<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1 to Form 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
-OR-
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period
from...to...
Commission File No. 0-24936
ERGO SCIENCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3271667
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
43 HIGH STREET
NORTH ANDOVER, MASSACHUSETTS 01845
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 974-9474
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 13, 2000, was approximately $32,741,294. As of March 13,
2000, there were 14,269,467 outstanding shares of the registrant's common stock.
Documents incorporated by reference: none.
<PAGE>
This Amendment No. 1 on Form 10-K/A to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1999 (the "Report") is being filed to
include information required to be set forth in Part III of the Report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the ages, principal occupation and present
position of each of the Directors and executive officer of the Company.
DIRECTORS
DAVID R. BURT, Age 36, Class III Director, 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, Age 60, Class II Director, 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, since 1996, 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., Age 42, Class III Director, 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.
2
<PAGE>
THOMAS F. MCWILLIAMS, Age 57, Class II Director, 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, Age 51, Class I Director, 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.
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.
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.
3
<PAGE>
ITEM 11. 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").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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 1998 150,000 30,000 --- 55,000 ---
Executive 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 Scientific Officer 1997 225,000 67,500 --- 150,000 4,450(6)
</TABLE>
- ----------------
(1) 1999 bonuses were expenses and paid in 2000; 1998 bonuses were
expenses 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.
4
<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
Shares Underlying Unexercised In-the-Money
Acquired On Value Options At Fy-End (#) Options At Fy-End ($)(1)
-------------------------- --------------------------
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 0 $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.
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 were 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
April 25, 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.
5
<PAGE>
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 $150 per hour 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.
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.
6
<PAGE>
ITEM 12. 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
Beneficial Owner Beneficially Beneficially
---------------- Owned(1) Owned(1)
------------ -------------
<S> <C> <C>
Hunt Financial Corporation...................................... 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>
- ---------------------------
* 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.
7
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of North
Andover and State of Massachusetts on May 1, 2000.
ERGO SCIENCE CORPORATION
By: /s/ J. Richard Crowley
-----------------------
J. Richard Crowley
Controller (principal accounting officer)
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ David R. Burt President, Chief Executive Officer and
- ------------------------------ Director (Principal Executive and Financial
(David R. Burt) Officer)
Director
- ------------------------------
(David L. Castaldi)
/s/ Anthony H. Cincotta, Ph.D. Director
- ------------------------------
(Anthony H. Cincotta, Ph.D.)
/s/ J. Richard Crowley Controller (principal accounting officer)
- ------------------------------
(J. Richard Crowley)
Director
- ------------------------------
(Thomas F. McWilliams)
/s/ Stephen P. Smiley Director
- ------------------------------
(Stephen P. Smiley)
By: /s/ J. Richard Crowley
- ------------------------------
(J. Richard Crowley)
Attorney-in-fact
</TABLE>
9
