SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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SPACETEC IMC CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SPACETEC IMC CORPORATION
------------------------------------------------
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SPACETEC IMC CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 1998 Annual Meeting of Shareholders of Spacetec IMC Corporation, a
Massachusetts corporation (the "Company"), will be held at The American
Textile History Museum, 491 Dutton Street, Lowell, Massachusetts 01854 at
10:00 a.m. on Thursday, July 30, 1998 for the following purposes:
1. To elect two directors to hold office for a term of three years as
Class III Directors and until their respective successors are duly elected
and qualified.
2. To transact such other business as may be in furtherance of or
incidental to the foregoing or as may otherwise properly come before the
meeting.
Only shareholders of record at the close of business on June 15, 1998 will
be entitled to vote at the meeting or any adjournment thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR
PROXY WILL NOT BE USED.
By order of the Board of Directors,
C. Raymond Boelig, President
Dated: June 22, 1998
SPACETEC IMC CORPORATION
THE BOOTT MILLS
100 FOOT OF JOHN STREET
LOWELL, MASSACHUSETTS 01852-1126
TELEPHONE: (978) 275-6100
----------------
PROXY STATEMENT
----------------
The enclosed proxy is solicited on behalf of the Board of Directors of
Spacetec IMC Corporation (the "Company") for use at the 1998 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the American Textile History
Museum, 491 Dutton Street, Lowell, Massachusetts 01854 at 10:00 a.m. on
Thursday, July 30, 1998, and at any adjournments thereof. The approximate date
on which this proxy statement and accompanying proxy are first being mailed to
shareholders is June 22, 1998.
The principal business expected to be transacted at the Annual Meeting, as
more fully described below, will be the election of two Class III Directors.
The authority granted by an executed proxy may be revoked at any time before
its exercise by filing with the Clerk of the Company a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Annual
Meeting.
The Company will bear the cost of the solicitation of proxies, including the
charges and expense of brokerage firms and others for forwarding solicitation
material to beneficial owners of stock. In addition to the use of mails,
proxies may be solicited by officers and employees of the Company, without
additional remuneration, in person or by telephone.
VOTING SECURITIES AND VOTES REQUIRED
Only shareholders of record at the close of business on June 15, 1998 will
be entitled to vote at the Annual Meeting. On that date the Company had
outstanding 7,132,601 shares of Common Stock, $0.01 par value per share (the
"Common Stock"), each of which is entitled to one vote. A majority in interest
of the outstanding Common Stock, represented at the Annual Meeting in person
or by proxy, constitutes a quorum for the transaction of business. Shares
represented by proxies which contain one or more abstentions or broker "non-
votes," are counted as present or represented for purposes of determining the
presence or absence of a quorum for the Annual Meeting. A "non-vote" occurs
when a broker or other nominee holding shares for a beneficial owner votes on
one proposal, but does not vote on another proposal because, with respect to
such other proposal, the broker does not have discretionary voting power and
has not received instructions from the beneficial owner. A plurality of the
votes cast is required to elect each nominee for director.
SHARE OWNERSHIP
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of June 15, 1998 by (i) persons known by the
Company to be beneficial owners of more than 5% of its Common Stock, (ii) the
executive officers named in the Summary Table, (iii) the directors and
nominees for election as directors of the Company, and (iv) all current
executive officers and directors of the Company as a group and the percentage
of shares represented thereby:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
--------------------------
BENEFICIAL OWNER SHARES PERCENT OF CLASS
---------------- --------- ----------------
5% STOCKHOLDERS
Dennis T. Gain(2)................................... 1,586,941 21.4%
30 Boren Lane
Boxford, MA 01921
J. Grant Jagelman(3)................................ 567,039 7.6%
Level 8 139 Macquarie St.
Sydney, NSW 2000 Australia
Gain Family Trust(4)................................ 1,046,590 14.1%
OTHER DIRECTORS AND NOMINEES FOR DIRECTOR
C. Raymond Boelig(5)................................ 20,000 *
Morton E. Goulder(6)................................ 143,809 1.9%
Jerry H. Loyd(7).................................... 41,809 *
George R. Rea(8).................................... 14,700 *
Patrick J. Sullivan(9).............................. 24,000 *
OTHER NAMED EXECUTIVE OFFICERS
John A. Hilton(10).................................. 174,311 2.4%
Joyce A. Ouellette(11).............................. 69,100 *
A. Lorne Grant(12).................................. 20,000 *
Neil M. Rossen(13)**................................ 16,450 *
All directors, nominees for director and executive
officers (10 persons) as a
group(14).......................................... 2,661,709 35.8%
- --------
* Less than one percent.
** As of June 11, 1998, individual was no longer an executive officer of the
Company.
(1) Except as otherwise indicated in these footnotes, the persons and
entities named in the table have sole voting and investment power with
respect to all shares beneficially owned by them. Includes shares of
Common Stock issuable pursuant to outstanding options which may be
exercised within 60 days after June 15, 1998. The inclusion herein of any
shares of Common Stock deemed beneficially owned does not constitute an
admission of beneficial ownership of those shares.
