<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended March 28, 1999, or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period from ______________ to ______________.
Commission file number: 0-12378
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CARLETON CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota 41-1349953
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10729 Bren Road East
Minnetonka, Minnesota 55343
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(Address of principal executive (ZIP Code)
offices)
Registrant's telephone number, including area code: (612) 238-4000
Securities registered pursuant to Section 12(b) of
the Act: None
Securities registered pursuant to Section 12(g) of
the Act: Common Stock, par value
$.25 per share
Common Stock purchase
rights
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.
Yes X No
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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 ( ).
The aggregate market value of voting stock held by non-affiliates of the
registrant as of July 2, 1999 was approximately $6,681,184 (based on the last
sale price of $2.0469 per share as reported by The Nasdaq National Market).
As of July 2, 1999, 3,346,244 shares of the registrant's Common Stock, par value
$.25 per share, were issued and outstanding.
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Carleton Corporation (the "Company") hereby amends its Annual Report on
Form 10-K for the fiscal year ended March 28, 1999, to include the information
required under Item 10, Item 11 and Item 12 of Part III of Form 10-K as follows:
Part III
Item 10. Directors and Executive Officers of the Registrant
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the direction of
its Board of Directors, which is composed of six members. The Board of Directors
is divided into three classes, and the members of each class are elected to
serve a three-year term, with the terms of office of each class ending in
successive years.
The term of the Class One directors expires at the Annual Meeting, and two
Class One directors will be elected at the Annual Meeting to hold office until
the 2002 Annual Meeting or until their respective successors are elected and
qualified. George E. Hubman and Arch J. McGill are the incumbent Class One
directors. Messrs. Hubman and McGill are being nominated for election at the
Annual Meeting. The persons named as proxies in the enclosed form of proxy will
vote the proxies received by them for the election of Messrs. Hubman and McGill,
unless otherwise directed. Each of Messrs. Hubman and McGill has indicated a
willingness to serve, but in case either of them is not a candidate at the
Annual Meeting, the persons named as proxies in the enclosed form of proxy may
vote for a substitute nominee in their discretion. Information concerning the
incumbent directors is set forth below. The terms of the incumbent Class Two and
Class Three directors expire at the 2000 and 2001 Annual Meetings, respectively.
The affirmative vote of a majority of the shares of Common Stock present
and entitled to vote at the Annual Meeting is necessary to elect the nominees
for director. The Board of Directors recommends a vote FOR the election of
Messrs. Hubman and McGill.
Information regarding the directors of the Company is set forth below:
<TABLE>
<CAPTION>
<S> <C>
George E. Hubman
(Class One)................... Mr. Hubman, 56 years of age, has been a director of the Company since July 1995.
Since 1994, he has been a business consultant and private investor. Mr. Hubman
retired as Vice President of Sales and Marketing of Walker Richer and Quinn, Inc.
("WRQ"), a provider of desk top connectivity software, in 1994. Mr. Hubman was a
co-founder of WRQ and held such position since the Company's formation in 1981.
Prior to WRQ, Mr. Hubman's career included sales positions with IBM and Hewlett-
Packard. Mr. Hubman is also a director of Syntax, Inc. and Tully's Coffee.
Arch J. McGill
(Class One)................... Mr. McGill, 68 years of age, has been a director of the Company since July 1989. He
is President of Chardonnay Inc., a venture capital investment company with which he
has been associated since 1985. From 1983 to 1985, Mr. McGill served as Chief
Executive Officer of Rothschild Ventures. Mr. McGill has extensive business
experience in the telecommunications industry, and from 1973 to 1983, he was
employed by AT&T Corp., most recently as President of AIS/American Bell.
Mr. McGill is also a director of ACT Networks, Inc. and Disc, Inc.
Nicholas J. Covatta, Jr.
(Class Two)................... Mr. Covatta, 52 years of age, has been a director of the Company since February 1982.
He has been Chairman of the Board of Atlantis Group, Inc., a private investment
company, since August 1986. Mr. Covatta's prior business experience includes
executive positions at the General Electric Company, Gulf Oil Corporation and the
Boston Consulting Group.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Robert D. Gordon
(Class Two)................... Mr. Gordon, 50 years of age, has been a director of the Company since July 1987. He
has been Chairman of the Board and Chief Executive Officer of the Company since
April 1990 and President since December 1988. He was first employed by the
Company as Senior Vice President in July 1987, and subsequently served as Chief
Financial Officer from August 1987 to May 1988, Secretary from January to
September 1988, and Group Vice President, Marketing from April to December 1988.
