (2) 14,500 14,500
All Other Fees 0 0
Total $164,000 $103,900
(1) Audit fees includes the audit of Research Frontiers
Incorporated annual financial statements and its internal
controls over financial reporting, review of financial
statements included in Research Frontiers Incorporated's
Form 10-Q Quarterly Reports, and services that are normally
provided by the independent registered public accountants in
connection with regulatory filings for those fiscal years.
(2) Tax fees include fees for all services performed by the
independent registered public accountants' tax personnel
except those services specifically related to the audit of the
financial statements, and includes fees for tax compliance and
tax advice.
The Audit Committee has approved the above-listed fees, has
considered whether the provision of the non-audit services
described above is compatible with maintaining such accounting
firms' independence, and has determined that the provision of such
services is compatible with maintaining such accounting firms'
independence.
The Board of Directors recommends a vote FOR ratification
of the selection of the accounting firm of BDO Seidman, LLP
as independent registered public accountants of the Company
for the fiscal year ending December 31, 2008.
Audit Committee Report
The following Audit Committee Report does not constitute
soliciting material and should not be deemed filed or incorporated
by reference into any other Company filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this Report by
reference therein.
During fiscal 2000, the Audit Committee of the Board of
Directors developed a written charter for the Committee that was
approved by the Board of Directors and which was updated in
2004. The complete text of the Audit Committee's current charter
is available on Company's website at www.SmartGlass.com.
The Audit Committee of the Board is responsible for
providing independent, objective oversight of the Company's
accounting functions and internal controls. The Audit Committee
is comprised of the independent directors of the Company: M.
Philip Guthrie, who serves as the Audit Committee's Chairman
and also is the Audit Committee's "financial expert" (as such term
is defined by applicable rules), Robert M. Budin, Richard Hermon-
Taylor and Victor F. Keen. The Company believes that all of the
members of its Audit Committee, due to their backgrounds and
business experience, have a sufficient understanding of generally
accepted accounting principles and financial statements, the ability
to assess the general application of such principles, an
understanding of internal controls over financial reporting, and of
audit committee functions to perform their duties as an Audit
Committee. Part of the Audit Committee's duties specifically
include the appointment, compensation and supervision of the
Company's independent registered public accountants, as well as
pre-approval of all auditing and non-auditing services provided by
the Company's independent registered public accounting firm.
Management is responsible for the Company's internal controls
and financial reporting process. The independent registered public
accountants are responsible for performing an independent audit
of the Company's financial statements and its internal controls
over financial reporting, in accordance with auditing standards of
the PCAOB, and to issue a report thereon. As set forth in more
detail in its charter, the Audit Committee's responsibility is to
monitor and oversee these processes.
In connection with these responsibilities, the Audit
Committee met with management and the Company's independent
registered public accountants, to review and discuss all financial
statements included in the Company's quarterly and annual reports
for the fiscal year ended December 31, 2007 (the "Financial
Statements") prior to their issuance and to discuss significant
accounting issues. Management has advised us that the Financial
Statements were prepared in accordance with generally accepted
accounting principles, and the Committee discussed the Financial
Statements with both management and the independent registered
public accountants. Our review included discussions with the
independent registered public accountants of matters required to
be discussed by the Statement on Auditing Standards No. 61 as
amended (communication with Audit Committees).
The Audit Committee also received written disclosures from
the independent registered public accountants required by
Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee
discussed with the independent registered public accountants that
firm's independence.
Finally, the Audit Committee continued to monitor the
integrity of the Company's financial reporting processes and its
internal procedures and controls.
Based upon the Audit Committee's discussions with
management and the independent registered public accountants,
and the Audit Committee's review of the representations of
management and the independent registered public accountants,
the Audit Committee recommended to the Board of Directors that
the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2007, for filing with the Securities and Exchange
Commission.
Members of the Audit Committee
M. Philip Guthrie (Chairman)
Robert M. Budin
Richard Hermon-Taylor
Victor F. Keen
ADOPTION OF 2008 EQUITY INCENTIVE PLAN
(Item 3)
The grant of equity awards is a common and recognized
practice for companies to attract, retain and provide incentives to
those responsible for its success, and to reduce the amount of cash
compensation that would otherwise be necessary to achieve such
goals. The Company's 1998 Stock Option Plan (the "1998 Plan")
expired on December 11, 2007 even though not all awards issuable
under such plan were issued. Although the 1998 Plan authorized
the grant of stock options, stock appreciation rights and restricted
stock grants, the Company only issued stock options during the ten
years that the 1998 Plan was in effect. Currently no options or
other equity awards are available for issuance under any Company
equity incentive plan.
On April 21, 2008, the Board of Directors of the Company
adopted an updated equity incentive plan entitled the "2008 Equity
Incentive Plan" (the "2008 Plan") which is substantially similar to
the Company's 1998 Plan except that it allows the Company to
grant restricted stock units in addition to other equity awards. A
copy of the 2008 Plan is annexed hereto as Exhibit A.
The Board of Directors believes that the 2008 Plan is
essential to the Company's continued success. The purpose of the
2008 Plan is to afford an incentive to executive officers, other
employees, non-employee directors and consultants of the
Company to acquire a proprietary interest in the Company, to
continue as employees, non-employee directors or consultants (as
the case may be), to increase their efforts on behalf of the
Company and to promote the success of the Company's business.
To further such purposes, stock options, stock appreciation rights,
restricted stock and restricted stock units may be granted pursuant
to the 2008 Plan. The Board of Directors believes that the granting
of awards under the 2008 Plan will promote continuity of
management, help attract new employees, and encourage
employees, directors, officers and consultants, to increase their
stock ownership in the Company and provide an increased
incentive and personal interest in the welfare of the Company by
those who are or may become primarily responsible for shaping
and carrying out the long range plans of the Company and securing
its continued growth, development and financial success. In a
departure from past practice, the Board anticipates that it may
grant awards other than options under the 2008 Plan. Granting
stock appreciation rights, restricted stock and/or restricted stock
units in lieu of options should result in a lower burn rate (the
number of shares subject to awards annually) and a lower level of
dilution.
The following summary of the 2008 Plan does not purport to
be complete and is subject to and qualified in its entirety by, the
text of the 2008 Plan.
The Company's employees, independent directors and
consultants are eligible to receive grants under the 2008 Plan.
Currently the Company's twelve full-time employees, four
non-employee independent directors, as well as part-time
employees and consultants would be eligible to receive grants.
Awards under the 2008 Plan are made by the committee
administering the plan. Because participation and the types of
awards under the 2008 Plan are subject to the discretion of the
committee, the benefits and amounts that will be received by any
participant if the 2008 Plan is approved are not currently
determinable.
The 2008 Plan will permit the issuance of up to 750,000
shares of common stock (having an underlying market value of
$5,715,000 as of April 18, 2008), which represents less than 5% of
the outstanding common stock as of the record date. If any awards
expire, are canceled or terminate for any reason without having
been exercised in full, the shares subject to such awards will again
be available for award under the 2008 Plan.
Under the 2008 Plan, stock options, stock appreciation rights
("SARs"), restricted stock or restricted stock units ("RSUs") may
be awarded by the Company to participants. The 2008 Plan will
be administered by a committee of at least two directors who are
not officers and employees of the Company (the "Committee").
At the outset, the Committee will consist of the Company's four
independent directors who serve as members of the Company's
Stock Option Committee.
Stock Options. The 2008 Plan provides for the grant of
options intended to qualify as incentive stock options ("ISOs")
under Section 422 of the Internal Revenue Code of 1986, as
amended, (the "Code") and options not intended to qualify as ISOs
("NQSOs"). ISOs may be granted only to employees of the
Company, including directors who are also employees. NQSOs
may be granted to employees, directors (regardless of whether they
are employees of the Company) and consultants. All options
granted under the 2008 Plan will have an exercise price at least
equal to the fair market value of the Company's common stock on
the date of grant (110% of fair market value in the case of ISOs
granted to 10% or more stockholders). Fair market value is
generally defined as the average of the high and low trading price
per share of common stock for the last day preceding the option
grant on which there was a sale. Unless otherwise agreed to by the
Company, all options granted under the 2008 Plan shall be
non-transferable except by will or pursuant to the laws of descent
and distribution. In no event may ISOs exercisable for stock
having an aggregate fair market value of $100,000 (together with
all ISOs granted under any other Company plan) be granted which
first become exercisable in any one calendar year. No options
granted under the 2008 Plan may have a term greater than ten
years (five years in the case of ISOs granted to 10% or more
stockholders). The Committee will determine the time or times
each option may be exercised and the time period if any, after
death, disability or termination of employment or other
relationship with the Company during which the option may be
exercised. The exercisability of an option may be accelerated by
the Committee. In general, a participant may pay the exercise
price of an option by cash, certified check, promissory note
providing for interest, "netting", by tendering shares of common
stock, or by means of a broker assisted cashless exercise. Under
the 2008 Plan, all options are intended to qualify as
"performance-based compensation" under Section 162(m) of the
Code.
Stock Appreciation Rights. SARs may be granted under the
2008 Plan either in conjunction with an option granted under the
2008 Plan or without regard to an option. Under exercise of a
SAR awarded under the 2008 Plan, the participant will be entitled
to an amount equal to the excess of the then fair market value of
a share of common stock over the fair market value of a share of
common stock on the date of grant, multiplied by the number of
SARs being exercised. The payment of this amount may be in
cash, common stock or any combination of the two, in the
discretion of the Company. The Committee will determine the
time or times, and the terms and condition pursuant to which, each
SAR not granted in conjunction with an option may be exercised.
A SAR granted in conjunction with an option will be exercisable
at such time or times and only to the extent that the related option
is exercised. Upon the exercise of a SAR granted in conjunction
with an option, the related option shall be canceled to the extent of
the number of shares of common stock as to which the SAR is
exercised and upon the exercise of an option granted in
conjunction with a SAR, the SAR will be cancelled to the extent
of the number of shares of common stock to which the option is
exercised. Under the 2008 Plan, all SARs are intended to qualify
as "performance-based compensation" under Section 162(m) of the
Code. To date, the Company has never awarded SARs under any
plan.
