SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as
permitted by Rule 14-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Centennial Technologies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number 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.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
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CENTENNIAL TECHNOLOGIES, INC.
7 LOPEZ ROAD
WILMINGTON, MASSACHUSETTS 01887
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Centennial Technologies, Inc. (the "Company") to be held at 10:00 a.m., local
time, on Tuesday, July 20, 1999 at the offices of Fleet Bank, One Federal
Street, 8(th) Floor, Boston, Massachusetts 02110.
At the Annual Meeting, you will be asked to elect seven (7) Directors of the
Company and vote upon certain other corporate matters described in the enclosed
Proxy Statement.
Details of the matters to be considered at the Annual Meeting are contained
in the Proxy Statement that we urge you to consider carefully. The Company's
1999 Annual Report, which is not part of the enclosed Proxy Statement, is also
enclosed and provides additional information regarding the financial results of
the Company. Holders of the Company's Common Stock are entitled to vote at the
Annual Meeting on the basis of one vote for each share held.
Whether or not you plan to attend the Annual Meeting, please complete, date,
sign and return your proxy promptly in the enclosed envelope, which requires no
postage if mailed in the United States. If you attend the Annual Meeting, you
may vote in person if you wish, even if you have previously returned your proxy.
Sincerely,
L. Michael Hone
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Wilmington, Massachusetts
June 4, 1999
CENTENNIAL TECHNOLOGIES, INC.
7 LOPEZ ROAD
WILMINGTON, MASSACHUSETTS 01887
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, JULY 20, 1999
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To the Stockholders of CENTENNIAL TECHNOLOGIES, INC.:
The Annual Meeting of Stockholders of CENTENNIAL TECHNOLOGIES, INC., a
Delaware corporation, (the "Company"), will be held on Tuesday, July 20, 1999,
at 10:00 a.m., local time, at the offices of Fleet Bank, One Federal Street, 8th
Floor, Boston, Massachusetts 02110 for the following purposes:
1. To elect Directors of the Company for the ensuing year;
2. To approve an amendment to the Company's Certificate of Incorporation to
effect a reverse split of the Company's Common Stock, $.01 par value per
share ("Common Stock"), pursuant to which each eight shares of Common
Stock then outstanding will be converted into one share of Common Stock;
3. To approve the adoption of the 1999 Qualified Employee Stock Purchase
Plan which provides for the issuance of up to 500,000 shares of the
Company's Common Stock;
4. To ratify the appointment of Ernst & Young LLP as the independent
accountants for the Company for the fiscal year ending March 31, 2000;
and
5. To consider and act upon any matters incidental to the foregoing and any
other matters that may properly come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the meeting.
All stockholders are invited to attend the Annual Meeting. Stockholders of
record at the close of business on June 1, 1999, the record date fixed by the
Board of Directors, are entitled to notice of and to vote at the Annual Meeting
and any adjournment or adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT THEIR PROXIES.
By Order of the Board of Directors
Donald R. Peck
SECRETARY, TREASURER AND GENERAL
COUNSEL
Wilmington, Massachusetts
June 4, 1999
CENTENNIAL TECHNOLOGIES, INC.
7 LOPEZ ROAD
WILMINGTON, MASSACHUSETTS 01887
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD TUESDAY, JULY 20, 1999
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of CENTENNIAL TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders to be held
on Tuesday, July 20, 1999, at 10:00 a.m., local time, at the offices of Fleet
Bank, One Federal Street, 8(th) Floor, Boston, Massachusetts 02110, and at any
adjournment or adjournments thereof (the "Annual Meeting").
A report containing financial statements for the fiscal period ended March
31, 1999 ("Fiscal 1999") is being mailed herewith to all stockholders entitled
to vote. References to Fiscal 1999 are to the twelve-month fiscal period ended
March 31, 1999. References to Fiscal 1998 are to the twelve-month fiscal period
ended March 31, 1998. References to Fiscal 1997 are to the nine-month fiscal
period ended March 31, 1997.
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Execution of a
Proxy will not in any way affect a stockholder's right to attend the Annual
Meeting and vote in person. The Proxy may be revoked at any time before it is
exercised by written notice to the Secretary prior to the meeting, by giving to
the Secretary a duly executed Proxy bearing a later date, or by voting in person
at the meeting by written ballot. The shares represented by all properly
executed Proxies received in time for the Annual Meeting will be voted as
specified therein. In the absence of a special notice, shares will be voted in
favor of the election as Directors of those persons named in this Proxy
Statement and in favor of all other items set forth herein.
The Notice of Meeting, this Proxy Statement and the enclosed Proxy Card are
being mailed to stockholders on or about June 4, 1999.
VOTING SECURITIES AND VOTES REQUIRED
Stockholders of record at the close of business on June 1, 1999 will be
entitled to vote at the Annual Meeting or any adjournment thereof. On that date,
shares of common stock, $0.01 par value, of the Company (the "Common
Stock") were issued and outstanding. Each share of Common Stock entitles the
holder to one vote with respect to all matters submitted to stockholders at the
Annual Meeting. There are no other voting securities of the Company.
The holders of a majority of the issued and outstanding shares of Common
Stock entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the meeting. Shares of Common Stock present in person
or represented by a properly executed proxy (including shares which abstain or
do not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum exists at
the Annual Meeting.
1
The election of Directors will be determined by a plurality of the votes
cast. The affirmative vote of the holders of two-thirds of the shares of Common
Stock issued and outstanding is required for approval of the amendment to the
Company's Certificate of Incorporation to effect a reverse split of the
Company's Common Stock. The other proposals to be voted upon by the stockholders
of the Company require the affirmative vote of a majority of the shares of
Common Stock present at the meeting for passage.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker-non-votes" will have no effect on the voting on a matter
that requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a particular matter. Shares which abstain from voting as to the
amendment to the Company's Certificate of Incorporation to effect a reverse
split of the Company's Common Stock, and shares held in "street name" by brokers
or nominees who indicate on their proxies that they do not have discretionary
authority to vote such shares as to such matter are nonetheless considered
outstanding shares and will have the same effect as a vote against such
amendment to the Company's Certificate of Incorporation.
MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY OWN OR MAY BE DEEMED TO
CONTROL APPROXIMATELY 6.0% OF THE OUTSTANDING SHARES OF COMMON STOCK (INCLUDING
OPTIONS TO PURCHASE SHARES OF COMMON STOCK EXERCISABLE WITHIN 60 DAYS OF MAY 31,
1999). THERE IS NO CUMULATIVE VOTING PROVIDED FOR IN THE COMPANY'S CERTIFICATE
OF INCORPORATION. THE MEMBERS OF THE BOARD OF DIRECTORS HAVE INDICATED THEIR
INTENT TO VOTE ALL SHARES OF COMMON STOCK OWNED OR CONTROLLED BY THEM IN FAVOR
OF EACH PROPOSAL SET FORTH HEREIN.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Directors of the Company are elected annually and hold office until the
next Annual Meeting of Stockholders and until their successors have been elected
and qualified. Shares represented by all Proxies received by the Board of
Directors and not so marked as to withhold authority to vote for an individual
nominee for Director, or for all nominees for Director, will be voted (unless
one or more nominees are unable or unwilling to serve) for the election of the
nominees named below. The Board of Directors is aware of no reason why any such
nominee should be unwilling to serve, but if such should be the case, Proxies
will be voted for the election of some other person or for fixing the number of
Directors at a lesser number.
2
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
The following table sets forth the positions and offices currently held by
each nominee with the Company, each nominee's principal occupation and business
experience for the past five years, the names of other publicly held companies
of which each nominee serves as a director, and each nominee's age and length of
service as a Director of the Company. For information about the ownership of the
Common Stock held by each nominee, see "Beneficial Ownership of Common Stock."
William J. Shea.............. Chairman of the Board of Directors since November 1997;
Chief Executive Officer of View Tech Inc., a publicly-traded
single-source provider of voice, video and data equipment,
network services and communications consulting services,
since April 1998; director of View Tech Inc. since February
1998; Vice Chairman, Chief Financial Officer and Treasurer
of BankBoston Corporation, a registered bank holding company
with national and international operations, from 1993 to
1997; various positions with Coopers & Lybrand L.L.P., a
public accounting firm, from 1974 to 1993, including most
recently Vice Chairman and Senior Partner. Age 51; director
of the Company since 1996.
Eugene M. Bullis............. Senior Vice President and Chief Financial Officer of
Physicians Quality Care, Inc., a company that provides
practice management services for multi-specialty medical
practice groups, since March 1998; director of Physicians
Quality Care, Inc. since June 1998; Interim Chief Financial
Officer of the Company from February 1997 to June 1998;
Chief Financial Officer of Computervision Corporation, a
publicly-traded company (now a subsidiary of Parametric
Technology Corporation) that provided computer-aided design
solutions for complex mechanical and electrical systems,
from October 1997 to January 1998; President of NYNEX
Information Technologies, Inc., a subsidiary of NYNEX
Corporation (now Bell Atlantic), a publicly-traded global
communications and media corporation, from 1994 to 1996;
Senior Vice President, Finance and Strategy of AGS
Computers, Inc., also a subsidiary of NYNEX Corporation,
from 1993 to 1994; Interim Executive and Business
Consultant, since 1990. Age 54; director of the Company
since 1998.
Steven M. DePerrior.......... Principal of Burke Group, a firm specializing in employee
benefits and compensation consulting, since 1997; various
positions with William M. Mercer, Inc., an international
human resource consulting firm, from 1991 to 1997, most
recently as Principal; director of Daniel Green Company, a
publicly-held shoe manufacturer located in central New York
State. Age 40; director of the Company since 1998.