From April 1984 to July 1987, Mr. Gordon was Executive Vice President of First
Bank System, Inc.
Robert W. Fischer
(Class Three)................. Mr. Fischer, 80 years of age, has been a director of the Company since October 1983.
He is President of Robert W. Fischer & Co., Inc., a private financial consulting and
investment banking firm, and he is a private investor. Mr. Fischer is also a director of
Ringer Corporation.
Michael Dexter-Smith
(Class Three)................. Mr. Dexter-Smith, 46 years of age, has been a director of the Company since October
1997, when he was added to the Board in connection with the acquisition of Carleton
Corporation. Since April 1995, he has been Chief Executive Officer of VenturCom,
Inc., a provider of tools and extensions for developing and deploying dedicated
applications on Windows NT and Windows CE. From 1992 to 1995, Mr. Dexter-
Smith served as Chief Operating Officer of Manager Software Products, Inc., a
provider of mainframe and client server technology for data management. From 1987
to 1992, Mr. Dexter-Smith was President and Chief Executive Officer of the former
Carleton Corporation.
</TABLE>
The Board of Directors has an Audit Committee consisting of Messrs.
Covatta, Fischer and Dexter-Smith and a Compensation Committee consisting of all
outside directors (Messrs. Covatta, Dexter-Smith, Fischer, Hubman and McGill).
The Audit Committee's function is to review and make recommendations to the
Board of Directors with respect to certain financial and accounting matters. The
Audit Committee met one time during the 1999 fiscal year. The Compensation
Committee's function is to review and make certain determinations with respect
to matters concerning the remuneration of employees, officers and directors. The
Compensation Committee met one time during the 1999 fiscal year. The Board of
Directors does not have a standing nominating committee.
During the 1999 fiscal year, the Board of Directors held seven meetings.
Each incumbent director attended at least 75% of the total number of meetings of
the Board of Directors and committees on which he served.
Each non-employee director receives a $12,000 annual retainer, a $750 fee
for each Board of Directors' and committee meeting he attends and a $350 fee for
each teleconference and meeting he participates in. In addition, under the terms
of the Company's 1990 Long Term Incentive Plan (the "1990 Plan"), each incumbent
non-employee director automatically receives an option to purchase 2,000 shares
of Common Stock at each annual meeting of shareholders, and each new
non-employee director will receive an option to purchase 4,000 shares on the
date of such director's initial election to the Board of Directors.
Directors who are employees of the Company do not receive any additional
compensation for serving on the Board of Directors.
As consideration for certain consulting services provided to the Company,
the Company provides health insurance for Mr. McGill at an annual cost to the
Company of approximately $3,500.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors, and greater than ten percent (10%)
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors were complied with, except that a statement
of changes in beneficial ownership on Form 4 was not timely filed for Mr.
Fischer, to reflect his sale of 600 shares of Common Stock in December 1998.
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Item 11. Executive Compensation
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and each of the other four executive officers of the
Company whose annual salary and bonus in fiscal 1999 exceeded $100,000 (the
"Named Executive Officers"):
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards (3)
---------------------------------- -----------------------
Restricted Securities
Fiscal Other Stock Underlying All Other
Name and Principal Position Year Salary Bonus (1) Annual (2) Awards ($) Options (#) Compensation (4)
- ---------------------------- -------- ---------- ---------- ---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Gordon
Chairman of the Board, 1999 $ 245,000 $ -- $ -- $ -- 82,100 $ 2,781
President and Chief 1998 245,000 25,000 -- -- 38,100 3,165
Executive Officer 1997 245,000 -- -- -- -- 2,970
Alexander F. Collier (8)
Vice President, 1999 150,000 -- -- -- 15,000 1,706
Research and Development 1998 31,538 25,000 -- -- 19,070 565
David M. Haggerty (5)
Vice President, 1999 128,461 3,798 -- -- 17,700 1,224
Professional Services 1998 133,097 -- -- 3,626 10,100 1,202
Travis M. Richardson (6) 1999 140,000 -- -- -- 29,100 1,400
Vice President, Marketing 1998 128,846 -- -- -- 18,100 1,150
Eugene E. Waara, Jr. (7) 1999 100,000 -- 50,000 -- 17,500 987
Vice President, Sales 1998 85,577 13,500 69,042 -- 15,100 528
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</TABLE>
(1) Includes bonuses paid in fiscal 1998 to Mr. Gordon in recognition of his
efforts in restructuring the Company, bonuses paid to Mr. Waara under
the Sales Incentive Plan prior to his becoming an executive officer of the
Company and bonuses paid to Mr. Collier in fiscal 1998 arising from his
employment agreement with the former Carleton Corporation.