(2) Includes (i) 1,046,590 shares held by the Gain Family Trust, a trust for
the benefit of certain members of the family of Dennis T. Gain and of
which Mr. Gain is the sole trustee, (ii) 34,000 shares of Common Stock
subject to options held by Mr. Gain exercisable as of June 15, 1998 or
within 60 days thereafter and (iii) 75,000 shares held by Mr. Gain's wife
and children and (iv) 37,600 shares held by the Gain New Zealand Trust of
which Mr. Gain is a Trustee (v) 291,667 shares held by 3D Open Motion of
which Mr. Gain is majority owner.
2
(3) Includes (i) 446,420 shares held by Rhetford Pty. Ltd., an Australian
corporation of which Mr. Jagelman is Chief Executive Officer and of which
his family members own 100% of the stock, (ii) 27,396 shares held by the
Group Superannuation Fund, an Australian retirement trust of which Mr.
Jagelman holds a 100% interest, (iii) 40,623 shares of Common Stock held
by Mr. Jagelman's wife and children and mother-in-law and (iv) 52,067
shares of Common stock subject to options held by Mr. Jagelman
exercisable as of June 15, 1998 or within 60 days thereafter.
(4) The Gain Family Trust is a trust for the benefit of certain family
members of Dennis T. Gain, director of the Company and the former
President and Chief Executive Officer. Mr. Gain is the sole trustee of
the Gain Family Trust and has sole voting control and investment power
over the shares held by the trust.
(5) Includes 20,000 shares of Common Stock subject to options held by Mr.
Boelig exercisable as of June 15, 1998 or within 60 days thereafter.
(6) Includes 23,000 shares of Common Stock subject to options held by Mr.
Goulder exercisable as of June 15, 1998 or within 60 days thereafter.
(7) Includes 23,000 shares of Common Stock subject to options held by Mr.
Loyd exercisable as of June 15, 1998 or within 60 days thereafter.
(8) Includes 14,700 shares of Common Stock subject to options held by Mr. Rea
exercisable as of June 15, 1998 or within 60 days thereafter.
(9) Includes 21,000 shares of Common Stock subject to options held by Mr.
Sullivan exercisable as of June 15, 1998 or within 60 days thereafter.
(10) Includes 39,400 shares of Common Stock subject to options held by Mr.
Hilton exercisable as of June 15, 1998 or within 60 days thereafter.
Includes 54,800 shares held by Mr. Hilton's wife.
(11) Includes 49,100 shares of Common Stock subject to options held by Ms.
Ouellette exercisable as of June 15, 1998 or within 60 days thereafter.
(12) Includes 20,000 shares of Common Stock subject to options held by Mr.
Grant exercisable as of June 15, 1998 or within 60 days thereafter.
(13) Includes 15,000 shares of Common Stock subject to options held by Mr.
Rossen exercisable as of June 15, 1998 or within 60 days thereafter.
(14) Includes shares and options described in footnotes (2) and (3) and (5-
12).
3
ELECTION OF DIRECTORS
The number of directors is currently set at seven members. In September
1997, the Board of Directors was increased to six members and George R. Rea
was elected as a Class I Director by the unanimous vote of the Board of
Directors. In March 1998, the Board of Directors was increased to seven
members and C. Raymond Boelig was elected as a Class II Director by the
unanimous vote of the Board of Directors. The Company's Restated Articles of
Organization provide that the Board of Directors is divided into three
classes, two of which consist of two directors and one of which consists of
three directors. Each director serves for a three year term, with one class of
directors being elected at each annual meeting. At the Annual Meeting, two
directors will be elected to hold office as Class III Directors for three
years and until their successors are duly elected and qualified. Dennis T.
Gain and Morton E. Goulder, who are presently serving as Class III Directors,
have been nominated for re-election by the Board of Directors.
Pursuant to a Separation Agreement dated as of March 18, 1998 between the
Company and Mr. Gain, the Company's Board of Directors agreed, subject to its
fiduciary and other legal duties under the laws of the Commonwealth of
Massachusetts and the United States of America, to nominate Mr. Gain as a
Class III director, for election to the Board of Directors at the 1998 Annual
Meeting, and shall instruct all proxies named by the Board of Directors to
vote for the election of Mr. Gain.
Unless a completed proxy withholds authority to vote for the nominees or is
a broker non-vote, the shares represented by such proxy will be voted for the
election of the nominees of the Board of Directors. If any of the nominees are
unable to serve, which is not expected, the shares represented by the enclosed
proxy will be voted for such other candidate as may be nominated by the Board
of Directors.
OCCUPATIONS OF DIRECTORS AND OFFICERS
The following table sets forth each Class I Director, Class II Director,
Class III Director and the executive officers of the Company, their ages and
present positions with the Company:
NAME AGE POSITION
---- --- --------
C. Raymond Boelig.......... 44 President, Chief Operating Officer and Class II
Director
Neil M. Rossen*............ 52 Vice President and Chief Financial Officer
John A. Hilton............. 38 Vice President and Chief Technology Scientist
A. Lorne Grant............. 53 Vice President, Engineering
Joyce A. Ouellette......... 40 Vice President, OEM Sales, Business Development
& ISV Relations
Dennis T. Gain**........... 55 Class III Director
Patrick J. Sullivan(2)..... 43 Class II Director
Morton E. Goulder(1)(2)**.. 77 Class III Director
J. Grant Jagelman(2)....... 56 Class I Director
Jerry H. Loyd(1)(2)........ 68 Class II Director
George R. Rea.............. 60 Class I Director
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
* As of June 11, 1998, individual was no longer an executive officer of the
Company.
