SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
HOWTEK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
HOWTEK, INC.
21 Park Avenue
Hudson, NH 03051
May 18, 2000
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders to
be held on Tuesday, June 20, 2000, at 10:30 a.m. at the Hudson Community Center,
1 Constitution Drive, Hudson, New Hampshire 03051.
The Notice of Annual Meeting and Proxy Statement that follow describe the
business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
Your vote is important. We will appreciate a prompt return of your signed
proxy card and hope to see you at the meeting.
Cordially,
Robert Howard
Chairman of the Board of Directors
HOWTEK, INC.
21 Park Avenue
Hudson, New Hampshire 03051
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 20, 2000
-----------------
To The Stockholders of HOWTEK, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Howtek, Inc. (the "Company") will be held on Tuesday, June 20,
2000, at 10:30 A.M. at the Hudson Community Center, 1 Constitution Drive,
Hudson, New Hampshire 03051 for the following purposes:
1. To elect six directors to serve on the Company's Board of Directors
for a term of one year and until their respective successors have been
duly elected and qualified;
2. To ratify the selection of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ended December 31, 2000; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on May 3, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
- -----------------------------------------
IT IS IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT TO
BE PRESENT AT THE MEETING, PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT THE
MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE THE
RIGHT TO VOTE YOUR SHARES PERSONALLY.
- -----------------------------------------
By Order of the Board of Directors,
Connie Webster, Secretary
May 18, 2000
HOWTEK, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 20, 2000
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HOWTEK, INC. (the "Company") for use at the
Annual Meeting of Stockholders to be held on Tuesday, June 20, 2000, including
any adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting. Management intends to mail this proxy statement
and the accompanying form of proxy to stockholders on or about May 18, 2000. The
costs of soliciting proxies will be borne by the Company. It is estimated that
said costs will be nominal.
Proxies in the accompanying form duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
VOTING SECURITIES
Only holders of the Company's common stock, par value $.01 per share, (the
"Common Stock") at the close of business on May 3, 2000, (the "Record Date") and
holders of the Company's Series A Preferred stock are entitled to receive notice
of and to vote at the Annual Meeting. As of the Record Date, the Company had
13,370,326 shares of Common Stock outstanding. Each share of Common Stock is
entitled to one vote on all matters. In addition, holders of the Company's
Series A Preferred Stock vote together with holders of the Common Stock as a
single class on all actions to be voted on by the stockholders. Each share of
Series A Preferred Stock entitles the holder to 100 votes per share. Based upon
7,150 shares of Series A Preferred Stock outstanding on the Record Date, the
holders of the Series A Preferred Stock are entitled to an aggregate of 715,000
votes. There are no cumulative voting rights.
The six nominees receiving the greatest number of votes cast by the holders
of the Company's shares of Common Stock entitled to vote at the meeting will be
elected directors of the Company.
The affirmative vote of a majority of the votes cast at the meeting is
necessary for the ratification of the selection of the independent auditors.
Shares represented by executed proxies received by the Company will be
counted for purposes of establishing a quorum, regardless of how or whether such
shares are voted on any specific proposal.
The inspector of elections appointed for the meeting will tabulate votes
cast in person or by proxy at the meeting. In accordance with Delaware law,
abstentions and "broker non-votes" (i.e. proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-
1
votes will be deemed not entitled to vote on the subject matter as to which the
non-vote is indicated and will, therefore, have no legal effect on the vote on
that particular matter.
The address of the principal executive offices of the Company is 21 Park
Avenue, Hudson, New Hampshire 03051, Telephone No. (603) 882-5200.
Proxies which are executed but which do not contain any specific
instructions will be voted in favor of the proposals contained herein.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the Common Stock
owned on May 3, 2000, by (i) each person who is known to the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock, (ii) each executive officer and key employee named in the Summary
Compensation Table, (iii) each director of the Company, and (iv) all current
executive officers and directors as a group.