(2) Includes draws and commissions of $56,542 paid to Mr. Waara in fiscal 1998
prior to his becoming an executive officer of the Company, and draws of
$12,500 in 1998, and $50,000 in 1999 subsequent to his becoming an
executive officer of the Company.
(3) Although the 1990 Plan permits awards of restricted stock, stock
appreciation rights and other stock-based awards, no such awards other than
restricted stock awards have been made to date to any of the named
executive officers. Other than as set forth above, no restricted stock
awards have been made to any of the named executive officers during the
last three fiscal years.
(4) Represents Company matching contributions under the Company's Savings and
Investment Plan and discounts on shares of stock purchased through the
Company's Employee Stock Purchase Plan.
(5) Mr. Haggerty became an executive officer of the Company on February 1,
1998.
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(6) Mr. Richardson became an executive officer of the Company on February 1,
1998.
(7) Mr. Waara became an executive officer of the Company on February 1, 1998.
(8) Mr. Collier became an executive officer of the Company on February 1,
1998.
Stock Options
The following tables summarize (i) stock option grants during the Company's
fiscal year ended March 28, 1999 to or by the Named Executive Officers and (ii)
the value of all options held by such persons at March 28, 1999. No options held
by such executive officers were exercised during the 1999 fiscal year. Note that
all options granted to the Named Executive Officers replace options that were
canceled.
<TABLE>
<CAPTION>
Individual Grants (1)
--------------------------------------------------------------- Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Price Appreciation for
Options/- Years in Employees Exercise or Option Term
SARs Vesting in Fiscal Base Price Expiration ----------------------
Name Granted Period 1999 (%/Share) Date 5% 10%
- ---------------------- ----------- --------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Gordon 40,200 2 10.10% $ 1.3125 12/7/08 $ 33,181 $ 84,090
41,900 3 10.53 1.3125 12/7/08 34,554 87,646
Alexander F. Collier 15,000 4 3.77 1.3125 12/7/08 12,381 31,377
David M. Haggerty 6,000 2 1.51 1.3125 12/7/08 4,952 12,551
11,700 3 2.94 1.3125 12/7/08 9,657 24,474
Travis M. Richardson 9,000 2 2.26 1.3125 12/7/08 7,429 18,826
16,100 3 4.05 1.3125 12/7/08 13,289 33,678
4,000 4 1.01 1.3125 12/7/08 3,302 8,367
Eugene E. Waara, Jr. 2,500 3 0.63 1.3125 12/7/08 2,064 5,230
15,000 4 3.77 1.3125 12/7/08 12,381 31,377
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</TABLE>
(1) Exercise price equal to the fair market value of the Common Stock on the
date of grant as determined in accordance with the 1990 Plan. All of the
options were granted under the 1990 Plan, have ten-year terms and vest in
equal annual installments over two to four years as indicated on table.
(2) During the 1999 fiscal year, the Company granted employees options to
purchase an aggregate of 397,850 shares of Common Stock including 320,650
options that replaced outstanding options that were canceled.
(3) The compounding assumes a ten-year exercise period for all option grants.
The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the SEC and do not represent the Company's
estimate or projection of the Company's future Common Stock prices. These
amounts represent certain assumed rates of appreciation only. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock and overall stock market conditions. The amounts
reflected in this table may not necessarily be achieved.
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<TABLE>
<CAPTION>
Aggregated Value of Options Held at March 28, 1999 (1)
--------------------------------------------------------------------------
Number of Unexercised Options Value of Unexercised In-the-
Held Money Options Held
---------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Robert D. Gordon 0 82,100 $ -- $ 66,706
Alexander F. Collier 4,070 15,000 -- 15,494
David M. Haggerty 0 17,700 -- 14,381
Travis M. Richardson 0 29,100 -- 23,644
Eugene E. Waara, Jr. 0 17,500 -- 14,219
</TABLE>
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(1) "Value" has been determined based on the difference between the last sale
price of the Company's Common Stock as reported by the Nasdaq National
Market System on March 26, 1999 ($2.125) and the per share option exercise
price, multiplied by the number of shares subject to the in-the-money
options.
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Stock Option Repricing
The following table summarizes stock options granted to the executive
officers of the Company that have been repriced during the past ten fiscal
years.
