SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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NICOLLET PROCESS ENGINEERING, INC.
(Name of Registrant as Specified In Its Charter)
NICOLLET PROCESS ENGINEERING, INC.
(Name of Person(s) Filing Proxy Statement)
--------------------------
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
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1 Title of each class of securities to which transaction applies:
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3 Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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1 Amount Previously Paid:
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PRELIMINARY COPY
1999 ANNUAL MEETING
NICOLLET PROCESS ENGINEERING, INC.
420 NORTH FIFTH STREET
FORD CENTRE, SUITE 1040
MINNEAPOLIS, MINNESOTA 55401
TO THE SHAREHOLDERS OF NICOLLET PROCESS ENGINEERING, INC.:
You are cordially invited to attend our Annual Meeting of Shareholders
to be held on February 16, 1999, at 3:30 p.m., local time, at the Marriott
Hotel -- City Center, 30 South Seventh Street, Minneapolis, Minnesota.
The formal Notice of Meeting, Proxy Statement and form of proxy are
enclosed.
Whether or not you plan to attend the meeting, please date, sign and
return the enclosed proxy in the envelope provided as soon as possible so
that your vote will be recorded.
Very truly yours,
Pierce A. McNally
CHAIRMAN OF THE BOARD
January __, 1999
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
TO SAVE THE COMPANY THE EXPENSE
OF ADDITIONAL SOLICITATION.
PRELIMINARY COPY
NICOLLET PROCESS ENGINEERING, INC.
420 NORTH FIFTH STREET
FORD CENTRE, SUITE 1040
MINNEAPOLIS, MINNESOTA 55401
______________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 16, 1999
_____________________________
TO THE SHAREHOLDERS OF NICOLLET PROCESS ENGINEERING, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
Nicollet Process Engineering, Inc. will be held on February 16, 1999, at 3:30
p.m., local time, at the Marriott Hotel -- City Center, 30 South Seventh
Street, Minneapolis, Minnesota, for the following purposes:
1. To elect seven directors to serve for the ensuing year or until their
successors are elected and qualified;
2. To consider and act upon a proposal to amend the Company's Articles of
Incorporation, as amended, to increase the authorized number of shares
of capital stock from 15,000,000 to 55,000,000 shares, consisting of
50,000,000 shares of common stock, no par value, and 5,000,000 shares
designated as preferred stock, no par value.
3. To consider and act upon a proposal to amend the Company's 1995
Amended and Restated Stock Incentive Plan to (a) increase the number
of shares available for issuance thereunder to 3,000,000, (b) increase
the number of shares that may be subject to an award granted to a
participant in any fiscal year of the Company with a value based
solely on an increase in the value of the Common Stock after the date
of the grant to 500,000 shares in the aggregate and (c) increase the
number of shares which may be subject to an award granted to a
participant who is first appointed or elected as an officer, hired as
an employee retained as a consultant by the Company or who receives a
promotion that results in an increase in responsibilities or duties
may be granted, during the fiscal year of such appointment, election,
hiring, retention or promotion to 700,000 shares.
4. To ratify the appointment of Ernst & Young LLP, certified public
accountants, as independent auditors for the Company for the year
ending August 31, 1999; and
5. To consider and act upon such other matters as may properly come
before the meeting or any adjournment thereof.
The close of business on December 31, 1998 has been fixed as the record
date for the determination of shareholders who are entitled to vote at the
meeting or any adjournments thereof.
By Order of the Board of Directors,
Thomas A. Letscher
SECRETARY
January __, 1999
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YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. NO ADMISSION
TICKET OR OTHER CREDENTIALS WILL BE NECESSARY. IF YOU DO NOT PLAN TO ATTEND THE
MEETING, PLEASE BE SURE YOU ARE REPRESENTED AT THE MEETING BY MARKING, SIGNING,
DATING AND MAILING YOUR PROXY IN THE REPLY ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
PRELMINARY COPY
NICOLLET PROCESS ENGINEERING, INC.
420 NORTH FIFTH STREET
FORD CENTRE, SUITE 1040
MINNEAPOLIS, MINNESOTA 55401
___________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 16, 1999
___________________
INTRODUCTION
The Annual Meeting of Shareholders (the "Annual Meeting") of Nicollet
Process Engineering, Inc. (the "Company") will be held on February 16, 1999,
at 3:30 p.m., local time, at the Marriott Hotel -- City Center, 30 South
Seventh Street, Minneapolis, Minnesota, or at any adjournment or adjournments
thereof, for the purposes set forth in the Notice of Annual Meeting of
Shareholders.
A proxy card is enclosed for your use. You are solicited on behalf of
the Board of Directors to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The
cost of soliciting proxies, including the preparation, assembly and mailing
of the proxies and soliciting material, as well as the cost of forwarding
such material to the beneficial owners of the Company's Common Stock, will be
borne by the Company. Directors, officers and regular employees of the
Company may, without compensation other than their regular compensation,
solicit proxies by telephone, telegraph or personal conversation. The
Company may reimburse brokerage firms and others for expenses in forwarding
proxy materials to the beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the Annual Meeting either by giving written notice of such revocation
to the Secretary of the Company, by filing a duly executed proxy bearing a
later date with the Secretary of the Company, or by appearing at the Annual
Meeting and filing written notice of revocation with the Secretary of the
Company prior to use of the proxy. Proxies will be voted as specified by
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will first be mailed to
shareholders on or about January __, 1999.
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VOTING OF SHARES
Only holders of Common Stock of record at the close of business on
December 31, 1998 will be entitled to vote at the Annual Meeting. On
December 15, 1998, the Company had 6,211,861 outstanding shares of Common
Stock, each such share entitling the holder thereof to one vote on each
matter to be voted on at the Annual Meeting.
The presence at the Annual Meeting, in person or by proxy, of the
holders of fifty percent (50%) of the outstanding shares of Common Stock
entitled to vote at the meeting (3,105,931 shares) is required for a quorum
for the transaction of business. In general, shares of Common Stock
represented by a properly signed and returned proxy card will be counted as
shares present and entitled to vote at the Annual Meeting for purposes of
determining a quorum, without regard to whether the card reflects abstentions
(or is left blank) or reflects a "broker non-vote" on a matter (I.E., a card
returned by a broker on behalf of its beneficial owner customer that is not
voted on a particular matter because voting instructions have not been
received and the broker has no discretionary authority to vote).
The election of a nominee for director and any other proposals that may
come before the Annual Meeting described in this Proxy Statement require the
approval of a majority of the shares present and entitled to vote in person
or by proxy on that matter (and at least a majority of the minimum number of
votes necessary for a quorum to transact business at the meeting). Shares
represented by a proxy card including any broker non-votes on a matter will
be treated as shares not entitled to vote on that matter, and thus will not
be counted in determining whether that matter has been approved. Shares
represented by a proxy card voted as abstaining on any of the other proposals
will be treated as shares present and entitled to vote that were not cast in
favor of a particular matter, and thus will be counted as votes against that
matter.
ELECTION OF DIRECTORS
PROPOSAL 1
NOMINATION
The Restated Bylaws of the Company provide that the number of directors
must be at least one, or such other number as may be determined by the Board
of Directors or by the shareholders at a regular meeting. The Board of
Directors (the "Board") has set its size at six and has nominated the six
individuals below to serve as directors of the Company until the next annual
meeting of the shareholders or until their respective successors have been
elected and qualified. All of the nominees are members of the current Board.
Mr. Thomas W. Bugbee, a current member of the board, is not standing for
reelection. Mr. John van Leeuwen and Mr. Frank van Luttikhuizen were elected
as members of the Board to fulfill the Company's obligations contemplated by
the Letter of Intent, dated December 15, 1998, between TECHinspirations, Inc.
("TECH") and the Company (the "TECH Letter of Intent"). See "Certain
Transactions." Mr. Boszhardt was elected as a member of the Board to fulfill
the Company's obligations under certain Subscription Agreements dated
November 7, 1997, among the Company and several investors. See "Certain
Transactions."
The Board recommends a vote FOR the election of each of the nominees
listed below. In absence of other instructions, the proxies will be voted
FOR the election of the nominees named below. If prior to the meeting the
Board should learn that any nominee will be unable to serve by reason of
death, incapacity or other unexpected occurrence, the proxies that otherwise
would have been voted for such nominee will be voted for such substitute
nominee as selected by the Board. Alternatively, the proxies, at the Board's
discretion, may be voted for such fewer number of nominees as results from
such
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death, incapacity or other unexpected occurrence. The Board has no reason to
believe that any of the nominees will be unable to serve.
INFORMATION ABOUT DIRECTORS AND NOMINEES
The following information has been furnished to the Company, as of
December 15, 1998, by the existing directors of the Company and by persons
who have been nominated by the Board to serve as directors for the ensuing
year.
NAME OF DIRECTOR OR NOMINEE AGE PRINCIPAL OCCUPATION
- --------------------------- --- --------------------
Pierce A. McNally 49 Chairman of the Board of the Company
Robert A. Pitner 55 Chief Executive Officer of the Company
Benton J. Case, Jr. (1) 63 President of Rainy River Resources, Inc.
Andrew K. Boszhardt, Jr. (1) 42 Chief Executive Officer of Oscar Capital
Management, LLC
John van Leeuwen 40 Chairman of the Board of TECHinspirations,
Inc.
