SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for the Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss. 240.14a-12
ACCENT COLOR SCIENCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
/X/ No fee required
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which
transaction applies:___________________________________________________
2. Aggregate number of securities to which
transaction applies:___________________________________________________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________________________________________________________
4. Proposed maximum aggregate value transaction:_____
5. Total fee paid:________________________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration number, or the Form
or Schedule and the date of its filing.
1. Amount previously paid:___________________________________________________
2. Form, Schedule or Registration Statement No.:_____________________________
3. Filing Party:_____________________________________________________________
4. Date Filed:_______________________________________________________________
ACCENT COLOR SCIENCES, INC.
800 CONNECTICUT BOULEVARD
EAST HARTFORD, CT 06108
April 26, 2000
Dear Shareholder:
You are cordially invited to attend the seventh Annual Meeting of
Shareholders of Accent Color Sciences, Inc. on Monday, May 22, 2000, at 11:00
a.m. at the offices of the Company. As part of this year's Annual Meeting, you
will have an opportunity to hear a report on the operations of the Company, as
well as ask questions that you might have about the Company.
Your vote is important, regardless of the number of shares that you
hold. We would appreciate it if you would promptly execute and return the proxy
card enclosed with this material.
Sincerely,
/s/ Richard J. Coburn
-------------------------------------
Richard J. Coburn
Chairman
/s/ Charles E. Buchheit
-------------------------------------
Charles E. Buchheit
President and Chief Executive Officer
Enclosures
ACCENT COLOR SCIENCES, INC.
800 CONNECTICUT BOULEVARD
EAST HARTFORD, CT 06108
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 26, 2000
To the Shareholders of
Accent Color Sciences, Inc.:
The Annual Meeting of Shareholders of Accent Color Sciences, Inc. will
be held at the offices of the Company, at 800 Connecticut Boulevard, East
Hartford, Connecticut on Monday, May 22, 2000, 11:00 a.m., local time, for the
following purposes:
1. To elect two Class 1 directors and one Class 2 director;
2. To approve the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's auditors for the year
ending December 31, 2000; and
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on April 19, 2000
will be entitled to notice of and to vote at the Annual Meeting or any
adjournments or postponements thereof. Shareholders may vote in person or by
proxy. The stock transfer books of the Company will not be closed.
By order of the Board of Director
/s/ Willard F. Pinney, Jr.
------------------------------------
Willard F. Pinney, Jr.
Secretary
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
IMPORTANT
It is important that your shares be represented at the Annual
Meeting. Please sign, date and return the enclosed proxy card
promptly in order that your shares will be
voted at the Annual Meeting. A return envelope which
requires no postage if mailed in the United States
is enclosed for your convenience.
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Accent Color Sciences, Inc. (the
"Company") to be used in voting at the Annual Meeting of Shareholders of the
Company to be held on Monday, May 22, 2000, at 11:00 a.m. and at any
adjournments or postponements thereof (the "Annual Meeting") at the offices of
the Company, at 800 Connecticut Boulevard, East Hartford, Connecticut 06108. The
close of business on April 19, 2000 is the record date for determining
shareholders entitled to notice of and to vote at the Annual Meeting. At such
record date, there were outstanding 22,390,858 shares of the Company's Common
Stock, no par value ("Common Stock"), each of which is entitled to one vote on
each matter to be presented before the shareholders of the Company, 1,158 shares
of the Company's Series B Convertible Preferred Stock, no par value (the "Series
B Stock") and 33,589 shares of the Company's Series C Convertible Preferred
Stock, no par value (the "Series C Stock"). Holders of Series B and Series C
Stock vote together with holders of Common Stock as a single class (unless
otherwise required by law). As of the record date, the holder of Series B Stock
was entitled to 1,175,985 votes. This number of votes is based upon the number
of shares of Common Stock which the holder of Series B Stock was then entitled
to receive by converting part of the holdings subject to a provision of the
Company's Restated Certificate of Incorporation which limits the amount of
Common Stock that the holder of Series B Stock may beneficially own at any one
time. This number is less than the total number of shares of Common Stock into
which the Series B Stock is otherwise convertible. As of the record date, the
holders of Series C Stock were entitled to 8,397,250 votes, being the number of
shares of Common Stock into which the Series C Stock was then convertible. This
Proxy Statement, the accompanying form of proxy and the 1999 Annual Report to
Shareholders are being first sent to shareholders on or about April 26, 2000.
VOTING
Shares may be voted by shareholders of record in person or by proxy, and
shares represented by a properly executed proxy will be voted with respect to
all shares represented by it in accordance with the instructions, if any, given
therein. If no instructions are given, the proxy will be voted as recommended by
the Board of Directors and, in the discretion of the persons designated on the
proxy card, the proxy will be voted with respect to any other matter which may
properly come before the meeting or any adjournments or postponements thereof.