<TABLE>
<CAPTION>
Ten-Year Option Repricing
Length of
Number of Market Original
Securities Price of Exercise Term
Underlying Stock at Price at New Remaining at
Options Time of Time of Exercise Date of
Name Date Repriced Repricing Repricing Price Repricing
- ----------------------- -------------- ------------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Gordon March 1990(3) 15,000 $ 8.7500 $ 15.0000 $ 8.7500 7 yrs, 10 mos.
March 1990(3) 3,000 8.7500 15.6250 8.7500 8 yrs, 4 mos.
March 1990(3) 7,000 8.7500 15.6250 8.7500 8 yrs, 9 mos.
March 1990(3) 20,000 8.7500 13.7500 8.7500 9 yrs, 2 mos.
April 1997(1)(3) 2,200 6.2500 8.7500 6.2500 2 yrs, 11 mos.
April 1997(1)(3) 10,000 6.2500 11.2500 6.2500 4 yrs, 1 mo.
April 1997(1)(3) 28,000 6.2500 17.5000 6.2500 6 yrs, 9 mos.
April 1997(1)(3) 3,800 6.2500 60.0000 6.2500 8 yrs, 1 mo.
December 1998(1) 2,200 1.3125 6.2500 1.3125 1 yr, 3 mos.
December 1998(1) 10,000 1.3125 6.2500 1.3125 2 yrs, 5 mos.
December 1998(1) 28,000 1.3125 6.2500 1.3125 5 yrs, 1 mo.
December 1998(1) 3,800 1.3125 6.2500 1.3125 6 yrs, 5 mos.
December 1998(1) 100 1.3125 6.2500 1.3125 8 yrs, 3 mos.
December 1998(1) 8,000 1.3125 7.5000 1.3125 8 yrs, 7 mos.
December 1998(1) 30,000 1.3125 6.2500 1.3125 8 yrs, 10 mos.
Julie Cummins Brady (2) April 1997(3) 4,000 6.2500 17.1875 6.2500 6 yrs, 9 mos.
April 1997(3) 1,600 6.2500 60.0000 6.2500 8 yrs, 1 mo.
April 1997(3) 1,000 6.2500 21.9000 6.2500 9 yrs, 1 mo.
Alexander F. Collier (1) December 1998(1) 15,000 1.3125 5.9400 1.3125 9 yrs, 1 mo.
Lloyd Hagemo March 1996(3) 7,000 22.8125 44.3750 22.8150 9 yrs, 4 mos.
David M. Haggerty (1) April 1997(3) 6,000 6.2500 10.7815 6.2500 5 yrs, 7 mos.
April 1997(3) 1,600 6.2500 15.6250 6.2500 9 yrs, 3 mos.
December 1998(1) 6,000 1.3125 6.2500 1.3125 3 yrs, 11 mos.
December 1998(1) 1,600 1.3125 6.2500 1.3125 7 yrs, 7 mos.
December 1998(1) 10,100 1.3125 6.2500 1.3125 8 yrs, 3 mos.
Martin G. Hahn March 1990(3) 250 8.7500 24.3750 8.7500 7 yrs, 5 mos.
March 1990(3) 250 8.7500 15.0000 8.7500 7 yrs, 10 mos.
March 1990(3) 15 8.7500 18.1250 8.7500 8 yrs, 1 mo.
Sue A. Hogue March 1990(3) 200 8.7500 10.6250 8.7500 9 yrs, 6 mos.
Travis M. Richardson (1) March 1990(3) 2,000 8.7500 15.6250 8.7500 8 yrs, 4 mos.
April 1997(3) 9,000 6.2500 8.7500 6.2500 2 yrs, 11 mos.
April 1997(3) 2,000 6.2500 15.6250 6.2500 9 yrs, 3 mos.
December 1998(1) 9,000 1.3125 6.2500 1.3125 1 yr, 3 mos.
December 1998(1) 2,000 1.3125 6.2500 1.3125 7 yrs, 7 mos.
December 1998(1) 100 1.3125 6.2500 1.3125 8 yrs, 3 mos.
December 1998(1) 14,000 1.3125 7.5000 1.3125 8 yrs, 7 mos.
December 1998(1) 4,000 1.3125 5.9400 1.3125 9 yrs, 1 mo.
</TABLE>
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<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Term
Underlying Stock at Price at New Remaining at
Options Time of Time of Exercise Date of
Name Date Repriced Repricing Repricing Price Repricing
- ----------------------- -------------- ------------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven L. Thimjon (1) December 1998(1) 25,000 $ 1.3125 $ 6.2500 $ 1.3125 8 yrs, 10 mos.