Frank van Luttikhuizen 44 Chief Financial Officer of the Company
and Chief Financial Officer of TECHinspirations, Inc.
(1) Member of the Audit Committee and Compensation Committee.
PIERCE A. MCNALLY has served as the Director of Corporate Development of
the Company from October 1, 1996 to December 1998, the Chairman of the Board
since May 1995 and has been a director since 1992. He also currently serves
as Chairman of the Board and Chief Executive Officer of Minnesota American,
Inc., a Minnetonka, Minnesota based holding company which owns LockerMate
Corporation, a developer of locker products. From January 1992 until October
1994, he was President and Co-Chief Executive Officer of Minnesota American,
Inc. Prior to that time, Mr. McNally was an officer and director of Midwest
Communications, Inc., a communications company. He also serves on the board
of directors of Imaging Institute, Inc., Rainy River Resources, Inc. ("Rainy
River") and Minnesota American, Inc.
ROBERT A. PITNER has served as Chief Executive Officer and director of
the Company since April 1991, as President from April 1991 to November 1998,
and as Interim Chief Financial Officer from May 1997 to December 1998. From
April 1991 to May 1995, Mr. Pitner also served as the Company's Chief
Financial Officer. From June 1989 to April 1991, Mr. Pitner was a Vice
President at Wiken Advertising and Promotion, a consulting firm specializing
in "high tech" industries. From 1988 to 1989, he was President and Chief
Operating Officer of Springboard Software, Inc., a software company. Prior
to 1988, Mr. Pitner spent
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twenty years in the banking industry in various executive positions, most
recently as a senior executive at First Bank System (now U.S. Bank).
BENTON J. CASE, JR., joined the Company's Board of Directors in 1988.
Since May 1978, Mr. Case has been employed by Rainy River, a company engaged
in oil and gas exploration. Mr. Case has served as President of Rainy River
since February 1991 and prior to that time, held the position of Treasurer.
Mr. Case has also served as Vice President of Future Care Systems, Inc. since
1994. From October 1990 until March 1994, he was a general partner of
Skylark II, a venture capital firm. Skylark II was sold to Rainy River in
1994. Mr. Case is also a member of the Board of Directors of Future Care
Systems, Inc.
ANDREW K. BOSZHARDT, JR., joined the Company's Board of Directors in
November 1997. Mr. Boszhardt currently serves as the Chief Executive Officer
of Oscar Capital Management, LLC, an investment advisory firm, which he
co-founded in December 1996. From 1980 through November 1996, Mr. Boszhardt
was employed by Goldman Sachs & Co. where he served as a Vice President and
was active in securities brokerage and asset management.
JOHN VAN LEEUWEN, joined the Company's Board of Directors in December
1998. Mr. Leeuwen currently serves as Chairman of the Board of
TECHinspirations, Inc., a venture capital investment firm which he co-founded
in June 1996. From October 1992 to June 1996, Mr. van Leeuwen was the
President and General Manager of Baan Company Canada, a European software
company. In September 1987, Mr. van Leeuwen founded STROHN Systems Inc., a
computer systems integration and engineering services business.
FRANK VAN LUTTIKHUIZEN, joined the Company's Board of Directors in
December 1998 and has served as the Chief Financial Officer since December
1998. Since September 1996, Mr. Luttikhuizen has been the Chief
Financial Officer of TECHinspirations, Inc., a venture capital investment
firm. From June 1993 to March 1996, Mr. Luttikhuizen was the Director of
Finance and Administration of Baan Company Canada, a European software
company. Mr. Luttikhuizen was an independent consultant from August 1990 to
June 1993. From July 1985 to July 1990, Mr. Luttikhuizen held various
positions in administration and finance at Victoria Hospital. From June 1983
to July 1985, he held various positions in administration and finance at
Union Gas and from August 1979 to June 1983, Mr. Luttikhuizen was an
accountant at Coopers & Lybrand.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board, which
met seven (7) times during the fiscal year ended August 31, 1998. Committees
established and maintained by the Board of Directors include the Audit
Committee and the Compensation Committee.
The members of the Audit Committee during fiscal 1998 were Messrs.
Bugbee and Case. The function of the Audit Committee is to review Company
financial statements, oversee the financial reporting and disclosures
prepared by management, make recommendations regarding the Company's
financial controls, and confer with the Company's outside auditors. The
Audit Committee met one time
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during fiscal 1998. Messrs. Boszhardt and Case will serve as members of the
Audit Committee for fiscal 1999.
The members of the Compensation Committee during fiscal 1998 were
Messrs. Bugbee and Case. The function of the Compensation Committee is to
set the compensation for those officers who are also directors, and set the
terms of, and grants of awards under, the Company's 1990 Stock Option Plan
(the "1990 Plan") and the 1995 Amended and Restated Stock Incentive Plan (the
"1995 Plan") and to act on other matters relating to compensation as it deems
appropriate. The Compensation Committee met twice during fiscal 1998.
Messrs. Boszhardt and Case will serve as members of the Compensation
Committee for fiscal 1999.
All of the Directors attended 75% or more of the aggregate meetings of
the Board and all committees on which they served during fiscal 1998.
DIRECTOR COMPENSATION
The Company does not pay fees to the members of the Board of Directors
except to Mr. McNally, who, pursuant to a written agreement, currently
receives compensation of $52,500 per year, plus a discretionary bonus. See
"Executive Compensation and Other Benefits--Employment and Consulting
Agreements." On April 23, 1998, for fiscal 1998, Messrs. McNally, Pitner and
Case were each granted an option to purchase 15,000 shares of Common Stock at
a price of $0.50 per share. All of these options are fully vested and remain
exercisable until April 23, 2003.
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of December 15, 1998 unless
otherwise noted (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each
director, (c) by each executive officer named in the Summary Compensation
Table and (d) by all executive officers and directors of the Company as a
group.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
--------------------------
PERCENT OF
NAME AMOUNT CLASS (2)
---- ------ ----------
Oscar Capital Management Group (3).............. 2,308,833 36.6%
David L. Chamberlain (4)........................ 765,500 12.3%
Pierce A. McNally (5)(6)........................ 1,014,662 14.7%
Robert A. Pitner (6)(7)......................... 1,014,662 14.7%
Benton J. Case, Jr. (8)......................... 176,265 2.8%
Thomas W. Bugbee (9)............................ 127,790 2.0%
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Andrew K. Boszhardt, Jr. (10)................... 2,308,833 36.6%
Frank van Luttikhuizen (11)..................... 0 0%
John van Leeuwen (12)........................... 0 0%
Evros Psiloyenis (13)........................... 0 0%
All executive officers and directors as a
group (8 persons) (14).......................... 3,627,550 50.9%
___________________________
(1) Except as otherwise indicated in the footnotes to this table, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person.
(2) Based on 6,211,861 shares of Common Stock outstanding as of December
15, 1998.
(3) Includes 233,333 shares of Common Stock held by Oscar Capital
Management, LLC ("Oscar Capital"); 1,804,833 shares of Common Stock
held by Andrew K. Boszhardt, Jr.; 104,000 shares of Common Stock
issuable upon the exercise of outstanding warrants held by Mr.
Boszhardt; and 166,667 shares of Common Stock held by Anthony
Scaramucci. Does not include 732,500 shares of Common Stock held by
David R. Chamberlain or 33,000 shares of Common Stock issuable upon the
exercise of outstanding warrants held by Mr. Chamberlain. Mr.
Boszhardt and Mr. Scaramucci are the sole members of Oscar Capital.
Mr. Chamberlain is a former co-worker and long-time friend of Mr.
Boszhardt and is not otherwise affiliated with Oscar Capital or Mr.
Boszhardt. The address for Oscar Capital is 900 Third Avenue, New
York, NY 10022.
(4) Includes 33,000 shares of Common Stock issuable upon the exercise of
outstanding warrants. Does not include 233,333 shares of Common Stock
held by Oscar Capital; 1,804,833 shares of Common Stock held by Andrew
K. Boszhardt, Jr.; 104,000 shares of Common Stock issuable upon the
exercise of outstanding warrants held by Mr. Boszhardt; or 166,667
shares of Common Stock held by Anthony Scaramucci. The address for Mr.
Chamberlain is 260 Wrights Road, Aspen, Colorado 81612.
(5) Includes 92,500 shares of Common Stock beneficially owned by Robert A.
Pitner who shares voting power with Mr. McNally regarding the election
of a director of the Company. See footnote (6). Also includes: (i)
89,000 shares of Common Stock issuable to Mr. McNally upon the exercise
of outstanding stock options; (ii) 610,334 shares of Common Stock
issuable to Mr. Pitner upon the exercise of outstanding stock options;
(iii) 4,000 shares of Common Stock issuable upon exercise of
outstanding warrants held by Mr. McNally's wife as custodian for the
benefit of their daughters as to which Mr. McNally disclaims any
beneficial interest; and (iv) an aggregate of 16,000 shares of Common
Stock held by Mr. McNally's wife as custodian for the benefit of their
daughters as to which Mr. McNally disclaims any beneficial interest.
Mr. McNally's address is 420 North Fifth Street, Ford Centre, Suite
1040, Minneapolis, MN 55401.