Restricted Stock. Restricted Stock may be granted under the
2008 Plan. Each award of Restricted Stock shall be evidenced by
a written agreement between the Company and the participant
which states the number of shares of Restricted Stock to be subject
to such award, and the conditions of grant. Share of Restricted
Stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, for such period as the Committee shall
determine from the date on which the award is granted (the
"Restricted Period"). The Committee may also impose such other
restrictions and conditions on the shares as it deems appropriate
including the satisfaction of performance criteria and the vesting
of such awards over time. Certificates for shares of stock issued
pursuant to Restricted Stock awards will bear an appropriate
legend referring to such restrictions during the Restricted Period,
and such certificates will be held in escrow by an escrow agent
appointed by the Company. The Committee has the authority to
waive or cancel all or any portion of any outstanding restrictions
prior to the expiration of the Restricted Period with respect to any
or all of the shares of Restricted Stock awarded. Subject to any
restrictions imposed on the grant, during the Restricted Period, the
participant will possess all incidents of ownership of such shares
including the right to receive dividends with respect to such shares
and to vote such shares. Subject to such exceptions as may be
determined by the Committee, if the participant's continuous
employment or other relationship with the Company terminates for
any reason prior to the expiration of the Restricted Period of an
award, any shares remaining subject to restrictions will thereupon
be forfeited by the participant and transferred to, and reacquired
by, the Company. To date, the Company has never awarded
Restricted Stock under any plan.
Restricted Stock Units. RSUs may be granted under the 2008
Plan. Each award of a RSU will entitle the participant one share
of common stock or cash equal to the value of one share of
common stock, in the discretion of the Committee. Unless
otherwise specified by the Committee, the Committee will deliver
the participant of a RSU a share or cash, as the case may be, within
30 days after the conditions and restrictions with respect to such
RSU have been satisfied. Each award of RSUs will be evidenced
by a written agreement between the Company and the participant
which states the number of RSUs to be subject to such award, and
the conditions of the grant. RSUs may be subject to the
satisfaction of such conditions and restrictions (such as a condition
of continued employment or the satisfaction of performance
criteria) as the Committee shall determine. The Committee has the
authority to waive or cancel all or any portion of any outstanding
conditions or restrictions with respect to any or all of the RSUs
prior to the satisfaction of such terms and conditions. Subject to
such exceptions as may be determined by the Committee, if the
participant's continuous employment or other relationship with
the Company terminates for any reason prior to the satisfaction of
the restrictions or conditions of SARs, any RSUs remaining
subject to restrictions shall thereupon be forfeited by the
participant and transferred to, and reacquired by, the Company.
The Company was not permitted to award RSUs under it prior
plans.
The 2008 Plan shall terminate on April 20, 2018. Any option
or other award outstanding under the 2008 Plan at the time of the
termination of the 2008 Plan shall remain in effect until such
option or award shall have been exercised or shall have expired in
accordance with its terms. The Board of Directors may make such
modifications of the 2008 Plan as it shall deem advisable.
However, the Board may not without further approval of the
holders of a majority of the shares of the Common Stock present
in person or by proxy at any special or annual meeting of the
stockholders increase the number of shares as to which options or
other awards may be granted or change the class of persons
eligible to receive an award under the 2008 Plan. The Company
intends to file a registration statement under the Securities Act of
1933, as amended covering the securities issuable under the 2008
Plan.
FEDERAL INCOME TAX ASPECTS OF AWARDS UNDER THE 2008 PLAN
The following is a brief summary of the federal income tax
consequences of awards made under the 2008 Plan based upon the
federal income tax laws in effect on the date hereof. This
summary is not intended to be exhaustive, and does not describe
state or local tax consequences.
Incentive Stock Options. No regular taxable income is
realized by the participant upon the grant or exercise of an
incentive stock option ("ISO"). However, upon exercise of an
ISO, the difference between the price paid for the shares and the
fair market value of the shares on the date of exercise will be
included in the participant's income under the Alternative
Minimum Tax. If a participant does not sell the stock received
upon the exercise of an ISO ("ISO Shares") within two years from
the date of grant and one year from the date of exercise, any gain
(loss) realized on the shares sold will be long-term capital gain
(loss). In such circumstances, no deduction will be allowed to the
Company for federal income tax purposes. If ISO Shares are
disposed of prior to the expiration of either of the two and
one-year holding periods described above, the participant
generally will realize ordinary income at that time equal to the
excess, if any, of the fair market value of the shares at exercise (or,
if less, the amount realized on the disposition of the shares) over
the price paid for such ISO Shares. The Company will be entitled
to deduct any such recognized amount. Any further gain or loss
realized by the participant will be taxed as short-term or long-term
capital gain or loss, depending upon the length of time that the
participant has held the shares. Subject to certain exceptions for
disability or death, if an ISO is exercised more than three months
following the termination of the participant's employment, the
option will generally be taxed as a non-qualified stock option.
Non-Qualified Stock Options. No income is realized by the
participant at the time a non-qualified stock option ("NQSO") is
granted. Generally upon exercise of a NQSO, the participant will
realize ordinary income in an amount equal to the difference
between the price paid for the shares and the fair market value of
the shares on the date of exercise. The Company will be entitled
to a tax deduction in the same amount. Any appreciation (or
depreciation) after the date of exercise will be either short-term or
long-term capital gain (or loss), depending upon the length of time
that the participant has held the shares.
Stock Appreciation Rights. No income will be realized by a
participant in connection with the grant of an SAR. When the SAR
is exercised, the participant will generally be required to include
as taxable ordinary income in the year of exercise an amount equal
to the amount of cash and/or the fair market value of any shares
received. The Company will be entitled to a deduction at the time
and in the amount included in the participant's income by reason
of the exercise. If the participant receives common stock upon
exercise of an SAR, any appreciation (or depreciation) after the
date of exercise will be either short-term or long-term capital gain
(or loss), depending upon the length of time that the participant has
held the shares.
Restricted Stock. A participant receiving restricted stock
generally will recognize ordinary income in the amount of the fair
market value of the restricted stock at the time the stock is no
longer subject to restriction or forfeiture, less any consideration
paid for the stock. The Company will be entitled to a deduction at
the same time and in the same amount. The holding period to
determine whether the participant has long-term or short-term
capital gain or loss on a subsequent sale generally begins when the
stock is no longer subject to forfeiture, and the participant's tax
basis for such shares will generally equal the fair market value of
such shares on such date. However, a participant may elect, under
Section 83(b) of the Internal Revenue Code, within 30 days of the
grant of the stock, to recognize taxable ordinary income on the
date of grant equal to the excess of the fair market value of the
shares of restricted stock (determined without regard to the
restrictions) over the purchase price of the restricted stock. By
reason of such an election, the participant's holding period will
commence on the date of grant and the participant's tax basis will
be equal to the fair market value of the shares on that date
(determined without regard to restrictions). Likewise, the
Company generally will be entitled to a deduction at that time in
the amount that is taxable as ordinary income to the participant.
If shares are forfeited after making such an election, the participant
only will be entitled to a loss for tax purposes in an amount equal
to the difference between the purchase price of the forefeited
shares (if any) and the amount received (if any) upon such
forfeiture.
Restricted Stock Unit. No income will be realized by a
participant in connection with the grant of Restricted Stock Unit.
The participant will generally recognize ordinary income equal to
the cash and/or fair market value of any shares of common stock
received at the time of such receipt. The Company will be entitled
to a deduction at the time and in the amount included in the
participant's income.
Awards granted under the 2008 Plan are intended to either
avoid the application of Section 409A of the Code (which deals
with non-qualified deferred compensation arrangement) or to
comply with such section.
In general, Section 162(m) of the Code denies a public
company a deduction for federal income tax purposes for
compensation in excess of $1 million per year paid to its chief
executive officer and the three other most highly compensated
officers whose compensation is disclosed in the company's proxy
statement (other than the chief financial officer), subject to certain
exceptions. The options and SARs granted under the 2008 Plan
are intended to qualify under one of the exceptions in Section
162(m), which provides that compensation that is "performance
based" is not subject to the Section 162(m) limitation for the
federal income tax deduction.
The Board of Directors recommends a vote FOR approval of the
2008 Plan and it is intended that proxies not marked to the contrary
will be so voted. Approval of the 2008 Plan requires the affirmative
vote of the holders of a majority of the shares of the Company's
Common Stock present, or represented, and entitled to vote at the
Annual Meeting.
SHAREHOLDER PROPOSAL REGARDING THE
REPORTING OF CERTAIN PRODUCTION
AND SALES INFORMATION OF THIRD PARTIES
(Item 4)
The Company has been notified that Mr. Barry Kupfer, a
shareholder, intends to present a proposal for consideration at
the Annual Meeting. Mr. Kupfer has presented the proposal and
supporting statement below, and we are presenting the proposal
as it was submitted to us. The Company is not responsible for
the contents of the shareholder proposal or his supporting
statement. We do not necessarily agree with all the statements
contained in the proposal and the supporting statement, but we
have limited our responses to the most important points and
have not attempted to refute all the statements with which we
disagree. The address and stock ownership of the proponent of
this proposal will be furnished by the Company's Secretary to
any person, orally or in writing as requested, promptly upon
receipt of any oral or written request.
Mr. Barry Kupfer, who claims to own at least $2,000 worth of
the Company's common stock, has notified the Company that
he intends to present the following proposal for consideration at
the Annual Meeting:
"RESOLUTION: Provide more detail information on film
production quantities and sales.
BE IT RESOLVED: On a quarterly basis beginning within 30
days of the 2008 annual meeting with the previous quarter's
data, the company shall separately report revenue by license
fees and royalties; and report total royalty revenue that the
licensees are required to report by their license agreement
even though it might be below minimum royalty payments.
Additionally, the company shall provide information on how
much film is produced for sale as reported by licensees as
required by their license agreement. This information can be
aggregated for all licensees so that any individual licensee's
information remains confidential.
Rationale for adoption: While there has been reported film
production and sales going back many years, there has not
been any officially reported measure of film produced or
revenue from sales that would inform shareholders of the true
extent of the commitment by licensees to develop SPD
products. In as much as the Company is 100% dependent on
licensees for SPD film production and sales, this information
equates to the viability of the Company and the only way to
fairly value the Company. Additionally, the Company has
over the years, partnered with licensees in the release of
information about SPD products for sale and sold but there
has been no information given to independently verify this."
Your Board of Directors recommends a vote AGAINST the
above proposal for the following reasons:
Your Company tries to provide its shareholders with as much
information about its operations as is possible within the
constraints provided by its agreements and business relationships
with our licensees. This is sometimes further limited by constraints
imposed on our licensees by their customers, and is often a
necessary condition to doing business with such customers,
especially in the automotive and aircraft industries where original
equipment manufacturers impose strong secrecy requirements
upon their suppliers around products that such OEMs have in
development. Due to factors such as these, and because our license
agreements would not permit the disclosure of the information
requested in the shareholder's proposal, the Company believes that
Rule 14a-8 of the Securities and Exchange Commission would
permit us to exclude the shareholder's proposal from this Proxy
Statement because it's implementation is outside of the Company's
control. We also believe that such proposal is not in the best
interests of the Company or its shareholders. We are including Mr.