Eugene E. Waara, Jr. (1) March 1990(3) 20 8.7500 18.1250 8.7500 8 yrs, 1 mo.
April 1997(3) 2,400 6.2500 15.6250 6.2500 9 yrs, 3 mos.
December 1998(1) 2,400 1.3125 6.2500 1.3125 7 yrs, 7 mos.
December 1998(1) 100 1.3125 6.2500 1.3125 8 yrs, 3 mos.
December 1998(1) 15,000 1.3125 5.9400 1.3125 9 yrs, 1 mo.
Lizabeth Converse Wilson March 1990(3) 20 8.7500 18.1250 8.7500 8 yrs, 1 mo.
March 1990(3) 200 8.7500 15.6250 8.7500 8 yrs, 6 mos.
</TABLE>
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(1) See "--Report of Compensation Committee on Annual Compensation--Executive
Officer Compensation Program--Stock Option Repricing."
(2) Upon termination of Ms. Brady's employment in December 1997, outstanding
options held by her received the benefit of the Company's April 1997 option
repricing, and the expiration of the options was set at September 30, 1998.
(3) In September 1999, the Company completed a one-for-five reverse stock
split. Options issued prior to the reverse stock split are presented as if
the split had been effective at the time of the original grant and
subsequent repricing(s).
OVERVIEW
The Compensation Committee of the Board of Directors is composed entirely
of outside directors and is responsible for developing and approving the
Company's executive compensation policies. In addition, the Compensation
Committee determines on an annual basis the compensation to be paid to the Chief
Executive Officer and to each of the other executive officers of the Company.
The Compensation Committee has available to it an outside compensation
consultant and access to independent compensation data for other companies. The
overall objectives of the Company's executive compensation program are to
provide compensation that will attract and retain superior talent and reward
performance.
The Company's executive compensation program provides an overall level of
compensation opportunity that is competitive with a broad group of computer
manufacturing industry companies and a smaller group of software and high tech
companies comparable in size to the Company. The broad industry peer group to
which the Compensation Committee compares the Company's executive compensation
levels is currently a group of computer manufacturing companies for which survey
data is obtained from the Company's outside compensation consultant. The other
comparative group of companies used by the Compensation Committee in determining
executive compensation levels currently consists of software and high tech
companies selected by the outside compensation consultant that have annual
revenues approximately equal to those of the Company. Because the Compensation
Committee does not believe that all of the companies included in the peer group
index used in the shareholder return graph included in this Proxy Statement
under the caption "Comparative Stock Performance" are comparable to the Company
or compete for the same pool of executive talent, the two groups of companies
used by the Compensation Committee in setting the Company's executive
compensation levels are both different than the group of companies in such peer
group index.
Actual compensation levels may be greater than competitive levels in
surveyed companies based upon annual and long-term Company performance, as well
as individual performance. The Compensation Committee uses its discretion
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to set executive compensation at levels warranted in its judgment by the
Company's or an individual executive officer's circumstances.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The components of the Company's compensation program for its executive
officers include (a) base salary, (b) performance-based cash bonuses, (c)
long-term incentive compensation in the form of stock options and restricted
stock awards, (d) participation in a stock acquisition loan assistance program
and (e) participation in a deferred compensation program.
Base Salary
The Chief Executive Officer makes annual recommendations regarding the base
salaries of the executive officers (other than the Chief Executive Officer) to
the Compensation Committee. For the 1999 fiscal year, base salaries for the
executive officers were intended to be at approximately the 50th percentile of
fixed compensation levels for comparable management personnel employed by the
two groups of peer companies referred to above. In making base salary
recommendations, the Chief Executive Officer also takes into account individual
experience and performance, and specific issues particular to the Company. The
Compensation Committee generally approves the Chief Executive Officer's
recommendations with respect to base salaries for other executive officers.
Performance Based Bonuses
Under the Company's bonus plan for executive officers and other key
management employees, bonuses are awarded only if the Company achieves or
exceeds certain corporate performance objectives relating to total revenues and
net income as determined by the Board during the first quarter of each year. The
size of the fund available for such bonuses increases in relation to the extent
to which such objectives are exceeded. The Committee allocates the fund among
the executive officers and other key management personnel based on a percentage
of the executive's salary ranging from approximately 20% to 65% as established
at the beginning of the year. If the base performance criteria are met, each
officer is entitled to a base bonus amount equal to that percentage of the
officer's base salary. In the event the base performance criteria are exceeded,
bonuses may be increased up to two times the base bonus amount depending on the
extent to which such base performance criteria are exceeded. For the 1999 fiscal
year, bonus payments available to executive officers under the bonus plan, in
addition to base salary, were targeted to be in the top quartile of the salary
and bonus levels, assuming superior performance, for comparable management
personnel employed by the two comparative groups of companies referred to above.
