<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ERGO SCIENCE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ERGO SCIENCE CORPORATION
NORTH ANDOVER MILLS
43 HIGH STREET
NORTH ANDOVER, MA 01845
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, JUNE 14, 2000
To our Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Ergo Science Corporation (the "COMPANY") on Wednesday, June 14,
2000 at 9:00 a.m., local time, at the Andover Inn, 10 Chapel Avenue, Andover,
Massachusetts. The meeting will be held for the following purposes:
(1) To elect two directors as Class II directors of the Company to
serve for three-year terms ending at the Annual Meeting of
Stockholders in 2003 and until their successors are duly
elected and qualified or their earlier resignation or removal;
and
(2) To transact any other business that may properly come before
the meeting.
This notice is accompanied by a form of proxy, a Proxy Statement, and
the Company's 1999 Annual Report on Form 10-K. These items of business are more
fully described in the Proxy Statement.
The close of business on May 1, 2000 has been fixed as the record date
to determine stockholders entitled to receive notice of and to vote at the
Annual Meeting and any adjournments. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection by any stockholder for any
purpose germane to the meeting during ordinary business hours for ten days
before the meeting at the Company's offices at 43 High Street, North Andover, MA
and at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE PROXY CARD TO ENSURE YOUR REPRESENTATION AT THE MEETING. A
return envelope is enclosed for that purpose. You may revoke your proxy at any
time before the shares to which it relates are voted at the Annual Meeting, and
you may still vote in person if you attend the Annual Meeting. Please note,
however, that if your shares are held in the name of a broker, bank, or other
nominee and you wish to attend and vote at the Annual Meeting, you must obtain a
proxy issued in your name from that broker, bank or other nominee.
By Order of the Board of Directors,
/s/ David R. Burt
-------------------------------------
David R. Burt
President and Chief Executive Officer
North Andover, Massachusetts
May 10, 2000
<PAGE>
ERGO SCIENCE CORPORATION
NORTH ANDOVER MILLS
43 HIGH STREET
NORTH ANDOVER, MA 01845
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors of Ergo Science Corporation (the "COMPANY")
requests your Proxy for use at the Annual Meeting of Stockholders to be held on
Wednesday, June 14, 2000 at 9:00 a.m., local time, at the Andover Inn, 10 Chapel
Avenue, Andover, Massachusetts. By signing and returning the enclosed Proxy, you
authorize the persons named on the Proxy to represent you and vote your shares
at the Annual Meeting, including any adjournments of the meeting. This Proxy
Statement and Proxy were first mailed or given to stockholders of the Company on
or about May 11, 2000.
If you attend the Annual Meeting, you may vote in person. If you are
not present at the Annual Meeting, your shares can be voted only if you have
returned a properly signed Proxy or are represented by another proxy. You may
revoke the enclosed Proxy at any time before it is exercised at the Annual
Meeting by (a) signing and submitting a later-dated proxy to the Secretary of
the Company, (b) written notice of revocation to the Secretary of the Company,
or (c) voting in person at the Annual Meeting.
VOTING AND QUORUM
The only outstanding voting security of the Company is its common
stock, par value $.01 per share ("COMMON STOCK"). On May 1, 2000, the record
date for the Annual Meeting, there were 14,299,217 shares of Common Stock
outstanding and entitled to be voted at the Annual Meeting.
Each share of Common Stock outstanding on the record date is entitled
to one vote. The presence in person or by proxy of a majority of the shares of
Common Stock outstanding on the record date is required to constitute a quorum
at the Annual Meeting. If a quorum is not present, the stockholders entitled to
vote who are present in person or represented by proxy at the Annual Meeting
have the power to adjourn the Annual Meeting from time to time, without notice
other than an announcement at the Annual Meeting, until a quorum is present. At
any adjourned Annual Meeting at which a quorum is present, any business may be
transacted that might have been transacted at the Annual Meeting as originally
notified. Abstentions and broker non-votes will count in determining whether a
quorum is present at the Annual Meeting. A broker non-vote occurs if a broker or
other nominee does not have discretionary authority and has not received
instructions with respect to a particular item.