Kupfer's proposal in this Proxy Statement so that our shareholders
can be aware of its contents and so that our shareholders will have
a better understanding about certain limitations on information that
the Company can publicly disclose for legal and competitive
business reasons. These limitations are prevalent in businesses
such as the Company's that deal in certain industries such as
automotive and aerospace, and we have asked Mr. Kupfer to
provide examples of other companies dealing in these industries
that provide the information he requests in his proposal. As of the
record date for this Annual Meeting, Mr. Kupfer has failed to
provide the Company with any such examples.
Even if compliance with the proposal's provisions were possible,
it would not be in the best interests of the Company, its
shareholders, its licensees or their customers in many significant
areas. For example, such disclosure would reveal to competitors
and to prospective licensees with whom your Company may be in
negotiation, details about the terms of prior license agreements that
would prevent the Company from negotiating the best possible
terms under new license agreements or amendments to existing
license agreements. The Securities and Exchange Commission has
recognized the proprietary nature of this information and permits
the Company to treat such information in our license agreements
as confidential. Furthermore, Generally Accepted Accounting
Principles (GAAP) which established the applicable standard for
all financial reporting, recognizes that providing detail as to
individual customers' activities could jeopardize a company's
relations with its customers and provide proprietary information to
competitors. For example, GAAP only requires that a company
disclose the percentage of revenues that its top customers account
for and only to the extent that a customer is responsible for greater
than ten percent of a company's revenues. The Company complies
with this standard in the notes to its annual financial statements as
required by GAAP. Also as written, the shareholder's proposal
would only require disclosure of information if a license
agreement would permit such disclosure. However, this could
result in partial and incomplete information being provided which
is not acceptable under applicable financial reporting standards,
and, if adopted, could require the Company's financial statements
to not comply with generally accepted accounting standards
consistently applied, which would be improper.
The shareholder's proposal also would not accomplish the
shareholder's stated purpose for the resolution. For example, the
proposal explicitly assumes that a licensee's commitment to
develop SPD products can be indicated by details of SPD film
production quantities and sales. Such information would only
report actual activity by a licensee after the fact, whereas the true
measure of a licensee's commitment to develop SPD products will
depend upon other factors such as the number of people that the
licensee devotes to its SPD business, the licensee's capital
expenditures to build or expand factory lines to produce SPD-
Smart emulsion, film and end-products, and the resources devoted
by the licensee to sales and marketing of such products. As noted
in the shareholder's proposal, the Company has from time to time
joined licensees in the release of information about SPD products,
but those activities were done with the licensees involvement,
participation, and consent. The shareholder's proposal would go
beyond that and would require the Company to unilaterally
disclose information that the licensee does not want revealed for
competitive or other reasons. In addition, the proposal could
require the disclosure of information that the Company would be
prohibited from releasing, or information that would put the
Company and/or its licensees at a competitive disadvantage, or
that could jeopardize the Company's relationship with its
licensees, or such licensees relationships with their own customers.
All of the foregoing would be detrimental to the Company's
business and management believes would not be in the best
interests of the Company, its shareholders, its licensees, or their
customers, if adopted.
The Board of Directors recommends a vote AGAINST the
above proposal for the reasons described above, and it is
intended that proxies not marked to the contrary will be so
voted.
EXECUTIVE COMPENSATION
The following table sets forth information regarding all cash
compensation paid by the Company and stock options granted
during the fiscal years indicated to Robert L. Saxe, the Company's
chief executive officer, and to each of the Company's executive
officers during the past fiscal year. Because Steven M. Slovak
became an executive officer in 2008, information with respect to
his compensation is not required to be included herein.
Name of Executive and Option All Other
Principal Positions Year Salary Bonus Awards($)(1) Compensation(2) Total(3)
Robert L. Saxe, 2007 $393,091 $ 0 $903,582 $ 10,583 $1,307,256
Director, Chairman 2006 $379,798 $ 0 $ 0 $ 24,833 $ 404,631
of the Board 2005 $400,274 $ 0 $225,737 $ 36,974 $ 662,985
Joseph M. Harary, 2007 $393,091 $139,760 $708,556 $37,797 $1,279,204
Director, President, 2006 $379,798 $ 54,000 $ 0 $43,823 $ 477,621
General Counsel, 2005 $364,140 $ 50,000 $ 85,512 $28,011 $ 527,663
Teasurer,Secretary
Michael R. LaPointe, 2007 $140,219 $ 0 $210,747 $ 0 $ 350,966
Vice-President 2006 $135,477 $ 0 $ 0 $ 4,168 $ 139,646
Marketing 2005 $129,892 $ 14,161 $ 44,099 $ 2,997 $ 191,149
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(1) The dollar value of option awards listed below are estimated
values based upon the Black-Scholes valuation method in
accordance with FAS 123(R) using the assumptions set forth in
the Company's Annual Report on Form 10-K for the respective
year in question.
(2) Consists of the payment of accrued but unused vacation.
(3) Consists of cash compensation (salary, bonus, and accrued
vacation) plus the estimated dollar value of option awards
based upon the Black-Scholes valuation method described in
footnote (1) above. These amounts do not indicate the amount
actually realized by the individual since estimated values will
fluctuate based upon future market conditions.
The Company has no plan providing for pension benefits, non-
qualified defined contributions, deferred contributions, or payments
upon a change of control of the Company.
Stock Options Granted in 2007
The following table sets forth information regarding all grants
of options to the executive officers of the Company during 2007, and
the estimated fair value of such options on the date of grant
recognized for financial statement reporting purposes based upon the
Black-Scholes valuation method in accordance with FAS 123(R)
using the assumptions set forth in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2007. Each
option is exercisable into one share of common stock. All options
expire ten years from the date of grant except the options granted to
Robert L. Saxe and Joseph M. Harary on July 12, 2007 which expire
three years from the date of grant:
Grant Exercise Number of Estimated Fair Value
Name Date Price Options Granted ofOptions Granted
Robert L. Saxe 02/13/07 $11.375 20,000 $143,948
Robert L. Saxe 07/12/07 $14.930 61,981 $406,707
Robert L. Saxe 12/03/07 $ 9.800 64,756 $352,927
Joseph M. Harary 02/13/07 $11.375 15,000 $107,961
Joseph M. Harary 07/12/07 $14.930 50,000 $328,090
Joseph M. Harary 12/03/07 $ 9.800 50,000 $272,505
Michael R. LaPointe 02/13/07 $11.375 10,000 $ 71,974
Michael R. LaPointe 07/12/07 $14.930 10,000 $ 84,272
Michael R. LaPointe 12/03/07 $ 9.800 10,000 $ 54,501
The following table shows all options outstanding as of the end of
2007 granted to executives of the Company. All options listed are
fully vested and exercisable at year end.
Outstanding Equity Awards at December 31, 2007
Number of
Securities
Underlying
Unexercised Option Option Option
Stock Options Exercise Grant Expiration
Name of Executive (# Exercisable) Price Date Date
Robert L. Saxe: 120,000 $ 7.15625 06/11/98 06/10/08
120,000 $ 7.37500 12/09/98 12/08/08
240,000 $ 8.37500 06/10/99 06/09/09
61,981 $14.93000 07/12/07 07/11/10
48,000 $14.46875 10/12/00 10/11/10
48,000 $19.00000 12/15/00 12/14/10
120,000 $25.52500 06/14/01 06/13/11
60,000 $ 9.94000 09/24/01 09/23/11
60,000 $12.77500 06/13/02 06/12/12
27,733 $ 6.00000 07/01/05 06/30/15
88,560 $11.20000 12/06/05 12/05/15
20,000 $11.37500 02/13/07 02/12/17
64,756 $ 9.80000 12/03/07 12/02/17
Joseph M. Harary: 60,000 $ 8.37500 06/10/99 06/09/09
50,000 $14.93000 07/12/07 07/11/10
28,000 $14.46875 10/12/00 10/11/10
28,000 $19.00000 12/15/00 12/14/10
60,000 $25.52500 06/14/01 06/13/11
30,000 $ 9.94000 09/24/01 09/23/11
35,000 $12.77500 06/13/02 06/12/12
40,000 $11.20000 12/06/05 12/05/15
15,000 $11.37500 02/13/07 02/12/17
50,000 $ 9.80000 12/03/07 12/02/17
Michael R. LaPointe: 50,000 $37.03125 02/22/00 02/21/10
1,500 $18.90625 06/08/00 05/22/10
1,500 $14.46875 10/12/00 10/11/10
1,500 $19.00000 12/15/00 12/14/10
15,000 $25.52500 06/14/01 06/13/11
7,000 $12.77500 06/13/02 06/12/12
7,000 $12.81000 06/12/03 06/11/13
10,000 $ 6.17500 12/14/04 12/13/14
11,000 $ 6.00000 07/01/05 06/30/15
10,000 $ 5.60000 12/06/05 12/05/15
10,000 $11.37500 02/13/07 02/12/17
10,000 $14.93000 07/12/07 07/11/17
10,000 $ 9.80000 12/03/07 12/02/17
Stock Options Exercised in 2007
The following table sets forth information regarding all
exercises of options by executives of the Company during 2007. In
accordance with applicable rules, the dollar amount listed in the
Value Realized column represents the difference between the market
price of the underlying securities on the date of exercise (calculated
based upon the average of the high and low trading prices of the
Company's common stock on the date of exercise) and the exercise
price of the options, and does not necessarily mean the executive
sold the number of shares indicated below as being acquired upon
exercise, or that the executive actually realized the amount listed
under the value realized column.
Number of
Shares Acquired Value Realized
Name on Exercise on Exercise
Joseph Harary 171,100 $814,120
Director Compensation
Historically, the Company has paid its directors fees in the form
of stock options and not in cash or other compensation. The
Company's policies towards compensation of directors is described
below in "Compensation Discussion and Analysis." The following
table shows the compensation, in the form of stock option grants, paid
to each Director of the Company who is not also an executive officer
of the Company during the past fiscal year. The dollar value of option
awards listed below are estimated values recognized for financial
statement reporting purposes based upon the Black-Scholes valuation
method in accordance with FAS 123(R) using the assumptions set
forth in the Company's Annual Report on Form 10-K for the
respective year in question. All independent directors received the
same level of option grants on each grant date, and the difference in
the estimated dollar amounts for each award listed below is
attributable to Mr. Guthrie and Mr. Hermon-Taylor joining, and Dr.
Malvino retiring from, the Company's Board of Directors in
December 2007.
Option
Name Awards ($)
Robert M. Budin $316,132
M. Philip Guthrie $136,253
Richard Hermon-Taylor $136,253
Victor F. Keen $316,132
Albert P. Malvino $179,879
Compensation Discussion and Analysis
The compensation of executive officers of the Company,
including the Company's chief executive officer, is determined by the
Compensation Committee of the Company's Board of Directors,
whose names are listed below at the end of their report. The starting
point for determining compensation of any executive officer is their
historical base salary and prior compensation history. The salaries of
all executive officers are also reviewed at least twice annually by the
Compensation Committee and by the entire Board of Directors.