Number of
Shares
Name and Address of Beneficially Percentage Total Voting
Beneficial Owner(1) Owned (1) (2) of Common Power
- ------------------- ------------------ ----------- -----------
Robert Howard........................... 2,576,511 (3) 18.42% 18.42%
303 East 57th Street
New York, New York 10022
Donald Chapman.......................... 1,663,024 (4) 9.00% 12.02%
8650 South Ocean Drive
Jenson Beach, FL 34957
W. Scott Parr........................... 256,234 (5) 1.49% 1.89%
Sheila Horwitz.......................... 79,000 (6) * *
Kit Howard.............................. 40,000 (7) * *
Richard Lehman.......................... 47,628 (8) * *
Joseph Manseau.......................... 8,409 (9) * *
Harvey Teich............................ 70,000 (10) * *
Ivan Gati............................... 65,000 (11) * *
All current executive officers and
directors as a group (7 persons)...... 3,115,061 (3) & (5)
through (7), (10) & (11) 21.25% 21.55%
- -----------------------------------
* Less than one percent.
1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from May 3, 2000, upon the exercise
of options, warrants or rights; through the conversion of a security;
pursuant to the power to revoke a trust, discretionary account or similar
arrangement; or pursuant to the automatic termination of a trust,
discretionary account or similar arrangement. Each beneficial owner's
percentage ownership is determined by assuming that the options or other
rights to acquire beneficial ownership as described above, that are held by
such person (but not those held by any other person) and which are
exercisable within 60 days from May 3, 2000, have been exercised.
2
2) Unless otherwise noted, the Company believes that the persons referred to
in the table have sole voting and investment power with respect to all
shares reflected as beneficially owned by them.
3) Includes options to purchase 10,000 shares of the Company's Common stock at
$1.72 per share. Also, includes 393,607 shares exercisable on conversion of
$590,000 principal amount of indebtedness outstanding as of May 3, 2000,
pursuant to a loan made by Mr. Howard to the Company, which is convertible
into 145,455 shares of Common Stock at $1.31 per share, 86,505 shares at
$1.16 per share, 62,439 shares at $1.28 per share, 28,445 shares at $2.81
per share, 23,704 shares at $3.38 per share and 47,059 shares at $2.13 per
share and 310,000 shares exercisable at $1.00 per share on conversion of
$310,000 principal amount of indebtedness outstanding pursuant to
Convertible Promissory Notes. Does not include 15,000 shares owned by Mr.
Howard's wife.
4) Includes 25,000 shares owned by Mr. Chapman's wife, 150,000 owned by a
revocable trust (of which Mr. Chapman is Trustee) and 460,000 shares
issuable upon conversion of 4,600 shares of Series A Preferred Stock owned
by Mr. Chapman.
5) Includes 11,000 shares owned by Mr. Parr's wife. Also includes options to
purchase 139,364 shares of the Company's Common Stock at $1.13 per share,
25,883 shares at $0.81 per share, 2,250 shares at $1.00 per share and
55,000 shares of issuable upon conversion of 550 shares of Series A
Preferred Stock owned by Mr. Parr.
6) Includes options to purchase 10,000 shares of the Company's Common Stock at
$1.72 per share, 25,000 shares at $1.50 per share and 25,000 shares at
$0.81 per share.
7) Includes options to purchase 25,000 shares of the Company's Common Stock at
$.81 per share.
8) Includes 2,000 shares owned by Mr. Lehman's wife. Also includes options to
purchase 20,500 of the Company's Common Stock at $1.72 per share, 16,376
shares at $1.13 per share, 2,752 shares at $1.00 per share and 1,666 shares
at $0.81 per share.
9) Includes options to purchase 1,000 shares of the Company's Common Stock at
$1.00 per share, 3,333 shares at $.81 per share and 4,076 shares at $1.13
per share.
10) Includes options to purchase 20,000 of the Company's Common Stock at $1.72
per share, 25,000 shares at $1.50 per share and 25,000 shares at $0.81 per
share.
11) Includes options to purchase 15,000 of the Company's Common Stock at $1.72
per share, 25,000 shares at $1.50 per share and 25,000 shares at $0.81 per
share.