Proxies in the accompanying form that are properly signed and returned
will be voted at the Annual Meeting in accordance with the instructions on the
Proxy. Any properly executed Proxy on which no contrary instructions have been
indicated about a proposal will be voted as follows with respect to the
proposals: FOR the election of the people named in this Proxy Statement as the
Board of Directors' nominees for election to the Board of Directors; and in
accordance with the discretion of the holders of the Proxy with respect to any
other business that properly comes before the stockholders at the Annual
Meeting. The Board of Directors knows of no matters, other than those previously
stated, to be presented for consideration at the Annual Meeting. The people
named in the accompanying Proxy may also, at their discretion, vote the Proxy to
adjourn the Annual Meeting.
<PAGE>
PROPOSAL ONE - ELECTION OF DIRECTORS
The members of the Company's Board of Directors are divided into three
classes serving staggered three-year terms. The terms of the Class II directors
expire at this Annual Meeting. Two directors are to be elected as Class II
directors at this Annual Meeting.
The Board of Directors has designated Thomas F. McWilliams and David L.
Castaldi as nominees for re-election as Class II directors of the Company at the
Annual Meeting. If elected, the nominees for Class II directors will serve until
the expiration of their terms at the 2003 Annual Meeting of stockholders and
until their successors are elected and qualified. The nominees are currently
directors of the Company. For information about the nominees, see "Directors and
Executive Officers."
The Board of Directors has no reason to believe that its nominees will
be unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to serve, your Proxy will be voted for the election of a substitute
nominee recommended by the current Board of Directors or the number of the
Company's directors will be so reduced.
The election of directors requires the affirmative vote of a plurality
of the shares of Common Stock present or represented by proxy and entitled to
vote at the Annual Meeting. Accordingly, abstentions and broker non-votes will
not have any effect on the election of a particular director.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES.
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning directors and
executive officers of the Company:
NAME AGE POSITION
David R. Burt................. 36 President, Chief Executive Officer,
Secretary, and Director
David L. Castaldi............. 60 Director
Anthony H. Cincotta, Ph.D..... 42 Director
Thomas F. McWilliams(1)....... 57 Director
Stephen P. Smiley(1).......... 51 Director
- ------------------------
(1) Member of the Audit Committee, Compensation Committee and Nominating
Committee.
The Company's executive officers hold office at the pleasure of the
Board of Directors. The Board of Directors is divided into three classes.
Directors in each class are elected for three-year terms, with the terms of
the three classes staggered so that directors from a single class are elected
at each annual meeting of stockholders. Thomas F. McWilliams and David L.
Castaldi are Class II directors whose terms of office expire at this Annual
Meeting of Stockholders; Anthony H. Cincotta, Ph.D. and David R. Burt are
Class III directors whose terms of office expire at the annual meeting of
stockholders in 2001. Stephen P. Smiley is a Class I director whose term of
office expires at the annual meeting of stockholders in 2002. Ray L. Hunt
resigned as a director in 1999. The Board of Directors has decided not to
nominate an additional Class II director, and the number of directors will be
so reduced. The Board of Directors also decided not to nominate an additional
Class I director when Ronald H. Abrahams, Ph.D. resigned from the board in
1999.
2
<PAGE>
Executive officers are generally elected annually by the Board of
Directors to serve at the discretion of the Board of Directors. A brief
biography of each director and executive officer follows.