** Nominee for Class III Director
4
C. Raymond Boelig has been a director of the Company since March 1998,
President since February 1998 and Chief Operating Officer since December 1997
and Vice President since July 1997. Prior to joining the Company, Mr. Boelig
was President of Bitstream Inc. (BITS) NASDAQ since July, 1993, and Vice
President of Sales & Marketing since February 1991. Mr. Boelig holds a B.S.
degree in business administration from the University of New Hampshire.
Neil M. Rossen served as Vice President and Chief Financial Officer since
November 1996 until his resignation on June 11, 1998. Mr. Rossen previously
held senior financial and operational positions with Northern Telecom Inc., in
Europe from 1978 through 1982, and senior financial positions with Data
General Corporation both in Europe and the United States from 1982 until 1989.
Between 1990 and 1992 Mr. Rossen was Vice President of Marketing and Sales of
PAGG Corporation a contract manufacturer. From 1993 through 1996 Mr. Rossen
was an investor in and officer of Intelliphone, a privately held interconnect
Company. Mr. Rossen holds a Bachelor of commerce degree from the University of
Cape Town, South Africa and qualified as a Chartered Accountant (S.A.).
John A. Hilton has served as Vice President since its incorporation in April
1991 and Chief Technology Scientist since 1997. Mr. Hilton holds a B.S. degree
in Computer Science, and B.E. and M.E. degrees in mechanical engineering from
the University of Sydney, Australia.
A. Lorne Grant has served as Vice President of Engineering since March 1997.
From 1995 until 1997, Mr. Grant served as a consultant to area high technology
firms, including Spacetec IMC Corporation. Mr. Grant served as Chief Executive
Officer of Nexus Integrated Services Corporation from 1990 through 1995.
Joyce A. Ouellette has served as Vice President since 1992 and is currently
the Vice President of Business Development, OEM Sales and ISV Relations since
August 1997. Ms. Ouellette holds a B.S. degree in business from North Adams
State College.
Dennis T. Gain has been a director of the Company since its incorporation in
April 1991. In addition, Mr. Gain was Chairman of the Board and served as
President and Chief Executive Officer of the Company from its incorporation in
April 1991 until February 1998. Mr. Gain has a B.E. degree and Post Graduate
Associate degree in Metallurgy from the University of Otago, New Zealand and a
B. Comm. Degree in Finance from the University of Auckland, New Zealand.
Patrick J. Sullivan has been a director of the Company since February 1997.
Mr. Sullivan has extensive consumer electronics and computer industry
experience. Mr. Sullivan served as Vice President of the Merchandising Group
of Digital Equipment Corporation since 1993. Mr. Sullivan attended
Northeastern University and Arizona State University.
Morton E. Goulder has been a director of the Company since January 1994.
Since 1977, Mr. Goulder's principal occupation has been President of M.E.
Goulder Enterprises, a consulting firm specializing in high technology. Mr.
Goulder is also a director of Computer Devices, Inc. and several private high
technology companies. Mr. Goulder has a B.S. degree in Applied Physics from
Massachusetts Institute of Technology.
J. Grant Jagelman has been a director of the Company since its inception in
April 1991. He was the Chairman of Spatial Systems Ltd. ("SSL"), an Australian
public company, from 1986 to July 1997 when SSL was merged into the Company.
Jerry H. Loyd has been a director of the Company since January 1994. Mr.
Loyd was a managing director of Morgan Stanley at the time of his retirement
in 1985. Mr. Loyd has a B.S. degree in each of Business and Engineering from
the University of Vermont and has an M.B.A. from New York University.
George R. Rea has been a director of the Company since September 1997. Mr.
Rea has been a consultant, investor, and board member of Conner Peripherals
Inc. since 1994. Prior to this, Mr. Rea was Executive Vice President of
Storage Systems Group from 1992 until his retirement in 1994. In addition, Mr.
Rea is a director of Imaging Technologies International LLC.
5
COMMITTEES OF THE BOARD
The Audit Committee, of which Mr. Goulder and Mr. Loyd are currently
members, is responsible for providing the Board of Directors with an
independent review of the financial health of the Company and its financial
controls and reporting. Its primary functions are to recommend independent
auditors to the Board of Directors, review the results of the annual audit and
the auditors' reports, and ensure the adequacy of the Company's financial
controls and procedures. The Audit Committee met once in Fiscal Year 1998.
The Compensation Committee, of which Messrs. Jagelman, Goulder, Loyd and
Sullivan are currently members, acts for the Board of Directors with respect
to the Company's compensation practices and implementation thereof. The
Compensation Committee sets and implements the compensation of the Company's
officers and administers the Company's stock plans. The Compensation Committee
held two meetings in Fiscal Year 1998.
The Board of Director does not have a standing nominating committee.
The Board of Directors held eleven meetings during Fiscal Year 1998. No
director attended less than 75% of the aggregate meetings of the Board of
Directors and all committees of the Board of Directors on which such director
served during Fiscal Year 1998.