Any proxy received by the Board of Directors may be revoked by the
shareholder at any time prior to its use at the meeting by a subsequent written
instrument signed in the same manner as the proxy and received by the Company
either at the Annual Meeting or before the Annual Meeting at Accent Color
Sciences, Inc., 800 Connecticut Boulevard, East Hartford, Connecticut 06108
Attention: Secretary.
Under Connecticut law and the governing instruments of the Company, the
presence, either in person or by proxy, of the holders of shares representing a
majority of the votes entitled to be cast on a matter to be considered at the
Annual Meeting is necessary to constitute a quorum for the transaction of
business with respect to that matter. Assuming the presence of a quorum,
directors will be elected by a plurality of the votes cast at the Annual Meeting
by shareholders entitled to vote in the election. Approval of each of the other
proposals set forth in the Notice of the meeting and approval of any other
matters voted on at the Annual Meeting will be achieved if the votes cast in
favor of the proposal exceed the votes cast against the proposal.
All matters to be considered at the Annual Meeting will be voted upon by
holders of Common Stock, Series B Stock and Series C Stock, voting together as a
single class.
An inspector of election will tabulate all votes cast at the Annual
Meeting. For purposes of the foregoing voting requirements, the inspector of
election will treat shares represented by proxies that withhold authority to
vote for a nominee for election as a director or that reflect abstentions as
shares that are present and entitled to vote on the matters for purposes of
determining the presence of a quorum, but neither proxies that withhold
authority (without naming an alternative nominee) nor abstentions will be
counted as votes cast at the Annual Meeting. Accordingly, such proxies will not
have any effect on the outcome of the voting on the election of directors, or
the approval of the other proposals. In the event that any other matters are
submitted to shareholders at the Annual Meeting, abstentions will have no impact
on the voting with respect to those matters.
Shares represented at the Annual Meeting that are held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote and over which the broker or nominee does not
have discretionary voting power on a particular matter (so-called, "broker
non-votes") will be treated as present for purposes of determining the presence
of a quorum. However, such shares will not be treated as shares that are
entitled to vote on the particular matter as to which the broker or nominee does
not have discretionary authority, nor will they be treated as votes cast at the
Annual Meeting. Accordingly, broker non-votes will have no impact on the voting
with respect to any matter to come before the Annual Meeting.
SOLICITATION
The cost of this solicitation will be borne by the Company. Solicitation
will be made by use of the mails, except that, if necessary, directors, officers
and regular employees of the Company (none of whom will receive any additional
compensation therefor) may make solicitations of proxies by telephone, telecopy,
telegram or personal interview. The Company may also engage a proxy-soliciting
firm at the Company's expense. The Company will reimburse brokers and other
persons holding shares of Common Stock in their names, or in the names of
nominees, for their expenses incurred in sending proxy materials to beneficial
owners and obtaining their proxies.
RICHARD HODGSON
The Company is saddened to report that Richard Hodgson, who had served
as a director of the Company since May 1996, died from injuries sustained in an
automobile accident in March 2000. Mr. Hodgson was a remarkable man with a long
and distinguished career which included service as a founder and director of
Intel Corporation. He will be missed.
ITEM 1. ELECTION OF DIRECTORS
INFORMATION ON NOMINEES
The Company's Restated Certificate of Incorporation provides for three
classes of directors, with each class to serve a term of three years. The Board
is presently composed of seven directors, three of whom are members of Class 1,
one of whom is a member of Class 2 (following the death of Mr. Hodgson, who was
a Class 2 director) and three of whom are members of Class 3. The current terms
of the members of Class 1 are scheduled to expire at this Annual Meeting. The
Board has nominated for re-election as Class 1 directors two of the persons who
are now serving as Class 1 directors of the Company and the Board has nominated
the third current Class 1 director for election as an additional Class 2
director.
The two Class 1 nominees standing for election at this Annual Meeting
are Charles E. Buchheit and Robert H. Steele. If elected, their terms will
expire in 2003. The Class 1 director nominated for election as a Class 2
director is Richard A. Hansen. If elected as a Class 2 director, Mr. Hansen's
term will expire in 2001. Biographical summaries of each nominee and of the
continuing directors appear below.
All nominees have consented to be so named and to serve if elected. If
a nominee becomes unavailable for election, it is the intention of the persons
named in the accompanying proxy card to vote for such other person, if any, as
the Board of Directors may designate.