DAVID R. BURT joined the Company as Vice President, Corporate
Development, in March 1993. He was appointed Secretary of the Company in March
1997. In March 1999, Mr. Burt was appointed as a director of the Company. He was
appointed President and Chief Executive Officer of the Company on March 26,
1999. From 1990 until 1993, Mr. Burt practiced corporate and securities law at
Johnson & Gibbs, P.C., a law firm in Dallas, Texas. Mr. Burt's practice involved
representing issuers and underwriters in financing transactions in a variety of
high technology industries. Mr. Burt received a B.A. in government from
Dartmouth College and a J.D. from the University of Maryland Law School. Before
attending law school, Mr. Burt worked on the staff of United States Senator Paul
S. Sarbanes.
DAVID L. CASTALDI became a director of the Company in September
1996. He was the co-founder, President and CEO of BioSurface Technology,
Inc., a company that developed living tissue therapies, from 1987 until its
acquisition by Genzyme in 1994. From 1977 to 1987, Mr. Castaldi was the
President of the Hyland Therapeutics Division of Baxter International, Inc.,
a worldwide manufacturer of protein-based pharmaceuticals made from human
blood plasma, prior to which he served as Executive Vice President of
Baxter's Artificial Organs Division. Since 1994, Mr. Castaldi has been a
consultant to the Life Sciences Industry, which has included serving as
Chairman of the Board and CEO of Biolink Corporation, a medical device
company, from 1996-98 and as Chairman of the Board and co-founder, since
1996, and CEO from 1998-1999, of Cadent Medical Corporation, a privately held
medical device company. He is also a director of Nabi, a publicly-held
biopharmaceutical company. Mr. Castaldi received his M.B.A from Harvard
University and his B.B.A. from the University of Notre Dame. He also served
as an officer in the U.S. Army.
ANTHONY H. CINCOTTA, PH.D., is a co-founder of the Company and was
Executive Vice President of the Company from March 1997 until November 1999
after serving as a Senior Vice President since June 1996. Dr. Cincotta was Chief
Scientific Officer from June 1996 until his resignation in November 1999. Dr.
Cincotta has been a director since 1990 and after resigning as an officer became
a consultant in 1999. From January 1990 to June 1996, Dr. Cincotta was Director
of Research of the Company. From 1989 through July 1995 he was an instructor at
the Harvard Medical School and an Assistant Instructor in Biochemistry at
Massachusetts General Hospital. From 1987 to 1989 he was an Adjunct Assistant
Professor of Zoology and Physiology at Louisiana State University ("LSU"), a
Research Assistant Professor of Zoology and Physiology at LSU, and a research
consultant at the Rowland Institute of Science, Inc. Dr. Cincotta received his
B.S. in biochemistry and molecular biology from the University of California at
Santa Barbara and his M.S. and Ph.D. degrees in physiology from LSU. He is the
author of more than 40 publications regarding temporal neuroendocrine
organization of metabolism.
THOMAS F. MCWILLIAMS became a director of the Company during September
1992 in connection with the purchase of the Company's convertible securities by
Citicorp Venture Capital Ltd. ("CVC"). Mr. McWilliams is Managing Director of
CVC, where he has been employed since 1983. He is a director of Chase
Industries, Inc. and a number of privately owned companies. Mr. McWilliams
received his A.B. from Brown University and his M.B.A. from the Wharton School,
University of Pennsylvania.
STEPHEN P. SMILEY became a director of the Company in October 1996. He
is President of Hunt Financial Corporation, a private investment company located
in Dallas, Texas. From 1991 until joining Hunt Financial in 1996, he was a
co-founder and President of Cypress Capital Corporation, a private investment
firm specializing in growth financings and buyouts. Prior to 1991, Mr. Smiley
was involved in venture capital and leveraged buyout activities of Citicorp in
New York and Dallas, Texas for 15 years. Mr. Smiley is a director of several
private companies and one other public company, Dynamex, Inc. Mr. Smiley
received a B.A. from the University of Virginia and an M.B.A. in Finance from
the College of William and Mary.
3
<PAGE>
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors held six meetings during 1999. Other than Mr.
Hunt, no director attended fewer than 75% of those meetings and of meetings of
the committees of the Board of Directors on which he served.
The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee, and the Nominating Committee.
The Audit Committee reviews the results and scope of the annual audit
and other services provided by the Company's independent public accountants.
During 1999, the members of the Audit Committee were Thomas F. McWilliams and
Stephen P. Smiley. The Audit Committee met twice during 1999.
The Compensation Committee determines salaries and incentive
compensation for officers of the Company. In addition, the Board of Directors
has designated the Compensation Committee as the administrator of the Company's
Amended and Restated 1995 Long-Term Incentive Plan (the "INCENTIVE PLAN").
During 1999 the members of the Compensation Committee were Thomas F. McWilliams
and Stephen P. Smiley. The Compensation Committee met once during 1999.