DIRECTOR COMPENSATION
Directors receive no cash compensation for their services. All directors who
are not employees of the Company (the "Eligible Directors"), however, are
currently eligible to participate in the Amended and Restated 1995 Director
Stock Option Plan, as amended, (the "Director Plan"). Under the Director Plan,
each Eligible Director receives, on the date such person is first elected to
the Board, an option to purchase 10,000 shares (the "Initial Option") of the
Company's Common Stock, such shares vesting over two years. Subsequent to the
grant of the Initial Option, each Eligible Director who is a director on each
December 31st thereafter receives an option to purchase an additional 10,000
shares of Common Stock, such shares vesting over two years. All options
granted under the Director Plan have an exercise price equal to the fair
market value of the Common Stock on the date of grant. Each option granted
under the Director Plan expires ten years from the date of grant.
During Fiscal Year 1998, Messrs. Goulder, Jagelman, Loyd, Rea and Sullivan
each received an option to purchase 10,000 shares of Common Stock which was
immediately exercisable with respect to 30% of such shares and will become
exercisable with respect to 30% and 40% on December 31, 1998 and December 31,
1999 respectively. In addition, Mr. Rea, upon his election to the Board of
Directors, also received and Initial Option of 10,000 shares of Common Stock
which was immediately exercisable with respect to 30% of such shares and will
become exercisable with respect to 30% and 40% of such shares on September 11,
1998 and September 11, 1999 respectively.
In addition to the Options granted pursuant to the Director Plan on November
20, 1997 each of Messrs. Rea and Sullivan were granted options from the 1993
Amended and Restated Stock Option Plan to purchase 9,000 and 10,000 shares of
Common Stock, respectively, in connection with their participation on a
technology advisory committee of the Company. The options were immediately
exercisable with respect to 30% of such shares and which will become
exercisable with respect to 30% and 40% of such shares on November 20, 1998
and November 20, 1999 respectively.
6
COMPENSATION AND OTHER INFORMATION CONCERNING
DIRECTORS AND OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides summary information on the cash compensation
and certain other compensation paid, awarded, or accrued by the Company to (i)
the Company's Chief Executive Officer, (ii) the Company's former Chief
Executive Officer (through February 1998), (iii) each of the Company's most
highly compensated executive officers who were serving as of March 31, 1998,
and (iv) a former executive officer who would have been among the Company's
four most highly compensated executive officers, but for the fact that he was
not serving in that capacity as of March 31, 1998.
ANNUAL ALL OTHER
COMPENSATION COMPENSATION
---------------------------------- ------------
LONG-TERM
COMPENSATION
AWARDS
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL UNDERLYING
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS # $
- ------------------ ---- -------- ------- ------------ ------------ ------------
C. Raymond Boelig....... 1998 $ 85,925 -- -- 100,000 $37,070(1)
President, Chief
Operating 1997 -- -- -- -- --
Officer and Director 1996 -- -- -- -- --
Dennis T. Gain.......... 1998 $148,205 -- -- 58,000(2)(3) $37,575(3)(4)
Former President, CEO, 1997 $180,000 -- -- -- $ 3,507(4)
and Chairman of the
Board 1996 $135,000 -- -- 40,000 $ 3,237(4)
Neil M. Rossen.......... 1998 $110,000 -- -- 75,000(2) --
Vice President and 1997 $ 37,800 -- -- 50,000 --
Chief Financial Officer 1996 -- -- -- -- --
John A. Hilton.......... 1998 $110,000 -- -- 15,500(2) --
Vice President and 1997 $110,000 -- -- 7,500 --
Chief Technology
Scientist 1996 $ 93,333 -- -- 42,000 --
Joyce A. Ouellette...... 1998 $ 98,300 -- -- 29,500(2) $54,545(5)
Vice President, OEM
Sales 1997 $ 90,000 -- -- -- $45,625(5)
Business Development &
ISV Relations 1996 $ 89,000 -- -- 62,000 $64,000(5)
A. Lorne Grant.......... 1998 $120,000 $16,000 2,000(6) 100,000 $ 4,925(7)
Vice President,
Engineering 1997 $ 29,600 -- -- -- --
1996 -- -- -- --
James J. Wick........... 1998 $ 93,711 -- -- 15,500(2) $17,401(8)
Former Vice President, 1997 $110,000 -- -- 7,500 --
and Chief Technology
Officer 1996 $ 92,000 -- -- 32,000 --
- --------
(1) Consists of sales commissions paid to Mr. Boelig for each respective
fiscal year. Mr. Boelig and the Company entered into an Employment
Agreement dated April 1, 1998. See "Certain Relationships and Related
Transactions."
(2) Includes options granted pursuant to the repricing of options described
under the caption "Option Repricing" and disclosed in the table "Ten Year
Option Repricing" set forth below.
(3) Includes certain payments and Option Re-grant made pursuant to a severance
agreement between Mr. Gain and the Company. See "Certain Relationships and
Related Transactions."
(4) These amounts represent the value of life insurance policies on the life
of Mr. Gain maintained by the Company until February 1998, under a split
dollar insurance agreement between the Company and New York Life Insurance
Company, where the Company paid $5,992, $5,963, and $22,669. in Fiscal
Years 1996, 1997 and 1998, respectively, of total premiums of $6,787,
$6,787, and 30,653 respectively.
(5) Consists of sales commissions paid to Ms. Ouellette for each respective
fiscal year.