Numerous factors are reviewed in determining compensation levels.
These factors include: the compensation levels of executive officers
with comparable experience and qualifications, compensation levels
at comparable companies, individual and Company performance, past
compensation levels, years of service, performance of the Company's
stock, and other relevant considerations, including a review of
applicable compensation studies and other reference materials.
Members of the Company's Compensation Committee review
recommendations made by management of the Company with respect
to the compensation of all employees, and without delegation of its
duties to others, the Compensation Committee sets the compensation
of management of the Company and reports its recommendations to
the entire Board of Directors of the Company. The Company's goal
is to set compensation levels based upon the approach discussed
above, and to include in such compensation a relevant combination of
base salary, equity incentives, and performance-based bonuses. This
approach is designed to more closely align total executive
compensation with the long-term performance of the Company and
enable all employees of the Company to participate in the Company's
growth. Through ownership of stock options, the executive is
rewarded if the Company's stockholders receive the benefit of
appreciation of the price of the Company's Common Stock. Because
the Company believes that its success is dependent upon the
coordinated efforts of all of its employees, and that teamwork is
essential in further developing the Company's technology and
meeting the expectations of the Company's licensees and
stockholders, when stock options are granted, usually all employees
of the Company are granted stock options. During 2006, no stock
options were granted. Stock options were awarded to all employees
and directors of the Company in February 2007 after certain key
milestones were achieved and publicly announced relating to
production of SPD light-control film and customer adoption of SPD
technology in certain end-products. These option grants were
supplemented in July 2007. In December 2007, prior to the expiration
of its 1998 Stock Option Plan, the Company also granted options to
its directors and employees to provide a future incentive and also to
pay existing and new directors their directors fees. In total during
2007, 654,537 options having a weighted average exercise price of
$11.85 were granted to directors, employees of, and consultants to,
the Company. All employees employed by the Company at the
beginning of 2007 and 2008 received a cost-of-living increase in their
base salaries and Steven M. Slovak and certain other members of his
technical staff received supplemental increases based upon
meritorious performance, increased duties, and achievement of other
research-related goals. In addition, the President of the Company
received bonus compensation during 2007 for the achievement of
certain milestones set by the Company's Board of Directors regarding
the raising of additional capital to strengthen the financial position of
the Company.
The Board of Directors has adopted a stock option plan
(described above) which requires the approval of the Company's
shareholders in order to become effective. The purpose of this stock
option plan is to attract key employees, officers and directors and to
encourage their continued employment and services and their
increased stock ownership in the Company. The Board of Directors
believes that the granting of stock options under this stock option plan
will promote continuity of management, and will result in the
increased incentive and personal interest in the welfare of the
Company by those who are or may become primarily responsible for
shaping and carrying out the long range plans of the Company and
securing its continued growth, development and financial success.
Currently no options of common stock are available for issuance
under the Company's other stock option plans which have all expired.
If any options expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject thereto will again be
available for issuance under this stock option plan. The number of
stock options granted under such plan is determined based upon
factors similar to those described above in connection with the setting
of cash compensation.
Since the Company's four independent directors each chair (or
recently chaired) one of three committees (Audit, Compensation, or
Nominating and Corporate Governance Committees), and serve as
members of the other such committees that they do not so chair, the
Company believes that it is appropriate to set target levels of director
compensation based upon the factors described above for service on
the Company's Board of Directors, and to pay each non-employee
independent Director an equal amount (rather than set compensation
based upon meetings attended based upon committees served on or
chaired). Based upon its review of comparable directors fees paid at
other companies, each non-employee independent director receives
stock options with respect to service as a Director during 2008. having
a Black-Scholes valuation initially targeted at approximately 80,000,
which amount is then subject to adjustment based upon results
achieved and future modification as a result of prevailing
compensation levels and other factors.
The Company's stock option plan is administered by a
committee of at least two directors who are not officers and
employees of the Company (the "Administrators"). Currently the
Administrators consist of all four independent directors of the
Company , who serve as members of the Company's Stock Option
Committee and are also the sole members of the Company's
Compensation Committee. Options which qualify as Incentive Stock
Options ("ISOs") under the Internal Revenue Code of 1986, as
amended (the "Code"), and non-qualifying options ("NQSOs") may
be issued under the Company's 2008 Equity Incentive Plan. Also
stock appreciation rights and restricted stock may be awarded under
the Company's 2008 Equity Incentive Plan, although to date there
have been no awards of stock appreciation rights and restricted stock
under any of the Company's stock option plans. The number of
options to be granted under these stock option plans are determined
by the Administrators in their discretion.
The purchase price of Common Stock subject to each option
issued under this stock option plan will be determined by the Board
of Directors or the Administrators, as the case may be, but in the case
of an ISO may not be less than (i) the fair market value of the
Common Stock subject to the option on the date of grant or (ii) in the
case of an option granted to an employee who, at the time the option
is granted, owns (within the meaning of the Code) more than 10% of
the total combined voting power of all classes of stock of the
Company, 110% of the fair market value of the Common Stock
subject to the option on the date of grant. Options under this stock
option plan may be exercised in the manner and at such times fixed
by the Board of Directors, but may not be exercised for a term of
more than 10 years, or for a term of five years in the case of an
employee who, at the time an ISO is granted, owns (within the
meaning of the Code) more than 10% of the total combined voting
power of all classes of stock of the Company. In no event may ISOs
exercisable for stock having an aggregate fair market value
determined on the date of grant of $100,000 (together with all ISOs
granted under any other stock option) be granted which first become
exercisable in any one calendar year. Options are not transferable
except by will or intestacy on the death of the optionee. In general,
ISOs terminate when an optionee ceases to be employed by the
Company or within a specified period after the termination of such
employment depending upon the reason for such termination. It is
currently expected that option grants will be reviewed twice per year.
Employment Arrangements
The Company entered into an employment agreement with Mr.
Robert L. Saxe which automatically renews itself for successive one-
year terms unless either the Company or Mr. Saxe gives the other at
least 10 days prior written notice of the intention not to renew the
employment agreement. Pursuant to that agreement, Mr. Saxe
received an annual base salary from the Company of $393,091 during
2007 and will receive an annual base salary of $402,132 through
December 31, 2008. The Compensation Committee of the Board of
Directors may, in its discretion, authorize a higher salary for Mr.
Saxe. Pursuant to his employment agreement, Mr. Saxe has agreed
not to compete with the Company for a period of two years following
the termination of his employment thereunder. The Company
maintains key-man life insurance on the life of Mr. Saxe in the
amount of $500,000.
Compensation Committee Interlocks and Insider Participation
In 2007, the Compensation Committee of our Board of Directors
consisted solely of independent directors. None of our executive
officers served as a director or member of the compensation
committee of another entity which had an executive officer that
served as a director or member of our Compensation Committee. No
member of the Company's Compensation Committee is a current or
former employee of the Company.
Compensation Committee Report
The following Compensation Committee Report does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except
to the extent the Company specifically incorporates this Report by
reference therein.
The Compensation Committee of the Board of Directors of
Research Frontiers Incorporated has reviewed and discussed with
management the Compensation Discussion and Analysis included in
this Proxy Statement. Based on its reviews and discussions, the
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy
Statement and incorporated by reference into the Company's Annual
Report on Form 10-K for the year ended December 31, 2007.
This report is submitted on behalf of the Compensation Committee.
Members of the Compensation Committee
Victor F. Keen (Chairman)
Robert M. Budin
M. Philip Guthrie
Richard Hermon-Taylor
Equity Compensation Plan Information
The following table sets forth information as of December 31,
2007 with respect to shares of the Company's Common Stock that
may be issued under the Company's existing Stock Option Plan, and
any other equity that may be issued to officers or directors of, or
consultants to, the Company.
Number of Weighted Number of
Securities to Average Securities
be Issued Upon Exercise Price Remaining
Exercise of of Outstading Available
Outstanding Options Options and for Future
Plan Category and Warrants Warrants Issuance
Equity compensation plans
approved by security holders 2,772,380 $12.28 0
Equity compensation plans not
approved by security holders (see
Notes 7(b)(ii) and (c) to the
Company's 12-31-07
financial statements) 220,250 $ 7.90 0
Total 2,992,630 $11.96 0
Stock Price Performance
The following table sets forth the range of the high and low
selling prices (as provided by The Nasdaq Stock Market, Inc.) of the
Company's common stock for each quarterly period within the past
two fiscal years:
Quarter Ended Low High
March 31, 2006 $3.59 $6.32
June 30, 2006 3.71 6.49
September 30, 2006 4.00 5.25
December 31, 2006 4.05 6.82
March 31, 2007 4.93 12.33
June 30, 2007 9.55 14.29
September 30, 2007 10.00 15.64
December 31, 2007 7.90 17.40
These quotations may reflect inter-dealer prices,
without retail mark-up, mark-down, or
commission, and may not necessarily represent
actual transactions.
The following graph compares the total returns (assuming
reinvestment of dividends) on $100 invested on December 31, 2002
in the Company's Common Stock (REFR), the NASDAQ Composite
(U.S.) Stock Index, and the NASDAQ Electronic Component Stock
Index. The stock price performance shown on the graph below
reflects historical data provided by The Nasdaq Stock Market, Inc.
and is not necessarily indicative of future price performance.