3
Jay M. Eastman, Ph.D. ....... President and Chief Executive Officer of Lucid, Inc., a
manufacturer of confocal diagnostic medical imaging systems
and OEM color and optical density measurement systems, since
1991; Senior Vice President of Strategic Planning of PSC
Inc., a publicly-held manufacturer of hand-held and
fixed-position laser based bar code scanners, scan engines
and other scanning products, from 1996 to 1997; Executive
Vice President of PSC Inc., from 1986 to 1995; director of
PSC Inc.; director of Electric Fuel Corporation, a publicly-
held manufacturer of batteries for electric vehicles and
portable equipment; director of Chapman Instruments, Inc., a
manufacturer of precision surface profiling instruments;
director of Dimension Technologies, Inc., a developer and
manufacturer of 3D computer and video displays. Fellow of
the Optical Society of America; honorary member of the
Rochester Chapter of the Optical Society of America. Dr.
Eastman is a named inventor on 17 United States patents and
1 European patent. Age 51; director of the Company since
1997.
L. Michael Hone.............. President and Chief Executive Officer of the Company since
August 1997; Chairman and Chief Executive Officer of PSC
Inc., a publicly-held manufacturer of hand-held and
fixed-position laser based bar code scanners, scan engines
and other scanning products, from 1992 to 1997; director of
Verax Systems, Inc., a company principally engaged in the
design of statistical process control software; director of
Rochester Healthcare Information Group, Inc., a company
principally engaged in providing data processing management
to the health care industry; director of Association for the
Blind and Visually Impaired, Inc., a company principally
engaged in assisting the blind and visually impaired to
achieve vocational and social independence; director of the
Boy Scouts of America, Inc., Oceana County, New York
Council. Mr. Hone is a named inventor on 6 United States
patents. Age 49; director of the Company since 1997.
4
David A. Lovenheim........... Attorney at the law firm of Harris Beach & Wilcox, L.L.P.,
since 1979, currently as a Partner in its Corporate and
International Departments; Chairman of the Board of Lucid,
Inc., a manufacturer of confocal diagnostic medical imaging
systems and OEM color and optical density measurement
systems; Chairman of the Board of Intercon Associates, Inc.,
a computer software company; director of Lenel Systems
International, Inc., a developer and marketer of security
and access control systems; director of Blue Lobster
Software, Inc., a developer and marketer of host to internet
software systems; director of Dimension Technologies, Inc.,
a developer and manufacturer of 3D computer and video
displays; director of Chapman Instruments, Inc., a
manufacturer of precision surface profiling instruments;
director of Infrared Components Corp., a developer and
marketer of infrared sensor systems and cyro-packaging
subsystems; director and Secretary of Waste Reduction by
Waste Reduction, Inc., a developer, manufacturer and
marketer of biological and regulated medical waste disposal
systems; Trustee for the Center for Governmental Research, a
Rochester, N.Y.-based not-for-profit public policy research
organization; director of Redpoint Software, Inc., a
developer and marketer of enterprise portfolio risk
management solutions, from 1995 to June 1998; director of
Council for Economic Action, Inc., a Boston-based research
organization that studies international business
relationships and urban economic development, from 1979 to
1995; director of Regulatory and Legislative Consultants,
Inc., a private consulting firm focusing on regulatory
policy regarding low-level radioactive wastes, from 1987 to
1995. Age 56, director of the Company since 1998.
John J. Shields.............. General Partner of Boston Capital Ventures, a firm engaged
in investing fund assets in private equities, since January
1998; President and Chief Executive Officer of King's Point
Holdings, Inc., a company principally engaged in venture
capital, technical consulting and cranberry cultivation,
since 1993; director of Ionics, Inc., a publicly-traded
company principally engaged in separations technology. Age
60; director of the Company since 1996, Vice Chairman of the
Board of Directors of the Company from August 1996 until
September 1998.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors established an Audit Committee and a Compensation
Committee in July 1994, a Stock Option Committee in October 1994, and an
Executive Committee and a Nominating Committee in November 1998. There were four
meetings of the Board of Directors held during Fiscal 1999. Each Director
attended at least 75 percent of the total number of meetings of the Board of
Directors, except for Mr. DePerrior, who attended two of the four meetings of
the Board of Directors held during Fiscal 1999. Each Director attended at least
75 percent of the total number of meeting of the committees of the Board of
Directors on which he served.
5
The Executive Committee is currently composed of Messrs. Hone (Chairman),
Shea and Lovenheim and Dr. Eastman. The Executive Committee is authorized to act
on behalf of the Board on all corporate actions for which applicable law does
not require participation of the full Board. All actions taken by the Executive
Committee are reported at the next Board meeting. The Executive Committee held
no formal meetings during Fiscal 1999.
The Audit Committee is currently composed of Messrs. Bullis (Chairman) and
DePerrior. The Audit Committee is responsible primarily for reviewing (i) the
Company's financial results and recommending the selection of the Company's
independent auditors; (ii) the effectiveness of the Company's accounting
policies, financial reporting and internal controls; and (iii) the scope of
independent audit coverage, the fees charged by independent auditors, any
transactions that may involve a potential conflict of interest, and internal
control systems. The Board of Directors approved an Audit Committee Charter in
January 1998. The Audit Committee met on four occasions during Fiscal 1999.
The Compensation Committee is currently composed of Messrs. DePerrior
(Chairman) and Lovenheim and Dr. Eastman. The Compensation Committee is
responsible for establishing the policies that govern compensation for the
Company's senior management team and for approving compensation arrangements for
members of management and Directors of the Company, including, but not limited
to, the granting of options pursuant to the Company's 1994 Stock Option Plan or
otherwise. The Compensation Committee met once in Fiscal 1999.
The Nominating Committee is currently composed of Dr. Eastman (Chairman) and
Messrs. Hone and Lovenheim. The Nominating Committee generally recommends to the
Board candidates for nomination for election to the Board. The Nominating
Committee will consider shareowner recommendations for director sent to the
Nominating Committee, c/o Donald R. Peck, Secretary, Treasurer and General
Counsel, Centennial Technologies, Inc., 7 Lopez Road, Wilmington, MA 01887.
The Stock Option Committee is currently composed of Messrs. DePerrior
(Chairman) and Lovenheim and Dr. Eastman. The Stock Option Committee administers
the Company's 1994 Stock Option Plan (the "1994 Plan"). The Stock Option
Committee did not meet during Fiscal 1999, but took action from time to time
pursuant to written consent resolutions.
No Director or executive officer is related to any other Director or
executive officer by blood or marriage.
COMPENSATION FOR DIRECTORS
Each non-employee Director is compensated at a rate of $500 for each Board
of Directors meeting attended, and receives a pro-rata portion of a $1,000
annual stipend for the number of months served on the Board of Directors.
Messrs. Bullis, DePerrior, Lovenheim, Shea and Shields and Dr. Eastman each
received $2,000, $1,000, $2,000, $3,500, $4,000, and $3,917, respectively, from
the Company as compensation for their services to the Company as a Director
during Fiscal 1999. In addition, Directors are reimbursed for travel and other
expenses incurred in attending Board and committee meetings. On July 21, 1998,
Messrs. Shea and Shields and Dr. Eastman were granted an option under the 1994
Plan to purchase up to 24,000, 42,500 and 5,500 shares of Common Stock,
respectively, at a price of $1.125 per share, all of which vested immediately.
On September 9, 1998, Messrs. Bullis, DePerrior and Lovenheim were each granted
an option under the 1994 Formula Stock Option Plan of the Company (the "1994
Formula Plan") to purchase up to 15,000 shares of Common Stock at a price of
$.75 per share that vested immediately. On September 10, 1998, Messrs. Shea and
Shields were each granted an option under the
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1994 Formula Plan to purchase up to 3,000 shares of Common Stock at a price of
$.75 per share that will vest on September 10, 1999, subject to continuing
service as a Director on that date.
Prior to his election as a Director, Mr. Bullis provided consulting services
to the Company, for which he received $33,000 in consulting fees during Fiscal
1999. See "Certain Transactions and Business Relationships."
EXECUTIVE OFFICERS AND MANAGEMENT OF THE COMPANY
The executive officers and management of the Company, their ages and
positions held in the Company, are as follows:
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
L. Michael Hone..................... 49 President and Chief Executive Officer
Donald R. Peck...................... 41 Secretary, Treasurer and General Counsel
Richard N. Stathes.................. 53 Senior Vice President of Sales and Marketing
Jacques Assour, Ph.D................ 66 Senior Vice President of Operations
John C. Nugent...................... 55 Managing Director--Centennial Technologies International Limited
Executive officers are elected by and serve at the pleasure of the Board of
Directors. The following is a brief summary of the background of each executive
officer of the Company, with the exception of Mr. Hone, whose background is
summarized under "Nominees for Election to Board of Directors" above.
Donald R. Peck, SECRETARY, TREASURER AND GENERAL COUNSEL. Mr. Peck has
served as the Company's Treasurer and General Counsel since September 1996 and
as its Secretary since July 1997. From 1986 to 1996, Mr. Peck was an attorney at
the law firm of Nutter, McClennen & Fish, LLP. Mr. Peck holds a Bachelor of
Science degree in Business Administration from the University of Rhode Island
and a Juris Doctor degree from Cornell Law School.
Richard N. Stathes, SENIOR VICE PRESIDENT OF SALES AND MARKETING. Mr.
Stathes joined the Company as its Senior Vice President of Sales and Marketing
in September 1997. From 1992 until 1997, Mr. Stathes served as Vice President of
Sales and Marketing for PSC Inc., a publicly-held manufacturer of hand-held and
fixed-position laser based bar code scanners, scan engines and other scanning
products. Mr. Stathes holds a Bachelor of Science degree in Business
Administration from Syracuse University.