(6) Consists of re-location expenses paid to Mr. Grant in connection with his
becoming an officer of the Company.
(7) Consists of sales commissions received by Mr. Grant.
(8) Consists of a payment made pursuant to a severance agreement between Mr.
Wick and the Company.
7
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
PRICE APPRECIATION
OF STOCK PRICE
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(2)
-------------------------------------------- ---------------------
% OF TOTAL
OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED YEAR 1998 ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ---------- ----------- ---------- ---------- ----------
C. Raymond Boelig....... 100,000 10.32% $4.38 7/14/07 $ 275,456 $ 698,059
Dennis T. Gain.......... 10,000 1.32% $3.58 9/29/00 $ 13,327 $ 37,047
30,000 3.10% $3.12 4/27/00 $ 14,802 $ 26,332
8,000 0.83% $1.10 4/29/99 $ 18,735 $ 20,282
10,000 1.32% $3.58 9/29/00 $ 1,091 $ 5,828
Neil M. Rossen.......... 50,000 5.16% $3.25 12/4/07 $ 110,715 $ 285,891
25,000 2.58% $3.25 4/11/07 $ 51,098 $ 129,492
John A. Hilton.......... 8,000 0.83% $3.25 9/29/05 $ 13,302 $ 32,278
7,500 0.77% $3.25 7/26/06 $ 13,978 $ 34,713
Joyce A. Ouellette...... 28,500 3.04% $3.25 9/29/05 $ 49,051 $ 119,026
A. Lorne Grant.......... 100,000 10.32% $3.25 4/11/07 $ 204,391 $ 517,966
James J. Wick........... 8,000 0.83% $3.25 9/29/05 $ 13,302 $ 32,278
7,500 0.77% $3.25 7/26/06 $ 13,978 $ 34,713
- --------
(1) Stock options were granted under the Company's 1993 Plan at an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. The options have a term of ten years from the date of grant
(with the exception of Mr. Gain which have a term of 5 years from date of
grant) and become exercisable as to 20% of the shares covered on the
anniversary of the date of grant for each of the next five years.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Company's Common Stock over the term of the options. these numbers
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common stock
holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the individuals.
8
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the Company's 1993 Plan,
including (i) the number of shares of Common Stock purchased upon exercise of
options in the fiscal year ended March 31, 1998; (ii) the net value realized
upon such exercise; (iii) the number of unexercised options outstanding at
March 31, 1998; and (iv) the value of such unexercised options at March 31,
1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT
UNEXERCISED OPTIONS AT MARCH 31,
MARCH 31, 1998(#) 1998($)(1)
------------------------- -------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
C. Raymond Boelig....... 0 0 0 100,000 0 0
Dennis T. Gain(2)....... 0 0 36,000 34,000 49,360 25,040
Neil M. Rossen.......... 0 0 10,000 65,000 0 0
John A. Hilton.......... 0 0 27,900 37,600 27,176 22,764
Joyce A. Ouellette...... 0 0 41,900 36,100 30,005 19,320
A. Lorne Grant.......... 0 0 20,000 80,000 0 0
James J. Wick(3)........ 0 0 23,900 0 25,536 0
- --------
(1) Value is based on the difference between the option exercise price and the
fair market value at March 31, 1998, the fiscal year-end ($3.25 per share
as quoted on the Nasdaq National Market), multiplied by the number of
shares underlying the option.
(2) All incentive stock options previously granted to Mr. Gain except for
12,000 options of an option grant on April 29, 1994 converted into non-
qualified stock options upon termination of employment. Mr. Gain exercised
and sold the 12,000 Incentive Stock Options on May 22, 1998.
(3) Mr. Wick's employment with the Company terminated on February 5, 1998.
Unvested Options terminated as of May 5, 1998 and may no longer be
exercised. Mr. Wick exercised and sold 19,200 options in April 1998.
9
TEN YEAR OPTION REPRICING
The following table sets forth information concerning the repricing of stock
options held by certain executive officers of the Company since December 6,
1995, the date of the Company's initial public offering, including (i) the
date of the repricing; (ii) the number of shares subject to the repricing;
(iii) the market price at the time of the repricing; (iv) the exercise price
prior to the repricing; (v) the new exercise price; and (vi) the original
option term remaining at the date of the repricing.
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL TERM
UNDERLYING OF STOCK AT PRICE AT REMAINING
OPTIONS TIME OF TIME OF NEW AT DATE OF
DATE OF REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME REPRICING AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE AMENDMENT
---- --------- ----------- ------------ ------------ -------- -------------
C. Raymond Boelig....... -- -- -- -- -- --
President and Chief
Operating Officer
Dennis T. Gain.......... 4/11/97 10,000 $3.25 $7.70 3.58 8.5 years
Former President, Chief
Executive Officer and
Chairman of the Board
Neil M. Rossen.......... 4/11/97 50,000 $3.25 $4.50 3.25 9.75 years
Former Vice President
and Chief Financial
Officer
John A. Hilton.......... 4/11/97 8,000 $3.25 $7.00 3.25 8.5 years
Vice President and 4/11/97 7,500 $3.25 $8.75 3.25 9.33 years
Chief Technology Scien-
tist
Joyce A. Ouellette...... 4/11/97 29,500 $3.25 $7.00 3.25 8.5 years
Vice President, OEM
Sales, Business
Development & ISV
Relations
James J. Wick........... 4/11/97 8,000 $3.25 $7.00 3.25 8.5 years
Former Vice President 4/11/97 7,500 $3.25 $8.75 3.25 9.33 years
and Chief Technology
Officer
COMPENSATION COMMITTEE REPORT OF EXECUTIVE COMPENSATION
The Compensation Committee Report set forth below describes the compensation
policies applicable to executive officers of the Company, including Mr. Boelig
and Mr. Gain during his tenure as the Company's President and Chief Executive
Officer.