-2-
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES:
NOMINEES
For Class 1 directors, whose terms expire in 2003:
CHARLES E. BUCHHEIT, age 59, became President and Chief Executive
Officer of the Company in May 1998 after becoming a director of the Company in
March 1998. Mr. Buchheit served as a Corporate Officer and Division President at
Moore Corporation from 1995 to 1997, where he also served as a member of the
Moore Executive Committee. At Moore, Mr. Buchheit developed Integrated Customer
Solutions, a division which had the capability of managing all forms of print.
Prior to that time, Mr. Buchheit was a Corporate Officer and Vice President at
Xerox Corporation from 1989 to 1995. At Xerox, he was responsible for launching
the multi-billion dollar Docutech program worldwide. From 1975 to 1989, he held
several executive positions at IBM Corporation, including Group Marketing
Executive, Director of Operations and Director of Product Programs and
Practices. At IBM, Mr. Buchheit was responsible for the worldwide marketing of
mainframes, system software, storage and printing devices. He has served on the
Board of Directors for Infomart and NEPS, a wholly owned subsidiary of Moore
Corporation, and is currently a member of the Board of Directors for Intercon
Associates, Incorporated.
ROBERT H. STEELE, age 61, became a director of the Company in 1996 and
is Chairman of the Executive Compensation Committee. Mr. Steele is currently
Vice Chairman of John Ryan Company, a banking services company, of which he
previously served as Senior Vice President since 1992. Mr. Steele served as
President of RHS Consulting, Inc., a business consulting firm, in 1991. From
1985 to 1990, Mr. Steele was Chairman and Chief Executive Officer of Dollar Dry
Dock Bank of New York. Mr. Steele also served as President and CEO of Norwich
Savings Society. Mr. Steele is a former U.S. Congressman from the State of
Connecticut and currently serves as a director of Moore Medical Corp., a medical
supplies distributor, Scan-Optics, Inc., a manufacturer of data capture
equipment, NLC Insurance Companies, SmartServ Online, Inc., an online
information provider and the New York Mercantile Exchange, a commodities
exchange. Mr. Steele received his undergraduate degree from Amherst College and
his Master's Degree from Columbia University and holds an honorary Doctor of
Laws from Sacred Heart University.
For Class 2 director whose term expires in 2001:
RICHARD A. HANSEN, age 60, became a director of the Company in January
2000. Currently Mr. Hansen is Chairman and Chief Executive Officer of the
investment-banking firm, Pennsylvania Merchant Group, which he founded in 1986.
Mr. Hansen also founded Radnor Venture Partners. Prior to forming Pennsylvania
Merchant Group, Ltd., Mr. Hansen served as a Vice President with Kidder, Peabody
& Co. and as a Senior Vice President with Blyth Eastman Dillion (which was
acquired by PaineWebber Group Inc.). Prior to his investment-banking career, Mr.
Hansen worked for Air Products & Chemicals. Currently, Mr. Hansen serves on the
Board of Directors of Ultralife Batteries and Computone Corporation. Mr. Hansen
received his undergraduate degree in mechanical engineering from Rochester
Institute of Technology and his Master of Science degree in industrial
administration from Purdue University.
-3-
CONTINUING DIRECTORS
Class 2 director, whose term expires in 2001:
JOSEPH T. BROPHY, age 66, became a director of the Company in March
1998. Mr. Brophy retired as President of Travelers Insurance Company, a
subsidiary of The Travelers Corporation, in 1993. Since then, he has served as a
consultant with Actuarial Sciences Associates working with major companies such
as AT&T, Equifax and others in developing their business strategies for health
care. His prior experience with The Travelers included service as its Chief
Information Officer in charge of data processing operations. Mr. Brophy is a
fellow of the Society of Actuaries, holds memberships in the American Academy of
Actuaries, New York Academy of Sciences, Acoustical Society of America and
American Arbitration Association. He has received awards including the
Distinguished Information Sciences Award from the Data Processing Management
Association in 1986 and the Award of Achievement in Managing Information
Technology from Carnegie Mellon and American Management Systems in 1987. Mr.
Brophy currently serves as a trustee of St. Joseph College and as a director of
the Connecticut Opera. He has also served as a director of LIMRA International,
Inc., trustee of RPI-Hartford Graduate Center, and director of the Connecticut
Academy for Education in Mathematics, Sciences and Technology and the Greater
Hartford Chamber of Commerce. He is currently an owner, director and co-founder
of Solution Point, an information company that provides decision support tools,
analysis and data for employers and health systems. Mr. Brophy is a cum laude
graduate of Fordham University, from which he received a Bachelors of Science
degree. He has also attended NYU Graduate School and completed the Advance
Management Program at the Sloane School, MIT.