Jacques Assour, Ph.D., SENIOR VICE PRESIDENT OF OPERATIONS. Dr. Assour
joined the Company as its Senior Vice President of Operations in September 1997.
From 1995 until 1997, Dr. Assour provided electronics design and financial
planning consulting services to various client companies, including Robotic
Vision Systems, Inc. From 1990 until 1995, Dr. Assour served as Senior Vice
President of Operations for PSC Inc., a publicly-held manufacturer of hand-held
and fixed-position laser-based bar code scanners, scan engines and other
scanning products. Dr. Assour is a named inventor on 5 United States patents.
Dr. Assour holds a Bachelor of Science degree and a Master of Science degree in
Electrical Engineering, and a Ph.D. in Electrophysics from Polytechnic
Institute.
John C. Nugent, MANAGING DIRECTOR--CENTENNIAL TECHNOLOGIES INTERNATIONAL
LIMITED. Mr. Nugent joined the Company as Managing Director of the Company's
subsidiary, Centennial Technologies International Limited, in January 1998. From
1997 until January 1998, Mr. Nugent served as Sales Manager for Matco, Inc., a
contract manufacturer of electronic boards. From 1992 until 1997, Mr. Nugent
served as
7
Vice President of International Operations for PSC Inc., a publicly-held
manufacturer of hand-held and fixed-position laser-based bar code scanners, scan
engines and other scanning products. Mr. Nugent holds an H.N.D. degree in
business studies from St. Edwards College.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires executive officers and directors, and persons who
beneficially own more than 10% of a company's equity securities that are
registered under Section 12 of the Exchange Act to file initial reports of
ownership of Form 3 and reports of changes in ownership on Form 4 with the
Commission and any national securities exchange on which the company's
securities are registered. Executive officers, Directors and greater than 10%
beneficial owners are required by the Commission's regulations to furnish the
company with copies of all forms they file pursuant to Section 16(a).
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and Directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, Directors and greater than 10% beneficial owners were
complied with during Fiscal 1999, with the exception of Messrs. Shea and
Stathes, each of whom filed a Form 4 late.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to Mr. Hone, the
Company's President and Chief Executive Officer with respect to services
rendered to the Company during Fiscal 1999, Fiscal 1998 and Fiscal 1997 and the
other executive officers who earned in excess of $100,000 in salary and bonus
during Fiscal 1999 (each a "Named Executive Officer"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEARS(6) SALARY BONUS OPTIONS (#)
- ----------------------------------------------------------------- ----------- --------- ---------- -------------
L. Michael Hone (1).............................................. 1999 $ 51,923 $ 361,000 1,267,250
President and Chief Executive Officer 1998 28,846 175,000 925,000
1997 -- -- --
Richard N. Stathes (2)........................................... 1999 215,171 26,450 308,250
Senior Vice President--Sales and Marketing 1998 83,200 -- 225,000
1997 -- -- --
Jacques Assour (3)............................................... 1999 160,000 72,000 171,250
Senior Vice President--Operations 1998 62,500 -- 125,000
1997 -- -- --
Donald R. Peck (4)............................................... 1999 158,654 55,125 226,000
Secretary, Treasurer and General Counsel 1998 153,846 75,000 150,000
1997 50,000 10,000 15,000
John C. Nugent (5)............................................... 1999 149,013 48,390 171,250
Managing Director--Centennial 1998 33,720 -- 125,000
Technologies International Limited 1997 -- -- --
8
- ------------------------
(1) Mr. Hone joined the Company as President and Chief Executive Officer in
August 1997. Securities underlying options in Fiscal 1999 consist of 342,250
options that were granted and repriced in Fiscal 1999 and 925,000 options
that were granted in Fiscal 1998 and repriced in Fiscal 1999.
(2) Mr. Stathes joined the Company as Senior Vice President--Sales and Marketing
in September 1997. Securities underlying options in Fiscal 1999 consist of
83,250 options that were granted and repriced in Fiscal 1999 and 225,000
options that were granted in Fiscal 1998 and repriced in Fiscal 1999.
(3) Dr. Assour joined the Company as Senior Vice President--Operations in
September 1997. Securities underlying options in Fiscal 1999 consist of
46,250 options that were granted and repriced in Fiscal 1999 and 125,000
options that were granted in Fiscal 1998 and repriced in Fiscal 1999.
(4) Securities underlying options in Fiscal 1999 consists of 76,000 options that
were granted and repriced in Fiscal 1999 and 150,000 options that were
granted in Fiscal 1998 and repriced in Fiscal 1999. Securities underlying
options in Fiscal 1998 consist of 150,000 options that were granted at an
exercise price of $2.30 per share in Fiscal 1998 in return for the
cancellation of 15,000 options that were granted at an exercise price of
$16.8125 per share in Fiscal 1997.
(5) Mr. Nugent joined the Company as Managing Director--Centennial Technologies
International Limited in January 1998. Securities underlying options in
Fiscal 1999 consist of 46,250 options that were granted and repriced in
Fiscal 1999 and 125,000 options that were granted in Fiscal 1998 and
repriced in Fiscal 1999.
(6) Information for Fiscal 1997 reflects the nine-month period ended March 31,
1997.
OPTION GRANTS IN FISCAL 1999
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM(3)
OPTIONS FISCAL OR BASE ----------------------
NAME GRANTED YEAR(1) PRICE(2) EXPIRATION DATE 5% 10%
- -------------------------------------------- ----------- --------------- ----------- --------------- ---------- ----------
L. Michael Hone............................. 342,250(4) 8.0% $ 0.65 7/20/08 $ 122,650 $ 302,092
925,000(5) 21.6% $ 0.65 8/18/07 $ 287,070 $ 687,583
Richard N. Stathes.......................... 83,250(4) 1.9% $ 0.65 7/20/08 $ 29,832 $ 73,482
225,000(6) 5.3% $ 0.65 9/14/07 $ 69,828 $ 167,250
Jacques Assour.............................. 46,250(4) 1.1% $ 0.65 7/20/08 $ 16,574 $ 40,823
125,000(6) 2.9% $ 0.65 9/14/07 $ 38,793 $ 92,917
Donald R. Peck.............................. 61,000(4) 1.4% $ 0.65 7/20/08 $ 21,860 $ 53,843
15,000(7) 0.4% $ 0.65 4/7/08 $ 5,375 $ 13,240
150,000(8) 3.5% $ 0.65 7/30/07 $ 46,552 $ 111,450
John C. Nugent.............................. 46,250(4) 1.1% $ 0.65 7/20/08 $ 16,574 $ 40,823
125,000(9) 2.9% $ 0.65 1/11/08 $ 38,793 $ 92,917
- ------------------------
(1) The number of options granted in Fiscal 1999 include (i) options to purchase
1,426,850 shares of Common Stock that were granted under the 1994 Plan, (ii)
options to purchase 125,500 shares of Common Stock that were granted to
non-employee directors under the 1994 Plan, (iii) options to
9
purchase 2,846,700 shares of Common Stock under the 1994 Plan that were
repriced in December 1998, and (iv) options to purchase 51,000 shares of
Common Stock that were granted to non-employee directors under the 1994
Formula Plan. In Fiscal 1999, no options to purchase shares of Common Stock
were exercised, and options to purchase 312,950 shares of Common Stock
(excluding options that were repriced in Fiscal 1999) were cancelled under
the 1994 Plan and made available for future grant. No options were
purchased, cancelled or repriced under the 1994 Formula Plan.
(2) Options were granted by the Compensation Committee pursuant to the 1994 Plan
at "fair market value" determined on the date of the grant. Repriced options
were granted at $0.65, the fair market value on the date of repricing.
(3) 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 compound rates of appreciation (5% and 10%) on
the market value of the Company's Common Stock on the date of option grant
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 exercise and Common Stock holdings are dependent on the timing
of the 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.
(4) The option was originally granted on July 21, 1998 at an exercise price of
$1.125 per share and immediately vested and became exercisable. This option
was repriced on December 11, 1998, and the date upon which the option became
exercisable was extended to July 1, 1999.
(5) The option was originally granted on August 19, 1997 at an exercise price of
$1.375 per share and vested in three equal annual installments beginning on
August 19, 1998. This option was repriced on December 11, 1998, and the date
upon which the option became exercisable was extended to the later of July
1, 1999 or its original vesting date.
(6) The option was originally granted on September 15, 1997 at an exercise price
of $2.4375 and vested in three equal annual installments beginning on
September 15, 1998. This option was repriced on December 11, 1998, and the
date upon which the option became exercisable was extended to the later of
July 1, 1999 or its original vesting date.
(7) The option was originally granted on April 8, 1998 at an exercise price of
$1.625 per share and vested in three equal annual installments beginning on
April 8, 1999. This option was repriced on December 11, 1998, and the date
upon which the option became exercisable was extended to the later of July
1, 1999 or its original vesting date.
(8) The option was originally granted on July 31, 1997 at an exercise price of
$2.30 per share and vested in three equal annual installments beginning on
October 1, 1997. This option was repriced on December 11, 1998, and the date
upon which the option became exercisable was extended to the later of July
1, 1999 or its original vesting date.
(9) The option was originally granted on January 12, 1998 at an exercise price
of $1.625 per share and vested in three equal annual installments beginning
on January 12, 1999. This option was repriced on December 11, 1998, and the
date upon which the option became exercisable was extended to the later of
July 1, 1999 or its original vesting date.