[graph with the following data points]
Date Index Index Index
U.S. NASDAQ Electronics REFR
12/31/02 $100.00 $100.00 $100.00
01/31/03 $98.92 $99.73 $88.01
02/28/03 $100.31 $107.11 $80.34
03/31/03 $100.60 $102.09 $86.33
04/30/03 $109.74 $116.30 $85.01
05/30/03 $119.38 $132.62 $137.28
06/30/03 $121.29 $131.61 $167.63
07/31/03 $129.65 $150.21 $162.94
08/29/03 $135.30 $164.98 $138.85
09/30/03 $133.54 $159.93 $137.52
10/31/03 $144.30 $183.62 $126.62
11/28/03 $146.43 $194.16 $112.83
12/31/03 $149.52 $192.44 $111.39
01/30/04 $153.95 $196.90 $152.04
02/27/04 $151.06 $186.50 $143.53
03/31/04 $148.48 $178.04 $115.35
04/30/04 $143.56 $161.02 $125.06
05/28/04 $148.33 $176.16 $107.91
06/30/04 $152.89 $176.11 $85.25
07/30/04 $141.22 $153.01 $84.17
08/31/04 $137.76 $137.29 $71.46
09/30/04 $141.87 $134.93 $76.26
10/29/04 $147.62 $145.32 $86.81
11/30/04 $156.72 $147.52 $75.18
12/31/04 $162.72 $152.19 $76.50
01/31/05 $154.25 $141.79 $71.94
02/28/05 $153.38 $145.81 $61.63
03/31/05 $149.47 $142.42 $62.35
04/29/05 $144.04 $137.19 $54.56
05/31/05 $155.17 $154.87 $52.28
06/30/05 $154.54 $150.97 $38.01
07/29/05 $164.41 $157.80 $35.13
08/31/05 $161.80 $151.92 $34.41
09/30/05 $161.93 $150.40 $37.17
10/31/05 $159.85 $142.13 $56.59
11/30/05 $168.57 $155.79 $67.87
12/30/05 $166.18 $150.79 $61.99
01/31/06 $173.52 $157.23 $61.15
02/28/06 $171.79 $158.69 $50.12
03/31/06 $176.27 $161.80 $46.28
04/28/06 $174.88 $162.18 $65.35
05/31/06 $164.33 $146.24 $64.75
06/30/06 $164.33 $144.40 $62.11
07/31/06 $158.06 $133.25 $51.56
08/31/06 $165.08 $149.93 $50.36
09/29/06 $170.77 $153.87 $51.80
10/31/06 $179.13 $159.15 $69.30
11/30/06 $183.81 $169.30 $72.30
12/29/06 $182.57 $165.77 $65.71
01/31/07 $186.14 $164.34 $76.62
02/28/07 $182.33 $163.71 $111.99
03/30/07 $182.84 $158.46 $115.11
04/30/07 $190.77 $170.23 $130.22
05/31/07 $196.62 $172.43 $124.22
06/29/07 $195.88 $179.75 $169.18
07/31/07 $191.16 $182.04 $179.02
08/31/07 $194.94 $193.67 $140.41
09/28/07 $202.10 $199.46 $178.90
10/31/07 $213.04 $202.34 $178.18
11/30/07 $198.36 $184.72 $118.11
12/31/07 $197.98 $185.85 $119.90
2009 STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Any stockholder who intends to present a proposal for action,
including the nomination of a candidate for Director, at the
Company's 2009 Annual Meeting of Stockholders, must comply
with and meet the requirements of the Company's By-Laws and of
Rule 14a-8 of the Securities and Exchange Commission. Rule 14a-8
requires, among other things, that any proposal be received by the
Company at its principal executive office, 240 Crossways Park
Drive, Woodbury, New York 11797, Attention: Corporate Secretary,
by December 31, 2008. Section 2.12 of the Company's By-Laws (a
copy of which is available upon request) sets forth the procedures
that must be followed with respect to stockholder nominations,
which include a requirement that the person making the nomination
be a stockholder of record at the time of giving notice for such
stockholders meeting and who shall be entitled to vote for the
election of directors at the meeting, and that such nomination be
made pursuant to timely notice in proper written form to the
Secretary of the Company. To be in proper written form, such notice
shall set forth (a) as to each person whom the stockholder proposes
to nominate for election or re-election as a director, (i) the name,
age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class
and number of shares of the Company which are owned beneficially
and of record by such person, (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies
for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (including, without limitation,
such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected), and (v) any
other information that is or would be required to be disclosed in a
Schedule 13D promulgated under the Securities Exchange Act of
1934 regardless of whether such person would otherwise be required
to file a Schedule 13D, and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Company's
books, as such stockholder, (ii) the class and number of shares of the
Company which are owned beneficially and of record by such
stockholder, and (iii) a description of all arrangements or
understandings between such stockholder and the person nominated
by such stockholder, and any interest by such stockholder in the
election of the person nominated by such stockholder, and any
relationship between such stockholder and the person so nominated.
In addition, a person providing notice under this Section shall
supplementally and promptly provide such other information as the
Company otherwise requests. At the request of the Board, any
person nominated by the Board for election as a director shall
furnish to the Secretary of the Company that information required to
be set forth in a stockholder's notice of nomination which pertains to
the nominee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than
ten percent of the Company's Common Stock are required to report
their initial ownership of the Company's Common Stock and any
subsequent changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been
established, and the Company is required to disclose in this Proxy
Statement any failure to file by these dates. All of these filing
requirements were satisfied on a timely basis. In making these
disclosures, the Company has relied solely on written representations
of its directors and executive officers and copies of the reports that
they have filed with the Commission.
GENERAL AND OTHER MATTERS
Management knows of no matter other than the matters
described above which will be presented to the meeting. However,
if any other matters properly come before the meeting, or any of its
adjournments, the person or persons voting the proxies will vote
them in accordance with his, her or their best judgment on such
matters.
By Order of the Board of Directors
JOSEPH M. HARARY, Secretary
Woodbury, New York
April 30, 2008
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2007 INCLUDING FINANCIAL STATEMENTS
AND ANY SCHEDULES THERETO (EXCEPT EXHIBITS), TO EACH OF THE COMPANY'S
STOCKHOLDERS, UPON RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO THE COMPANY'S
OFFICES, ATTENTION: SECRETARY. REQUESTS FROM BENEFICIAL STOCKHOLDERS MUST SET
FORTH A REPRESENTATION AS TO SUCH OWNERSHIP ON APRIL 18, 2008.
EXHIBIT A
2008 EQUITY INCENTIVE PLAN
OF RESEARCH FRONTIERS INCORPORATED
1. Purpose. Types of Awards. The purpose of the 2008
Equity Incentive Plan of Research Frontiers Incorporated (the
"Plan") is to afford an incentive to executive officers, other
employees and non-employee directors and consultants of
Research Frontiers Incorporated, a Delaware corporation (the
"Company"), or any Subsidiary (as defined below), to acquire a
proprietary interest in the Company, to continue as employees,
non-employee directors or consultants (as the case may be), to
increase their efforts on behalf of the Company and to promote
the success of the Company's business. To further such purposes
the Committee may grant stock options, stock appreciation
rights, restricted stock and restricted stock units.
2. Definitions. As used in this Plan, the following words
and phrases shall have the meanings indicated:
(a) "Agreement" shall mean an agreement entered into
between the Company and a Grantee in connection with an
award under the Plan.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any reference to a section of
the Code or regulation promulgated thereunder shall also refer to
any successor of such section or regulation.
(d) "Committee" shall mean a committee established by the
Board to administer the Plan, and unless otherwise determined
by the Board, shall be composed solely of two or more directors,
each of whom shall qualify as (i) a "non-employee director"
within the meaning of Section 16 of the Exchange Act, (ii) an
"outside director" within the meaning of Section 162(m) of the
Code and (iii) an independent director under the independence
requirements of the stock exchange on which Common Stock is
listed.
(e) "Common Stock" shall mean shares of common stock,
par value $.0001 per share, of the Company.
(f) "Company" shall mean Research Frontiers Incorporated,
a corporation organized under the laws of the State of Delaware,
or any successor corporation.
(g) "Disability" shall mean a Grantee's inability to perform
his duties with the Company or any Subsidiary for more than six
consecutive months by reason of any medically determinable
physical or mental impairment, as determined by a physician
selected by the Grantee and acceptable to the Company.
(h) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time, and as now or
hereafter construed, interpreted and applied by regulations,
rulings and cases, and any reference to a section of the Exchange
Act or rule or regulation promulgated thereunder shall also refer
to any successor of such section, rule or regulation.
(i) "Fair Market Value" per share as of a particular date
shall mean (i) the average high and low trading prices per share
of Common Stock on the national securities exchange on which
the Common Stock is principally traded for the last preceding
date on which there was a sale of such Common Stock on such
exchange, or (ii) if the shares of Common Stock are then traded
in an over-the-counter market, the average high and low trading
prices per share of Common Stock in such over-the-counter
market for the last preceding date on which there was a sale of
such Common Stock in such market, or (iii) if the shares of
Common Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as
the Committee, in its sole discretion, shall determine, taking into
account the requirements of Section 409A of the Code.
(j) "Grantee" shall mean a person who receives a grant of
Options, Stock Appreciation Rights, Restricted Stock or
Restricted Stock Units under the Plan.
(k) "Incentive Stock Option" shall mean any option
intended to be, and designated as, an incentive stock option
within the meaning of Section 422 of the Code.
(1) "Insider" shall mean a Grantee who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
(m) "Option" or "Options" shall mean a grant to a Grantee
of an option or options to purchase shares of Common Stock.
Options granted by the Committee to an employee Grantee
pursuant to the Plan shall constitute either Incentive Stock
Options or Nonqualified Stock Options. Options granted to any
consultant or non-employee director shall be Nonqualified Stock
Options.
(n) "Option Price" shall mean the exercise price of an
Option per share of Common Stock covered by the Option.
(o) "Option Term" shall mean the period (determined at the
Option's grant) from its date of grant to the last date on which it
can be exercised. The Option Term of any Option shall not be
longer than ten (10) years, except that in the case of any
Incentive Stock Option granted to a Ten Percent Stockholder,
the Option Term shall not be longer than five (5) years.
(p) "Plan" means this 2008 Equity Incentive Plan of
Research Frontiers Incorporated, as amended from time to time.
(q) "Restricted Stock" shall mean a grant of Common
Stock subject to forfeiture and transfer restrictions as provided
in Section 10 hereof.
(r) "Restricted Stock Unit" shall mean an award subject to
the terms and conditions of Section 10 hereof which is settled (i)
by the delivery of one share of Company Stock, (ii) in cash in an
amount equal to the Fair Market Value of one share of Common
Stock or (iii) a combination thereof, as specified in the award or
determined by the Committee.
(s) "Retirement" shall mean a Grantee's retirement in
accordance with the terms of any pension or retirement plan
adopted by the Company (or any Subsidiary), if any, as the case
may be, on or after the normal retirement date prescribed from
time to time by the Company or such Subsidiary.
(t) "Rule 16b-3" shall mean Rule 16b-3, as from time to
time in effect, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, including
any successor to such Rule.
(u) "Stock Appreciation Right" shall mean the right granted
under Section 9 hereof to be paid an amount measured by the
appreciation in the Fair Market Value of Common Stock from
the date of grant to the date of exercise of the right, with
payment to be made in cash or Common Stock as specified in
the award or determined by the Committee.
(v) "Subsidiary" shall be as defined in Section 424(f) of the
Code and shall include a subsidiary of any subsidiary.
(w) "Ten Percent Stockholder" shall mean an employee
Grantee who, at the time an Incentive Stock Option is granted to
such Grantee, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock
of the employer corporation or of its parent or subsidiary
corporation.
3. Administration. The Plan shall be administered by the
Committee. The Committee shall have the authority in its
discretion, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under
the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant
Options, Stock Appreciation Rights, Restricted Stock and
Restricted Stock Units; to determine which Options shall
constitute Incentive Stock Options and which Options shall
constitute Nonqualified Stock Options; to determine the
purchase price of the shares of Common Stock covered by each
Option; to determine the persons to whom, and the time or times
at which awards shall be granted; to determine the number of
shares to be covered by each award; to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of the
Agreements (which need not be identical) and to cancel or
suspend awards, as necessary; and to make all other
determinations deemed necessary or advisable for the
administration of the Plan.