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PROPOSAL 1
ELECTION OF DIRECTORS
The proxies granted by stockholders will be voted individually at the
Annual Meeting for the election of the persons listed below as directors of the
Company, to serve until the next annual meeting of stockholders and until their
successors are duly elected and qualified. In the event any of the nominees
listed below shall be unable to serve, it is intended that the proxy will be
voted for such other nominees as are designated by the Board of Directors. Each
of the persons named has indicated to the Board of Directors of the Company that
he or she will be available as a candidate.
Director
Name Age Position Since
- ---- --- -------- -----
Robert Howard........... 77 Chairman of the Board, and Director 1984
W. Scott Parr........... 49 President, Chief Executive Officer
and Director 1998
Ivan Gati............... 54 Director 1989
Sheila Horwitz.......... 65 Director 1996
Kit Howard.............. 57 Director 1999
Harvey Teich............ 81 Director 1988
All persons listed above are currently serving a term of office as
directors which continues until the next annual meeting of stockholders.
Robert Howard, the founder and Chairman of the Board of Directors of the
Company, was the inventor of the first impact dot matrix printer. Mr. Howard was
Chief Executive Officer of the Company from its establishment in 1984 until
December of 1993. He was the founder, and from 1969 to April 1980 he served as
President and Chairman of the Board of Centronics Data Computer Corp.
("Centronics"), a manufacturer of a variety of computer printers. He resigned
from Centronics' Board of Directors in 1983. From April 1980 until 1983, Mr.
Howard was principally engaged in the management of his investments. Commencing
in mid-1982, Mr. Howard, doing business as R.H. Research, developed the ink jet
technology upon which the Company was initially based. Mr. Howard contributed
this technology, without compensation, to the Company. Until September 8, 1998,
Mr. Howard served as Chairman of the Board of Presstek, Inc. ("Presstek"), a
public company, which has developed proprietary imaging and consumable
technologies for the printing and graphic arts, industries. He currently serves
as Chairman Emeritus and a Director of Presstek. In February 1994 Mr. Howard
entered into a settlement agreement in the form of a consent decree with the
Securities and Exchange Commission (the "Commission") in connection with the
Commission's investigation covering trading in the Company's Common Stock by an
acquaintance of Mr. Howard and a business associate of such acquaintance. Mr.
Howard, without admitting or denying the Commission's allegations of securities
laws violations, agreed to pay a fine and to the entry of a permanent injunction
against future violations of Section 10(b) and Rule 10b-5 of the Securities
Exchange Act of 1934. In addition, in December of 1997, in connection with a
Commission investigation into trading of the Securities of Presstek, Mr. Howard,
without admitting or denying the Commission's allegations of securities laws
violations, agreed to pay a civil penalty of $2,700,000 and to the entry of a
final judgment enjoining him future violations of Section 10(b) and 13(a) and
Rules 10b-5, 12b-20, 13a-1 and 13a-20 of the Exchange Act of 1934.
W. Scott Parr joined the Company in January 1998, as President and Chief
Executive Officer. He was appointed to the Company's Board of Directors on
February 4, 1998. Prior to joining Howtek, Mr. Parr served as Divisional
Director and a member of the Board of Directors of SABi International Ventures,
Inc., responsible for restructuring and upgrading certain US companies owned by
foreign and venture investors. From 1995 to 1997, Mr. Parr was Chief Executive
Officer, General Counsel and Director of Allied Logic Corporation, a start-up
4
venture specializing in proprietary molding and manufacturing technologies. From
1990 to 1995 Mr. Parr was General Counsel and a Director of LaserMaster
Technologies, Inc. (now VirtualFund.Com, Inc.).
Ivan Gati is currently an executive business coach. Mr. Gati served as
Chairman of Turner Management Inc., a vertically integrated real estate
investment company from 1983 to 2000. Mr. Gati is also a member of the Board of
Directors of Universal Automation Systems, Inc.
Sheila Horwitz is a Senior Vice President of Schroder & Co., Inc., a broker
dealer firm. She has an extensive background in the securities brokerage
industry, having worked at her current firm, formerly known as Wertheim,
Schroder & Co., since 1990. Previously Ms. Horwitz worked for Oppenheimer & Co.
from 1988 to 1990, and for L. F. Rothschild & Co. from 1978 to 1988, in similar
capacities.