10
AGGREGATED OPTIONS EXERCISED IN FISCAL 1999 AND FISCAL YEAR END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS(1)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------------------- ----------------- ------------- ----------------- -------------
L. Michael Hone......................................... 0 $ 0 0/1,267,250 $0/$0
Richard N. Stathes...................................... 0 $ 0 0/308,250 $0/$0
Jacques Assour.......................................... 0 $ 0 0/171,250 $0/$0
Donald R. Peck.......................................... 0 $ 0 0/226,000 $0/$0
John C. Nugent.......................................... 0 $ 0 0/171,250 $0/$0
- ------------------------
(1) In-the-money options are those options for which the fair market value of
the underlying Common Stock is greater than the exercise price of the
option. The market value of the Common Stock as of March 31, 1999 was $.65
per share, based on information reported by certain internet-based bulletin
board services purporting to monitor trading activities. The Company is
unable to verify the accuracy or completeness of such information.
REPRICING OF OPTIONS
The following table sets forth information with respect to the repricing of
options during Fiscal 1999: (a) the name of each Named Executive Officer; (b)
the date of the repricing; (c) the number of securities underlying the repriced
options; (d) the per-share market price of the underlying security at the time
of the repricing; (e) the original exercise price of the canceled option; (f)
the per share exercise price of the replacement option; and (g) the amount of
time remaining before the canceled option would have expired. Although the
Company has previously repriced options prior to fiscal 1999, it has not done so
with respect to any of the Named Executive Officers. In accordance with the
rules of the Securities and Exchange Commission, the following table includes
information only with respect to Named Executive Officers.
11
OPTION REPRICING
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SECURITIES MARKET PRICE EXERCISE TERM
UNDERLYING OF STOCK AT PRICE AT REMAINING
OPTIONS TIME OF TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT(1)
- ------------------------------------ -------- ------------ ---------------- -------------- -------- ------------
L. Michael Hone..................... 12/11/98 342,250 $ 0.65 $ 1.125 $ 0.65 7/20/08
12/11/98 925,000 $ 0.65 $ 1.375 $ 0.65 8/18/07
Richard N. Stathes.................. 12/11/98 83,250 $ 0.65 $ 1.125 $ 0.65 7/20/08
12/11/98 225,000 $ 0.65 $ 2.4375 $ 0.65 9/14/07
Jacques Assour...................... 12/11/98 46,250 $ 0.65 $ 1.125 $ 0.65 7/20/08
12/11/98 125,000 $ 0.65 $ 2.4375 $ 0.65 9/14/07
Donald R. Peck...................... 12/11/98 61,000 $ 0.65 $ 1.125 $ 0.65 7/20/08
12/11/98 15,000 $ 0.65 $ 1.625 $ 0.65 4/7/08
12/11/98 150,000(2) $ 0.65 $ 2.30 $ 0.65 7/30/07
John C. Nugent...................... 12/11/98 46,250 $ 0.65 $ 1.125 $ 0.65 7/20/08
12/11/98 125,000 $ 0.65 $ 1.625 $ 0.65 1/11/08
- ------------------------
(1) The length of the original option term was not changed.
(2) On July 31, 1997, the Company granted Mr. Peck an option to purchase 150,000
shares of Common Stock at an exercise price of $2.30 per share, and Mr. Peck
agreed to terminate an option granted by the Company on September 5, 1996 to
purchase 15,000 shares of Common Stock at an exercise price of $16.8125 per
share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 31, 1999, the number and percentage
ownership of the Common Stock by (i) all persons known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding Common Stock,
(ii) each Named Executive Officer (as defined herein) and Director, and (iii)
all Directors and Named Executive Officers of the Company as a group.
The number of shares beneficially owned by each Director or Named Executive
Officer (as defined herein) is determined under the rules of the Securities and
Exchange Commission (the "Commission"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares that the individual
has the right to acquire on or before July 30, 1999 through the exercise of any
stock option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her spouse) with
respect to the shares
12
set forth in the following table. The inclusion herein of any shares deemed
beneficially owned does not constitute an admission of beneficial ownership of
those shares.
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY OF
BENEFICIAL OWNER(1) OWNED (2) CLASS
- --------------------------------------------------------------------------- ------------ ------------
L. Michael Hone (3)........................................................ 650,586 2.6%
Richard N. Stathes (3)..................................................... 163,288 *
Jacques Assour (3)......................................................... 87,917 *
Donald R. Peck (3)(4)...................................................... 166,555 *
John C. Nugent (3)......................................................... 87,917 *
William J. Shea (3)(5)..................................................... 146,700 *
Eugene M. Bullis (3)(6).................................................... 15,000 *
Jay M. Eastman (3)......................................................... 20,500 *
Steven M. DePerrior(3)..................................................... 15,000 *
David A. Lovenheim (3)..................................................... 15,000 *
John J. Shields (3)........................................................ 157,500 *
All directors and executive officers as a group (11 persons)(7)............ 1,525,960 6.0%
- ------------------------
* Less than 1%.
(1) The address for all of these individuals is Centennial Technologies, Inc., 7
Lopez Road, Wilmington, Massachusetts 01887.
(2) Pursuant to the rules of the Commission, shares of Common Stock that an
individual or group has a right to acquire within 60 days pursuant to the
exercise of options or warrants are deemed to be outstanding for the purpose
of computing the percentage ownership of such individual or group, but are
not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown on the table.
(3) Includes the right to acquire, pursuant to the exercise of stock options,
within 60 days after May 31, 1999, the following number of shares: 650,583
shares for Mr. Hone; 158,250 shares for Mr. Stathes; 87,917 shares for Dr.
Assour; 166,000 shares for Mr. Peck; 87,917 shares for Mr. Nugent; 89,000
shares for Mr. Shea; 15,000 shares for Mr. Bullis; 20,500 shares for Dr.
Eastman; 15,000 shares for Mr. DePerrior; 15,000 share for Mr. Lovenheim;
and 157,500 shares for Mr. Shields.
(4) Includes 555 shares held in trust for the benefit of Mr. Peck's children.
Mr. Peck is neither a trustee nor a beneficiary of such trust, and disclaims
beneficial ownership of such shares.
(5) Includes 25,200 shares held by Mr. Shea's wife, and 500 shares held by Mr.
Shea's son, as to both of which Mr. Shea disclaims beneficial ownership.
(6) Mr. Bullis, the Company's former Interim Chief Financial Officer, became a
Director in September 1998.
(7) Includes the securities identified in notes (2) through (5).
13
PERFORMANCE GRAPH
The following graph and table demonstrate a comparison of cumulative total
returns for (i) the Company's Common Stock, (ii) NASDAQ Market Index, and (iii)
a Peer Group Index based upon the Company's Standard Industry Classification
Number (the "SIC Code Index") for the period from June 30, 1994 through March
31, 1999. The graph assumes an investment of $100 on June 30, 1994.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CENTENNIAL TECHNOLOGIES, INC.
NASDAQ MARKET INDEX AND SIC CODE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ASSUMES $100 INVESTED ON JUNE 30, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MARCH 31, 1999
CENTENNIAL SIC NASDAQ
TECHNOLOGIES, INC. CODE INDEX MARKET INDEX
6/30/94 100.00 100.00 100.00
6/30/95 430.97 177.03 117.28
6/30/96 853.57 260.12 147.64
3/31/97 200.00 212.26 150.77
3/31/98 128.57 337.10 227.84
3/31/99 37.14 614.08 297.75
14
THE STOCK PERFORMANCE SHOWN ON THE GRAPH ABOVE IS NOT NECESSARILY INDICATIVE
OF FUTURE PERFORMANCE. THE COMPANY WILL NOT MAKE OR ENDORSE ANY PREDICTIONS AS
TO FUTURE COMMON STOCK PERFORMANCE.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Company's Executive Compensation programs are administered by the
Compensation Committee. This Compensation Committee, composed of Messrs.
DePerrior and Lovenheim and Dr. Eastman, is responsible for establishing the
policies that govern base salary, short-term incentives, long-term incentives
and perquisites for the Company's senior management team. The Compensation
Committee met on December 10, 1998 to discuss executive compensation issues. The
Compensation Committee's executive compensation philosophy is to provide:
- Competitive base salaries as compared to similarly sized high technology
companies;
- Annual incentive compensation which provides market incentives for the
achievement of above plan performance; and
- Long term incentive compensation that is consistent with industry
practices and balances short-term and long-term decision making.
In setting, reviewing and approving the cash compensation for all executive
officers, the Compensation Committee reviews salaries annually. The Compensation
Committee's policy is to fix base salaries at levels comparable to other
executives in similarly sized companies with comparable experience levels.
Equity compensation in the form of stock options is designed to provide
long-term incentives to executive officers and other Company employees. Stock
options have been granted in order to motivate these Company employees to
maximize stockholder value. Generally, options granted to the Company's
employees expire ten years after the date of grant. In addition, the Company has
a policy of awarding stock options at not less than the fair market value at the
date of grant. As a result of this policy, executives and other Company
employees are rewarded economically through stock options only to the extent
that the Stockholders also benefit through appreciation in the value of the
Common Stock of the Company.
Options granted to Company employees are used to attract qualified personnel
or granted to existing employees based on such factors as individual initiative,
achievement and performance. The Compensation Committee generally reviews the
option holdings of each of the executive officers, including exercise price and
the then current value of unexercised options. The Compensation Committee
considers equity compensation to be an integral part of a competitive executive
compensation package and an important mechanism to align the interests of
management with those of the Company's stockholders.