Class 3 directors whose terms expire in 2002:
RICHARD J. COBURN, age 68, has been Chairman of the Board since May 1996
and is a co-founder of the Company. Mr. Coburn served as President of the
Company from May 1993 until May 1996 and served as Chief Executive Officer of
the Company from May 1993 until August 1996. From 1991 until 1993, Mr. Coburn
worked as an independent consultant to development stage companies. Mr. Coburn
was a co-founder of KCR Technology, Inc., a manufacturer of high-speed,
monochrome printers, and served in various roles, both consulting and
managerial, including President, from 1977 to 1991. Mr. Coburn was also the
founder of Coburn Technology, Inc., a developer of a xerographic printer product
for word processing, the rights to which were sold to Wang Laboratories, Inc.,
and served as its President from 1974 to 1977. From 1968 to 1974, Mr. Coburn was
President of Scan-Optics, Inc., a manufacturer of data capture equipment, of
which he was a co-founder and currently serves as a director. Prior to 1968, Mr.
Coburn had served in various engineering management positions in the aerospace
industry over a 14-year period. Mr. Coburn received his degree in engineering
from Yale University.
NORMAN L. MILLIARD, age 57, has been Vice Chairman and Chief Technology
Officer of the Company since May 1998. Mr. Milliard served as President and
Chief Executive Officer of the Company from May 1996 through May 1998. Mr.
Millard was elected a director of the Company in 1995. Mr. Milliard served as
Vice President of the Company from January 1994 until May 1996. From 1988
through 1993, Mr. Milliard served as head of the Special Product Group at AEG
Schneider Automation, Inc. (formerly Modicon, Inc.), an industrial automation
company, and as the Director of Engineering and Operations for KCR Technology, a
manufacturer of high-speed, monochrome printers, from 1982 to 1988. Mr. Milliard
founded two companies in the electronic music field and holds a number of
patents in both the printing and electronic music fields. Mr. Milliard received
his degree in physics, with honors, from The Citadel, the Military College of
South Carolina.
WILLARD F. PINNEY, JR., age 56, has been Secretary of the Company since
December 1993 and became a director of the Company in 1996. Mr. Pinney has been
a partner since 1973 in the Connecticut law firm of Murtha, Cullina, Richter and
Pinney LLP, which serves as counsel to the Company. He received his degree in
political science from Yale University and his JD, with honors, from the
University of Michigan Law School.
-4-
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to a review of the Company's records, all required filings
under Section 16(a) of the Securities Exchange Act of 1934 were made in
compliance with such section.
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees of the Company receive a
monthly retainer of $750 and a per meeting fee of $750 for each meeting of the
Board of Directors and any committee meetings attended in person by such
director. The Company also reimburses directors for reasonable travel expenses
incurred in order to attend meetings.
Under its 1995 Stock Incentive Plan, the Company has established a stock
incentive program for non-employee directors, whereby each newly elected
director receives an initial option to purchase 5,000 shares of Common Stock and
will receive an option to purchase an additional 5,000 shares of Common Stock on
the date of the annual meeting of the Board each year through 2000 as long as
the director remains in office. Under this program, Mr. Hansen received an
option to purchase 5,000 shares of Common Stock upon his election to the Board
on January 31, 2000 and Messrs. Brophy, Hodgson, Pinney, and Steele each
received at the time of the annual meeting of shareholders on November 29, 1999
an option each to purchase 5,000 shares of Common Stock. Although not as part of
this program for non-employee directors, each such director also received, on a
one-time basis, an option award to purchase 25,000 shares of Common Stock of the
Company in the context of a comprehensive grant of options to all employees and
non-employee directors on April 30, 1999.
The Company, as permitted by Connecticut law, has purchased directors
and officers liability insurance policies covering all of the Company's
directors and officers on an annual basis and on a one time three-year basis
with respect to the Company's initial public offering in December 1996. The
aggregate premiums for these policies paid or accrued during 1999 was
approximately $69,025.
ATTENDANCE; BOARD COMMITTEES
The business and affairs of the Company are managed under the direction
of the Board of Directors. Members of the Board may serve on one or more
committees to carry out certain responsibilities. The standing committees of the
Board of Directors are the Audit Committee and the Executive Compensation
Committee.
The Board of Directors held a total of eight regular and special
meetings during 1999. Each director attended at least 75% of the aggregate
number of meetings of the Board and Board committees on which such director
served.
An Audit Committee was established in May 1996. This Committee is
responsible for overseeing and reviewing the audit of the Company's books and
accounts, reviewing the audited financial statements of the Company, reviewing
the Company's internal control procedures and reviewing the independence of the
Company's independent public accountants. No member of this Committee is an
employee of the Company. The Audit Committee met once during 1999. The current
member of the Audit Committee is Robert H. Steele. The Audit Committee, which
was chaired by Richard Hodgson prior to his death in March 2000, will be
expanded at the Annual Meeting of the Board in May 2000.