Kit Howard holds a Bachelor of Science Degree from New York University. She
has worked in the financial community as a stockbroker from 1980 until 1986.
Since then she has assisted Robert Howard, her husband and Chairman of the
Company, in his various business enterprises.
Harvey Teich is a retired certified public accountant. On January 1, 1992,
the accounting firm of Merman & Teich, where Mr. Teich had been a principal for
the previous seventeen years, ceased to operate as a partnership. He is a member
of the New York State Society for Certified Public Accountants.
BOARD OF DIRECTOR MEETINGS AND COMMITTEES
During the last fiscal year, the Board of Directors held two meetings, the
Stock Option Committee of the Board of Directors held four meetings, the
Directors Incentive Plan Committee held one meeting and the Audit Committee held
one meeting. The Company does not have standing nominating or compensation
committees of the Board of Directors, or committees performing similar
functions.
The members of the Stock Option Committee during the last fiscal year
consisted of Sheila Horwitz and Kit Howard and currently consist of the same
persons. The function of the Stock Option committee is to administer the
Company's 1993 Stock Option Plan. The Committee consists of not fewer than two
directors who are appointed by and serve at the pleasure of the Board of
Directors. Members of the Committee are not eligible to have participated in the
Plan during the prior twelve months or to be currently participating in the Plan
while serving as members.
The Directors Incentive Plan Committee consists of one member, Robert
Howard, who serves as Chairman. The purpose of this Committee is to administer
the Company's Directors Incentive Plan pursuant to which the Directors are
eligible to receive grants of stock options for shares of Company Common Stock
as compensation for serving on the Board of Directors.
The members of the Audit Committee during the last fiscal year consisted of
Ivan Gati, Sheila Horwitz and Kit Howard and currently consist of the same
persons. The Audit Committee provides an independent review and advisory
function for the independent auditors, the Board and the Company's management
with regard to financial reporting, internal controls and corporate integrity.
5
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Name Age Position
W. Scott Parr(1) 49 President, Chief Executive Officer, Director
Richard F. Lehman(2) 62 Vice President, Engineering
Annette L. Heroux(1) 43 Chief Financial Officer
Joseph E. Manseau(2) 43 Vice President Sales and Marketing
- ------------------------------
(1) Officer appointed by the Board of Directors.
(2) Key employees
Richard F. Lehman joined the Company in July 1990, as Director of Scanner
Engineering. In December 1993, he was named Vice President of Scanner
Engineering and in October 1996, he was named Vice President of Engineering.
Prior to joining the Company, Mr. Lehman was employed by Xerox Corporation for
23 years where he served in various engineering and managerial capacities.
Annette L. Heroux joined the Company in October 1987 as Accounting Manager and
was named Controller in October 1998 and Chief Financial Officer in July 1999.
Prior to joining the Company, Ms. Heroux worked from 1980 to 1987 for Laurier,
Inc., a small semiconductor equipment manufacturer, in various financial and
managerial capacities.
Joseph E. Manseau joined the Company in August 1998 as Regional Sales Manager
and was named to Vice President Sales and Marketing on April 1, 1999. Prior to
joining the Company Mr. Manseau worked from 1997 to 1998 for Escher-Grad Tech.,
Inc. where he was responsible for implementing the sales and marketing strategy
for its large format image setters. From 1981 to 1997 he worked for AGFA and
Compugraphic, currently divisions of Bayer Corporation, in various marketing and
sales capacities.
6
EXECUTIVE COMPENSATION
The following table provides information on the compensation provided by the
Company during fiscal years 1999, 1998 and 1997 to the persons serving as the
Company's Chief Executive Officer during fiscal 1999, the Company's most highly
compensated executive officers and certain key employees serving at the end of
the 1999 fiscal year. Included in this list are only those executive officers
and key employees whose total annual salary and bonus exceeded $100,000 during
the 1999 fiscal year.