(6) Messrs. McNally and Pitner are parties to a Letter Agreement dated
November 7, 1997 (the "Letter Agreement") whereby they agreed to vote
all shares of Common Stock of the Company held by them "FOR" the
election of Andrew K. Boszhardt, Jr., or his nominee, as director of
the Company. Under the rules of the Securities and Exchange
Commission, Messrs. Pitner and McNally may be deemed to share voting
power over each other's shares of Common Stock.
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Messrs. Pitner and McNally disclaim any beneficial interest in the
other person's shares of Common Stock.
(7) Includes 187,828 shares of Common Stock beneficially owned by Pierce A.
McNally who shares voting power with Mr. Pitner regarding the election
of a director of the Company. See footnote (6). Also includes: (i)
610,334 shares of Common Stock issuable to Mr. Pitner upon the exercise
of outstanding stock options; (ii) 89,000 shares of Common Stock
issuable to Mr. McNally upon the exercise of outstanding options; (iii)
4,000 shares of Common Stock issuable upon exercise of outstanding
warrants held by Mr. McNally's wife as custodian for the benefit of
their daughters as to which Mr. McNally disclaims any beneficial
interest; and (iv) an aggregate of 16,000 shares of Common Stock held
by Mr. McNally's wife as custodian for the benefit of their daughters
as to which Mr. McNally disclaims any beneficial interest. The address
for Mr. Pitner is 420 North Fifth Street, Ford Centre, Suite 1040,
Minneapolis, MN 55401.
(8) Includes 60,000 shares of Common Stock issuable upon the exercise of
outstanding stock options; 46,501 shares of Common Stock held by Mr.
Case's wife, as to which Mr. Case disclaims any beneficial interest;
17,430 shares of Common Stock held by Rainy River Resources, Inc.
("Rainy River"); and 4,000 shares of Common Stock held by FCSI Business
Development Corp. ("FCSI"). Mr. Case is an executive of Rainy River
and the Vice President of FCSI. Mr. Case disclaims beneficial ownership
of shares held by Rainy River and FCSI except to the extent of his
pecuniary interest therein.
(9) Includes 47,500 shares of Common Stock issuable upon the exercise of
outstanding stock options.
(10) Includes 104,000 shares of Common Stock issuable upon the exercise of
outstanding warrants; 233,333 shares of Common Stock held by Oscar
Capital; and 166,667 shares of Common Stock held by Anthony Scaramucci.
Does not include 732,500 shares of Common Stock held by David R.
Chamberlain or 33,000 shares of Common Stock issuable upon the exercise
of outstanding warrants held by Mr. Chamberlain.
(11) The address for Mr. van Luttikhuizen is 2275 No. 8 Side Road, R.R. #2,
Milton, Ontario, Canada. Does not include any shares of Common Stock
issuable upon exercise of options to be issued to TECH under the TECH
Letter of Intent.
(12) The address for Mr. van Leeuwen is 2275 No. 8 Side Road, R.R. #2,
Milton, Ontario, Canada. Does not include any shares of Common Stock
issuable upon exercise of options to be issued to TECH under the TECH
Letter of Intent.
(13) The address for Mr. Psiloyenis is 420 North Fifth Street, Ford Centre,
Suite 1040, Minneapolis, MN 55401.
(14) Includes 806,834 shares of Common Stock issuable upon exercise of
outstanding options; 438,529 shares of Common Stock held by directors'
spouses, a director's spouse as custodian for the benefit of their
children, and certain affiliates of directors, as to which such
directors disclaim any beneficial interest except to the extent of
their pecuniary interest therein; 104,000 shares of Common Stock
issuable upon exercise of outstanding warrants held by a director; and
4,000 shares of Common Stock issuable upon exercise of outstanding
warrants held by a director's wife as custodian for his children, as to
which such director disclaims any beneficial interest.
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EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief
Executive Officer of the Company and the three other most highly compensated
executive officers of the Company whose salary and bonus exceeded $100,000 in
the last fiscal year (the "Named Executive Officers"). Other than Mr.
Pitner, no other executive officer of the Company had salary and bonus which
exceeded $100,000 in the fiscal year ended August 31, 1998.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($)(1) OPTIONS (#)
- --------------------------- ---- ---------- ----------- -----------
Robert A. Pitner 1998 $108,000 $ 0 263,500 (2)
PRESIDENT, CHIEF EXECUTIVE 1997 $108,000 $ 34,000 26,000
OFFICER AND INTERIM CHIEF 1996 $108,000 $ 50,000 7,500
FINANCIAL OFFICER
- --------------------------
(1) Cash bonuses for services rendered have been included as compensation
for the year earned, even though such bonuses were actually paid in the
following year.
(2) Mr. Pitner was granted options to purchase an aggregate of 263,500
shares of Common Stock during fiscal 1998. Of this amount, an aggregate of
248,500 shares represented options originally granted in December 1993, July
1994, August 1994, August 1995, September 1995 and October 1996,
respectively, that were canceled and reissued in June 1998. See "Board of
Directors Report on Repricing of Options."
OPTION GRANTS AND EXERCISES
The following tables summarize option grants and exercises during the
year ended August 31, 1998 to or by the Named Executive Officers and the
potential realizable value of the options held by such persons at August 31,
1998.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS GRANTED TO
SECURITIES UNDERLYING EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED (#)(1) FISCAL YEAR PRICE ($/SH) DATE
- ---- ---------------------- ----------- ------------ ----
Robert A. Pitner 15,000(2)(10) 3.0% $0.3125 08/31/00
100,000(3)(10) 20.2% $0.3125 07/31/04
50,000(4)(10) 10.1% $0.3125 08/31/04
16,000(5)(10) 3.2% $0.3125 10/07/01
10,000(6)(10) 2.0% $0.3125 08/01/99
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50,000(7)(10) 10.1% $0.3125 08/31/00
7,500(8)(10) 1.5% $0.3125 09/01/00
15,000(9) 3.0% $0.5000 04/23/03
- ----------------------
(1) The options listed above were granted under the 1995 Plan. Options become
exercisable under the 1995 Plan so long as the executive remains in the
employ of the Company or one of its subsidiaries. To the extent not
already exercisable, options granted under the 1995 Plan become immediately
exercisable in full upon certain changes in control of the Company,
provided that, upon such a change in control, the Compensation Committee
may determine that holders of options granted under the 1995 Plan will
receive cash in an amount equal to the excess of the fair market value of
such shares immediately prior to the effective date of such change in
control of the Company over the exercise price of such options. See
"Proposal to Amend the Amended and Restated 1995 Stock Incentive Plan."
(2) These options were granted on December 1, 1993 and were subsequently
canceled and reissued on June 1, 1998. See Note (10) below.
(3) This option was granted on July 31, 1994 and was subsequently canceled and
reissued on June 1, 1998. See Note (10) below.
(4) This option was granted on August 31, 1994 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(5) This option was granted on October 7, 1996 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(6) This option was granted on August 1, 1994 and was subsequently canceled and
reissued on June 1, 1998. See Note (10) below.
(7) This option was granted on August 31, 1995 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(8) This option was granted on September 1, 1995 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(9) This option was granted on April 23, 1998 and is exercisable in full.
(10) These options were granted on June 1, 1998 during the repricing program and
replaced a like number of previously granted options.
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AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#)(1) AT FY-END ($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ------------ ------------------------- -------------------------
Robert A. Pitner 0 $0 273,500/0 $18,767/$0
- ------------------
(1) The exercise price of options granted under the Company's 1995 Plan may be
paid in cash or in shares of the Company's Common Stock valued at fair
market value on the date of exercise. In addition, the exercise price of
options granted may be paid pursuant to a cashless exercise procedure under
which the executive provides irrevocable instructions to a brokerage firm
to sell the purchased shares and to remit to the Company, out of the sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes. Under the 1995 Plan, the Compensation Committee also
has the discretion to grant a supplemental cash bonus to an optionee in
connection with the grant or exercise of an option or both the grant and
exercise of an option. See "Proposal to Amend the Amended and Restated
1995 Stock Incentive Plan."
(2) Value is based on the difference between the fair market value of the
Common Stock on August 29, 1998 and the exercise price of the options. The
fair market value of the Common Stock as of August 29, 1998, was calculated
as the average of the bid and asked prices as quoted in the local
over-the-counter market ($.4063). The exercise price of outstanding
options range from approximately $0.3125 to $0.72 per share.
STOCK OPTION PLANS
The Company's 1995 Amended and Restated Stock Incentive Plan (the "1995
Plan"), which was approved by the Company's shareholders in January 1996,
replaced the Company's 1990 Stock Option Plan (the "1990 Plan"). The 1995
Plan provides for the grant to participating eligible recipients of the
Company of options to purchase Common Stock, restricted stock awards,
performance units, stock bonuses and stock appreciation rights. See
"Proposal to Amend the Amended and Restated 1995 Stock Incentive Plan" for a
description of the 1995 Plan, including terms related to a change in control
of the Company.