The Committee may delegate to one or more of its
members or to one or more agents such administrative duties as
it may deem advisable, and the Committee or any person to
whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. All
decisions, determination and interpretations of the Committee
shall be final and binding on all Grantees of any awards under
this Plan. The Board shall fill all vacancies, however caused, in
the Committee. The Board may from time to time appoint
additional members to the Committee, and may at any time
remove one or more Committee members and substitute others.
One member of the Committee shall be selected by the Board as
chairman. The Committee shall hold its meetings at such times
and places as it shall deem advisable. All determinations of the
Committee shall be made by a majority of its members either
present in person or participating by conference telephone at a
meeting or by written consent. The Committee may appoint a
secretary and make such rules and regulations for the conduct of
its business as it shall deem advisable, and shall keep minutes of
its meetings.
No member of the Board or Committee shall be liable for
any action taken or determination made in good faith with
respect to the Plan or any award granted hereunder.
4. Eligibility. Awards may be granted to executive officers
and other employees, including officers and directors who are
employees, and to non-employee directors of and consultants to
the Company or a Subsidiary, except as proscribed by the
Exchange Act or the Code. In determining the persons to whom
awards shall be granted and the number of shares to be covered
by each award, the Committee may take into account the duties
of the respective persons, their present and potential
contributions to the success of the Company or a Subsidiary and
such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan. The
maximum aggregate number of shares of Common Stock that
may be granted in the form of Options and Stock Appreciation
Rights to one Grantee in any calendar year shall be 350,000
shares, subject to adjustment as provided in Section 11 hereof.
5. Stock. The maximum number of shares of Common
Stock reserved for the grant of awards under the Plan shall be
750,000 shares, subject to adjustment as provided in Section 11
hereof. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be
reacquired by the Company. For purposes of this Section 5,
where the exercise price of an Option is paid in Common Stock
pursuant to Section 6(d) of the Plan, only the net number of
additional shares issued and which remain outstanding in
connection with such exercise shall be deemed "issued" for
purposes of the Plan.
If any outstanding award under the Plan should, for any
reason expire, be canceled or be forfeited (other than in
connection with the exercise of a Stock Appreciation Right),
without having been exercised in full, the shares of Common
Stock allocable to the unexercised, canceled or terminated
portion of such award shall (unless the Plan shall have been
terminated) become available for subsequent grants of awards
under the Plan; provided, however, that, in the case of the
cancellation or forfeiture of Restricted Stock with respect to
which dividends have been paid or accrued, the number of
shares with respect to such Restricted Stock shall not be
available for subsequent grants hereunder unless, in the case of
shares with respect to which dividends were accrued but unpaid,
such dividends are also canceled or forfeited.
6. Terms and Conditions of Options. Each Option granted
pursuant to the Plan shall be evidenced by a written agreement
between the Company and the Grantee (the "Option
Agreement"), in such form and containing such terms and
conditions as the Committee shall from time to time approve,
which Option Agreement shall comply with and be subject to
the following terms and conditions, unless otherwise specifically
provided in such Option Agreement.
(a) Number of Shares. Each Option Agreement shall state
the number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall
specifically state that the Option constitutes an Incentive Stock
Option and/or a Nonqualified Stock Option.
(c) Option Price. Each Option Agreement shall state the
Option Price, which shall not be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock
covered by the Option on the date of grant and shall not be less
than the par value of a share of the Common Stock covered by
the Option. The Option Price shall be subject to adjustment as
provided in Section 11 hereof. The effective date as of which the
Committee adopts a resolution expressly granting an Option or
such later date as may be established by the Committee in
accordance with applicable laws shall be considered the day on
which such Option is granted. Notwithstanding the foregoing,
the exercise price an option granted in assumption of, or in
substitution for, an outstanding option previously granted by a
company acquired by the Company (or a Subsidiary) or with
which the Company (or a Subsidiary) combines shall not be
subject to the requirements of this Section 6(c).
(d) Medium and Time of Payment. Payment of the Option
Price may be made (as determined by the Board) (i) in cash, (ii)
by certified check or bank cashier's check payable to the order of
the Company in the amount of such Option Price, or, if
permitted by the Committee: (iii) by promissory note issued by
the Grantee in favor of the Company in an amount equal to such
Option Price and payable on terms prescribed by the Committee
and which provides for the payment of interest at a fair market
rate, as determined by the Committee, (iv) by delivery (either by
actual delivery or attestation) of capital stock to the Company
having a fair market value (determined on the date of exercise)
equal to the Option Price, (v) by agreeing with the Company to
cancel a portion of the exercisable Options issued hereunder to
such Grantee having a value (measured as the difference
between the current Fair Market Value (determined on the date
of exercise) and the Option Price of the Common Stock subject
to such portion) equal to the Option Price, (vi) if there shall be a
public market for the Common Stock at such time, subject to
such rules as may be established by the Committee, through
delivery of irrevocable instructions to a broker to sell the
Common Stock otherwise deliverable upon exercise of the
Option and to deliver promptly to the Company an amount equal
to the aggregate Option Price, or (vii) by any combination of the
methods of payment described in (i) through (vi) above.
Notwithstanding the foregoing, no "executive officer" as defined
in Exchange Act shall be permitted to satisfy the Option Price
by using a method of payment otherwise authorized under the
Plan or Option Agreement if such method would constitute a
personal loan under Section 13(k) of the Exchange Act. If an
Option Agreement for a Grantee who is not an "executive
officer" authorizes a method of payment that would constitute a
personal loan under Section 13(k) of the Exchange Act and the
Grantee subsequently becomes an "executive officer," then the
payment method shall no longer be available to the Grantee and
the Committee shall take whatever steps are necessary to make
such payment method void as to such Grantee, including but not
limited to requiring immediate payment of any note or loan
previously obtained in connection with the Option.
(e) Term and Exercisability of Options. Each Option
Agreement shall provide the exercise schedule for the Option as
determined by the Committee; provided, however, that the
Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems
appropriate. Each Option Agreement shall provide an Option
Term which shall be ten (10) years from the date of the grant of
the Option, unless otherwise provided in Section 8(b) hereof or
otherwise determined by the Committee. The Option Term shall
be subject to earlier expiration as provided in Sections 6(f) and
6(g) hereof. An Option may be exercised, as to any or all full
shares of Common Stock as to which the Option has become
exercisable, by written notice delivered in person or by mail to
the Secretary of the Company, specifying the number of shares
of Common Stock with respect to which the Option is being
exercised.
(f) Termination of Grantee's Employment or Consulting
Relationship. Unless a different period is specified in the Option
Agreement, in the event that the employment or consulting
relationship of a Grantee shall terminate (other than by reason of
death or Disability), all Options of such Grantee that are
exercisable on the date of such termination shall continue to be
exercisable for three months after the date of such termination.
Notwithstanding the foregoing provisions of this Section 6(f), no
Option may be exercised later than the expiration of its Option
Term. Except as the Committee may otherwise determine, to the
extent that any Option is not exercisable on the date of such
termination of employment, the Option shall be forfeited.
(g) Termination of Grantee's Employment or Consulting
Relationship due to Death or Disability. Unless a different
period is specified in the Option Agreement, if the Grantee shall
die while employed by, or in a consulting relationship with the
Company or a Subsidiary, or within three months after the date
of termination of such Grantee's employment or consulting
relationship (or within such different period as the Committee
may have provided for exercise of the Grantee's Options after
termination of the Grantee's employment or consulting
relationship pursuant to Section 6(f) hereof), or if the Grantee's
employment or consulting relationship shall terminate by reason
of Disability, all Options theretofore granted to such Grantee (to
the extent such Options are exercisable on the date the Grantee's
employment or consulting relationship is terminated by such
death or Disability) may be exercised by the Grantee or by the
Grantee's estate or by a person who acquired the right to
exercise such Options by bequest or inheritance or otherwise by
reason of death or Disability of the Grantee, at any time within
six months after the death or Disability of the Grantee. Except as
the Committee may otherwise determine, to the extent that any
Option is not exercisable on the date of such termination of
employment or consulting relationship by reason of death or
Disability, its Option Term shall expire on such date.
(h) Other Provisions. The Option Agreements evidencing
awards under the Plan shall contain such other terms and
conditions not inconsistent with the Plan as the Committee may
determine.
7. Nonqualified Stock Options. Options granted pursuant to
this Section 7 are intended to constitute Nonqualified Stock
Options and shall be subject to only the general terms and
conditions specified in Section 6 hereof. At the discretion of the
Committee, the early termination provisions contained in
Section 6 hereof may be waived by the Committee as evidenced
by their exclusion from any Option Agreement.
8. Incentive Stock Options. Options granted pursuant to this
Section 8 are intended to constitute Incentive Stock Options and
shall be subject to the following special terms and conditions, in
addition to the general terms and conditions specified in Section
6 hereof.
(a) Value of Shares. The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted)
of the shares of Common Stock with respect to which Incentive
Stock Options granted under this Plan (and all other plans of a
Grantee's employer corporation and its parent and subsidiary
corporations) become exercisable for the first time by the
Grantee during any calendar year shall not exceed $100,000. To
the extent that the grant of an Option results in the aggregate
Fair Market Value (determined at the time of grant) of the
Common Stock (or other capital stock of the Company or any
Subsidiary) with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar
year (under all plans of the Company and Subsidiaries) to
exceed $100,000, such Option shall be treated as a Nonqualified
Stock Option to the extent of such excess. The provisions of
this subsection shall be construed and applied in accordance
with Section 422(d) of the Code and the regulations, if any,
promulgated thereunder. Nothing contained in the Plan shall be
construed to limit the right of the Committee to grant an
Incentive Stock Option and a Nonqualified Stock Option
concurrently under a single Option Agreement so long as each
Option is clearly identified as to its status.
(b) Ten Percent Stockholder. In the case of an Incentive
Stock Option granted to a Ten Percent Stockholder, (i) the
Option Price shall not be less than one-hundred-ten percent
(110%) of the Fair Market Value of a share of Common Stock
on the date of grant of such Incentive Stock Option, and (ii) the
Option Term shall not exceed five (5) years from the date of
grant of such Incentive Stock Option.
(c) Disqualifying Dispositions of Incentive Stock Options.
If Common Stock acquired upon exercise of any Incentive Stock
Option is disposed of within two years following the date of
grant or one year following the transfer of such shares upon
exercise, the Grantee shall, promptly following such disposition
notify the Company in writing of the date and terms of such
disposition and provide such other information regarding the
disposition as the Committee may reasonably require.