SUMMARY COMPENSATION TABLE
Securities
Underlying
Name and Principal Position Year Salary($) Option(#)
- --------------------------- ---- --------- ---------
W. Scott Parr
Chief Executive Officer............... 1999 138,197 127,337
1998 131,502 277,431
1997 N/A N/A
Richard Lehman
Vice President, Engineering........... 1999 112,735 5,000
1998 101,976 19,128
1997 113,698 5,000
Joseph E. Manseau
Vice President, Sales & Marketing..... 1999 126,529 18,410
1998 N/A N/A
1997 N/A N/A
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants Potential
--------------------------- Realizable Value at
Number of Percent of Assumed Annual
Securities Total Options Rates of Stock
underlying Granted to Exercise of Price Appreciation
Options Employees Base Price Expiration for Option Term
Name Granted* in Fiscal Year ($/Sh) Date 5%($) 10%($)
---- -------- -------------- ----------- ----------- ----- ------
W. Scott Parr 125,000 29.0 .81 07/07/2009 63,676 161,366
2,337 .5 1.13 10/07/2009 1,661 4,209
Joseph Manseau 10,000 2.3 .81 07/07/2009 5,094 12,909
8,410 2.0 1.13 10/07/2009 5,977 15,146
Richard Lehman 5,000 1.2 .81 07/07/2009 2,547 6,455
*Except for the options for 2,337 shares granted to Mr. Parr which vested
immediately, all the options vest in annual installments at various times
between July 7, 1999 and September 1, 2003.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information on an aggregated basis regarding each
exercise of stock options during the Company's last completed fiscal year by
each of the named executive officers and the fiscal year-end value of
unexercised options.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the Money
Options at Options at
FY-End (#) FY-End($) (1)
Shares ---------- -------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
- ---- ------------ -------- ------------- -------------
W. Scott Parr (2) 0 0 99,546/328,855 139,089/347,805
Joseph Manseau (2) 0 0 6,243/16,167 9,370/23,695
Richard Lehman (2) 0 0 50,294/5,334 52,989/6,866
- --------------
(1) Based upon the closing price of the Common Stock on December 31, 1999, of
$2.44 per share.
(2) Options granted pursuant to the Company's 1993 Stock Option Plan, as
amended.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
There is no Compensation Committee or other committee of the Company's
Board of Directors performing similar functions. The person who performed the
equivalent function in 1999 was Robert Howard, Chairman of the Board under the
direction of the Board of Directors. Scott Parr, the Company's Chief Executive
Officer and a director, participated in discussions with Mr. Howard during the
1999 fiscal year in his capacity as an executive officer in connection with
executive officer compensation. During 1999 none of the executive officers of
the Company served on the Board of Directors of Compensation Committee of any
other entity, any of whose officers has served on the Board of Directors of the
Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
There is no Compensation Committee of the Board of Directors or other
committee of the Board of Directors performing an equivalent function. As noted
above, executive compensation in 1999 was determined by the Company's Chairman,
Robert Howard, in consultation with Scott Parr, the Company's Chief Executive
Officer. There is no formal compensation policy for either the Chief Executive
Officer or the other executive officers of the Company. Executive compensation
is based generally on performance and the Company's resources, but not on
specific objective criteria.
Compensation for executive officers consists of a combination of salary and
stock options. In 1999 the Company recorded a loss of $3,996,828 on revenues of
$6,663,230 as compared to a loss of $3,372,323 in 1998 on revenues of
$5,232,601. During 1999 there were no increases in salaries to executive
officers, however one key employee received an increase of 5% based on
performance criteria and another key employee received an increase of 37% in
connection with his promotion to Vice President.
Robert Howard, Chairman Ivan Gati Kit Howard
Sheila Horwitz W. Scott Parr Harvey Teich
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PERFORMANCE GRAPH
The following chart sets forth a line graph comparing the performance of
the Company's Common Stock, over the past five years. This graph assumes the
investment of $100 on December 31, 1994, in the Company's Common Stock, and
compares the performance with the NASDAQ Composite Index and the NASDAQ Computer
Manufacturer Index. Measurement points are at December 31 for each respective
year.
On July 13, 1995, the Company's Common Stock ceased trading on the American
Stock Exchange and commenced trading on the NASDAQ National Market. The Company
started trading on the NASDAQ Small Cap Market on July 15, 1998.