An Executive Compensation Committee was also established in May 1996 and
is generally responsible for reviewing and recommending to the Board of
Directors salaries and incentive compensation for the Company's executive
officers. This Committee met once in 1999. The current members of the Executive
Compensation Committee are Robert H. Steele (Chairman), Joseph T. Brophy and
Willard F. Pinney, Jr.
The Company does not have a nominating committee.
-5-
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 3, 2000
regarding the beneficial ownership of the Company's Common Stock by (i) each
person (or group of affiliated persons) known by the Company to own more than 5%
of the outstanding shares of Common Stock, (ii) each of the directors of the
Company and each nominee for election as director, (iii) each of the Named
Executive Officers and (iv) all directors and executive officers of the Company
as a group.
Number of
Shares
Beneficially Percentage of
NAME AND ADDRESS (1) OWNED (2) COMMON STOCK
- -------------------- ------------ -------------
Richard J. Coburn (3) 629,303 2.8%
Charles E. Buchheit(4) 633,334 2.9%
Norman L. Milliard (5) 319,667 1.5%
Joseph T. Brophy (6) 330,649 1.5%
Willard F. Pinney, Jr. (7), (8) 144,799 *
Robert H. Steele (7), (9) 219,118 1.0%
Richard A. Hansen (10) 419,956 1.9%
- ------------------------------------------------
All directors and officers of the Company as a group (7 persons) (11) 2,696,826 12.2%
* Less than 1%
(1) The address of all persons who are executive officers or directors of
the Company is in care of the Company, 800 Connecticut Boulevard, East
Hartford, Connecticut 06108.
(2) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares, subject to
community property laws where applicable. Shares not outstanding but
deemed beneficially owned by virtue of the right of a person or group to
acquire them within 60 days of March 3, 2000 ("currently exercisable
options") are treated as outstanding only for purposes of determining
the amount and percent owned by such person or group.
(3) Includes 168,334 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan. Includes
25,000 shares of Common Stock that is issuable upon conversion of the
Series C Stock.
(4) Includes 413,334 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan and 100,000
shares of Common Stock subject to currently exercisable warrants.
Includes 100,000 shares of Common Stock that is issuable upon conversion
of the Series C Stock.
(5) Includes 204,167 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(6) Includes 40,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan. Includes
250,000 shares of Common Stock that is issuable upon conversion of the
Series C Stock.
-6-
(7) Includes 70,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(8) Includes 30,000 shares of Common Stock subject to currently exercisable
options granted to Murtha, Cullina, Richter and Pinney LLP, counsel to
the Company, of which Mr. Pinney is a partner. Includes 25,000 shares of
Common Stock that is issuable upon conversion of the Series C Stock.
(9) Includes 17,118 shares of Common Stock owned by Mr. Steele's wife and
1,500 shares of Common Stock subject to currently exercisable warrants
issued to Mr. Steele's wife, as to all of which he disclaims beneficial
ownership. Includes 112,500 shares of Common Stock that is issuable upon
conversion of the Series C Stock.
(10) Includes 20,214 shares of Common Stock and 12,388 shares of Common Stock
subject to currently exercisable warrants held by Mr. Hansen's wife as
custodian for their minor children. Includes 5,000 shares of Common
Stock subject to currently exercisable options granted pursuant to the
1995 Stock Incentive Plan. Includes 346,535 shares of Common Stock
subject to currently exercisable warrants held by Pennsylvania Merchant
Group, Ltd., of which Mr. Hansen is President.
(11) Includes 1,000,835 shares of Common Stock subject to currently
exercisable options granted pursuant to the 1995 Stock Incentive Plan,
512,500 shares of Common Stock issuable upon conversion of the Series C
Stock and 460,423 shares of Common Stock subject to currently
exercisable warrants.
EXECUTIVE OFFICERS
The current Executive Officers of the Company are set forth in the
section entitled "Election of Directors". The term of each of the Executive
Officers expires as of the next Annual Meeting of the Board of Directors.
EXECUTIVE COMPENSATION
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION FOR 1999 The compensation of senior executives of
the Company for 1999 was determined by the Board of Directors of the Company
based upon recommendations of the Executive Compensation Committee of the Board
of Directors (the "Committee"). The base salaries of the Company's executive
officers have been determined at levels which management and the Board of
Directors believe to be appropriate and competitive in order to attract and
retain individuals with talents and experience necessary to carry out the
Company's business plan, but only when viewed in combination with awards made to
such executive officers under the Company's 1995 Stock Incentive Plan (the
"Stock Incentive Plan"). In view of the continuing priority on cash management,
awards under the Stock Incentive Plan have become a critical component of
executive compensation. The Company's Chief Executive Officer, Charles E.