(d) Waiver of Early Termination Provisions. At the
discretion of the Committee, the early termination provisions
contained in Section 6 hereof may be waived by the Committee
as evidenced by their exclusion from any Option Agreement;
provided, however, a Grantee's failure to exercise an Incentive
Stock Option while employed or within three months of the
termination of such employment may prevent the Grantee from
the favorable tax treatment accorded Incentive Stock Options.
9. Stock Appreciation Rights. The Committee shall have
authority to grant a Stock Appreciation Right to any eligible
individual. A Stock Appreciation Right may be granted in
conjunction with all or part of an Option granted under the Plan
or without regard to any Option. A Stock Appreciation Right
granted in conjunction with an Option shall, except as provided
in this Section 9, be subject to the same terms and conditions as
the related Option. Each Stock Appreciation Right granted
pursuant to the Plan shall be evidenced by a written Agreement
between the Company and the Grantee in such form as the
Committee shall time to time approve.
(a) Time of Grant. A Stock Appreciation Right granted in
conjunction with an Option may be granted either at the time of
grant of the Option, or at any time thereafter during the term of
the Option; provided, however, that Stock Appreciation Rights
related to Incentive Stock Options may only be granted at the
time of grant of the related Option.
(b) Payment. A Stock Appreciation Right shall entitle the
holder thereof, upon exercise of the Stock Appreciation Right or
any portion thereof, to receive payment of an amount computed
pursuant to Section 9(d) hereof.
(c) Exercise. A Stock Appreciation Right not granted in
conjunction with an Option shall be exercisable at such time or
times and subject to such terms and conditions as provided in
the applicable Agreement. A Stock Appreciation Right granted
in conjunction with an Option shall be exercisable at such time
or times and only to the extent that the related Option is
exercisable, and will not be transferable except to the extent the
related Option may be transferable. A Stock Appreciation Right
granted in connection with an Incentive Stock Option shall be
exercisable only if the Fair Market Value of a share of Common
Stock on the date of exercise exceeds the purchase price
specified in the related Incentive Stock Option.
(d) Amount Payable. Upon the exercise of a Stock
Appreciation Right, the Grantee shall be entitled to receive an
amount determined by multiplying (i) the excess of the Fair
Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right over the Fair Market
Value of a share of Common Stock on the date of the grant of
such Stock Appreciation Right, by (ii) the number of shares of
Common Stock as to which such Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee
may limit in any manner the amount payable with respect to any
Stock Appreciation Right by including such a limit at the time it
is granted.
(e) Treatment of Related Options and Stock Appreciation
Rights upon Exercise. Upon the exercise of a Stock Appreciation
Right granted in conjunction with an Option, the related Option
shall be canceled to the extent of the number of shares of
Common Stock as to which the Stock Appreciation Right is
exercised and upon the exercise of an Option granted in
connection with a Stock Appreciation Right, the Stock
Appreciation Right shall be canceled to the extent of the number
of shares of Common Stock as to which the Option is exercised
or surrendered.
(f) Method of Exercise. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in
person or by mail to the Secretary of the Company, specifying
the number of shares of Common Stock with respect to which
the Stock Appreciation Right is being exercised. If requested by
the Committee, the Grantee shall deliver the Agreement
evidencing the Stock Appreciation Right being exercised and the
Option Agreement evidencing any related Option to the
Secretary of the Company who shall endorse thereon a notation
of such exercise and return such Agreements to the Grantee.
(g) Form of Payment. Payment of the amount determined
under Section 9(d) hereof, may be made solely in whole shares
of Common Stock in a number determined based upon their Fair
Market Value on the date of exercise of the Stock Appreciation
Right or, alternatively, at the sole discretion of the Committee,
solely in cash, or in a combination of cash and shares of
Common Stock as the Committee deems advisable. If the
Committee decides to make full payment in shares of Common
Stock and the amount payable results in a fractional share,
payment for the fractional share will be made in cash.
Notwithstanding the foregoing, to the extent required by Rule
16b-3 no payment in the form of cash may be made upon the
exercise of a Stock Appreciation Right pursuant to Section 9(d)
to an Insider, unless the exercise of such Stock Appreciation
Right is made during the period beginning on the third business
day and ending on the twelfth business day following the date of
release for publication of the Company's quarterly or annual
statements of earnings.
(h) Rights with respect to Stock Appreciation Rights. A
holder of Stock Appreciation Rights shall have no rights other
than those of a general creditor of the Company. Stock
Appreciation Rights represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions
of the applicable Agreement.
10. Restricted Stock and Restricted Stock Units. The
Committee may award shares of Restricted Stock and Restricted
Stock Units to any eligible person. Each award of Restricted
Stock and Restricted Stock Units under the Plan shall be
evidenced by a written Agreement between the Company and
the Grantee, in such form as the Committee shall from time to
time approve, and shall comply with the following terms and
conditions (and with such other terms and conditions not
inconsistent with the terms of this Plan as the Committee, in its
discretion, shall establish):
(a) Provisions Applicable to Restricted Stock.
(i) Number of Shares. Each Agreement shall state the
number of shares of Restricted Stock to be subject to an award.
(ii) Restrictions. Shares of Restricted Stock may not
be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and
distribution, for such period as the Committee shall determine
from the date on which the award is granted (the "Restricted
Period"). The Committee may also impose such other
restrictions and conditions on the shares as it deems appropriate
including the satisfaction of performance criteria. Certificates
for shares of stock issued pursuant to Restricted Stock awards
shall bear an appropriate legend referring to such restrictions,
and any attempt to dispose of any such shares of stock in
contravention of such restrictions shall be null and void and
without effect. During the Restricted Period, such certificates
shall be held in escrow by an escrow agent appointed by the
Committee. In determining the Restricted Period of an award,
the Committee may provide that the foregoing restrictions shall
lapse with respect to specified percentages of the awarded shares
on successive anniversaries of the date of such award.
(iii) Forfeiture. Subject to such exceptions as may be
determined by the Committee, if the Grantee's employment or
consulting relationship with the Company or any Subsidiary
shall terminate for any reason prior to the expiration of the
Restricted Period of an award, any shares remaining subject to
restrictions shall thereupon be forfeited by the Grantee and
transferred to, and reacquired by, the Company or a Subsidiary
at no cost to the Company or Subsidiary.
(iv) Ownership. During the Restricted Period, the
Grantee shall possess all incidents of ownership of such shares,
subject to Section 10(a)(ii) hereof, including the right to receive
dividends with respect to such shares and to vote such shares.
(v) Accelerated Lapse of Restrictions. The Committee
shall have the authority (and the Agreement may, but need not,
so provide) to cancel all or any portion of any outstanding
restrictions prior to the expiration of the Restricted Period with
respect to any or all the shares of Restricted Stock awarded as
the Committee shall deem appropriate.
(b) Provisions Applicable to Restricted Stock Units.
(i) Number of Restricted Stock Units. Each Agreement
shall state the number of Restricted Stock Units to be subject to
an award.
(ii) Vesting. Restricted Stock Units may be subject to
the satisfaction of such conditions and restrictions (such as a
condition of continued employment or the satisfaction of
performance criteria) as the Committee shall determine on the
date on which the award is granted and contained in the
applicable Agreement.
(iii) Forfeiture. Subject to such exceptions as may be
determined by the Committee, if the Grantee's employment or
consulting relationship with the Company or any Subsidiary
shall terminate for any reason prior to the satisfaction of the
conditions and restrictions on a Restricted Stock Unit, the
Restricted Stock Unit shall thereupon be forfeited by the
Grantee and transferred to, and reacquired by, the Company or a
Subsidiary at no cost to the Company or Subsidiary.
(iv) Rights with respect to Restricted Stock Units. A
holder of Restricted Stock Units shall have no rights other than
those of a general creditor of the Company. Restricted Stock
Units represent an unfunded and unsecured obligation of the
Company, subject to the terms and conditions of the applicable
Agreement.
(v) Delivery of Shares or Payment. Except as
otherwise provided in the Plan or in the applicable Agreement,
the Company shall deliver to the holder of a Restricted Stock
Unit shares of Common Stock or cash, as the case may be,
within 30 days after the conditions and restrictions with respect
to such Restricted Stock Unit have been satisfied.
(vi) Accelerated Lapse of Conditions and Restrictions.
The Committee shall have the authority (and the applicable
Agreement may, but need not, so provide) to cancel all or any
portion of any outstanding conditions or restrictions prior to
their satisfaction with respect to any or all Restricted Stock
Units awarded as the Committee shall deem appropriate.
11. Effect of Certain Changes. In the event of any
extraordinary dividend, stock dividend, recapitalization, merger,
consolidation, stock split, warrant or rights issuance, or
combination or exchange of such shares, or other similar
transactions, the number of shares of Common Stock available
for awards, the number of such shares covered by outstanding
awards, and the price per share of Options or the applicable
market value of Stock Appreciation Rights shall be equitably
adjusted by the Committee to reflect such event and preserve,
without dilution or enhancement, the value of such awards;
provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. If the Company shall be
reorganized, consolidated, or merged with another corporation,
or if all or substantially all of the assets of the Company shall be
sold or exchanged, a Grantee shall at the time of issuance of the
stock under such a corporate event, be entitled to receive upon
the exercise or vesting, as the case may be, of his award the
same number and kind of shares of stock or the same amount of
property, cash or securities as he would have been entitled to
receive upon the occurrence of any such corporate event as if he
had been, immediately prior to such event, the holder of the
number of shares covered by his award and that his award shall
have been fully vested and/or exercised at the time of such
event; provided, however, that in any of such events the
Committee shall have the discretionary power to take any action
necessary or appropriate to prevent Incentive Stock Options
granted hereunder from being disqualified as Incentive Stock
Options and to prevent any award being subject to an excise tax
under Section 409A of the Code. Any adjustment under this
Section 11 shall apply proportionately to only the unexercised
portion of any award granted hereunder. If fractions of a share
would result from any such adjustment, the adjustment shall be
revised to the next lower whole number of shares.
12. Surrender and Exchange of Awards. The Committee
may, subject to shareholder approval as described below, permit
the voluntary surrender of all or a portion of any Option granted
under the Plan to an employee or any option granted under any
other plan, program or arrangement of the Company or any
Subsidiary ("Surrendered Option"), to be conditioned upon the
granting to the employee Grantee of a new Option for the same
number of shares of Common Stock as the Surrendered Option,
or may require such voluntary surrender as a condition
precedent to a grant of a new Option to such Grantee. Subject to
the provisions of the Plan, such new Option may be an Incentive
Stock Option or a Nonqualified Stock Option and shall be
exercisable at the price, during such period and on such other
terms and conditions as are specified by the Committee at the
time the new Option is granted. The Committee may also grant
Restricted Stock in exchange for Surrendered Options to any
holder of such Surrendered Option. Notwithstanding anything
herein to the contrary, without the prior approval of the
Company's shareholders, Options issued under the Plan will not
be repriced, replaced or regranted through cancellation, or by
lowering the exercise price of a previously granted Option.