The terms of the 1990 Plan are substantially similar to those of the 1995
Plan, although the 1990 Plan does not provide for the grant of performance
units, restricted stock awards or stock bonuses. Also, under the 1990 Plan, in
the event of a dissolution or liquidation of the Company, a merger (other than a
merger effecting a reincorporation of the Company in another state) or
consolidation in which the Company is not the surviving corporation, or a
transaction in which another corporation becomes the owner of 50% or more of the
total combined voting power of all classes of stock of the Company, all
outstanding options and stock appreciation rights will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms; provided, however, that such acceleration of exercisability shall not
apply to a given option or stock appreciation right if any surviving or
acquiring corporation agrees to assume such option or stock appreciation right
in connection with the merger,
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consolidation, or transaction or agrees to substitute a new option satisfying
the requirements of Section 425(a) of the Internal Revenue Code of 1986, as
amended, or to substitute a new stock appreciation right.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company entered into a new employment agreement with its President
and Chief Executive Officer, Robert A. Pitner (the "Pitner Employment
Agreement") on September 1, 1998 that provides for an annual base salary of
$120,000, which amount may be increased by the Board of Directors, and a
discretionary bonus, payable in cash, stock options or any other manner, with
the amount and terms to be determined by the Board of Directors. Under the
terms of the Pitner Employment Agreement, Mr. Pitner was granted stock
options for the purchase of 351,834 shares of Common Stock at an exercise
price of $.25 per share exercisable until September 1, 2004. The Pitner
Employment Agreement contains provisions providing for the assignment of
inventions by Mr. Pitner, the maintenance of confidential information of the
Company and is subject to a one-year non-competition clause in the event of
termination of employment. The Pitner Employment Agreement may be terminated
(i) by either party upon six month's notice for whatever reason; and (ii) by
the Company immediately in the event Mr. Pitner defaults or does not perform.
Upon termination, if Mr. Pitner does not obtain employment consistent with
his training and education because of the non-competition clause, the Company
must compensate Mr. Pitner until he secures employment at a rate of 100% of
his current base salary for the first twelve months of separation from the
Company.
On May 1, 1995, the Company entered into an agreement with Pierce A.
McNally providing for Mr. McNally's services as Chairman of the Board of the
Company on an as needed, up to full time basis. For Mr. McNally's services,
he currently receives compensation of $52,500 per year plus a bonus payable
at the discretion of the Board of Directors. As part of the agreement, on
September 1, 1995, Mr. McNally was granted options to purchase 10,000 shares
of Common Stock at an exercise price of $3.00 for five years. These options
were immediately vested and remain exercisable until September 1, 2000. On
October 26, 1995, the Company amended this agreement to provide for the
future grant of additional options to purchase 15,000 shares should the Board
of Directors so determine. The Board of Directors granted such options to Mr.
McNally on October 7, 1996. These options have an exercise price of $2.63 and
are fully exercisable until October 7, 2001.
On June 18, 1998, the Company entered into a letter agreement with Evros
Psiloyenis providing for his employment on an "at will" basis as the
Company's President. Mr. Psiloyenis began employment on November 1, 1998.
Mr. Psiloyenis is paid an annual base salary of $120,000, which amount may be
increased by the Board of Directors, and a discretionary bonus, payable on
completion of quarterly financial statements. In December 1998, Mr.
Psiloyenis was granted an option to purchase 500,000 shares of Common Stock
at an exercise price of $0.25 per share which vests with respect to 200,000
shares after two years and 100,000 after each of the next three years.
BOARD OF DIRECTORS REPORT ON REPRICING OF OPTIONS
On July 13, 1998, the Board of Directors of the Company ratified the repricing
of existing stock options held by employees and directors that had an exercise
price of $1.00 or more. The repricing was effective June 1, 1998. The repriced
options are identical to the original options except for the exercise price,
which was changed to $.3125 per share, the fair market value of one share of
Common Stock on the
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effective date. The vesting and exercise dates of the options were not
changed. Robert A. Pitner, the Company's Chief Executive Officer and a
director, held options to purchase an aggregate of 263,500 shares, which were
repriced to an exercise price of $.3125 per share. In approving the option
repricing, the Board of Directors acknowledged that the retention of
employees and the directors is critical to the Company's success and its
ability to continue to meet its performance objective and that stock options
constitute one of the primary components of the Company's compensation
structure and therefore serve as a significant factor in the Company's
ability to continue to attract and retain the services of highly qualified
personnel.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
PROPOSAL 2
INTRODUCTION
At present, the Articles of Incorporation, as amended, of the Company
authorize the issuance of 12,000,000 shares of Common Stock, no par value and
3,000,000 shares of preferred stock, no par value. As of December 15, 1998,
6,211,861 shares of the Company's authorized shares of Common Stock were
issued and outstanding and 5,788,139 shares were authorized but unissued. Of
the 5,788,139 shares of Common Stock that were authorized and unissued, an
aggregate of 1,982,291 shares are reserved for issuance pursuant to
outstanding options and warrants of the Company. Accordingly, as of December
15, 1998, there were 3,805,848 shares of Common Stock available for issuance
or sale by the Company other than those issuable as described above. The
Company does not currently have any shares of Preferred Stock issued or
outstanding.
The Board of Directors has unanimously proposed that the Company's
Articles of Incorporation, as amended, be amended to increase the authorized
number of shares of capital stock from 15,000,000 to 55,000,000 shares, of
which 50,000,000 shares will be designated as common stock, no par value, and
5,000,000 shares will be designated preferred stock, no par value (the
"Preferred Stock") and that this amendment should be presented to the
Company's shareholders at the Annual Meeting. At the Annual Meeting, the
shareholders of the Company are being asked to approve this amendment.
PROPOSED FINANCING
Effective November 30, 1998, the Company entered into the TECH Letter of Intent,
which provides the basis on which an investor ("Investor") to be identified by
TECH, would provide $3,000,000 in debt/equity financing (the "Financing") to the
Company. As of November 29, 1998, a total of $1,955,000 had been advanced to
the Company in connection with the Financing. The terms of the Financing would
include the issuance of 1,500,000 shares of Preferred Stock at a price of $1.00
per share, the proceeds of which would be used to repay $1,500,000 of the
advances. In addition, the Company would issue the Investor a warrant to
purchase an additional 1,500,000 shares of Preferred Stock at an exercise price
of $1.00 per share. The warrant would expire three years after the closing of
the Financing or repayment of the loan facilities, whichever were later. The
Preferred Stock would have the following rights and preferences. Each share of
Preferred Stock would be convertible at the option of the holder into 6-2/3
shares of Common Stock and have the right to vote on all matters submitted to
holders of the Common Stock on an as-if-converted basis. Each share of
Preferred Stock would have the right to participate in all dividends declared on
the Common Stock on an as-if-converted basis. In addition, each share of
Preferred Stock would be entitled to a liquidation preference of $1.00 per share
prior to any distributions to be made on the Common Stock and, after payment of
such preference, would
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share, PARI PASSU, with any distributions made to holders of the Common Stock
on an as-if-converted basis. Andrew K. Boszhardt, Jr., a director of the
Company, and David Chamberlain have each advanced the Company $50,000 in
exchange for the issuance of Preferred Stock at a price of $.15 per share.
In addition, Pierce A. McNally and Benton J. Case, Jr., directors of the
Company have indicated that they intend to purchase shares of Preferred Stock
at a price of $.15 per share.
The Investor would continue to make available to the Company a $1,500,000
revolving operating line of credit. The line of credit would continue to be
secured by a security interest in the Company's assets, bear interest at the
rate of 1% in excess of the prime rate and have a term of three years. The
Company also agreed to pay TECH a fee of $800,000 payable in monthly
installments of $25,000 each beginning December 1, 1998 through June 30,
1999. The Company had previously paid TECH an aggregate of $100,000 for the
period from July 31, 1998 through November 30, 1998. The Company has also
agreed to issue TECH warrants to purchase up to 4,750,000 shares of Common
Stock at a price of $.15 per share. The warrants would be immediately
exercisable with respect to 1,500,000 shares, become exercisable with respect
to an additional 1,000,000 shares, 1,000,000 shares and 1,250,000 shares
after the Company's Common Stock had traded at a price of at least $1.00,
$2.00 and $3.00 per share, respectively, for a period of ten days. The
Investor also has the right to designate a majority of the nominees for
election to the Board of Directors, and John Van Leeuwen and Frank van
Luttikhuizen have been elected to the Board and nominated for election at the
Annual Meeting as designees of the Investor. The Letter of Intent is
non-binding, except for the obligation to pay the fee to TECH
The Company does not currently have a sufficient number of authorized and
unreserved shares of Common Stock or Preferred Stock to complete the
Financing as currently structured, and this amendment must be approved in
order to complete the Financing as currently structured. If the Financing is
completed, the Investor will "beneficially own" (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended) approximately
66% of the Company's Common Stock immediately following the Financing.
COMMON STOCK
All outstanding shares of Common Stock are fully paid and nonassessable.
Each share of the outstanding Common Stock is entitled to participate equally
in dividends as and when declared by the Board of Directors and is entitled
to participate equally in any distribution of net assets made to the
shareholders upon liquidation of the Company. There are no redemption,
sinking fund, conversion or preemptive rights with respect to the shares of
Common Stock, except for the contractual preemptive right held by Medtronic,
Inc. All shares of Common Stock have equal rights and preferences. The
holders of Common Stock are entitled to one vote for each share held of
record on all matters voted upon by shareholders and may not cumulate votes
for the election of directors. Accordingly, the owners of a majority of the
shares of Common stock outstanding may elect all of the directors of the
Company if they choose to do so, and the owners of the balance of such shares
would not be able to elect any directors. The Company has not declared or
paid any cash dividends on its Common Stock since its inception and does not
intend to pay any dividends for the foreseeable future.