During the 1999 fiscal year, the Company did not meet the total revenue and
net income goals set forth in the bonus plan, and as a result, no executive
officer received a bonus under the plan.
Stock Option and Restricted Stock Program
Stock options and restricted stock awards are granted to key management
employees under the 1990 Plan, which was approved by the Company's shareholders
in 1990. The objectives of the 1990 Plan are to align executive and shareholder
long-term interests by creating a strong and direct link between executive pay
and shareholder return, and to enable executives to develop and maintain a
significant long-term ownership position in the Company's Common Stock.
The 1990 Plan authorizes the Board or a committee of outside directors to
grant stock options, restricted stock and other types of awards to key
executives and key employees. To date, the only type of awards granted to
executive officers under the 1990 Plan have been stock options and restricted
stock. All stock options outstanding were granted at an option price equal to
the fair market value of the Company's Common Stock on the date of grant, have
ten year terms and generally become exercisable in installments over a four or
five year period.
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Stock options are granted upon commencement of employment based on the
recommendation of the Chief Executive Officer. In determining whether to
recommend additional option grants to an executive officer, the Chief Executive
Officer typically considers the individual's performance and any planned change
in functional responsibility. Neither the profitability of the Company nor the
market value of its stock are considered in setting the amount of executive
officer stock option grants. The stock option position of executive officers is
reviewed on an annual basis. The Company's policy is to not grant stock options
annually, but to review each individual's stock option position, at which point
the Compensation Committee may or may not grant additional options in its
discretion. The determination of whether or not additional options will be
granted is based on a number of factors, including Company performance,
individual performance and levels of options granted at the competitive median
for the two comparative groups of companies referred to above. Options to
purchase an aggregate of 161,400 shares of Common Stock were granted to five
executive officers other than the Chief Executive Officer during the 1999 fiscal
year.
Historically, the Company has not made restricted stock awards to executive
officers but rather has made such awards to other key management personnel.
However, Mr. Haggerty received a restricted stock award prior to the time he
became an executive officer.
Stock Acquisition Loan Assistance Program
In order to encourage stock ownership, the Board of Directors of the
Company adopted a stock acquisition loan assistance program (the "Loan
Program"). Under the terms of the Loan Program, the Company may make loans to
key employees in order to provide them with funds to purchase the Company's
Common Stock. In addition, participants are required to buy, with their own
funds, equivalent amounts of Common Stock. Each loan bears interest at the rate
of 5.0% per annum and is required to be repaid on a date two years after the
loan is made. However, if the participant continues to be employed with the
Company on such date, the entire amount of the loan is forgiven. During the 1999
fiscal year, the Company did not make any loans under the Loan Program.
Deferred Compensation Program
In May 1996, the Board of Directors adopted a deferred compensation program
(the "Deferred Compensation Program") pursuant to which executive officers of
the Company may elect to defer payment of a portion of their salary. Subject to
the Board of Directors' discretion, the Company may also make matching
contributions to the executive officer's deferred compensation accounts.
Although no Common Stock of the Company is acquired pursuant to the Deferred
Compensation Program, amounts deferred and Company matching contributions are
deemed to be invested in the Company's Common Stock. The right to receive the
amounts in the deferred compensation accounts vests on a date specified by the
Board of Directors, and amounts are distributed after the vesting date if the
executive officer is employed by the Company as of such date. The amount
distributed is determined based on the values of the Company's Common Stock on
the distribution date.
The terms of the Deferred Compensation Program as originally adopted by the
Board of Directors provided that the price of the Common Stock in which amounts
contributed to the deferred compensation accounts were deemed to be invested was
equal to the market price of the Common Stock as of the date of inception of the
Deferred Compensation Program, which was equal to $10.00 as of such date. In May
1996, the Board of Directors amended the Deferred Compensation Program to
provide that the price of the Common Stock in which amounts contributed to the
deferred compensation accounts were deemed to be invested would be equal to the
lowest average quarterly price for the four quarters following the date such
amounts were deemed to be invested in the Deferred Compensation Program.