The Nominating Committee identifies and recruits candidates to serve as
directors of the Company for recommendation to the full Board of Directors. In
recommending candidates to the Board of Directors, the Nominating Committee
seeks persons of proven judgment and experience. Stockholders who wish to
suggest qualified candidates may write to the Secretary of the Company at the
address on the first page of this Proxy Statement, stating in detail the
qualifications of the persons they recommend. The Nominating Committee was
established in February 1996. Its members during 1999 were Thomas F. McWilliams
and Stephen P. Smiley. The Nominating Committee met once in 1999.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash compensation for their
services as directors. The Company reimburses them for the expenses incurred in
attending meetings of the Board of Directors and its committees.
In June 1996, Ergo's shareholders approved a Stock Option Plan for
Non-Employee Directors (the "Director Stock Plan"). The Director Stock Plan
provides for an initial grant of a stock option for 10,000 shares of Common
Stock to each non-employee director upon first being elected or appointed to
serve on the Board of Directors. Mr. McWilliams who was serving as a
non-employee director when the Director Stock Plan was approved was granted a
stock option for 10,000 shares of Common Stock with a deemed grant date of May
15, 1996. In addition, each non-employee director appointed by the Board of
Directors after June 1996 was granted an initial stock option for 10,000 shares
of Common Stock with a grant date as of the date of such director's appointment
to the board as follows: David L. Castaldi, September 12, 1996 and Stephen P.
Smiley, October 25, 1996. On the second anniversary of their initial grant date,
each of these non-employee directors was granted a second nonqualified stock
option for 10,000 shares of Common Stock.
The total number of shares of Common Stock authorized for issuance
under the Director Stock Plan is 200,000 of which 60,000 have been granted as of
May 1, 2000. Each option under the Director Stock Plan has an exercise price
equal to the fair market value of the Common Stock on the grant date. These
options will become exercisable in equal increments on the first and second
anniversary of their date of grant and will expire ten years after the grant
date if not exercised. If a change in control of the Company occurs, all stock
options granted under the Director Stock Plan will become fully exercisable.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the 1999, 1998 and 1997 compensation
paid to or earned by all persons serving in the capacity of the Company's Chief
Executive Officer during 1999 and the Company's most highly compensated
executive officers other than the Chief Executive Officer during 1999 (the
"Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION ($)
----------------------------------------------------- ------------- ----------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITIONS IN 1999 YEAR SALARY ($) BONUS ($) (1) COMPENSATION ($) OPTIONS (#)
----------------- ---- --------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
David R. Burt.................. 1999 200,000 37,500 -- -- --
President and Chief Executive 1998 150,000 30,000 -- 55,000 --
Officer 1997 110,000 33,000 -- 30,000 --
Ronald H. Abrahams (2)......... 1999 66,635(3) -- -- -- --
Former President and Chief 1998 262,500 -- -- -- --
Executive Officer 1997 250,000 93,750 -- 100,000 --
Anthony H. Cincotta(4)......... 1999 196,375(5) -- -- -- --
Former Senior Vice President 1998 236,250 -- -- -- 4,450(6)
and Chief Scientifc Officer 1997 225,000 67,500 -- 150,000 4,450(6)
</TABLE>
- --------------------------------
(1) 1999 bonuses were expensed and paid in 2000; 1998 bonuses were expensed and
paid in 1998; and 1997 bonuses were expensed in 1997 and paid in 1998.
(2) Dr. Abrahams resigned from the Company and the Board of Directors on March
26, 1999.
(3) Reflects salary earned from January 1, 1999 until March 26, 1999, the date
of Dr. Abraham's resignation from the Company.
(4) Dr. Cincotta resigned from the Company on November 9, 1999.
(5) Reflects salary earned from January 1, 1999 until November 9, 1999, the
date of Dr. Cincotta's resignation from the Company.
(6) Reflects the value of term life and disability insurance premiums.
OPTION GRANTS IN 1999
During 1999, the Company did not grant any stock options.