PREFERRED STOCK
Under applicable Minnesota law, no action by the Company's shareholders is
necessary, and only action of the Board of Directors is required, to authorize
the issuance of any Preferred Stock. The Board of Directors is empowered to
establish, and to designate the name of, each class or series of the shares of
Preferred Stock and to set the terms of such shares (including terms with
respect to redemption,
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sinking fund, dividend, liquidation, preemptive, conversion and voting rights
and preferences). The Board of Directors can issue shares of such class or
series to, among other individuals, the holders of another class or series of
preferred stock or to the holders of Common Stock. Accordingly, the Board of
Directors, without shareholder approval, can issue preferred stock with
voting or conversion rights which could adversely affect the voting power of
the holders of the Common Stock. The Preferred Stock may have the effect of
discouraging an attempt, through acquisition of a substantial number of
shares of Common Stock, to acquire control of the Company with a view to
effecting a merger, sale or exchange of assets or a similar transaction. For
example, the Board of Directors could issue such shares as a dividend to
holders of Common Stock or place such shares privately with purchasers who
may side with the Board of Directors in opposing a takeover bid. The Board
currently intends to designate 3,500,000 shares of Preferred Stock for
issuance in connection with the Financing.
PURPOSE AND EFFECTS OF THE PROPOSED AMENDMENT
The purpose of adopting the proposed amendment is to enable the Company
to consummate the Financing. In addition, the Board of Directors believes
that it is necessary and desirable to increase the number of shares of Common
Stock and Preferred Stock the Company is authorized to issue to give the
Board of Directors additional flexibility to declare stock splits or
dividends, adopt additional future employee benefit plans, make acquisitions
through the use of stock, increase the number of shares in the market, enable
the Board of Directors to reserve additional shares for issuance under any
options, warrants or convertible securities which may be issued and raise
equity capital. The Board of Directors has no immediate plans,
understandings or agreements or commitments to issue additional shares of
Common Stock or Preferred Stock for any of these purposes, except in
connection with the Financing discussed above and except as permitted or
required by outstanding options, warrants, convertible securities and
additional options which may be granted from time to time under the 1995
Plan. The flexibility inherent in having the authority to issue shares of
Common Stock will, in the opinion of the Board of Directors, be advantageous
to the Company in any negotiations involving the issuance of such stock. If
the shareholders fail to approve the proposed amendment the Company will not
be able to complete the Financing as currently structured, and the Company
would be forced to restructure the Financing. In addition, if the
authorization of additional shares of Common Stock and Preferred Stock
(beyond the number of shares needed to complete the Financing) are deferred
until a specific need existed, the time and expense required in connection
with obtaining the necessary shareholder action for each proposed issuance
could deprive the Company of flexibility that the Board of Directors believes
will result in the most efficient use of such shares. If this proposed
amendment is adopted, no additional action or authorizationby the Company's
shareholders will be necessary prior to the issuance of such additional
shares, unless required by applicable law or regulation, or unless deemed
desirable or advisable by the Board of Directors. Furthermore, the Board of
Directors will be empowered, without further shareholder action, to
establish, and to designate the names of, classes or series of the Preferred
Stock and to set the terms of such shares (including terms with respect to
redemption, sinking fund, dividend, liquidation, conversion and voting rights
and preferences).
If adopted, the proposal will not, by itself, have any effect on the
rights of holders of presently issued and outstanding shares of Common Stock.
Under the Company's Articles of Incorporation, as amended, the shareholders
of the Company do not have preemptive rights with respect to the Common
Stock. Thus, should the Board of Directors elect to issue additional shares
of Common Stock or Preferred Stock, existing shareholders would not have any
preferential rights to purchase such additional shares of Common Stock or
Preferred Stock.
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Although the Board of Directors is proposing this amendment to the
Company's Articles of Incorporation, as amended, for the reasons stated
above, the amendment could, under certain circumstances, discourage or make
more difficult an attempt by a person or organization to gain control of the
Company by tender offer or proxy contest, or to consummate a merger or
consolidation with the Company after acquiring control, and to remove
incumbent management, even if such transactions were favorable to the
shareholders of the Company. Issuance of shares of Common Stock or Preferred
Stock in a private placement to a person sympathetic to management and
opposed to any attempt to gain control of the Company could make a change in
control of the Company more difficult. Accordingly, this proposal to amend
the Company's Articles of Incorporation, as amended, may be deemed (under
certain circumstances which may or may not occur) to be an anti-takeover
measure. However, the proposal is not being presented as an anti-takeover
measure.
PROPOSED RESOLUTION
A resolution in substantially the following form will be submitted to
the shareholders at the Annual Meeting:
RESOLVED, That the first sentence of Article III of the Company's
Articles of Incorporation, as amended, is amended in its entirety to
read as follows:
The aggregate number of shares of stock which the Corporation
shall have authority to issue is Fifty-Five Million (55,000,000)
shares, consisting of Fifty Million (50,000,000) shares of common
stock, no par value per share (the "Common Stock") and Five Million
(5,000,000) of which shall be designated preferred stock, no par value
(the "Preferred Stock").
RESOLVED FURTHER, That the appropriate officers of the Company are
authorized and directed to make, execute, acknowledge and file such
certificates and documents as may be required by law with respect to
the foregoing resolutions.
INTERESTS OF CERTAIN PERSONS
If the proposed amendment to the Company's Articles of Incorporation is
approved and the Company completes the Financing: (a) the Investor will
acquire 1,500,000 shares of Designated Preferred Stock, a promissory note
convertible into an additional 1,500,000 shares of Designated Preferred Stock
and warrants to purchase up to 4,750,000 shares of Common Stock; and (b)
certain directors will acquire up to 500,000 shares of Designated Preferred
Stock.
BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors recommends a vote FOR approval of this amendment.
The affirmative vote of the holders of a majority of shares of Common Stock
of the Company present in person or by proxy at the Annual Meeting is
necessary for approval. Unless a contrary choice is specified, proxies
solicited by the Board of Directors will be voted FOR the approval of this
amendment.
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PROPOSAL TO AMEND THE AMENDED AND
RESTATED 1995 STOCK INCENTIVE PLAN
PROPOSAL 3
INTRODUCTION
In December 1995, the Board Directors of the Company reaffirmed the Amended
and Restated 1995 Stock Incentive Plan (the "1995 Plan"), which was approved
by the Company's shareholders in January 1996. On December 15, 1998 the
Board of Directors amended the 1995 Plan, subject to shareholder approval, to
(a) increase the number of shares available for issuance thereunder to
3,000,000, (b) increase the number of shares that may be subject to an award
granted to a participant in any fiscal year of the Company with a value based
solely on an increase in the value of the Common Stock after the date of the
grant to 500,000 shares in the aggregate and (c) increase the number of
shares which may be subject to an award granted to a participant who is first
appointed or elected as an officer, hired as an employer retained as a
consultant by the Company or who receives a promotion that results in an
increase in responsibilities or duties may be granted, during the fiscal year
of such appointment, election, hiring, retention or promotion to 700,000
shares. At the Annual Meeting, the Company's shareholders are being asked to
approve this amendment.
The increase in the number of shares reserved for issuance under the 1995
Plan is necessary to permit the Company to continue operation of the 1995
Plan for the benefit of new participants as well as to allow additional
awards to current participants. As of December 15, 1998, the Company had
issued options to purchase an aggregate of 1,544,338 shares of Common Stock
under the 1995 Plan. If this amendment is approved, 1,455,666 shares will be
available for future grants. The Company anticipates that it will issue
additional options in the future.
SUMMARY OF THE 1995 PLAN
A general description of the basic features of the 1995 Plan is outlined
below. This summary is qualified in its entirety by the terms of the 1995
Plan, a copy of which may be obtained from John Sandberg, the Controller of
the Company.
GENERAL. The 1995 Plan provides for awards to eligible recipients of:
(i) options to purchase Common Stock that qualify as "incentive stock
options" within the meaning of Section 422 of the Code ("Incentive Stock
Options"); (ii) options to purchase Common Stock that do not qualify as
Incentive Stock Options ("Non-Statutory Stock Options"); (iii) stock
appreciation rights ("Stock Appreciation Rights"); (iv) restricted stock
awards ("Restricted Stock Awards"); (v) performance units ("Performance
Units"); and (vi) stock bonuses ("Stock Bonuses"). Incentive Stock Options
and Non-Statutory Stock Options are referred to as "Options," and Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Units and
Stock Bonuses are collectively referred to as "Incentive Awards."
The 1995 Plan may be administered by the Board of Directors or by a
committee of the Board of Directors consisting of not less than two members
of the Board who are "disinterested persons" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The 1995 Plan is currently administered by the Board of Directors (the
"Committee"). The Committee selects the participants to be granted Incentive
Awards under the 1995 Plan (the "Participants"), determines the nature and
extent of the Incentive Awards granted to the Participants, the time or times
when Incentive Awards will be granted, the duration of each Incentive Award
and the discretionary terms and conditions of each grant not otherwise fixed
under the 1995 Plan. In addition,
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the Committee will have the authority under the 1995 Plan in its sole
discretion to pay the economic value of any Incentive Award in the form of
cash, Common Stock, Preferred Stock or any combination of the foregoing.