REPORT ON REPRICING OF OPTIONS
On December 10, 1998, the Compensation Committee approved a repricing of
some options granted to employees, including some of the Company's executive
officers, under the 1994 Plan. Because of a decline in market value of the
Company's Common Stock, some outstanding options were exercisable at prices that
greatly exceeded the market value of the Company's common stock. In view of this
decline and in keeping with the Company's philosophy of using equity incentives
to motivate and retain qualified employees, the Compensation Committee believed
it important to regain the incentive intended to be provided by options to
purchase shares of the Company's Common Stock. The Compensation Committee
believed the repricing was necessary as a result of the intense competition in
the Company's industry for experienced managers, skilled engineers, sales and
marketing personnel, and other employees. Further,
15
equity-based compensation is of particular importance among computer hardware
and software companies, and the Company's failure to provide competitive
equity-based compensation could require the Company to pay significantly higher
cash salaries and bonuses in order to attract and retain qualified personnel.
Because increased cash compensation would negatively impact cash flow and would
likely result in an immediate drop in the value of stockholders' investments,
the Compensation Committee believed that repricing outstanding options and
regaining the incentive intended to be provided by the options would be in the
best interests of the Company and its stockholders.
The exercise price of the repriced options equaled the then-current fair
market value of the Common Stock. In exchange for the repricing, the
exercisability of any portion of a repriced option (including any then-vested
portion) was delayed until the later of July 1, 1999 or the date upon which such
options were originally scheduled to become vested. Accordingly, optionees were
prohibited from exercising the repriced options for at least six months. Except
as otherwise noted, vesting schedules of the repriced options remained the same
as those of the original options.
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for compensation over $1.0 million
paid to the chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. In this regard,
the Company has limited the number of shares subject to stock options which may
be granted to Company employees in a manner that complies with the
performance-based requirements of Section 162(m). While the Compensation
Committee does not currently intend to qualify its other compensatory awards as
performance-based compensation, it will continue to monitor the impact of
Section 162(m) on the Company.
BY THE COMPENSATION COMMITTEE MEMBERS
Steven M. DePerrior, Chairman
Jay M. Eastman, Ph.D.
David A. Lovenheim
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
DePerrior and Lovenheim and Dr. Eastman. No executive officer of the Company has
served as a director or member of the compensation committee (or other committee
serving an equivalent function) of any other entity, one of whose executive
officers served as a director of or member of the Company's Compensation
Committee.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
On August 19, 1997, the Company entered into an employment agreement with L.
Michael Hone, the Company's President and Chief Executive Officer (the "Hone
Agreement"), as well as a non-competition and non-solicitation agreement, and an
invention and non-disclosure agreement. The Hone Agreement provides for: (i) a
salary of $50,000 per annum; (ii) a guaranteed bonus for the first twelve months
following execution of the Hone Agreement of $100,000; (iii) a signing bonus of
$175,000 payable in the amounts of $75,000 on January 1, 1998 and $100,000 on
April 28, 1998; and (iv) a retention bonus of
16
$450,000 payable on May 15, 2000. The Hone Agreement also provides for: (i) the
awarding of an option to purchase 925,000 shares of Common Stock at $1.375 per
share, which vests over the first, second and third anniversaries of employment
with the Company; (ii) reimbursement of relocation expenses; (iii) a monthly
stipend of $1,000 for expenses associated with his position; (iv) a loan of up
to $25,000 if Mr. Hone should sell his home in Rochester, New York at a loss as
a result of his relocation to Massachusetts; and (v) all benefits offered to the
Company's executive officers generally. If Mr. Hone were discharged without
cause, he would be entitled to his annual salary and monthly stipend for a
period of twelve months, as well as a pro-rata portion of his retention bonus.
The Company has also entered into employment agreements with Donald R. Peck,
the Company's Secretary, Treasurer and General Counsel and Richard N. Stathes,
the Company's Senior Vice President of Sales and Marketing, under which if the
Company terminates either officer without cause, the Company will be obligated
to pay that officer a severance amount equal to such officer's salary for six
(6) months or three (3) months, respectively, and provide him with all of the
health and insurance benefits to which he was entitled at the time of his
termination for that period.
The Company entered into an employment agreement, effective as of April 1,
1998, with Jacques Assour, Ph.D., the Company's Senior Vice President of
Operations (the "Assour Agreement"). The Assour Agreement provides for: (i) a
salary of $160,000 per annum; (ii) a housing allowance of $1,000 per month; and
(iii) all benefits offered to other executive officers of the Company generally.
If Dr. Assour is terminated without cause, as defined in the Assour Agreement,
the Company will be obligated to pay him a severance amount equal to his salary
for six (6) months, and provide him with all of the health and insurance
benefits to which he was entitled at the time of his termination for a period of
six (6) months.
The Company entered into an employment agreement, effective as of January
12, 1998, with John C. Nugent, Managing Director of Centennial Technologies
International Limited (the "Nugent Agreement"). The Nugent Agreement provides
for: (i) a salary of L90,000 per annum; (ii) a bonus of L30,000; (iii) the
awarding of an option to purchase 125,000 shares of Common Stock at $1.625 per
share, which vests over the first, second and third anniversaries of employment
with the Company; (iv) use of a Company leased automobile, and (v) all benefits
offered to other executive officers of the Company generally.
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with its executive
officers, including each of the Named Executive Officers. The agreements
continue through March 31, 2001, and provide that they are to be automatically
extended in one-year increments unless the Company gives prior notice of
termination. The severance agreements are intended to reinforce and encourage
the continued employment and dedication of the Company's key personnel without
distraction from the possibility of a change in control of the Company and
related events and circumstances. The agreements provide that covered executive
officers could be entitled to certain severance benefits following a change in
control of the Company. If, following such a change in control, the executive
officer is terminated for any reason, other than for disability or for cause, or
if such executive officer terminates his or her employment for good reason (as
defined in the agreements), then the executive officer is entitled to a
severance payment that will be equal to the sum of the executive officer's
highest annual base salary and highest annual bonus from the Company during the
five-year period prior to the change in control, multiplied by a factor of 2.5
(3.0 in the case of Mr. Hone). The severance payments generally would be made in
the form of a lump sum. In the event that any severance payments made in
connection with a change in control would be subjected to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended, the Company
17
would be required to "gross up" the executive officer's compensation for such
excise tax and all federal, state and local income and excise taxes on such
gross-up payment. Under the severance agreements, a change in control would
occur if and when: (i) any "person," as defined in the Exchange Act, acquires 30
percent or more of the Company's Common Stock; (ii) a majority of the Company's
Directors are replaced, or (iii) shareholders approve certain mergers, or a
liquidation or sale of the Company's assets.
Pursuant to the terms of stock option awards to these executive officers,
upon a change in control (as defined therein), all unvested options granted to
such executive officers would vest and become exercisable for the remainder of
the term of the option.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Since April 1, 1998, the Company has engaged in the following transactions
with its directors, executive officers and 5% stockholders, and their
affiliates.
TRANSACTIONS WITH EUGENE M. BULLIS
The Company contracted with Eugene M. Bullis, the Company's former Interim
Chief Financial Officer, for financial consulting services during Fiscal 1999.
In September 1998, Mr. Bullis was elected a Director. During Fiscal 1999, the
Company paid Mr. Bullis $33,000 for services provided pursuant to this
consulting arrangement. This consulting arrangement was terminated in February
1999.
18
PROPOSAL NO. 2
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT ONE-FOR-EIGHT REVERSE STOCK SPLIT
The Board of Directors has adopted a resolution declaring the advisability
of, and submitting to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation to effect a reverse split of the
Company's Common Stock, pursuant to which each eight shares of Common Stock will
be automatically converted into one share of Common Stock without any further
action on the part of the stockholder (the "Reverse Split"). The text of the
proposed amendment is set forth in EXHIBIT A to this Proxy Statement.
Consummation of the Reverse Split will not change the number of shares of
Common Stock authorized by the Company's Certificate of Incorporation, which
will remain at 50,000,000 shares, or the par value per share of the Common
Stock. The Reverse Split will become effective as of the close of business on
the date that the Certificate of Amendment to the Company's Certificate of
Incorporation is filed (the "Effective Date") with the Secretary of State of
Delaware. If for any reason the Board of Directors deems it advisable, the
proposed amendment may be abandoned at any time before the Effective Date,
whether before or after the Annual Meeting (even if such proposal has been
approved by the stockholders).
Stockholders will be entitled to receive, in lieu of any fractional share
arising as a result of the Reverse Split, cash in the amount of the relevant
portion of the fair market value of one share of Common Stock on the Effective
Date, as determined by the Board of Directors of the Company.
As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates which represent shares of Common Stock outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
such certificate or certificates to the Company's designated exchange agent in
exchange for certificates representing the number of whole shares of Common
Stock into which their shares of Common Stock have been converted as a result of
the Reverse Split (plus the payment of the relevant portion of the fair market
value of any fractional shares resulting from the Reverse Split, if any). No
cash payment will be made or new certificate issued to a stockholder until he or
she has surrendered his or her outstanding certificates together with the letter
of transmittal to the Company's exchange agent. See "--Exchange of Stock
Certificates."
PURPOSE OF THE REVERSE SPLIT
The Company's shares of Common Stock were listed and traded on the American
Stock Exchange beginning on April 12, 1994. The Company's shares of Common Stock
commenced trading on the New York Stock Exchange ("NYSE") on November 25, 1996.
Due to noncompliance by the Company with the continued listing requirements of
the NYSE, the Company's Common Stock was delisted from the NYSE on April 25,
1997. The Company's Common Stock is not currently listed on any organized stock
exchange.
The Board of Directors recommends the Reverse Split be effectuated to
enhance the prospects of the Company's Common Stock being listed for trading on
an organized exchange.