13. Period During Which Awards May Be Granted. Awards
may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the
Board, or the date the Plan is approved by the stockholders of
the Company, whichever is earlier.
14. Nontransferability of Awards. Unless otherwise agreed
to by the Company, Awards granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution, and awards may be exercised or otherwise realized,
during the lifetime of the Grantee, only by the Grantee or by his
guardian or legal representative. No award granted under the
Plan shall be subject to execution, attachment or other process.
15. Approval of Shareholders. The Plan shall take effect as
of the date determined by the Board in its adoption of the Plan
but the Plan (and any grants of awards made prior to the
shareholder approval described in this sentence shall be subject
to the approval of the holder(s) of a majority of the shares of
voting securities of the Company present, or represented, and
entitled to vote at the Company's next Annual Meeting of
Stockholders, which approval must occur within twelve months
of the date the Plan is adopted by the Board.
16. Agreement by Employee Grantee Regarding
Withholding Taxes. If the Committee shall so require, as a
condition of exercise of an Option or Stock Appreciation Right,
the expiration of the Restricted Period or the payment with
respect to a Restricted Stock Unit (each a "Tax Event"), each
employee Grantee shall agree that, no later than the date of the
Tax Event, the Grantee will pay to the Company or make
arrangements satisfactory to the Committee regarding payment
of any federal, state or local taxes of any kind required by law to
be withheld upon the Tax Event. Alternatively, the Committee
may provide that an employee Grantee may elect, to the extent
permitted or required by law, to have the Company deduct
federal, state and local taxes of any kind required by law to be
withheld upon the Tax Event from any payment of any kind due
to the Grantee. The withholding obligation may be satisfied by
the withholding or delivery of Common Stock.
17. Amendment and Termination of the Plan.
(a) The Board at any time and from time to time may
suspend, terminate, modify or amend the Plan; provided,
however, that an amendment which requires stockholder
approval in order for the Plan to continue to comply with Rule
16b-3 or any other law, regulation or stock exchange
requirement shall not be effective unless approved by the
requisite vote of stockholders. Except as provided in Section 11
hereof, no suspension, termination, modification or amendment
of the Plan may adversely affect any award previously granted,
unless the written consent of the Grantee is obtained.
(b) The Plan may from time to time be terminated,
modified or amended by the affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present,
or represented, and entitled to vote at a meeting of stockholders
duly held in accordance with applicable state law.
(c) The Board of the Company may at any time terminate
the Plan or from time to time make such modifications or
amendments of the Plan as it may deem advisable; provided,
however, that the Board shall not (i) modify or amend the Plan
in any way that would disqualify any Option issued pursuant to
the Plan as an Incentive Stock Option, or (ii) without approval
by the affirmative vote of the holders of a majority of the shares
of the Company's Common Stock present, or represented, and
entitled to vote at a meeting of stockholders duly held in
accordance with applicable state law increase (except as
provided by Section 11) the maximum number of Common
Shares as to which awards may be granted under the Plan or
change the class of persons eligible to receive an award under
the Plan.
(d) Subject to Section 25(b) hereof, no termination,
modification or amendment of the Plan may adversely affect the
rights conferred by any awards without the consent of the
Grantee thereof.
18. Rights as a Shareholder. Except as provided in Section
10(a)(iv) hereof, a Grantee of an award (or any individual
acquiring rights under such award from the Grantee) shall have
no rights as a shareholder with respect to any shares covered by
the award until the date of the issuance of a stock certificate for
such shares to the Grantee (or such individual). No adjustment
shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property) or distribution of other
rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 11 hereof.
19. No Rights to Employment. Nothing in the Plan or in
any award granted or Agreement entered into pursuant hereto
shall confer upon any Grantee the right to continue in the
employ of, or a consultant relationship with, the Company or
any Subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or applicable Agreement or to interfere
with or limit in any way the right of the Company or any such
Subsidiary to terminate such Grantee's employment or retention
as a consultant. Awards granted under the Plan shall not be
affected by any change in duties or position of a Grantee as long
as such Grantee continues to be employed by, or in a consultant
relationship with, the Company or any Subsidiary.
20. Beneficiary. A Grantee may file with the Committee a
written designation of a beneficiary on such form as may be
prescribed by the Committee and may, from time to time, amend
or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the
Grantee's estate shall be deemed to be the Grantee's beneficiary.
21. Governing Law. The Plan and all determinations made
and actions taken pursuant hereto shall be governed by the laws
of the State of Delaware.
22. Effective Date and Duration of the Plan. This Plan shall
be effective as of the date determined by the Company, subject
to the approval of the Plan by the stockholders of the Company,
and shall terminate on the tenth anniversary of such date, unless
earlier terminated pursuant to Section 17 hereof. No awards
shall be granted after the termination of the Plan.
23. Leave of Absence. For purposes of the Plan, an
individual who is on military or sick leave or other bona fide
leave of absence (such as temporary employment by the United
States or any state government) shall be considered as remaining
in the employ of the Company or of a Subsidiary, if any, for 90
days or such longer period as shall be determined by the
Committee.
24. Further Conditions of Exercise.
(a) Unless prior to the exercise of an award, the Common
Stock issuable upon such exercise are the subject of a
registration statement filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), and there is then in effect a prospectus
filed as part of such registration statement meeting the
requirements of Section 10(a)(3) of the Securities Act, the
acceptance of such award and the notice of exercise with respect
to such award shall be accompanied by a representation or
agreement deemed hereunder to have been made by the Grantee
to the Company to the effect that such shares are being acquired
for investment only and not with a view to the resale or
distribution thereof, or such other documentation as may be
required by the Company, unless, in the opinion of counsel to
the Company, such representation, agreement or documentation
is not necessary to comply with the Securities Act.
(b) Anything in subsection (a) of this Section 24 to the
contrary notwithstanding, the Company shall not be obligated to
issue or sell any Common Stock until they have been listed on
each securities exchange on which the Common Stock may then
be listed and until and unless, in the opinion of counsel to the
Company, the Company may issue such shares pursuant to a
qualification or an effective registration statement, or an
exemption from registration, under such state and federal laws,
rules or regulations as such counsel may deem applicable. The
Company shall use reasonable efforts to effect such listing,
qualification and registration, as the case may be.
25. Construction.
(a) Section 16. The provisions of the Plan are intended to
satisfy the requirements of Section 16(b) of the Exchange Act,
and shall be interpreted in a manner consistent with the
requirements thereof, as now or hereafter construed, interpreted
and applied by regulations, rulings and cases.
(b) Code Section 409A. The provisions of the Plan and
Agreements are intended to either avoid the application of
Section 409A of the Code or to comply with such section, and
the provisions of the Plan and Agreements shall be interpreted in
a manner consistent with such intentions. If an award under the
Plan is subject to Section 409A, then if, at the time a Grantee is
separated from service (within the meaning of Section 409A),
the Grantee shall be a specified employee (within the meaning
of Section 409A and using the identification methodology
selected by the Company from time to time) and the payment of
such award is required to be delayed pursuant to the six-month
delay rule set forth in Section 409A in order to avoid taxes or
penalties under such section, then the Company shall not pay
such amount on the otherwise scheduled payment date but shall
instead pay it on the first business day after such six-month
period (or upon the Grantee's death, if earlier). Such amount
shall be paid without interest, unless otherwise determined by
the Committee, in its sole discretion, or as otherwise provided in
an applicable Agreement. Notwithstanding any provision of the
Plan or an applicable Agreement to the contrary, in light of the
uncertainty with respect to the proper application of Section
409A, the Company reserves the right to make amendments to
the Plan and/or an Agreement as the Company reasonably
deems necessary or desirable to avoid or reduce the imposition
of taxes and penalties that may arise in connection with awards
under the Plan (including any taxes arising under Section 409A).
The Company, its officers and directors, and members of the
Committee shall have no obligation to indemnify or otherwise
hold any Grantee harmless from any or all of such taxes or
penalties.
26. Reductions and Claw Backs. The Committee may
specify in an Agreement that the Grantee's rights, payments and
benefits with respect to an award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of
specific events, in addition to any other applicable vesting or
performance conditions of an award. Such events shall include,
but not be limited to, termination of employment for cause,
material violation of material Company policies, breach of
noncompetition, confidentiality or other restrictive covenants
that may apply to the Grantee, or other conduct by the Grantee
that is detrimental to the business or reputation of the Company.
[PROXY CARD - FRONT]
PROXY RESEARCH FRONTIERS INCORPORATED
240 Crossways Park Drive, Woodbury, New York 11797-2033
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - June 12, 2008
The undersigned hereby appoints Robert L. Saxe and Joseph M.
Harary, or either of them, as Proxy or Proxies of the undersigned with full
power of substitution to attend and to represent the undersigned at the
Annual Meeting of Stockholders of Research Frontiers Incorporated to be
held on June 12, 2008, and at any adjournments thereof, and to vote
thereat the number of shares of stock of the Company the undersigned
would be entitled to vote if personally present, in accordance with the
instructions set forth on the reverse side hereof. Any proxy heretofore
given by the undersigned with respect to such stock is hereby revoked.
Dated:______________________________________________, 2008
________________________________________________________
__________________________________________________________
Please sign exactly as name appears above. For joint
accounts, each joint owner must sign. Please give full title
if signing in a representative capacity.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
[PROXY CARD - BACK]
1. ELECTION OF CLASS III DIRECTORS
NOMINEES: Robert L. Saxe and Robert M. Budin.
[ ] FOR ALL nominees listed above.
[ ] FOR ALL nominees listed above
EXCEPT:_________________________________________
(Instruction: To withhold authority to vote on any individual
nominee, write the name in the space at the right.)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. RATIFICATION OF THE SELECTION OF BDO SEIDMAN, LLP AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2008.
[ ] FOR RATIFICATION [ ] AGAINST RATIFICATION [ ] ABSTAIN
3. ADOPTION OF THE COMPANY'S 2008 EQUITY INCENTIVE PLAN.
[ ] FOR ADOPTION [ ] AGAINST ADOPTION [ ] ABSTAIN
4. ADOPTION OF PROPOSAL BY A SHAREHOLDER OF THE COMPANY REGARDING THE
REPORTING OF CERTAIN PRODUCTION AND SALES INFORMATION OF THIRD PARTIES.
[ ] FOR ADOPTION [ ] AGAINST ADOPTION [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL 4.
5. In their discretion, upon such other matters as may properly come before
the meeting. If no specification is made, this proxy will be voted FOR
the nominee listed above and FOR APPROVAL of Proposals 2 and 3, and
AGAINST approval of Proposal 4.
Please indicate whether or not you plan to attend the Annual Meeting on
Thursday, June 12, 2008.
Yes [ ] No [ ]