5
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table provides information about the number of shares
issued upon option exercises by the Named Executive Officers during 1999, and
the value realized by the Named Executive Officers. The table also provides
information about the number and value of options held by the Named Executive
Officers at December 31, 1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
David R. Burt......................... -- -- 90,500 65,000 $3,120 --
Ronald H. Abrahams (2)................ -- -- 224,750 75,000 $11,603 --
Anthony H. Cincotta................... -- -- 269,725 269,725 $29,250 --
</TABLE>
(1) Option values are based on the difference between the exercise price per
share of the option and $1.19 per share, which was the closing price of the
Common Stock on the Nasdaq National Market on December 31, 1999, multiplied
by the number of shares of Common Stock subject to the option.
(2) Dr. Abrahams resigned from the Company and the Board of Directors on March
26, 1999.
EMPLOYMENT CONTRACTS
The Named Executive Officer is an employee-at-will as the Company did
not renew the employment agreement with its Named Executive Officer in October
1998. The current base salary amount is $200,000 to Mr. Burt. The Compensation
Committee may increase the base amounts at its discretion.
Dr. Abrahams resigned from the Company on March 26, 1999. As severance,
Dr. Abrahams received from the Company a payment of $294,330. The Company also
agreed to vest 25,000 shares of options that would not have vested until April
29, 1999.
Dr. Cincotta, who resigned as an officer and became a consultant in
1999, is paid on an hourly basis, as needed.
DIRECTOR AND OFFICER INDEMNIFICATION
The Company has entered into indemnification agreements with each of
its directors and executive officers, agreeing to indemnify the director or
officer to the fullest extent permitted by law, and to advance expenses, if the
director or officer becomes a party to or witness or other participant in any
threatened, pending or completed action, suit or proceeding (a "Claim") by
reason of any occurrence related to the fact that the person is or was a
director, officer, employee, agent or fiduciary of the Company or a subsidiary
of the Company or another entity at the Company's request (an "Indemnifiable
Event"), unless a reviewing party (either outside counsel or a committee
appointed by the Board of Directors) determines that the person would not be
entitled to indemnification under applicable law. In addition, if a change in
control or a potential change in control of the Company occurs, and if the
person indemnified so requests, the Company will establish a trust for the
benefit of the indemnitee and fund the trust in an amount sufficient to satisfy
all expenses reasonably anticipated at the time of the request to be incurred in
connection with any Claim relating to an Indemnifiable Event. The reviewing
party will determine the amount deposited in the trust. An indemnitee's rights
under the indemnification agreement are not exclusive of any other rights under
the Company's Certificate of Incorporation or Bylaws or applicable law.
6
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE EXECUTIVE COMPENSATION PROGRAM
The Company's compensation program is designed to help increase the
value of the Company for its shareholders.
CASH COMPENSATION. Cash compensation set forth in the Summary
Compensation Table consists of a base salary and an annual bonus. The base
salaries are consistent with other companies at a stage of development
comparable to that of the Company. The Compensation Committee determines an
executive's competitive level of compensation based on information from a
variety of sources, including proxy statements of other companies and special
surveys. The Compensation Committee believes it is crucial to provide salaries
within a competitive market range to attract and retain highly talented
executives. The specific competitive markets considered depend on the nature and
level of the executive position in question and the labor markets from which
qualified individuals would be recruited. Annual salary increases for the
Company's executive may be given based on general levels of market salary
increase, individual performance and the Company's overall financial results
without any specific weighting among these factors. Any base salary increases
are expected to be consistent with the Company's philosophy of
pay-for-performance.
An executive of the Company may also be awarded a cash bonus as a
percentage of base pay within a pre-determined range established by the Board of
Directors. Within that range, an executive's cash bonus will be determined by
the Board of Directors in proportion to the extent to which the performance
objectives established by the Board of Directors for that executive are met or
exceeded. These objectives typically focus on results of the Company's
operations and accomplishments.