The rules of the Nasdaq National Market require that as a condition of the
initial listing of a company's securities on the Nasdaq National Market, a
company satisfy several requirements, which
19
generally include certain minimum criteria relating to its financial condition,
results of operations and trading market for its listed securities. Under one
such listing requirement, the minimum bid price of the Company's shares of
Common Stock must equal or exceed $5.00, among other criteria. The closing price
of the Company's Common Stock on May , 1999 was $ per share.
The Company believes that if the Reverse Split is approved by the
stockholders at the Annual Meeting, and the Reverse Split is effectuated, the
trading price of the Company's Common Stock will exceed $5.00 per share, and
therefore the Company will meet the requirement as to minimum bid prices for
listing on the Nasdaq National Market. There can be no assurance, however, that
the Company's shares of Common Stock will trade in excess of any specific price,
the Company will meet any other listing criteria or be approved for listing on
the Nasdaq National Market or that, if the Company is approved for listing, that
the Company will be successful in meeting the maintenance criteria necessary for
continued listing.
The Company believes that if the Reverse Split is not approved by the
stockholders at the Annual Meeting, it is highly likely that the Company's
Common Stock will not be eligible to be listed and traded on the Nasdaq National
Market or another recognized exchange for some period of time, which could
adversely affect the liquidity of the Company's Common Stock and the ability of
the Company to raise capital. If not approved for listing on the Nasdaq National
Market or another recognized exchange, the shares of Common Stock will likely
continue to be quoted on the OTC Electronic Bulletin Board, and stockholders may
continue to experience a greater degree of difficulty in engaging in trades of
shares of Common Stock.
In addition, the Board of Directors further believes that low trading prices
of the Company's Common Stock may have an adverse impact upon the efficient
operation of the trading market in such securities. In particular, brokerage
firms often charge a greater percentage commission on transactions involving
low-priced shares than on transactions involving higher-priced shares, even when
the aggregate dollar amount of securities is the same. In addition, a number of
brokerage firms will not recommend purchases of low-priced stock to their
clients or make a market in such shares, which tendencies may adversely affect
the Company.
Stockholders should note that the effect of the Reverse Split upon the
market prices for the Company's Common Stock cannot be accurately predicted. In
particular, there is no assurance that prices for shares of the Common Stock
after the Reverse Split will be eight times the prices for shares of the Common
Stock immediately prior to the Reverse Split. Furthermore, there can be no
assurance that the proposed Reverse Split will achieve the desired results which
have been outlined above, nor can there be any assurance that the Reverse Split
will not adversely impact the market price of the Common Stock or,
alternatively, that any increased price per share of the Common Stock
immediately after the proposed Reverse Split will be sustained for any prolonged
period of time. In addition, the Reverse Split may have the effect of creating
odd lots of stock for some stockholders and such odd lots may be more difficult
to sell or have higher brokerage commissions associated with their sale.
EFFECT OF THE REVERSE SPLIT
As a result of the Reverse Split, the number of whole shares of Common Stock
held by stockholders of record as of the close of business on the Effective Date
will automatically, without any further action required by the stockholders, be
equal to the number of shares of Common Stock held immediately prior to the
close of business on the Effective Date divided by eight, less the total of any
fractional shares. The Reverse Split will not affect a stockholder's percentage
ownership interest in the Company or proportional
20
voting power, except for minor differences resulting from the payment of cash in
lieu of fractional shares. The rights and privileges of the holders of shares of
Common Stock will be unaffected by the Reverse Split, except that holders of
fewer than eight shares will cease to be stockholders of the Company's Common
Stock and will receive cash in lieu of the resulting fractional share after the
Reverse Split. The par value of the Common Stock will remain at $.01 per share
following the Effective Date of the Reverse Split, and the number of shares of
Common Stock issued will be reduced. Consequently, the aggregate par value of
the issued Common Stock also will be reduced. Although the reverse stock split
will have no direct effect on earnings, earnings per share based on any given
level of earnings will increase, as there will be fewer outstanding shares.
Because the number of shares of Common Stock authorized for issuance in the
Company's Certificate of Incorporation will not be reduced, the net effect of
the Reverse Split will be an increase in the number of authorized but unissued
shares of Common Stock that may be approved for issuance by the Board of
Directors. The issuance of such shares may have the effect of diluting the
earnings per share and book value per share, as well as the stock ownership and
voting rights, of outstanding shares of Common Stock. As the Reverse Split will
increase the number of authorized but unissued shares of Common Stock, it may be
construed as having an anti-takeover effect by permitting the issuance of shares
to purchasers who might oppose a hostile takeover bid or oppose any efforts to
amend or repeal certain provisions of the Company's Certificate of Incorporation
or Bylaws.
Stockholders will not have the right under Delaware law or under the
Company's Certificate of Incorporation or Bylaws to dissent and seek appraisal
rights with respect to their shares of the Company's Common Stock as a result of
the Reverse Split.
The Common Stock is currently registered under Section 12(g) of the Exchange
Act and as a result, the Company is subject to the periodic reporting and other
requirements of the Exchange Act. The Reverse Split will not affect the
registration of the Common Stock under the Exchange Act, and the Company has no
current intention of terminating its registration under the Exchange Act.
Upon consummation of the Reverse Split, the total number of shares currently
reserved for grants of stock options and all stock options previously granted
would be decreased proportionately. The cash consideration payable per share
upon exercise of outstanding stock options would be increased proportionately.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates ("Old Certificates")
for new certificates ("New Certificates") representing the number of whole
shares of Common Stock into which their shares of Common Stock have been
converted as a result of the Reverse Split (as well as cash in lieu of any
fractional share resulting from the Reverse Split). The Company's transfer agent
will furnish stockholders with the necessary materials and instructions for the
surrender and exchange of stock certificates at the appropriate time.
Stockholders will not be required to pay a transfer or other fee in connection
with the exchange of certificates. STOCKHOLDERS SHOULD NOT SUBMIT ANY
CERTIFICATES TO THE TRANSFER AGENT UNTIL REQUESTED TO DO SO.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following description of the material federal income tax consequences of
the Reverse Split is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), the applicable Treasury Regulations promulgated thereunder,
judicial authority and current administrative rulings and practices all
21
as in effect on the date of this Proxy Statement. The Company has not sought and
will not seek an opinion of counsel or a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the Reverse Split. This
discussion is for general information only, does not discuss consequences which
may apply to special classes of taxpayers, such as non-resident aliens,
broker-dealers or insurance companies, and does not discuss the tax consequences
under the laws of any foreign, state or local jurisdictions. Stockholders are
urged to consult their own tax advisors to determine the particular tax
consequences that may be applicable to them as a result of the Reverse Split.
In general, the federal income tax consequences of the proposed Reverse
Split will vary among stockholders depending upon whether they receive cash in
lieu of any fractional share resulting from the Reverse Split or solely New
Certificates in exchange for Old Certificates. The Company believes that because
the Reverse Split is not part of a plan to increase a stockholder's
proportionate interest in the Company's assets or earnings and profits, the
Reverse Split probably will have the following federal income tax effects:
A stockholder who receives New Certificates but not any cash in lieu of a
fractional share will not recognize gain or loss on the exchange. In the
aggregate, the stockholder's basis in the Common Stock represented by New
Certificates will equal such holder's basis in the Common Stock represented by
Old Certificates.
A stockholder who receives cash in lieu of any fractional share resulting
from the Reverse Split will generally be treated as having received the payment
as a distribution in redemption of the fractional share, as provided in Section
302(a) of the Code. Each affected stockholder should consult their own tax
advisor for the tax effect of such redemption (i.e., exchange or dividend
treatment) in light of such stockholder's particular facts and circumstances.
The Reverse Split will constitute a reorganization within the meaning of
Section 368(a)(1)(E) of the Code, and the Company will not recognize any gain or
loss as a result of the Reverse Split.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT OF THE
CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND THEREFORE RECOMMENDS A VOTE
"FOR" THIS PROPOSAL.
PROPOSAL NO. 3
PROPOSAL TO APPROVE 1999 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN UNDER
WHICH 500,000 SHARES OF COMMON STOCK HAVE BEEN RESERVED FOR ISSUANCE
The Board of Directors believes it is in the best interests of the Company
to encourage stock ownership by employees of the Company. Accordingly, as of May
5, 1999, the Board of Directors adopted, subject to stockholder approval, the
Company's 1999 Qualified Employee Stock Purchase Plan (the "Purchase Plan")
covering 500,000 shares of the Company's Common Stock (subject to adjustment for
any dividend, stock split or other relevant changes in the Company's
capitalization, including the Reverse Split, if approved by the Company's
stockholders). The effectiveness of the Purchase Plan is dependent on
stockholder approval. The following summary of the Purchase Plan is qualified by
reference to the text of the Purchase Plan, a copy of which is attached to this
Proxy Statement as EXHIBIT B and incorporated herein by reference. All
capitalized or quoted terms have the meanings set forth in the Purchase Plan.
22
ELIGIBILITY
With certain limited exceptions in the case of employees already holding a
significant amount of Common Stock, each employee of the Company (including
Directors who are employees) as of the date an offering commences and who
ordinarily works 20 or more hours per week and more than five months per year is
eligible to participate in the Purchase Plan.
ADMINISTRATION
The Compensation Committee of the Board of Directors will administer the
Purchase Plan. The Compensation Committee is authorized to make rules and
regulations for the administration and interpretation of the Purchase Plan, to
interpret the Plan and supervise its administration, to make determinations
about Purchase Plan entitlements, and to take other actions consistent with the
delegation from the Board.
Because option grants under the Purchase Plan will be at the election of
each officer or employee, the benefits to be received by any particular current
executive officer, by all current executive officers as a group, or by
non-executive officer employees as a group cannot be determined by the Company
at this time. Directors who are neither officers nor employees of the Company
are not eligible to participate in the Purchase Plan.