Those companies which compete with the Company in its principal market,
image scanning, are either small subsidiaries or divisions of large United
States corporations or are foreign companies which are either not quoted on a
stock exchange or for which data is difficult to obtain. For this reason a more
generic index of NASDAQ technology stocks has been adopted. The Company pays no
dividends. The NASDAQ Composite Index and the NASDAQ Computer Manufacturer Index
reflect a cumulative total return based upon the reinvestment of dividends of
the stocks included in those indices. The historical information set forth below
is not necessarily indicative of future performance.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
STOCK PERFORMANCE GRAPH
HOWTEK $100.00 $75.34 $19.87 $15.76 $13.70 $26.72
NASDAQ Index $100.00 $141.34 $173.90 $213.07 $300.43 $555.99
NASDAQ Computer $100.00 $156.60 $209.63 $253.50 $549.74 $1,170.85
Manufacturer Index
9
RELATED TRANSACTIONS
The Company has a Convertible Revolving Credit Promissory Note ("the Convertible
Note") and Revolving Loan and Security Agreement (the "Loan Agreement") with Mr.
Robert Howard, Chairman of the Board of Directors of the Company, under which
Mr. Howard has agreed to advance funds, or to provide guarantees of advances
made by third parties in an amount up to $3,000,000, of which $2,670,000 was
available at December 31, 1999. The Loan Agreement expires January 4, 2001.
Outstanding advances are collateralized by substantially all of the assets of
the Company and bear interest at prime interest rate plus 2%. The Convertible
Note entitles Mr. Howard to convert outstanding advances into shares of the
Company's common stock at any time based on the outstanding closing market price
of the Company's common stock at the time each advance is made. At December 31,
1999, $330,000 was outstanding under the Loan Agreement.
The Company has Secured Demand Notes and Security Agreements (the "New Notes")
owed to Mr. Robert Howard. Principal of these notes are due and payable in full,
together with interest accrued and any penalties provided for, on demand. Under
the terms of the New Notes the Company agreed to pay interest at the lower rate
of (a) 12% per annum, compounded monthly or (b) the maximum rate permitted by
applicable law. The New Notes currently bear interest at 12%. Payment of the New
Notes is secured by a security interest in certain assets of the Company. As of
December 31, 1999 $500,000 was outstanding pursuant to the New Notes.
During 1999 the Company borrowed, $310,000 from Mr. Robert Howard, pursuant to
Convertible Promissory Notes (the "Promissory Notes"). Principal on these
Promissory Notes are payable in equal payments based on the borrowed amount at
the end of each quarter starting March 31, 2003 through December 31, 2006. Under
the terms of the Promissory Notes the Company agreed to pay interest at a fixed
rate of 7% per annum. At the Company's option it may pay the interest in either
cash or in restricted shares of the Company's common stock, or in any
combination thereof. Interest paid in shares of the Company's common stock will
be paid at the greater of $1.00 per share or the average per share closing
market price at the time each interest payment is due. The Promissory Notes
entitle the payees to convert outstanding principal due into shares of the
Company's common stock at $1.00 per share. As of December 31, 1999, the Company
owed $310,000 pursuant to the Promissory Notes.
As of December 31, 1999, the Company had one lease obligation related to its
facility. The lease obligation through September 30, 2000 is approximately
$58,875. The Company's principal executive offices and research and development
laboratory is leased by the Company from Mr. Robert Howard pursuant to a lease,
which expires September 30, 2000. Rental expense for the year ended December 31,
1999 was $78,500.
As of December 31, 1998, the Company owed Dr. Lawrence Howard $200,000, pursuant
to Secured Demand Notes and Security Agreements (The "New LH Notes"). Principal
of these notes were due and payable in full, together with interest accrued and
any penalties provided for, on demand. Under the terms of the New LH Notes the
Company agreed to pay interest at the lower rate of (a) 12% per annum,
compounded monthly or (b) the maximum rate permitted by applicable law. Payment
of the New LH Notes is secured by a security interest in certain assets of the
Company.
In the fourth quarter of 1999 the Company consummated an agreement with Dr.