INCENTIVE PLAN. Equity based incentive compensation may be awarded
under the Company's Incentive Plan to the Company's executives. The Incentive
Plan allows grants of stock options, SARs and restricted stock awards. To date,
only stock options have been awarded under the Incentive Plan. The Compensation
Committee believes that providing equity based compensation to executives can be
critical in attracting and retaining qualified individuals and in bringing out
their superior performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
As previously described, the Company structures the pay for all
executives, including the Chief Executive Officer, considering both a
pay-for-performance philosophy and market rates of compensation for the job. In
March 1999, David R. Burt, formerly the Company's Vice President, Corporate
Development, was elected President and Chief Executive Officer. Specific actions
taken by the Compensation Committee regarding the compensation of Mr. Burt are
summarized below:
BASE SALARY. Concurrent with Mr. Burt's duties of the Company's
President and Chief Executive Officer, Mr. Burt's annual base salary is
$200,000.
BONUS. Mr. Burt received a cash bonus for fiscal year 1999 in the
amount of $37,500.
INCENTIVE STOCK PLAN. Mr. Burt was not granted in 1999 options to
purchase shares of the Company's stock. Mr. Burt has 98,000 vested exercisable
stock options.
In September 1996, Ronald H. Abrahams, Ph.D., formerly the Company's
Executive Vice President and Chief Operating Officer, was elected President and
Acting Chief Executive Officer. The Board of Directors subsequently appointed
Dr. Abrahams as Chief Executive Officer in March 1997. Dr. Abrahams resigned
from his positions of Chief Executive Officer and President, as well as from his
position on the board of directors, on March 26, 1999. Specific actions taken by
the Compensation Committee regarding the compensation of Dr. Abrahams during
1999 are summarized below.
BASE SALARY. Concurrent with Dr. Abrahams' duties of the Company's
President and Chief Executive Officer through March 26, 1999, Dr. Abrahams' was
paid $66,635.
BONUS. Dr. Abrahams did not receive a cash bonus for fiscal year 1999.
INCENTIVE STOCK PLAN. Dr. Abrahams was not granted in 1999 options to
purchase shares of the Company's stock.
7
<PAGE>
Dr. Abrahams resigned from the Company on March 26, 1999. As severance,
Dr. Abrahams received from the Company a payment of $294,330. The Company also
agreed to vest 25,000 shares of options that would not have vested until April
29, 1999.
COMPENSATION COMMITTEE
Stephen P. Smiley
Thomas F. McWilliams, Chairman
8
<PAGE>
PERFORMANCE GRAPH
The Performance Graph compares the cumulative total return of the
Company, the NASDAQ Stock Market (U.S. Companies) and NASDAQ Pharmaceutical
Stocks. The graph assumes that $100 was invested in the stock or the index on
December 14, 1995, the date of the Company's initial inclusion on the Nasdaq
National Market, and also assumes reinvestment of dividends. Historical stock
price performance is not necessarily indicative of future stock price
performance.
ERGO SCIENCE CORPORATION
COMPARATIVE TOTAL RETURNS
DECEMBER 14, 1995 THROUGH DECEMBER 31, 1999
[GRAPHIC REPRESENTATION OF PERFORMANCE CHART]
<TABLE>
<CAPTION>
December 14, December 31, December 31, December 31, December 31, December 31,
1995 1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Ergo Science
Corporation(1) $100 $143 $131 $153 $10 $10
NASDAQ Stock Market
$100 $101 $125 $153 $215 $389
NASDAQ
Pharmaceutical $100 $115 $115 $119 $153 $285
</TABLE>
(1) Based upon a stock price of $10.00 per share, the closing per share price
of the Common Stock on the day of the initial public offering.
As of May 1, 2000, the closing price of the Company's Common Stock on
the Nasdaq National Market was $1.28 per share.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the shares of the Company's Common Stock as of April 25,
2000, by (i) each person the Company knows to be the beneficial owner of 5% or
more of the outstanding shares of Common Stock, (ii) each Named Executive
Officer, (iii) each director of the Company, and (iv) all executive officers and
directors of the Company as a group. Except as indicated in the footnotes to the
table, the Company believes that the persons named in the table have sole voting
and investment power with respect to the shares of Common Stock indicated.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED(1) OWNED(1)
---------------- ------------ ------------
<S> <C> <C>
Hunt Financial.......................................................1,533,318 10.72%
1445 Ross at Field
Dallas, Texas 75202
Citicorp Venture Capital Ltd. (2)....................................1,678,910 11.74%
399 Park Avenue
New York, New York 10043
Anthony H. Cincotta (3)..............................................1,014,622 7.10%
David R. Burt (4) ......................................................98,255 *
David L. Castaldi (5) ..................................................15,000 *
Thomas F. McWilliams (6) ...............................................20,000 *
Stephen P. Smiley (7) ..................................................15,100 *
All executive officers and directors as a group (5 persons) .........1,162,977 8.05%
</TABLE>
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* Represents less than 1% of outstanding Common Stock or voting power.