PARTICIPATION
Employees will enroll in the Purchase Plan by completing a payroll deduction
form. The maximum payroll deduction allowed is generally 10% of an Employee's
pay. Pay is an Employee's base cash pay, with any modifications determined by
the Compensation Committee. No Employee is allowed to buy more than $25,000 of
Common Stock in any year, based upon the fair market value of the stock at the
beginning of the purchase period in which the shares are purchased. An Employee
may discontinue participation in the Purchase Plan at any time. An Employee's
eligibility to participate in the Purchase Plan ends at termination of
employment.
OFFERING
The Purchase Plan will be implemented by establishing purchase periods that
will generally coincide with the Company's fiscal quarters. If the Company's
stockholders approve the Purchase Plan, the first purchase period will commence
on October 4, 1999.
PURCHASE PRICE
Employees who choose to participate in the Purchase Plan will receive an
option to acquire Common Stock at a discount. Under the option, the purchase
price of Common Stock will be the lower of (i) 85% of the fair market value of
the Common Stock on the first day of a purchase period, or (ii) 85% of the fair
market value of the Common Stock on the last day of the purchase period. The
fair market value will be the closing price on the Over the Counter Electronic
Bulletin Board or other exchange on which the Company's Common Stock is traded.
23
PURCHASE OF STOCK
At the end of a purchase period, a participant's option will be exercised
automatically to purchase the number of shares of Common Stock that the
employee's accumulated payroll deductions will buy at the purchase price,
subject to limitations.
RECAPITALIZATION
In the event any change is made in the Company's capitalization, such as a
stock split, reverse stock split (including the Reverse Split) or stock
dividend, which results in an increase or decrease in the number of outstanding
shares of Common Stock without the Company's receipt of consideration,
appropriate adjustments will be made to the shares available in the Purchase
Plan, the maximum number of shares and the price of the option.
TRANSFERABILITY
Options under the Purchase Plan cannot be voluntarily or involuntarily
assigned. The shares of Common Stock acquired under the Purchase Plan will be
freely transferable, except as otherwise determined by the Compensation
Committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Purchase Plan from time to time, except
that no amendment may, without the approval of shareholders: (i) increase the
number of shares authorized under the Purchase Plan, or (ii) materially modify
the eligibility requirements for participation in the Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
Purchase Plan and with respect to the sale of Common Stock acquired under the
Purchase Plan. The Purchase Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Code.
TAX CONSEQUENCES TO PARTICIPANTS. In general, a participant will not
recognize taxable income upon enrolling in the Purchase Plan or upon purchasing
shares of Common Stock at the end of an offering. Instead, if a participant
sells Common Stock acquired under the Purchase Plan at a sale price that exceeds
the price at which the participant purchased the Common Stock, then the
participant will recognize taxable income in an amount equal to the excess of
the sale price of the Common Stock over the price at which the participant
purchased the Common Stock. A portion of that taxable income will be ordinary
income, and a portion may be capital gain.
If the participant sells the Common Stock more than one year after acquiring
it and more than two years after the date on which the offering commenced (the
"Grant Date"), then the participant will be taxed as follows. If the sale price
of the Common Stock is higher than the price at which the participant purchased
the Common Stock, then the participant will recognize ordinary compensation
income in an amount equal to the lesser of:
(i) fifteen percent of the fair market value of the Common Stock on the
Grant Date; and
24
(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value of
the Common Stock on the date that it was purchased, or capital loss in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the sale price of the Common Stock. This capital gain
or loss will be a long-term capital gain or loss if the participant has held the
Common Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss if the participant has held the Common Stock for
a shorter period.
TAX CONSEQUENCES TO THE COMPANY. The offering of Common Stock under the
Purchase Plan will have no tax consequences to the Company. Moreover, in
general, neither the purchase nor the sale of Common Stock acquired under the
Purchase Plan will have any tax consequences to the Company except that the
Company will be entitled to a business-expense deduction with respect to any
ordinary compensation income recognized by a participant upon making a
Disqualifying Disposition. Any such deduction will be subject to the limitations
of Section 162(m) of the Code.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS BELIEVES THE PURCHASE PLAN IS IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND THEREFORE RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
PROPOSAL NO. 4
PROPOSAL TO RATIFY AND CONFIRM THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE
FISCAL YEAR ENDING MARCH 31, 2000
The Board of Directors of the Company, upon the recommendation of its Audit
Committee, has appointed Ernst & Young LLP ("Ernst & Young") as independent
accountants to examine the Company's consolidated financial statements for the
fiscal year ending March 31, 2000 and to render other professional services as
required.
The appointment of Ernst & Young is being submitted to stockholders for
ratification. Ernst & Young has served as the Company's independent accountants
since July 1998. PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.,
which became PricewaterhouseCoopers LLP ("PwC") on July 1, 1998) served as the
Company's independent accountants from 1994 through fiscal 1998.
In June 1998, the Company requested proposals from several independent
accounting firms to provide auditing and tax services for the Company. On July
6, 1998, the Company's former independent accountants, PwC, advised the Company
that they did not intend to submit a proposal. On July 7, 1998, the
25
Company selected Ernst & Young and engaged them as independent auditors. The
selection of accountants was made by the Audit Committee of the Board of
Directors of the Company. None of the reports of PwC on the financial statements
of the Company for either of the past two fiscal years contained an adverse
opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles, except for the report on the
financial statements for the nine month period ended March 31, 1997, which noted
that significant and recurring losses from operations, accumulated deficit and
the absence of a final shareholder settlement raised substantial doubt about the
Company's ability to continue as a going concern.
In connection with its audit for Fiscal 1998 and through July 6, 1998, there
were no disagreements with PwC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement if not resolved to the satisfaction of PwC would have caused them
to make reference thereto in their report on the financial statements for such
years, except as set forth in the following paragraphs.
On January 29, 1997, prior to the Company's announcement of its results for
the quarter ended December 31, 1996, PwC met with management and raised
questions regarding the treatment of certain accounting transactions which were
included in the Company's results. Management agreed to communicate with the
Audit Committee and then with PwC prior to announcing earnings. On January 30,
1997, the Company announced the quarter's earnings, which included the
questioned amounts without informing PwC. As a result of the announcement, PwC
requested a meeting with the Audit Committee to discuss the disagreements. PwC
informed the Audit Committee that they would need to perform extensive
procedures to obtain sufficient information to address the issues raised in the
disagreements, and that, if the Company was not willing to authorize such
procedures, PwC would be required to contact the Securities and Exchange
Commission and inform them of the potential misstatement of results. The Audit
Committee directed PwC to expand its procedures, which PwC began immediately.
On February 10, 1997, the Company's Board of Directors reviewed information
that raised significant questions as to whether previously reported financial
results contained material misstatements. A special committee consisting of
independent members of the Company's Board of Directors, with the assistance of
outside counsel and PwC, conducted an investigation regarding the financial
statements and business affairs of the Company. The results of the
investigation, which included significant restatements of financial statements
for the Fiscal 1994 through Fiscal 1996 and interim periods during Fiscal 1997,
are more fully described in the Company's Form 10-K/A filed in April 1998.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
At the time this proxy statement was printed, the Company's management was
unaware of any proposals to be presented for consideration at the Annual Meeting
other than those set forth herein. If other matters are properly presented at
the Annual Meeting, it is the intention of the persons named in the proxy to
vote the shares represented by such proxy according to their best judgment.
26
SOLICITATION OF PROXIES
The solicitation of proxies is made by the Company, and the cost of
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by mail, officers and employees of the Company, without
additional remuneration, may solicit proxies in person or by telephone, and the
Company reserves the right to retain outside agencies for the purpose of
soliciting proxies. The Company has retained Regan & Associates to assist in the
solicitation of proxies for this year's Annual Meeting, at a cost to the Company
of $8,000 plus reimbursement of reasonable expenses. The Company may reimburse
brokers or persons holding stock in their names, or in the names of their
nominees, for their expenses in sending proxies and proxy material to beneficial
owners.
REVOCATION OF PROXIES
Subject to the terms and conditions set forth herein, all proxies received
by the Company will be effective, notwithstanding the transfer of the shares to
which such proxies relate, unless prior to the Annual Meeting the Company
receives written notice of revocation signed by the person who, as of the record
date, was the registered holder of such shares. Such notice of revocation must
indicate the certificate number or numbers of the shares to which such
revocation relates and the aggregate number of shares represented by such
certificate(s).
STOCKHOLDER PROPOSALS
A proposal by a stockholder for inclusion in the Company's proxy statement
and form of proxy for the 2000 annual meeting of stockholders must be received
by the Company at 7 Lopez Road, Wilmington, Massachusetts 01887, Attention:
Donald R. Peck, Secretary, Treasurer and General Counsel of the Company, on or
before February 5, 2000 in order to be eligible for inclusion. If a stockholder
wishes to present a proposal before the annual meeting in 2000 but has not
complied with the requirements for inclusion of the proposal in the Company's
proxy statement pursuant to Rule 14a-8 under the Exchange Act, the stockholder
must give notice to the Company's secretary at the foregoing address no earlier
than April 21, 2000 nor later than May 11, 2000.
ANNUAL REPORTS
The Company is providing to each stockholder, without charge, a copy of the
Company's annual report, including the financial statements and related
schedules for Fiscal 1999.
By Order of the Board of Directors,
Donald R. Peck
SECRETARY, TREASURER AND GENERAL
COUNSEL
Wilmington, Massachusetts
June 4, 1999
THE MANAGEMENT HOPES THAT THE STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT THEIR PROXIES.
27
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CENTENNIAL TECHNOLOGIES, INC.