Buchheit, was the recipient of a substantial stock option award in April 1999
and a cash bonus approved in November 1999 and paid in January 2000. The stock
option award was intended by the Committee and the Board to further incent Mr.
Buchheit giving him an opportunity for an increased stake in the Company's
performance. The bonus award reflected the judgment of the Committee and the
Board that Mr. Buchheit was instrumental in the achievements of the Company,
including the development of a substantial order backlog at the end of the year,
-7-
solidifying the Company's relationships with its key OEM customers and
successfully closing a financing required to sustain the Company's business
plan.
RESPONSIBILITIES AND POLICIES OF EXECUTIVE COMPENSATION COMMITTEE. The
responsibilities of the Executive Compensation Committee include formulating
policies and making recommendations to the Board of Directors with respect to
compensation of executive officers of the Company. The Committee held one
meeting in 1999 in order to consider base salaries and incentive stock option
and bonus awards for senior executive officers.
LIMITATION OF DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m)
of the Internal Revenue Code of 1986, general denies a publicly held
corporation, such as the Company, a federal income tax deduction for
compensation in excess of $1,000,000 per year paid or accrued for its chief
executive officer or any of the four other most highly compensated executive
officers. Certain "performance based" compensation is not subject to the
limitation on deductibility provided certain stockholder approval and
independent director requirements are met. Because the compensation paid to each
of the Company's executive officers have not exceeded nor approached $1,000,000
in any year, the Committee does not believe that this limitation on
deductibility of executive compensation is currently of any concern to the
Company. However, the Committee will continue to review this limitation in light
of future events with the objective of achieving deductibility of executive
compensation, as appropriate.
EXECUTIVE COMPENSATION COMMITTEE
Robert H. Steele, Chairman
Joseph T. Brophy
Willard F. Pinney, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the executive officers of the Company served during 1999 as a
member of the Compensation Committee of any other company, except for Mr. Coburn
who serves on the executive compensation committee of Scan Optics, Inc. All
members of the Executive Compensation Committee are outside directors, except
that Willard F. Pinney, Jr., is Secretary of the Company and a partner of
Murtha, Cullina, Richter and Pinney LLP, which serves as counsel to the Company.
-8-
SUMMARY EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information
concerning compensation for services in all capacities to the Company for the
fiscal year ended December 31, 1999 of (i) the chief executive officer and (ii)
the Company's other most highly compensated executive officers whose total
salary and bonus for the year ended December 31, 1999 exceeded $100,000 (the
"Named Executive Officers").
Long -Term
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -----------------------
Securities
Other Annual Underlying
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS ($) COMPENSATION ($) OPTIONS/SARS(#)
------------------------- ---- --------- --------- ---------------- ---------------
Richard J. Coburn 1999 120,000 44,731 - 250,000
Chairman 1998 120,000 500 - 120,000 (1)
1997 121,923 24,663 - 10,000
Charles E. Buchheit 1999 250,000 119,731 20,265 (2) 650,000
President and CEO 1998 166,667 500 19,547(2) 610,000 (1)(3)
Norman L. Milliard 1999 150,000 61,462 20,927 (4) 75,000
Vice Chairman and 1998 181,344 500 - 220,000 (1)
CTO 1997 161,077 46,480 - 15,000
(1) Includes the re-pricing of previously granted options to the named
executive officers: 60,000 for Mr. Coburn, 255,000 for Mr. Buchheit and
110,000 for Mr. Milliard.
(2) Consists of various living expense reimbursements to Mr. Buchheit
pursuant to his employment agreement with the Company.
(3) Includes a warrant to purchase 100,000 shares of the Company's Common
Stock, commencing on September 29, 1998, at an exercise price of $ 1.00
per share and expiring in 2003.
(4) Reflects various living expenses of Mr. Milliard pursuant to his
employment agreement with the Company.
-9-
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option
grants made to each of the Named Executive Officers in fiscal 1999. No stock
appreciation rights were granted during such year.
Number of Potential Realizable Value at
Securities % of Total Assumed Annual Rate of Stock
Underlying Options/SARs Exercise or Price Appreciation for Option
Options/SAR Granted to Base Price TERM (2)
Grants Employees in per Share
NAME (#) FISCAL YEAR ($/SH)(1) EXPIRATION DATE 5% ($) 10%($)
- ---- --------- ----------- --------- --------------- ------ ------
Charles E. Buchheit 621,714 32.4% .22 04/30/09 85,530 216,749
28,286 1.5% .22 04/30/09 3,891 9,861
Richard J. Coburn 250,000 13.0% .22 04/30/09 34,393 87,158
Norman L. Milliard 75,000 3.9% .22 04/30/09 10,318 26,147
(1) All options were granted at the fair market value on the date of grant
as determined by the Board of Directors.