Overall Policy. The Company's executive compensation program is designed to
be closely linked to corporate performance and equity returns to stockholders.
To this end, the Company has developed an overall compensation strategy and
specific compensation plan that tie a portion of each executive's compensation
to the Company's success in meeting specified performance goals. In addition,
through the use of stock options, the Company ensures that a part of each
executive's compensation is closely tied to appreciation in the Company's
Common Stock price. The overall objectives of this strategy are to attract and
retain the best possible executive talent, to motivate these executives to
achieve goals inherent in the Company's business strategy, to link executive
and stockholder interests through equity-based plans and, finally, to provide
a compensation package that recognizes individual contributions as well as
overall business results.
10
The Compensation Committee determines the compensation of the individuals
named in the Summary Compensation Table. The Compensation Committee takes into
account the views of the President in reviewing the individual performance of
the executives (other than himself).
The key elements of the Company's executive compensation consist of base
salary, annual bonus and stock options. The Compensation Committee's policies
with respect to each of these elements are discussed below. In addition, while
the elements of compensation described below are considered separately, the
Compensation Committee takes into account the full compensation package
afforded by the Company to the executive officer, including insurance and
other employee benefits.
Base Salaries. Base salaries for executive officers are initially determined
by evaluating the responsibilities of the position held and the experience of
the individual. In making determinations regarding base salaries, the
Compensation Committee considers generally available information regarding
salaries prevailing in the industry, but does not utilize any particular
indices or peer groups.
Annual salary adjustments are determined by evaluating the financial
performance of the Company and of each executive officer, and also takes into
account new responsibilities. The Compensation Committee, where appropriate,
also considers non-financial performance measures. These non-financial
performance measures may include such factors as efficiency gains,
improvements in product quality and improvements in relations with customers,
suppliers and employees. No particular weight is given to any of these non-
financial factors.
Annual Bonus. The Company's executive officers are eligible for an annual
cash bonus, based primarily on achievement of significant milestones by the
Company and the executive. Executive officers were eligible to receive bonuses
for Fiscal Year 1998 based upon the achievement of certain milestones by the
Company during Fiscal Year 1998.
Stock Options. Under the Company's Amended and Restated 1993 Stock Option
Plan (the "1993 Plan"), which was approved by stockholders, stock options are
granted to the Company's executive officers. Stock options are designed to
align the interests of executives with those of the stockholders. Stock
options are granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant and generally vest over five years.
Stock option grants are designed to encourage the creation of stockholder
value over the long term since the full benefit of the compensation package
cannot be realized unless Common Stock price appreciation is achieved, and,
once achieved, is maintained and improved upon. In determining the amount of
such option grants, the Compensation Committee evaluates the job level of the
executive, responsibilities to be assumed in the upcoming year, and
responsibilities in prior years, and also takes into account the size of the
executive's awards in the past.
Option Repricing. On April 11, 1997, the Compensation Committee of the Board
of Directors of the Corporation and the Board, approved a reduction in
exercise price of certain outstanding stock options granted under the 1993
Plan to then-current employees of the Company who had options with exercise
prices ranging from $4.50 to $11.00 per share to $3.25 per share, the fair
market value of the Company's Common Stock on April 11, 1997. All other terms
and conditions of these options, including vesting schedules and expiration
dates, remained unchanged.
As set forth in the Company's 1993 Plan, stock options are intended to
provide incentives to the Company's officers and employees who are critical to
the Company's long term success. The Compensation Committee believed that, at
their original exercise prices, the disparity between the exercise price of
these options and recent market prices of the Company's Common Stock did not
provide meaningful incentives to the employees holding these options. The
Compensation Committee approved the repricing of these options as a means of
ensuring the optionees will continue to have meaningful equity incentives to
work toward the success of the Company. The adjustment was deemed by the
Compensation Committee to be in the best interest of the Company and its
shareholders.
11
CEO's and the President's Compensation. The compensation of the Chief
Executive Officer and the President reflects consideration and application of
the policies described above. While CEO, Mr. Gain was granted a base salary of
$160,000 which represented a decrease of approximately 11% from his $180,000
base salary for fiscal year 1997. Mr. Boelig assumed the position of President
in February, 1997 at his then current salary of $120,000. Mr. Boelig was
granted a salary of $160,000 for fiscal year 1999 which commenced on April 1,
1998.
Conclusion. Through the programs described above, a very significant portion
of the Company's executive compensation is linked directly to individual and
corporate performance and stock appreciation. In Fiscal Year 1998, as in
previous years, a substantial portion of the Company's targeted executive
compensation consisted of performance-based variable elements. The
Compensation Committee intends to continue the policy of linking executive
compensation to Company performance and returns to stockholders, recognizing
that the ups and downs of the business cycle from time to time may result in
an imbalance for a particular period.