Under the terms of the Deferred Compensation Program, if an executive
officer's employment is voluntarily terminated by the officer or is terminated
by the Company for cause prior to the vesting date, the amount of compensation
deferred by such officer is distributed in cash without regard to the value of
the stock on such date, and the Company matching contribution is forfeited. If
the executive officer's employment is terminated by the Company without cause,
the greater of the amount of compensation deferred by such officer or the value
of the deferred compensation account attributable to amounts deferred by such
officer is distributed in cash, and a pro rata portion of the value of the
Company
-11-
<PAGE>
matching contributions is distributed in cash based upon the number of days from
the date of the initial election to participate in the Deferred Compensation
Program to the date employment is terminated and the number of days to the
vesting date. Upon a change in control of the Company, all amounts become fully
vested.
During the 1999 fiscal year, no executive officers of the Company deferred
any salary pursuant to the Deferred Compensation Program, and the Company did
not make any matching or supplemental contributions.
Savings and Investment Plan; Benefits
The Company makes a matching contribution under the Company's Savings and
Investment Plan, a Section 401(k) retirement plan. The Company also has an
Employee Stock Purchase Plan pursuant to which the Company's Common Stock can be
purchased through periodic payroll deductions at a discount from the market
price. In addition, the Company provides medical and other miscellaneous
benefits to executive officers that are generally available to Company
employees. The amount of perquisites did not exceed 10% of total annual salary
and bonus for any executive officer during the 1999 fiscal year.
Stock Option Cancellation and New Option Grants
In November 1998, the Compensation Committee and Board of Directors
authorized the cancellation of all outstanding stock options under the 1990 Plan
held by then current employees and Board members and the granting of new options
to such persons. The Compensation Committee and Board of Directors believed that
the market price of the Company's common stock had been negatively affected by
several factors, including general market factors, the Company's earnings
performance and limited investment analyst coverage. As a result, the
outstanding stock options, which had been granted at exercise prices ranging
from $1.8750 to $12.3450 per share, no longer represented an effective retention
or motivational incentive for employees to work to achieve long-term success for
the Company. Therefore, the options were canceled and new options granted
effective December 7, 1998 at an exercise price equal to the market price of the
Common Stock on that date ($1.3125). Option vesting periods for the new options
range from two to four years. The number of shares subject to the canceled
options and new grants at the average option exercise price for each of the
Named Executive Officers is as follows: Mr. Gordon -- 82,108 shares at an
average exercise price of $6.37 per share; Mr. Collier -- 15,000 shares at an
average exercise price of $5.94 per share; Mr. Haggerty -- 12,700 shares at an
average exercise price of $6.25 per share; Mr. Richardson -- 29,100 shares at an
average exercise price of $6.81 per share; and Mr. Waara -- 17,500 shares at an
average exercise price of $5.18 per share.
CHIEF EXECUTIVE OFFICER COMPENSATION
Base Salary
The base salary of the Chief Executive Officer is established by and is
subject to adjustment by the Compensation Committee. For the 1999 fiscal year,
the Chief Executive Officer's base salary was intended to be at approximately
the 50th percentile of the base salaries for chief executive officers of the two
comparative groups of companies referred to above. Other factors taken into
consideration in the determination of the Chief Executive Officer's base salary
include historical compensation practices at the Company and the general
experience of the Compensation Committee members in dealing with compensation
matters at other high-growth technology companies. In evaluating the performance
and setting the base salary of the Chief Executive Officer, the Compensation
Committee has taken into account the Company's financial performance and Mr.
Gordon's individual performance. Mr. Gordon's base salary is $245,000. As a
result of the Company's performance, Mr. Gordon did not receive an increase in
his base salary in fiscal 1999.
Bonuses, Stock Option Awards and Loan Program
Mr. Gordon did not receive a bonus for the 1999 fiscal year under the bonus
plan because the Company did not meet the total revenue and net income goals set
forth in the bonus plan. Mr. Gordon did receive the benefit of the
-12-
<PAGE>
Company's stock option cancellation and new grants as described above. Mr.
Gordon has not been granted any restricted stock under the 1990 Plan to date.
During the 1999 fiscal year, Mr. Gordon did not defer any salary pursuant
to the Deferred Compensation Program, and the Company did not make any matching
or supplemental contribution to Mr. Gordon's deferred compensation account.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), should not affect the deductibility of compensation paid to the
Company's executive officers for the foreseeable future. However, in 1994, the
1990 Plan was amended to comply with Section 162(m) in order that compensation
resulting from stock options and certain other awards under the 1990 Plan will
not be counted toward the $1,000,000 limit on deductible compensation under
Section 162(m). The Compensation Committee has not formulated any policy with
respect to qualifying other types of compensation for deductibility under
Section 162(m).