Pursuant to Section 242 of the
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
CENTENNIAL TECHNOLOGIES, INC., (hereinafter called the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation on May 5, 1999,
the Board of Directors duly adopted resolutions, pursuant to Section 242 of the
General Corporation Law of the State of Delaware ("DGCL"), setting forth an
amendment to the Certificate of Incorporation of the Corporation and declaring
said amendment to be advisable. The stockholders of the Corporation duly
approved, pursuant to Section 242 of the DGCL, said proposed amendment at the
Annual Meeting of Stockholders held on July 20, 1999. The resolutions setting
forth the amendment are as follows:
RESOLVED: That the first paragraph of Article 4. of the Certificate of
Incorporation of the Corporation, as amended, be and hereby is
deleted in its entirety and the following paragraphs are
inserted in lieu thereof:
"4. That upon the filing date of this Certificate of Amendment
of this Certificate of Incorporation (the "Effective Date"), a
one-for-eight reverse stock split of the Corporation's Common
Stock shall become effective, pursuant to which each eight
shares of Common Stock outstanding and held of record by each
stockholder of the Corporation (including treasury shares)
immediately prior to the Effective Date shall be reclassified
and combined into one share of Common Stock automatically and
without any action by the holder thereof upon the Effective
Date and shall represent one share of Common Stock from and
after the Effective Date. No fractional shares of Common Stock
shall be issued as a result of such reclassification and
combination. In lieu of any fractional shares to which the
stockholder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then fair
market value of the Common Stock as determined by the Board of
Directors of the Corporation.
The total number of shares of all classes of stock which
the Corporation shall have the authority to issue is fifty-one
million (51,000,000) shares, fifty million (50,000,000) shares
of which shall be Common Stock, of the par value of $.01 per
share, and one million (1,000,000) shares of Preferred Stock,
of the par value of $.01 per share, amounting in the aggregate
to Five Hundred Ten Thousand ($510,000.00).
28
Additional designations and powers, preferences and rights
and qualifications, limitations or restrictions of the shares
of stock shall be determined by the Board of Directors of the
Corporation from time to time."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment
to be signed by its President this day of , 1999.
CENTENNIAL TECHNOLOGIES, INC.
By:
--------------------------------------
L. Michael Hone
29
EXHIBIT B
CENTENNIAL TECHNOLOGIES, INC.
1999 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
MAY 5, 1999
The purpose of this Plan is to provide eligible employees of Centennial
Technologies, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"), commencing on September 27, 1999. Five Hundred Thousand
(500,000) shares of Common Stock in the aggregate have been approved for this
purpose. This Plan is intended to qualify as an "employee stock purchase plan"
as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder, and shall be interpreted
consistent therewith.
1. ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. ELIGIBILITY. All employees of the Company, including Directors who are
employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three (3) full months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on the
first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee, immediately
after the option is granted, owns 5% or more of the total combined voting power
or value of the stock of the Company or any subsidiary. For purposes of the
preceding sentence, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of an employee, and all stock which the
employee has a contractual right to purchase shall be treated as stock owned by
the employee.
3. OFFERINGS. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan. The first Offering shall commence
on October 4, 1999. Subsequent Offerings will begin on the beginning of each
fiscal quarter of the Company or the first business day thereafter if such day
is not a business day (together with the October 4, 1999 Offering commencement
date, the "Offering Commencement Dates"). The Company's fiscal year begins April
1 and each fiscal quarter ends on the Saturday of the thirteenth week following
the beginning of the quarter except for the fourth quarter, which ends on March
31. Each Offering Commencement Date will begin a fiscal quarter period (a "Plan
Period") during which payroll deductions will be made and held for the purchase
of Common Stock at the end of
30
the Plan Period. The Board or the Committee may, at its discretion, choose a
different Plan Period of twelve (12) months or less for subsequent Offerings.
4. PARTICIPATION. An employee eligible on the Offering Commencement Date
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least seven (7) days prior to the applicable Offering Commencement
Date. The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the
employee's Federal Income Tax Withholding Statement, excluding overtime, shift
premium, incentive or bonus awards, allowances and reimbursements for expenses
such as relocation allowances for travel expenses, income or gains on the
exercise of Company stock options or stock appreciation rights, and similar
items, whether or not shown on the employee's Federal Income Tax Withholding
Statement, but including, in the case of salespersons, sales commissions to the
extent determined by the Board or the Committee to be part of such salesperson's
regular compensation.
5. DEDUCTIONS. The Company will maintain payroll deduction accounts for
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 15% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made. Any change in
compensation during the Plan Period will result in an automatic corresponding
change in the dollar amount withheld. The minimum payroll deduction is such
percentage of compensation as may be established from time to time by the Board
or the Committee.
No employee may be granted an Option (as defined in Section 9) which permits
his rights to purchase Common Stock under this Plan and any other employee stock
purchase plan (as defined in Section 423(b) of the Code) of the Company and its
subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such Common Stock (determined at the Offering Commencement Date of the Plan
Period) for each calendar year in which the Option is outstanding at any time.
6. DEDUCTION CHANGES. An employee may decrease or discontinue his payroll
deduction once during any Plan Period by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. INTEREST. Interest will not be paid on any employee accounts, except to
the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. WITHDRAWAL OF FUNDS. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
31
9. PURCHASE OF SHARES. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by multiplying $2,083 by the
number of full months in the Offering Period and dividing the result by the
closing price (as defined below) on the Offering Commencement Date of such Plan
Period.
The purchase price for each share purchased will be 85% of the closing price
of the Common Stock on the Exercise Date. Such closing price shall be (a) the
closing price on any national securities exchange on which the Common Stock is
listed, (b) the closing price of the Common Stock on the Nasdaq National Market
or (c) the average of the closing bid and asked prices in the
over-the-counter-market, whichever is applicable, as published in THE WALL
STREET JOURNAL or, in the case of (c), an internet-based bulletin board service.
If no sales of Common Stock were made on such a day, the price of the Common
Stock for purposes of clauses (a) and (b) above shall be the reported price for
the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for, but not in excess of the maximum
number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee (less amounts owed by the employee to the Company) or, in
the event of the employee's death, (a) to a beneficiary previously designated in
a revocable notice signed by the employee (with any spousal consent required
under state law) or (b) in the absence of such a designated beneficiary, to the
executor or administrator of the employee's estate or (c) if no such executor or
administrator has been appointed to the knowledge of the Company, to such other
person(s) as the Company may, in its discretion, designate. If, prior to the
last business day of the Plan Period, the Designated Subsidiary by which an
employee is employed shall cease to be a subsidiary of the Company, or if the
employee is transferred to a subsidiary of the Company that is not a Designated
Subsidiary, the employee shall be deemed to have terminated employment for the
purposes of this Plan.
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12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
including but not limited to a reverse stock split, such adjustment shall be
made as may be deemed equitable by the Board or the Committee to give proper
effect to such event.
16. MERGER. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and
33
(b) in no event may any amendment be made which would cause the Plan to fail to
comply with Section 423 of the Code.
18. INSUFFICIENT SHARES. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market (to the extent the Common Stock is
then so listed or quoted) and the approval of all governmental authorities
required in connection with the authorization, issuance or sale of such stock.
21. GOVERNING LAW. The Plan shall be governed by Delaware law except to
the extent that such law is preempted by federal law.
22. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. EFFECTIVE DATE AND APPROVAL OF SHAREHOLDERS. The Plan shall take
effect on October 4, 1999 subject to approval by the shareholders of the Company
as required by Section 423 of the Code, which approval must occur within twelve
months of the adoption of the Plan by the Board.
Adopted by the Board of Directors
on May 5, 1999
Approved by the stockholders on
, 1999
34
PROXY PROXY
CENTENNIAL TECHNOLOGIES, INC.
ANNUAL MEETING OF SHAREHOLDERS --JULY 20, 1999
The undersigned hereby appoints L. Michael Hone and Donald R. Peck, and
each of them with full power to appoint his substitute, attorneys and proxies to
represent the shareholder and to vote and act with respect to all shares that
the shareholder would be entitled to vote on all matters which come before the
annual meeting of shareholders of Centennial Technologies, Inc.(the "Company")
referred to above and at any adjournment of that meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATIONS ARE MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS ON THIS PROXY.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE
PROXY HOLDERS ON ANY OTHER MATTER, INCLUDING SUBSTITUTION OF DIRECTOR NOMINEES,
WHICH MAY COME BEFORE THE MEETING.
1. ELECTION OF DIRECTORS / / FOR / / WITHHELD
NOMINEES: Eugene M. Bullis, Steven M. DePerrior, Jay M.
Eastman, Ph.D., L. Michael Hone, David A. Lovenheim,
William J. Shea and John J. Shields
To withhold authority to vote for any individual nominee(s) write his
or her names in the following space
----------------------------------------------------------------------
2. To approve an amendment to the Company's Certificate of Incorporation
to effect a reverse split of the Company's Common Stock, $.01 par value
per share ("Common Stock"), pursuant to which each eight shares of
Common Stock then outstanding will be converted into one share of
Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed on reverse side.)
PLEASE SIGN AND RETURN IMMEDIATELY
3. To approve the adoption of the 1999 Qualified Employee Stock Purchase
Plan which provides for the issuance of up to 500,000 shares of the
Company's Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
4. To ratify the appointment of Ernst & Young L.L.P. as the independent
accountants for the Company for the fiscal year ending March 31, 2000.
/ / FOR / / AGAINST / / ABSTAIN
Signature(s)
------------------------------------
NOTE: 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
the person named on the stock
certificate has died, please submit
evidence of your authority. If a
corporation, please sign in full
corporate name by the President or
authorized officer and indicate the
signer's office. If a partnership,
please sign in partnership name by
authorized person.