(2) The 5% and 10% assumed annual rates of compound stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not reflect the Company's estimates or projections of
future Common Stock prices. There can be no assurance provided to any
executive officer or any other holder of the Company's securities that
the actual stock price appreciation over the term will be at the
assumed 5% or 10% levels or at any other defined level. Unless the
market price of the Common Stock appreciates over the option term; no
value will be realized from the option grants made to the executive
officers.
-10-
AGGREGATE OPTION EXERCISE IN LAST FISCAL YEAR AND OPTION VALUES AS OF
DECEMBER 31, 1999
None of the Named Executive Officers exercised stock options during the
year ended December 31, 1999. The following table provides information regarding
the number of shares underlying both exercisable and unexercisable stock options
as of December 31, 1999 and the values of unexercised "in-the-money" options as
of that date. An option is "in-the-money" if the per share fair market value of
the underlying share exceeds the option's exercise price per share.
Number of Securities Value of unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs at
December 31, 1999 December 31, 1999 (1)
------------------------------------------------------------------------------------------------------
Number of
Shares
Acquired on Value Exercisable Unexercisable Exercisable Unexercisable
Exercise Realized (#) (#) ($) ($)
------------------------------------------------------------------------------------------------------
Charles E. Buchheit - - 5,000 900,000 - 142,188
Richard J. Coburn - - 23,334 286,666 - 54,688
Norman L. Milliard - - 145,000 115,000 - 16,406
(1) Based on the closing price of the Common Stock at December 31, 1999 of
$0.4062.
EMPLOYMENT AGREEMENTS
Charles E. Buchheit and Norman L. Milliard have entered into employment
agreements with the Company. Both agreements have a three-year term and expire
on April 14, 2001 and June 30, 2001, respectively. If his employment agreement
was terminated without "cause", as defined in the agreement, Mr. Buchheit would
be entitled to receive (i) his base salary for the longer of a two-year period
commencing on the date of termination or the balance of the three-year
employment term; (ii) any accrued vacation; (iii) payment of health benefits for
the balance of the employment term, and (iv) immediate vesting in all
outstanding options. If his employment agreement was terminated without "cause",
as defined in the agreement, Mr. Milliard would be entitled to receive his base
salary and payment of health benefits for the balance of the three-year term.
Mr. Buchheit's current base salary is $250,000 and Mr. Milliard's current base
salary is $125,000.
The employment agreements restrict Mr. Buchheit and Mr. Milliard from
directly or indirectly competing with the Company through the participation in
the development or distribution of any product related to the Company's product
or processes during the term of the agreement and for a period of one year after
if they voluntarily resign from the Company or are terminated for cause. The
Employment Agreements do not otherwise restrict Mr. Buchheit and Mr. Milliard
from pursuing any other business interests that do not directly compete with the
Company.
11
STOCK INCENTIVE PLAN
In January 1995, the Board of Directors and shareholders of the Company
adopted the 1995 Stock Incentive Plan (the "Stock Incentive Plan"). Pursuant to
the Stock Incentive Plan, the Board of Directors or a committee thereof may
grant options or other awards for up to 4,000,000 shares of Common Stock. On
November 29 1999, the Company's shareholders approved an amendment to the Stock
Incentive Plan to increase the number of shares with respect to which awards may
be granted from 2,000,000 shares to 4,000,000 shares. The Stock Incentive Plan
is designed to give directors, officers and employees of the Company and other
persons an expanded opportunity to acquire Common Stock in the Company or
receive other long-term incentive remuneration in order that they may
participate in the Company's growth and be motivated to remain with the Company
and promote its further development and success.
The Stock Incentive Plan includes provisions for granting both
"incentive stock options" intended to qualify for certain federal tax advantages
and "non-statutory options" which do not qualify for such tax advantages.
Qualified incentive stock options may be granted only to eligible persons who
are employees of the Company while non-statutory options may be granted to any
persons, including directors, consultants and advisors of the Company who, in
the sole opinion of the Board of Directors or a committee thereof are, from time
to time, responsible for the management or growth of all or part of the business
of the Company.
The purchase price under each incentive stock option is as determined by
the Board of Directors or a committee thereof but may not be less than 100% of
the fair market value of the shares subject to such option on the date of grant,
provided that such option price may not be less than 110% of such fair market
value in the case of any stock option granted to a principal shareholder. The
purchase price per share of Common Stock deliverable upon the exercise of
non-statutory options is determined by the Committee, but may not be less than
85% of the fair market value of the Common Stock on the date of grant.