Eligible recipients of Incentive Awards under the 1995 Plan include all
full-time or part-time employees of the Company or any subsidiary and any
non-employee directors, consultants and independent contractors of the
Company or any subsidiary. The Company intends that Incentive Awards be
granted under the 1995 Plan to those eligible persons who are performing
vital services in the management, operations and development of the Company
or a subsidiary and significantly contribute to the achievement of long-term,
corporate economic objectives.
The 1995 Plan will terminate on January 1, 2005, unless sooner
terminated by action of the Board of Directors. No Award will be granted
after termination of the 1995 Plan. Currently, a maximum of 1,000,000 shares
of Common Stock are reserved for issuance under the 1995 Plan. In the event
of any reorganization, merger, recapitalization, stock dividend, stock split
or similar change in the corporate structure or shares of the Company,
appropriate adjustments will be made to the number and kind of shares
reserved under the 1995 Plan and under outstanding Incentive Awards and to
the exercise price of outstanding Options. The Board of Directors may amend
the 1995 Plan in any respect without stockholder approval, unless stockholder
approval is then required by federal securities or tax laws or the rules of
any stock exchange or Nasdaq. Except pursuant to testamentary will or the
laws of descent and distribution or as otherwise expressly permitted by the
1995 Plan, no right or interest of any Participant in an Incentive Award
prior to the exercise or vesting of such Incentive Award will be assignable
or transferable, or subjected to any lien, during the lifetime of the
Participant, provided that a Participant may designate a beneficiary to
receive an Incentive Award upon such Participant's death.
OPTIONS. The exercise price for Non-Statutory Stock Options may be not
less than 85% of the fair market value of the Common Stock on the date the
Non-Statutory Stock Options are granted. Incentive Stock Options may not be
granted with an exercise price that is less than 100% of the fair market
value of the Common Stock on the date the Incentive Stock Options are
granted, except that Incentive Stock Options granted to persons owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any subsidiary may not be granted with an exercise
price that is less than 110% of the fair market value on the date of grant.
Payment of an option exercise price will be made entirely in cash;
provided, however, that the Committee, in its sole discretion and upon terms
and conditions established by the Committee, may allow such payments to be
made, in whole or in part, by tender of a broker exercise notice, a
promissory note or previously acquired shares of Common Stock or Preferred
Stock having an aggregate fair market value on the date of exercise equal to
the payment required, or by a combination of such methods. The Committee may
also, in its sole discretion and upon terms and conditions established by the
Committee, permit or require a Participant to satisfy, in whole or in part,
any withholding or employment-related tax obligation by tender of a broker
exercise notice, a promissory note or previously acquired shares, or by a
combination of such methods.
Options may not be transferred other than by will or the laws of descent
and distribution or to a beneficiary designated by the Participant as provided
in the 1995 Plan, and during the lifetime of a Participant may be exercised only
by the Participant. Options will become exercisable at such times and in such
installments as determined by the Committee and may be exercised in whole or in
part from time to time thereafter, subject to the terms and conditions set forth
in the 1995 Plan; provided, however, that no Option may be exercisable after 10
years from its date of grant. To the extent that any Incentive
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Stock Option granted under the 1995 Plan ceases for any reason to qualify as
an "incentive stock option" for purposes of the federal tax laws, such option
will continue to be outstanding for purposes of the 1995 Plan as a
Non-Statutory Stock Option.
STOCK APPRECIATION RIGHTS. Stock Appreciation Rights are rights granted
to a recipient to receive a payment from the Company in the form of Common
Stock, cash or a combination of both, equal to the difference between the
fair market value of one or more shares of Common Stock and the exercise
price of such shares under the terms of such Stock Appreciation Right. The
terms and conditions of any Stock Appreciation Rights granted under the 1995
Plan will be determined by the Committee in its sole discretion, subject to
certain requirements contained in the 1995 Plan. The exercise price of a
Stock Appreciation Right will be determined by the Committee, in its
discretion, at the date of grant; provided, however, that the exercise price
may not be less than the fair market value of one share of the underlying
Common Stock on the date the Stock Appreciation Right is granted. A Stock
Appreciation Right will become exercisable at such time and in such
installments as determined by the Committee at the time of grant and will
expire at the time fixed in the applicable award agreement; provided,
however, that no Stock Appreciation Right may be exercisable after 10 years
from the date of grant.
RESTRICTED STOCK AWARDS. Restricted Stock Awards are grants to
Participants of shares of Common Stock that are subject to restrictions on
transferability and subject to the possibility of forfeiture under terms and
conditions set by the Committee. The Committee may impose such restrictions
or conditions, not inconsistent with the 1995 Plan, as the Committee may deem
appropriate, including, without limitation, that the Participant remain
continuously employed by the Company for a period of time or that the
Participant or the Company satisfy certain performance goals or criteria.
Unless provided otherwise by the Committee in the exercise of its sole
discretion, Participants holding Restricted Stock Awards will have voting and
liquidation rights with respect to the number of shares of Common Stock
underlying the Restricted Stock Awards as if the Participant were the holder
of such number of shares of Common Stock, but any dividends and distributions
with respect to such shares of unvested Common Stock will be subject to the
same restrictions as the shares.
PERFORMANCE UNITS. Performance Units are rights to receive a payment
from the Company in the form of stock, cash or a combination of both, upon
the achievement of established performance criteria. Such criteria may
include achievement by the Participant, the Company or a specified business
unit or subsidiary of predetermined performance goals approved by the
Compensation Committee at the time the Performance Units are awarded.
STOCK BONUSES. Stock Bonuses are awards of Common Stock granted to
Participants, subject to such terms and conditions as may be determined by
the Committee. Participants receiving Stock Bonuses will have all voting,
dividend, liquidation and other rights with respect to, and upon becoming the
record holder of, the shares of Common Stock issued as the Stock Bonus, but
the Committee may place such restrictions on the transfer or assignability of
shares received as a Stock Bonus as it may deem appropriate.
EFFECT OF TERMINATION OF EMPLOYMENT. If a Participant's employment or
other service with the Company and all subsidiaries is terminated by reason
of death, disability or retirement, all Options and Stock Appreciation Rights
held by the Participant that are currently exercisable by the Participant as
of the time of such termination will remain exercisable for one year (but in
no event after the expiration date of any such Option for Stock Appreciation
Right) after such termination. All Restricted Stock Awards will become fully
vested and all Performance Units and Stock Bonuses then held by a
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Participant will vest and/or continue to vest as provided in the applicable
award agreement following termination of the Participant's employment due to
death, disability or retirement.
If a Participant's employment is terminated for a reason other than
death, disability or retirement, all rights of the Participant under the 1995
Plan and any agreements evidencing an Incentive Award will immediately
terminate without notice of any kind, and no Options or Stock Appreciation
Rights held by the Participant will thereafter be exercisable, all Restricted
Stock Awards held by the Participant that have not vested will be terminated
and forfeited and all Performance Units and Stock Bonuses will vest and/or
continue to vest in the manner provided in the applicable award agreement;
provided, however, that in the event the termination is for a reason other
than "cause" (as defined in the 1995 Plan), all Options or Stock Appreciation
Rights then held by the Participant that are currently exercisable by the
Participant as of the time of such termination will remain exercisable for a
period of three months after the termination.
CHANGE IN CONTROL OF THE COMPANY. In the event a "change in control" of
the Company occurs, then, if approved by the Compensation Committee, (i) all
outstanding options and stock appreciation rights will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms, regardless of whether the participant remains in the employ or service
of the Company or any subsidiary, (ii) all outstanding restricted stock
awards will become immediately fully vested, and (iii) all outstanding
performance units and stock bonuses will vest and/or continue to vest in the
manner determined by the Compensation Committee and reflected in the award
agreement. In addition, the Compensation Committee, without the consent of
any affected participant, may determine that some or all participants holding
outstanding options will receive cash in an amount equal to the excess of the
fair market value immediately prior to the effective date of such change in
control over the exercise price per share of the options.
For purposes of the 1995 Plan, a "change in control" of the Company will
be deemed to have occurred, among other things, upon (i) the sale or other
disposition of substantially all of the assets of the Company, (ii) the
approval by the Company's shareholders of a plan or proposal for the
liquidation or dissolution of the Company, (iii) a merger or consolidation to
which the Company is a party if the Company's shareholders immediately prior
to the merger or consolidation beneficially own, immediately after the merger
or consolidation, securities of the surviving corporation representing (A)
more than 50%, but not more than 80%, of the combined voting power of the
surviving corporation's then outstanding securities, unless the transaction
was approved in advance by the directors as of the effective date of the 1995
Plan or by any persons who subsequently become directors and whose election
or nomination was approved by a majority vote of the directors comprising the
Board as of the effective date of the 1995 Plan (the "Incumbent Directors"),
or (B) 50% or less of the combined voting power of the surviving
corporation's then outstanding securities (regardless of any approval by the
Incumbent Directors), (iv) any person becoming, after the effective date of
the 1995 Plan, the beneficial owner of (A) 20% or more, but not 50% or more,
of the combined voting power of the Company's Common Stock, unless the
transaction resulting in such ownership was approved in advance by the
Incumbent Directors, or (B) 50% or more of the combined voting power of the
Company's outstanding securities (regardless of any approval by the Incumbent
Directors), or (v) the Incumbent Directors cease for any reason to constitute
at least a majority of the Board, or (vi) any other change in control of the
Company of a nature that would be required to be reported pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended.