By the Compensation Committee,
J. Grant Jagelmen
Morton E. Goulder
Jerry H. Loyd
Patrick J. Sullivan
12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
INTERLOCKS
On July 18, 1997 the Company completed a tender offer for the outstanding
shares of SSL, a shareholder of the Company. At the time of the tender offer,
Mr. Jagelman, Chairman of the Board of SSL, was a director and shareholder of
the Company. Pursuant to the tender offer, the Company exchanged (i) two
shares of the Company's Common Stock for fifteen shares of SSL and (ii) one
share of the Company's Common Stock for every option to purchase twelve shares
of SSL. Concurrent with the completion of the tender offer, all shares of
Common Stock of the Company owned by SSL at the time of the tender offer were
canceled and the license agreement between the Company and SSL was terminated.
As a result of this transaction, the number of outstanding shares of the
Company did not change.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dennis T. Gain, a director of the Company and former President and Chief
Executive Officer of the Company, entered into a Separation Agreement with the
Company on March 18, 1998. The Separation Agreement provides that the Company
shall pay to or on behalf of Mr. Gain: (i) severance payments in an aggregate
of $12,000 per month for the next twenty months, (ii) health insurance premium
for his then-existing health coverage for the next twenty-four months, (iii) a
$1,000 automobile allowance for the next twenty months and. In addition, all
incentive stock options previously granted to Mr. Gain, other than 12,000
options of an option grant on April 29, 1994, converted into non-qualified
stock options and Mr. Gain exercised and sold the 12,000 Incentive Stock
Options on May 22, 1998. Further, the Company sold an automobile purchased by
it in March 1997 to Mr. Gain for $28,471, $11,929 below the fair market value
of the automobile. The Board of Directors agreed, subject to its fiduciary and
other legal duties, to nominate Mr. Gain for election to the Board of
Directors at the Annual Meeting. In connection therewith, Mr. Gain agreed to
return all proprietary information of the Company, release all claims and
causes of action relating to his employment with the Company, and to execute a
Non-competition, Non-disclosure and Non-solicitation Agreement with the
Company.
On June 5, 1998, the Company contributed its Open Motion technology and
certain assets related thereto having a net book value of approximately
$50,000 to 3D Open Motion, LLC, a Delaware limited liability corporation (the
"LLC"), established by Mr. Gain, a director of the Company, former President
and Chief Executive Officer of the Company and majority owner of the LLC, in
exchange for an initial 20% non-voting interest in the LLC. In addition, the
Company has an option, exercisable beginning January 1, 1999 through May 31,
1999 upon payment of $250,000 to the LLC, to obtain a 50% discount from the
most favorable terms offered to any other customer on all commercial products
developed by the LLC. Simultaneously with the Company's contribution, Mr. Gain
contributed 291,667 shares of the Company's Common Stock to the LLC. The
Company will repurchase the 291,667 shares on June 17, 1998 from the LLC
pursuant to its stock buyback plan at $2.40 per share, a 20% discount from the
closing price of the Company's Common Stock on the Nasdaq National Market on
June 3, 1998, the date on which the Company and the LLC agreed to the terms of
their joint venture.
Mr. Boelig and the Company entered into an Employment Agreement dated April
1, 1998 whereby Mr. Boelig agreed to serve as President and Chief Operating
Officer of the Company for a two year period ending March 31, 2000, at an
annual salary $160,000 for the first year and a bonus plan pursuant to which
Mr. Boelig would be eligible for a bonus up to $100,000 per year upon the
attainment of certain goals. In addition, the Board of Directors granted Mr.
Boelig a nonqualified stock option to purchase 50,000 shares of Common Stock
at an exercise price of $3.25, the fair market value of the Common Stock on
April 1, 1998, such option to vest twenty percent (20%) per year over five
years. In the event Mr. Boelig is terminated for reasons other than Just Cause
(as defined in the Employment Agreement), Mr. Boelig shall receive salary and
benefits for twelve months and all options which may become vested within the
twelve-month period following such termination (the "Exercise Period") shall
become vested and all vested options held by Mr. Boelig pursuant to any option
agreement may be exercised at any time within such Exercise Period. Mr. Boelig
had previously executed a Non-competition, Non-disclosure and Inventions
Agreement with the Company which continues in full force and effect.
13
On July 18, 1997, the Company completed a tender offer for the outstanding
shares of SSL, a then-shareholder of the Company. At the time of the tender
offer, (i) Mr. Jagelman, Chairman of the Board of SSL, was a director and
shareholder of the Company. Pursuant to the tender offer, the Company
exchanged (i) two shares of the Company's Common Stock for fifteen shares of
SSL and (ii) one share of the Company's Common Stock for every option to
purchase twelve shares of SSL. Concurrent with the tender offer, all shares of
Common Stock of the Company owned by SSL at the time of the tender offer were
canceled. As a result of this transaction, the number of outstanding shares of
the Company did not change.
On April 11, 1997, the Compensation Committee of the Board of Directors
repriced certain outstanding stock options granted to then-current employees,
including options held by Messrs. Gain, Rossen, Hilton, Wick and Ms. Ouellette
under the 1993 Plan which had an exercise price ranging from $4.50 to $11.00
to an exercise price equal to $3.25. See "Option Repricing".