Each option granted under the Stock Incentive Plan becomes exercisable
on such date or dates and in such amount or amounts as the Board of Directors or
a committee thereof determines. To date, all incentive stock options granted to
employees are exercisable with respect to not more than one-third of the shares
subject thereto after the expiration of one year following the date of its
grant, and are exercisable as to an additional one-third of such shares after
the expiration of each of the succeeding two years, on a cumulative basis, so
that such option, or any unexercised portion thereof, shall be fully exercisable
on the third anniversary of the date of its grant, except that on April 30,1999
incentive stock options were granted to employees that are 50% exercisable after
one year and the remaining 50% exercisable on the second anniversary of the date
of the grant. These options vest immediately in the event of a change in control
of the Company or the termination of employment of the optionee without cause.
As of March 3, 2000 incentive stock options to purchase 2,554,661 shares
of Common Stock and non-statutory options to purchase 615,589 shares of Common
Stock net of cancellations and exercises have been granted. All such options
have been granted to employees of the Company, except for options granted (i) to
non-employee directors, as described above, (ii) to Murtha, Cullina, Richter and
Pinney LLP, counsel to the Company, in January 1995 entitling it to purchase
30,000 shares of the Company's Common Stock for a period of five years at an
exercise price of $1.19 per share, which has been extended for an additional
five years, (iii) to a consultant of the Company, an option granted in April
1996 and repriced in April 1998 entitling him to purchase 2,250 shares of the
Company's Common Stock for a period of five years at an exercise reprice of
$3.13, (iv) to the Company's Investor Relations firm, an option granted in July
1997 and repriced in April 1998 entitling it to purchase 10,000 shares of the
Company's Common Stock for a period of five years at an exercise reprice of
$3.13 and an option granted in April 1998 entitling it to purchase 5,000 shares
of the Company's Common Stock for a period of five years at an exercise price of
$3.13, (v) to a consultant of the Company, an option granted in October 1997 and
repriced in April 1998 entitling him to purchase 20,000 shares of the Company's
Common Stock for a period of five years at an exercise reprice of $3.13, (vi) to
a consultant of the Company, an option granted in September 1998 entitling him
to purchase 20,000 shares of the Company's Common Stock for a period of five
years at an exercise price of $0.91 and (vii) to a consultant of the Company, an
option granted in March 1999 entitling him to purchase 25,000 shares of the
Company's Common Stock for a period of five years at an exercise price of $0.23.
All options, both incentive and non-statutory, have been granted at fair market
value as determined by the Board of Directors on the date of grant.
-12-
PERFORMANCE GRAPH
The following graph demonstrates a comparison of cumulative total return
based on an initial investment of $100 in the Company's Common Stock as compared
with the Nasdaq Computer Manufacturers Index and the Nasdaq Composite Index and
assumes the reinvestment of dividends, although dividends have not been declared
on the Company's Common Stock. The stock price performance shown on the graph
below is not necessarily indicative of future price performance and only
reflects the Company's relative stock price for the period commencing on
December 18, 1996, the date the Company's Common Stock began trading on the
Nasdaq National Market, and ending on December 31, 1999. The following graph
includes information required by the Securities and Exchange Commission and
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, unless the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such Acts.
[GRAPH CHART OMMITTED]
ITEM 2. APPOINTMENT OF AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as
auditors of the Company for the year ending December 31, 2000, subject to
approval by shareholders at the Annual Meeting. PricewaterhouseCoopers LLP, has
served as the Company's independent auditors since 1995. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting and will be
given the opportunity to make a statement if they desire to do so and will be
available to respond to questions of shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
13
PROPOSALS FOR THE 2001 ANNUAL MEETING
In accordance with the rules of the Securities and Exchange Commission,
shareholder proposals for inclusion in the Company's proxy statement for the
2001 Annual Meeting must be received at the Company's offices at 800 Connecticut
Boulevard, East Hartford, Connecticut 06108, Attention: Secretary no later than
December 29, 2000.
OTHER MATTERS
The Board of Directors does not intend to present any other matters
before the meeting and is not informed of any other business which others may
bring before the meeting. However, if any other matters should properly come
before the meeting, or any adjournments or postponements thereof, it is the
intention of the persons named in the accompanying Proxy Card to vote on each
such matter as they, in their sole discretion, may determine.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999,
FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE COMPANY'S OFFICES AT 800 CONNECTICUT BOULEVARD, EAST
HARTFORD, CONNECTICUT 06108, ATTENTION: SECRETARY.
14