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or disposition power with respect to
securities including stock options vesting by June 26, 2000.
(2) Excludes shares of Common Stock beneficially owned by the employees of
Citicorp Venture Capital Ltd. ("CVC") and Citi Growth Fund, L.P., including
shares owned by Mr. McWilliams, as to which CVC and Citi Growth Fund, L.P.
disclaim beneficial ownership. CVC and Citi Growth Fund, L.P. are
affiliates, but each disclaims beneficial ownership of the shares held by
the other.
(3) Includes 269,725 shares of Common Stock subject to exercisable stock
options and 146,078 shares held in a trust for the benefit of the children
of Manuel Cincotta, Jr., for which Dr. Anthony Cincotta serves as
co-trustee.
(4) Includes 98,000 shares of Common Stock subject to exercisable stock options
and 100 shares of Common Stock owned by Mr. Burt's daughter.
(5) Common Stock subject to exercisable stock options.
(6) Common Stock subject to exercisable stock options. Excludes shares owned by
CVC, Citi Growth Fund, L.P., and other employees of CVC, as to which Mr.
McWilliams disclaims beneficial ownership.
(7) Includes 15,000 shares of Common Stock subject to exercisable stock
options.
10
<PAGE>
CERTAIN TRANSACTIONS
Ergo granted demand and piggyback registration rights with respect to
the Common Stock issued upon conversion of the Series A, Series B, and Series C
Preferred Stock or issued in payment of loans at the closing of the initial
public offering to purchasers of Preferred Stock and to the following lenders:
Citicorp Venture Capital, Ltd. ("CVC"); Citi Growth Fund L.P.; CVC employees
(including Mr. McWilliams); Hunt Financial Corporation; and Lafayette Investment
Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Stephen P. Smiley and
Thomas F. McWilliams. Neither of these members is or has been an employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers, directors, and persons who beneficially own more
than 10% of a registered class of the Company's equity securities file with the
Securities and Exchange Commission initial reports of ownership and reports of
any changes in ownership of common stock and other equity securities of the
Company. Based on the Company's review of forms furnished to the Company and
written representations from reporting persons, the Company believes that all
filing requirements applicable to the Company's executive officers, directors,
and 10% beneficial owners were complied with during 1999.
ADDITIONAL INFORMATION
SOLICITATION
This solicitation of proxies is made by the Board of Directors and will
be conducted primarily by mail. Officers, directors and employees of the Company
may solicit proxies personally or by telephone, telegram or other forms of wire
or facsimile communication. The Company may also request banking institutions,
brokerage firms, custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of Common Stock that those companies hold of
record. The costs of the solicitation, including reimbursement of such
forwarding expenses, will be paid by the Company.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the proxy statement relating to the
Annual Meeting of Stockholders to be held in 2001, the Company must receive
stockholder proposals no later than January 11, 2001. To be considered for
presentation at such meeting, although not included in the proxy statement,
proposals must be received no later than sixty days before the annual meeting or
(if later) ten days after the first public notice of the meeting. All
stockholder proposals should be marked for the attention of Secretary, Ergo
Science Corporation, 43 High Street, North Andover, MA 01845.