Lawrence Howard to convert the Notes and interest accrued into 200,326 shares of
restricted common stock, par value $.01 per share of the Company's common stock.
In February 1999, the Company borrowed $30,000 from Mr. W. Scott Parr, the
Company's President, Chief Executive Officer pursuant to a Convertible
Promissory Note (the "Parr Promissory Note"). Principal on the Parr Promissory
Note was payable in equal payments based on the borrowed amount at the end of
each quarter starting March 31, 2003 through December 31, 2006. Under the terms
of the Parr Promissory Note the Company agreed to pay interest at a fixed rate
of 7% per annum, beginning on December 31, 1999 and each succeeding year during
the terms hereof. At the Company's option it may pay the interest in either cash
or in restricted shares of the Company's common stock, or in any combination
thereof. Interest paid in shares of the Company's common stock will be paid at
the greater of $1.00 per share or the average per share closing market price at
the time each interest payment is due. The Parr Promissory Note entitled the
payee to convert outstanding principal due into shares of the
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Company's common stock at $1.00 per share, which was the market price of the
Company's stock at the date the Parr Promissory Notes were issued. On December
31, 1999, the Company consummated an agreement with Mr. Parr to convert the Parr
Promissory Note into shares of 7.0% Series A convertible preferred stock of the
Company and converted the interest accrued into shares of its common stock.
In April 2000, the Company borrowed an additional $100,000 from Mr. Robert
Howard under the Convertible Note and Revolving Loan and Security Agreement. A
total of $2,410,000 was available for borrowing by the Company at April 30,
2000.
Additionally, in April 2000 the Company sold shares of its 7% Series A
Convertible Preferred Stock, 1,000 shares to an unrelated party, 1,000 shares to
Dr. Lawrence Howard, son of the Company's Chairman Robert Howard, and 250 shares
to Mr. W. Scott Part, the Company's President for gross proceeds of $225,000.
During the year ended December 31, 1999 the Company sold engineering services
totaling $77,394 to Presstek, Inc., which Mr. Howard was the Chairman Emeritus
of the Board and is a principal stockholder.
PROPOSAL 2
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO Seidman, LLP has audited and reported upon the financial statements of
the Company for the fiscal year ended December 31, 1999, and has been selected
by the Board of Directors to examine and report upon the financial statements of
the Company for the fiscal year ending December 31, 2000. The Board of Directors
recommends to the stockholders that they ratify this selection. BDO Seidman, LLP
has no direct or indirect interest in the Company or any affiliate of the
Company. A representative of BDO Seidman, LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement, if such person desires
to do so, and is expected to be available to respond to appropriate questions.
DEADLINE FOR SUBMISSION OF
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders to be held in 2001, must (I) submit
the proposals in proper form to the Company at its address set forth on the
first page of this proxy statement not later than January 11, 2001, and (ii)
must satisfy the conditions established by the Securities and Exchange
Commission and the Company's By-laws for stockholder proposals, in order for the
proposals to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such Annual Meeting.
After the January 11, 2001 deadline, a stockholder may present a proposal
at the Company's 2000 Annual Meeting, to be held in the year 2001, if it is
submitted to the Company's Secretary at the address set forth below no later
than March 27, 2001. If timely submitted, the stockholder may present the
proposal at the 2000 Annual Meeting, to be held in the year 2001, but the
Company is not obligated to present the matter in its proxy statement.
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OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and postage
will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1999, IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE
CLOSE OF BUSINESS ON MAY 3, 2000. ADDITIONAL COPIES OF THE ANNUAL REPORT WILL BE
PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
HOWTEK, INC.
21 PARK AVENUE
HUDSON, NEW HAMPSHIRE 03051
ATTENTION: MS. CONNIE WEBSTER
IN ADDITION, COPIES OF ANY EXHIBITS TO THE ANNUAL REPORT WILL BE PROVIDED FOR A
NOMINAL CHARGE TO STOCKHOLDERS WHO MAKE A WRITTEN REQUEST TO THE COMPANY AT THE
ABOVE ADDRESS.
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of
Directors,
ROBERT HOWARD
Chairman of the Board of Directors
May 18, 2000
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