14
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return on the
Company's Common Stock over the period from December 31, 1995 (the end of the
first trading month of the Company's Common Stock) to March 31, 1998, as
compared with that of the Nasdaq Market Index and the Computer Peripheral
Equipment N.E.C. Index, based on an initial investment of $100 in each on
December 31, 1995. Total stockholder return is measured by dividing share
price change plus dividends, if any, for each period by the share price at the
beginning of the respective period, and assumes reinvestment of dividends. The
Computer Peripheral Equipment N.E.C. Index consists of 121 publicly traded
computer peripheral equipment companies reporting under the same Standard
Industrial Classification Code (SIC 3577) as the Company.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
- --------------------------------FISCAL YEAR ENDING-----------------------------
COMPANY 1995 1996 1996 1997 1997 1998
SPACETEC IMC CORP 100 131.91 43.62 27.66 25.53 27.66
INDUSTRY INDEX 100 104.55 126.48 93.94 124.56 145.21
BROAD MARKET 100 104.62 120.90 114.76 148.31 173.82
15
INFORMATION CONCERNING AUDITORS
The firm of Ernst & Young LLP, independent accounts has audited the
Company's accounts for a number of years and will do so for the fiscal year
ending March 31, 1999. Representatives of Ernst & Young LLP have been invited
to attend the Annual Meeting.
STOCKHOLDER PROPOSALS
The Company's Bylaws require a stockholder who wishes to bring business
before or propose director nominations at an annual meeting to give written
notice to the Chairman of the Board of Directors, the President or the Clerk
of the Company not less than 50 days nor more than 75 days before the meeting,
unless less than 65 days' notice or public disclosure of the date of the
meeting is given, in which case the stockholder's notice must be received
within 15 days following the day on which such notice or disclosure of the
date of the annual meeting was marked or public disclosure was made. The
notice must contain specified information about the proposed business or
nominee and the stockholder making the proposal or nomination. If any
stockholder intends to present a proposal at the Fiscal Year 1999 Annual
Meeting of Stockholders and desires that it be considered for inclusion in the
Company's proxy statement and form of proxy, it must be received by the
Company at the Boott Mills, 100 Foot of John Street, Lowell, Massachusetts
01852-1126, Attention: C. Raymond Boelig, no later than February 22, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors and persons who own
beneficially more than ten percent of the Company's equity securities are
required under Section 16(a) of the Exchange Act to file reports of ownership
and changes of ownership of Company securities with the Securities and
Exchange Commission. Copies of these reports must also be furnished to the
Company. Based solely on a review of the copies of reports furnished to the
Company and written representations that no other reports were required, the
Company believes that during Fiscal Year 1998 the Company's executive
officers, directors, and 10% beneficial owners complied with all applicable
Section 16(a) filing requirements, except that (i) John A. Hilton reported in
a Form 4 filed April 10, 1998 a grant of an option to purchase 7,500 shares of
Common Stock for which a Form 5 was due on May 15, 1997, (ii) J. Grant
Jagelman reported in a Form 5 filed May 15, 1998 the sale of 20,000 shares of
Common Stock for which a Form 4 was due March 10, 1998, and (iii) SSL reported
in a Form 5, filed by J. Grant Jagelman on May 15, 1998 the purchase of 1,170
shares which should have been reported in a Form 5 due on May 15, 1997.
OTHER MATTERS
The Board of Directors does not know of any business to come before the
Annual Meeting other than the matters described in the notice. If other
business is properly presented for consideration at the Annual Meeting, the
enclosed proxy authorizes the persons named therein to vote the shares in
their discretion.
16
P SPACETEC IMC CORPORATION
R
O Proxy for Annual Meeting of Stockholders
X
Y July 30, 1998
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Raymond Boelig and John M. Hession, and
each or both of them, proxies, with full power of substitution to vote all
shares of stock of Spacetec IMC Corporation (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on Thursday, July 30, 1998, at 10:00 a.m., local time, at The
American Textile History Museum, 491 Dutton Street, Lowell, Massachusetts 01854
and at any adjournments thereof, upon matters set forth in the Notice of Annual
Meeting of Stockholders and Proxy Statement dated June 22, 1998, a copy of which
has been received by the undersigned. The proxies are further authorized to
vote, in their discretion, upon such other business as may properly come before
the meeting or any adjournment thereof.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
---------------
SEE REVERSE
SIDE
---------------
Please Detach and Mail in the Envelope Provided
A [X] Please mark your votes as in this example.
1. Proposal to elect two directors to serve a three-year term as Class III
Directors
FOR WITHHELD
both nominees from both nominees
[___] [___]
INSTRUCTIONS: To withhold your vote for any individual nominee write the
nominee's name on the space provided below.
- --------------------------------------------------------------------------------
Nominees: Dennis T. Gain
Morton E. Goulder
2. To transact such other business as may properly come before the meeting and
any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS.
MARK HERE
FOR ADDRESS [___]
CHANGE AND
NOTE AT LEFT
Signature Date
------------------------------------- -----------------
Signature Date
------------------------------------- -----------------
Note: (Please sign exactly as your name appears hereon. If signing as
attorney, executer, trustee or guardian, please give your full title as
such. If stock is held jointly, each owner should sign. Please read
reverse side before signing.)