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FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES IS BASED ON
CURRENT STATUTES, REGULATIONS AND INTERPRETATIONS. THE DESCRIPTION DOES NOT
INCLUDE FOREIGN, STATE OR LOCAL INCOME TAX CONSEQUENCES. IN ADDITION, THE
DESCRIPTION IS NOT INTENDED TO ADDRESS SPECIFIC TAX CONSEQUENCES APPLICABLE
TO DIRECTORS, OFFICERS OR GREATER THAN 10% STOCKHOLDERS OF THE COMPANY OR TO
ANY INDIVIDUAL PARTICIPANT WHO RECEIVES AN INCENTIVE AWARD.
INCENTIVE STOCK OPTIONS. There will not be any federal income tax
consequences to either the Participant or the Company as a result of the
grant to an employee of an Incentive Stock Option under the 1995 Plan. The
exercise by a Participant of an Incentive Stock Option also will not result
in any federal income tax consequences to the Company or the Participant,
except that (i) an amount equal to the excess of the fair market value of the
shares acquired upon exercise of the Incentive Stock Option, determined at
the time of exercise, over the amount paid for the shares by the Participant
will be includable in the Participant's alternative minimum taxable income
for purposes of the alternative minimum tax, and (ii) the Participant may be
subject to an additional excise tax if any amounts are treated as excess
parachute payments (see explanation below). Special rules will apply if
previously acquired shares of Common Stock or Preferred Stock are permitted
to be tendered in payment of an Option exercise price.
If the Participant disposes of the Incentive Stock Option shares
acquired upon exercise of the Incentive Stock Option, the federal income tax
consequences will depend upon how long the Participant has held the shares.
If the Participant does not dispose of the shares within two years after the
Incentive Stock Option was granted, nor within one year after the Participant
exercised the Incentive Stock Option and the shares were transferred to the
Participant, then the Participant will recognize a long-term capital gain or
loss. The amount of the long-term capital gain or loss will be equal to the
difference between (i) the amount the Participant realized on disposition of
the shares, and (ii) the option price at which the Participant acquired the
shares. The Company is not entitled to any compensation expense deduction
under these circumstances.
If the Participant does not satisfy both of the above holding period
requirements (a "disqualifying disposition"), then the Participant will be
required to report as ordinary income, in the year the Participant disposes
of the shares, the amount by which the lesser of (i) the fair market value of
the shares at the time of exercise of the Incentive Stock Option, or (ii) the
amount realized on the disposition of the shares, exceeds the option price
for the shares. The Company will be entitled to a compensation expense
deduction in an amount equal to the ordinary income includable in the taxable
income of the Participant. This compensation income may be subject to
withholding. The remainder of the gain recognized on the disposition, if
any, or any loss recognized on the disposition, will be treated as long-term
or short-term capital gain or loss, depending on the holding period.
NON-STATUTORY STOCK OPTIONS. Neither the Participant nor the Company
incurs any federal income tax consequences as a result of the grant of a
Non-Statutory Stock Option. Upon exercise of a Non-Statutory Stock Option, a
Participant will recognize ordinary income, subject to withholding, on the
date of exercise in an amount equal to the difference between (i) the fair
market value of the shares purchased, determined on the date of exercise, and
(ii) the consideration paid for the shares. The Participant may be subject
to an additional excise tax if any amounts are treated as excess parachute
payments (see explanation below). Special rules will apply if previously
acquired shares of Common Stock or Preferred Stock are permitted to be
tendered in payment of an Option exercise price.
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At the time of a subsequent sale or disposition of any shares of Common
Stock obtained upon exercise of a Non-Statutory Stock Option, any gain or
loss will be a capital gain or loss. Such capital gain or loss will be
treated as long-term or short-term capital gain or loss, depending on the
holding period.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Statutory Stock Option for
any amounts includable in the taxable income of the Participant as ordinary
income, provided the Company complies with any applicable withholding
requirements.
STOCK APPRECIATION RIGHTS. A participant who receives a Stock
Appreciation Right will not recognize any taxable income at the time of the
grant. Upon the exercise of a Stock Appreciation Right, the Participant will
realize ordinary income in an amount equal to the cash and the fair market
value of any shares of Common Stock received by the Participant. Provided
that proper withholding is made, the Company will be entitled to a
compensation expense deduction for any amounts includable by the Participant
as ordinary income.
RESTRICTED STOCK AWARDS. With respect to shares issued pursuant to a
Restricted Stock Award that are not subject to a substantial risk of
forfeiture, a Participant will include as ordinary income in the year of
receipt an amount equal to the fair market value of the shares received on
the date of receipt. With respect to shares that are subject to a substantial
risk of forfeiture, a Participant may file an election under Section 83(b) of
the Code within 30 days after the shares are received to include as ordinary
income in the year of receipt an amount equal to the fair market value of the
shares received on the date of receipt (determined as if the shares were not
subject to any risk of forfeiture). The Company will receive a corresponding
tax deduction, provided that proper withholding is made. If a Section 83(b)
election is made, the Participant will not recognize any additional income
when the restrictions on the shares issued in connection with the stock award
lapse. At the time any such shares are sold or disposed of, any gain or loss
will be treated as long-term or short-term capital gain or loss, depending on
the holding period from the date of receipt of the Restricted Stock Award.
A Participant who does not make a Section 83(b) election within 30 days
of the receipt of a Restricted Stock Award that is subject to a substantial
risk of forfeiture will recognize ordinary income at the time of the lapse of
the restrictions in an amount equal to the then fair market value of the
shares. The Company will receive a corresponding tax deduction, provided that
proper withholding is made. At the time of a subsequent sale or disposition
of any shares of Common Stock issued in connection with a Restricted Stock
Award as to which the restrictions have lapsed, any gain or loss will be
treated as long-term or short-term capital gain or loss, depending on the
holding period from the date the restrictions lapse.
PERFORMANCE UNITS. A Participant who receives a Performance Unit will
not recognize any taxable income at the time of the grant. Upon settlement
of the Performance Unit, the Participant will realize ordinary income in an
amount equal to the cash and the fair market value of any shares of Common
Stock received by the Participant. Provided that proper withholding is made,
the Company would be entitled to a compensation expense deduction for any
amounts includable by the Participant as ordinary income.
STOCK BONUSES. With respect to shares issued pursuant to a Stock Bonus,
a Participant will include as ordinary income in the year of receipt an
amount equal to the fair market value of the shares received as of the date
of receipt. The Company will receive a corresponding tax deduction, provided
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that proper withholding is made. At the time of a subsequent sale or
disposition of any shares of Common Stock issued in connection with a Stock
Bonus, any gain or loss will be treated as long-term or short-term capital
gain or loss, depending on the holding period from the date the shares were
received.
EXCISE TAX ON PARACHUTE PAYMENTS. The Code also imposes a 20% excise
tax on the recipient of "excess parachute payments," as defined in the Code
and denies tax deductibility to the Company on excess parachute payments.
Generally, parachute payments are payments in the nature of compensation to
employees of a company who are officers, stockholders or highly compensated
individuals, which payments are contingent upon a change in ownership or
effective control of the company, or in the ownership of a substantial
portion of the assets of the company. For example, acceleration of the
exercisability of Options, or the vesting of Restricted Stock Awards, upon a
change in control of the Company may constitute parachute payments, and in
certain cases, "excess parachute payments."
SECTION 162(m). Under Section 162(m) of the Code, the deductibility of
certain compensation paid to the chief executive officer and each of the four
other most highly compensated executives of publicly held companies is
limited to $1,000,000. Compensation for this purpose generally includes any
items of compensation expense described above in connection with Incentive
Awards under the 1995 Plan. However, certain types of compensation are
excepted from this limit, including compensation that qualifies as
"performance-based compensation." Under Section 162(m), any compensation
expense resulting from the exercise of Options under the 1995 Plan with
exercise prices equal to (or greater than) the fair market value of the
Common Stock on the date of grant should qualify as "performance-based
compensation" excepted from the limit of Section 162(m). However,
compensation expense in connection with any other Incentive Awards under the
1995 Plan will be subject to this limit.
OPTIONS GRANTED UNDER THE 1995 PLAN
The table below summarizes outstanding Options under the 1995 Plan as of the
date of this Proxy Statement. The Options granted in fiscal 1998 to the
Named Executive Officers are also disclosed in the Summary of Compensation
Table and the Option Grants in Last Fiscal Year Table, as required by the
rules of the Securities and Exchange Commission.
NEW PLAN BENEFITS
AMENDED AND RESTATED 1995 STOCK INCENTIVE PLAN
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
----------------- ------------------
Robert A. Pitner................................ 610,334
CHIEF EXECUTIVE OFFICER
Evros Psiloyenis................................ 500,000
PRESIDENT
Executive Group................................. 1,110,334
Non-Executive Director Group.................... 161,500
Non-Executive Employee Group.................... 496,000
Total.......................................... 1,767,834
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BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the 1995 Plan. The affirmative vote of a majority of shares of
the Common Stock of the Company voting in person or by proxy on the proposed
amendment to the 1995 Plan at the Annual Meeting is necessary for approval of
the amendment. Unless a contrary choice is specified, proxies solicited by
the Board of Directors will be voted FOR approval of the proposed amendment
to the 1995 Plan.