CHANGE IN INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers L.L.P. as
the Company's independent accountants for 2000. Coopers and Lybrand L.L.P. had
been the Company's independent accountants since August 1995. In 1998, Coopers &
Lybrand L.L.P. became PricewaterhouseCoopers L.L.P. The selection of
PricewaterhouseCoopers L.L.P. as the Company's independent accountants for 1999
was approved by the Board of Directors. The Company expects that representatives
of PricewaterhouseCoopers L.L.P. will be present at the Annual Meeting to
respond to appropriate questions and will have an opportunity to make a
statement if they so desire to do so. The Board of Directors may terminate the
11
<PAGE>
appointment of PricewaterhouseCoopers L.L.P. as independent accountants without
the approval of the Company's stockholders whenever the Board of Directors deems
termination necessary or appropriate.
ANNUAL REPORT
The Company's annual report on Form 10-K to stockholders for the year
ended December 31, 1999, including financial statements, is being mailed
herewith to all stockholders entitled to vote at the Annual Meeting. The annual
report does not constitute a part of the proxy solicitation material. COPIES OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST BY CONTACTING THE COMPANY'S INVESTOR RELATIONS DEPARTMENT, ERGO SCIENCE
CORPORATION, 43 HIGH STREET, NORTH ANDOVER, MA 01845, ATTN: LISA DESCENZA, OR BY
CALLING 978-974-9474 X226.
By Order of the Board of Directors,
/s/ David R. Burt
-----------------------------------
David R. Burt
President and Chief Executive Officer
North Andover, Massachusetts
May 1, 2000
12
<PAGE>
DETACH HERE
PROXY
ERGO SCIENCE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING, JUNE 14, 2000
The undersigned hereby constitutes and appoints each of J. Richard
Crowley and David R. Burt, his true and lawful agents and proxies with full
power of substitution, to represent the undersigned, with all the powers
which the undersigned would possess if personally present, and to vote the
Common Stock of Ergo Science Corporation held of record by the undersigned on
the record date, at the Annual Meeting of Stockholders of Ergo Science
Corporation, to be held at the Andover Inn, 10 Chapel Avenue, Andover,
Massachusetts, on Wednesday, June 14, 2000, at 9:00 a.m. local time, and at
any adjournment thereof, on all matters coming before said meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR VOTE BY MARKING THE APPROPRIATE BOX ON
THE REVERSE SIDE BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION THAT IS FOR THE
ELECTION OF THE NAMED NOMINEES AS DIRECTORS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD. THIS PROXY MAY BE REVOKED IN
WRITING AT ANY TIME PRIOR TO THE VOTING THEREOF.
- -------------- --------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- -------------- --------------
<PAGE>
ERGO SCIENCE CORPORATION
THIS IS YOUR PROXY
Dear Stockholder:
Your Proxy is being solicited by the Board of Directors of Ergo Science
Corporation for the Annual Meeting of Stockholders to be held at 9:00 a.m.
local time on June 14, 2000 at the Andover Inn, 10 Chapel Avenue, Andover,
Massachusetts.
Enclosed with this Proxy is a Proxy Statement containing important
information about the issue that you are being asked to approve.
Your vote is important to us. Whether or not you plan to attend the Annual
Meeting, you can be sure your shares are represented at the meeting by
promptly returning your completed Proxy card prior to the Annual Meeting.
Please mark the boxes on the Proxy card below to indicate how your shares are
to be voted, then sign the card, detach it and return your Proxy card in the
enclosed envelope.
Thank you in advance for your prompt consideration of these matters.
DETACH HERE
PLEASE MARK
/ X / VOTES AS IN
THIS EXAMPLE
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN AND AUTHORIZE THE PROXIES TO TAKE ACTION IN THEIR DISCRETION UPON
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS: To elect (01) David L.
Castaldi and (02) Thomas F. McWilliams as
Class II directors for a three year term ending
at the Annual Meeting of Stockholders in 2003
and until their successors are duly elected
and qualified or their earlier resignation
or removal.
FOR WITHHELD
THE / / / / FROM THE
NOMINEES NOMINEES
/ /
--------------------------------------
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND / /
NOTE AT LEFT
Please sign exactly as your name
appears on this card. Joint owners
should each sign personally. If you
are signing as a representative of
the named stockholder (e.g. as a
trustee, corporate officer or other
agent on behalf of a trust,
corporation or other entity) you
should indicate your title or the
capacity in which you sign.
Signature: Date:
---------------------------- -------------
Signature: Date:
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