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
PROPOSAL 4
PROPOSAL
The Board has appointed Ernst & Young LLP, independent certified public
accountants, as auditors of the Company for the year ending August 31, 1999.
Although it is not required to do so, the Board wishes to submit the
selection of Ernst & Young LLP to the shareholders for ratification.
Representatives of Ernst & Young LLP will be present at the Annual Meeting,
will have an opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
BOARD OF DIRECTORS' RECOMMENDATION
The Board recommends a vote FOR ratification of the appointment of Ernst
& Young LLP as auditors of the Company for the year ending August 31, 1999.
The affirmative vote of the holders of a majority of shares of Common Stock
of the Company present in person or by proxy at the Annual Meeting, assuming
a quorum is present, is necessary for approval. Unless a contrary choice is
specified, proxies solicited by the Board will be voted FOR the ratification
of Ernst & Young LLP.
CERTAIN TRANSACTIONS
On November 7, 1997, the Company entered into Subscription Agreements (the
"Subscription Agreements") with certain investors (collectively, the
"Investors"), including Andrew K. Boszhardt, Jr., a member of the Company's
Board of Directors, pursuant to which the Investors agreed to purchase an
aggregate of 1,166,667 shares of Common Stock at purchase price of $0.60 per
share. As a condition to the Investors' purchase of such shares, members of the
Company's Board of Directors, were required to purchase an aggregate of 100,000
shares of Common Stock (the "Director Shares") at a purchase price of $0.60 per
share. In connection with the Subscription Agreements, the Company agreed to
allow Mr. Boszhardt, or his designee, to nominate one director (such nominee,
the "Boszhardt Nominee") for election as a member of the Board of Directors of
the Company at each annual meeting of shareholders or any other meeting at which
directors are elected (such director, the "Boszhardt Director"). The Company
agreed to use its good faith, reasonable efforts to ensure that the Boszhardt
Director will continue as a member of the Board of Directors for such period as
the Investors and/or any affiliates of Mr. Boszhardt own, in the aggregate,
beneficially and of record not less than 500,000 shares of Common Stock of the
Company (the "Minimum Holding Period"). Additionally, in connection with the
Subscription Agreements, Messrs. McNally and Pitner entered into a Letter
Agreement dated as of November 7, 1997 with Mr. Boszhardt, pursuant to which
Messrs. McNally and Pitner agreed to vote all
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of the shares of Common Stock beneficially held by them to elect Mr.
Boszhardt, or his nominee, as a member of the Board of Directors of the
Company for such Minimum Holding Period.
On December 31, 1997, the Company entered into a termination agreement
with Richard Koontz, a former officer of the Company, providing for
termination of his employment. Mr. Koontz was paid an aggregate of $50,000
under this agreement and released all claims against the Company.
On February 26, 1998, the Company sold 450,000 shares of Common Stock at
a price of $0.50 per share, for an aggregate purchase price of $225,000, to
Andrew K. Boszhardt, Jr., a director and shareholder of the Company. On
March 12, 1998, the Company sold an additional 450,000 shares of Common
Stock, at a price of $0.50 per share, for an aggregate purchase price of
$225,000, to Andrew K. Boszhardt, Jr. and Anthony Scaramucci.
On June 3, 1998, Norwest Business Credit, Inc. assigned all of its
right, title and interest in the Company's credit facilities with Norwest
Business Credit, Inc. to TECH. The loan documents underlying the credit
facility consisted of a revolving promissory note, dated May 28, 1997, in the
principal amount of $800,000, a credit and security agreement which, among
other things, granted the lender a security interest in all of the Company's
assets. The outstanding balance at the time of the assignment was
approximately $142,000 TECH has continued to make advances available to the
Company under these loan documents. The advances bear interest at the rate
of 1% in excess of the prime rate. As of November 30, 1998, the principal
outstanding balance was $1,955,000.
On December 15, 1998, the Company agreed to pay TECH a fee of $25,000
per month and to grant to TECH a warrant to purchase an aggregate of
4,750,000 shares of Common Stock, at an exercise price of $.15 per share, in
connection with the Financing, which has been arranged by TECH. Mr. van
Luttikhuizen and Mr. van Leeuwen are principals of TECH. See "Proposal to
Amend the Articles of Incorporation to Increase the Authorized Capital Stock
of the Company."
See "Proposal to Amend the Articles of Incorporation to Increase the
Authorized Capital Stock of the Company - Proposed Financing" for a
description of the TECH letter of Intent and participation in such financing
by certain directors of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Executive officers, directors and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) reports they file. To the Company's knowledge, based on review of the
copies of such reports furnished to the Company during the period ended
August 31, 1998, and based on representations by such persons, all Section
16(a) filing requirements applicable to its executive officers, directors,
and greater than 10% shareholders were complied with.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of shareholders intended to be presented in the proxy
materials relating to the next Annual Meeting must be received by the Company
at its principal executive offices on or before September 16, 1999.
OTHER MATTERS
The management of the Company does not intend to present other items of
business and knows of no items of business that are likely to be brought before
the Annual Meeting except those described in this Proxy Statement. However, if
any other matters should properly come before the Annual Meeting,
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the persons named in the enclosed proxy will have discretionary authority to
vote such proxy in accordance with their best judgment on such matters.
MISCELLANEOUS
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-KSB (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED AUGUST 31, 1998
TO EACH PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF DECEMBER 31, 1998,
UPON RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL
REPORT. SUCH REQUEST SHOULD BE SENT TO: 420 NORTH FIFTH STREET, FORD CENTRE,
SUITE 1040, MINNEAPOLIS, MINNESOTA 55401; ATTN.: SHAREHOLDER INFORMATION.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas A. Letscher
SECRETARY
Minneapolis, Minnesota
January __, 1999
25
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NICOLLET
PROCESSING ENGINEERING, INC.
The undersigned hereby appoints Robert A. Pitner and Pierce A. McNally, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of common stock of Nicollet Process Engineering, Inc. held of
record by the undersigned on December 31, 1998 at the Annual Meeting of
Shareholders to be held on February 16, 1999 or any adjournment thereof.
1. ELECTION OF DIRECTORS: / / FOR all nominees listed below / / AGAINST all nominees listed
(EXCEPT AS MARKED TO THE CONTRARY below
BELOW)
(INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THAT
NOMINEE'S NAME IN THE LIST BELOW.)
PIERCE A. MCNALLY
ANDREW K. BOSZHARDT, JR.
ROBERT A. PITNER
JOHN VAN LEEUWEN
BENTON J. CASE, JR.
FRANK VAN LUTTIKHUIZEN
2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION, AS AMENDED, TO INCREASE THE AUTHORIZED NUMBER OF
SHARES OF CAPITAL STOCK FROM 15,000,000 TO 55,000,000 SHARES, CONSISTING OF 50,000,000 SHARES OF COMMON
STOCK, NO PAR VALUE, AND 5,000,000 SHARES DESIGNATED AS PREFERRED STOCK, NO PAR VALUE.
/ / For / / Against / / Abstain
3. PROPOSAL TO AMEND THE COMPANY'S 1995 AMENDED AND RESTATED STOCK INCENTIVE
PLAN TO (A) INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER
TO 3,000,000, (B) INCREASE THE NUMBER OF SHARES THAT MAY BE SUBJECT TO AN
AWARD GRANTED TO A PARTICIPANT IN ANY FISCAL YEAR OF THE COMPANY WITH A
VALUE BASED SOLELY ON AN INCREASE IN THE VALUE OF THE COMMON STOCK AFTER THE
DATE OF THE GRANT TO 500,000 SHARES IN THE AGGREGATE AND (C) INCREASE THE
NUMBER OF SHARES WHICH MAY BE SUBJECT TO AN AWARD GRANTED TO A PARTICIPANT
WHO IS FIRST APPOINTED OR ELECTED AS AN OFFICER, HIRED AS AN EMPLOYEE,
RETAINED AS A CONSULTANT TO
(CONTINUED ON REVERSE SIDE)
THE COMPANY OR WHO RECEIVES A PROMOTION THAT RESULTS IN AN INCREASE IN
RESPONSIBILITIES OR DUTIES MAY BE GRANTED, DURING THE FISCAL YEAR OF SUCH
APPOINTMENT, ELECTION, HIRING, RETENTION OR PROMOTION TO 700,000 SHARES.
/ / For / / Against / / Abstain
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP, CERTIFIED PUBLIC ACCOUNTANTS, AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE YEAR ENDING AUGUST 31, 1999.
/ / For / / Against / / Abstain
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES NAMED IN PROPOSAL 1 ABOVE AND FOR PROPOSALS 2, 3 AND
4. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership or limited liability company, please
sign in partnership or applicable entity name by authorized person.
Dated: ______________________, 1999
___________________________________
Signature
___________________________________
Signature if held jointly
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL
1 AND FOR PROPOSALS 2, 3 AND 4. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.