Nicholas J. Covatta, Jr.
Michael Dexter-Smith
Robert W. Fischer
George E. Hubman
Arch J. McGill
Members of the Compensation Committee
Severance Arrangements
The Company has a policy under which its current executive officers are
entitled to receive severance payments in the event that their employment is
involuntarily terminated. Pursuant to this policy, Mr. Gordon would receive
twelve months of severance pay and the other executive officers would receive
six months.
Comparative Stock Performance
The graph below compares the cumulative total shareholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return on the Total Return Index for the Nasdaq Stock Market (U.S. Companies)
and the Total Return Index for Nasdaq Computer Manufacturing Stocks over the
same period (assuming the investment of $100 in each on March 28, 1994, and the
reinvestment of all dividends).
Indices
---------------------
Nasdaq Nasdaq Nasdaq
(US) (Comp Mfr) (Carleton)
-------- ---------- ----------
Mar-94 239.419 206.876 15.00000
Mar-95 266.363 247.032 64.37500
Mar-96 361.670 380.308 18.12500
Mar-97 401.825 415.860 7.18750
Mar-98 609.153 736.501 5.78125
Mar-99 819.869 1,459.679 2.12500
$100 Investment value
----------------------------
April 3, 1994 $100 $100 $100
April 2, 1995 $111 $119 $429
March 31, 1996 $151 $184 $121
March 30, 1997 $168 $201 $ 48
March 29, 1998 $254 $356 $ 39
March 28, 1999 $342 $706 $ 14
- -----------------
(1) This index is composed of computer manufacturing companies (including
the Company) traded on the Nasdaq Stock Market. As of March 28, 1999,
this index included approximately 190 companies.
-13-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of June 30, 1999, certain information
with respect to the beneficial ownership of Company's Common Stock by (i) each
director of the Company, (ii) each of the Named Executive Officers, and (iii)
all directors and executive officers of the Company as a group. No person is
known by the Company to beneficially own more than 5% of the Company's Common
Stock. Except as otherwise indicated, the shareholders listed in the table have
sole voting and investment power with respect to the Common Stock owned by them.
The address of each of the following shareholders is the same as the Company.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
------------------------------------
Name Number (2) Percentage
- ------------------------------------------------ ---------------- ---------------
<S> <C> <C>
Robert D. Gordon (3)............................ 8,621 *
Nicholas J. Covatta, Jr. (2)(4)................. 17,600 *
Michael Dexter-Smith (2)........................ 26,952 *
Robert W. Fischer (3)(5)........................ 20,520 *
George E. Hubman (2)............................ 9,200 *
Arch J. McGill (2).............................. 30,054 *
Alexander F. Collier (2)........................ 4,470 *
David M. Haggerty (6)........................... 1,374 *
Travis M. Richardson (7)........................ 2,000 *
Eugene E. Waara, Jr............................. 473 *
All directors and executive officers as a group
(10 persons) (8)................................ 127,264 3.80%
</TABLE>
- ---------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with rules of the SEC, and
includes voting power and/or investment power with respect to securities.
Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days of June 30, 1998 are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote, the Company believes that the persons named in
this table, based on information provided by such persons, have sole voting
and investment power with respect to the shares of Common Stock indicated.
(2) Includes shares subject to options exercisable within 60 days of June 30,
1999 under the 1990 Plan as follows: Mr. Covatta, 6,000 shares; Mr.
Dexter-Smith, 6,000 shares; Mr. Fischer, 14,000 shares; Mr. Hubman, 9,000
shares; and Mr. McGill, 6,000 shares. Also includes 4,070 shares subject to
options held by Alexander F. Collier, Vice President - Development, that
were rolled over from the former Carleton Corporation Option Plan and that
are currently exercisable.
(3) Includes 802 shares held in the Company's 401(k) plan for Mr. Gordon.
(4) Includes 2,000 shares held by Mr. Covatta as Trustee of Eastern Shore
Nursery Incentive Plan and 2,000 shares held in an IRA for the account
of Mr. Covatta.
(5) Includes 600 shares owned by Robert W. Fischer, Inc., a corporation
controlled by Mr. Fischer.
-14-
<PAGE>
(6) Includes 174 shares held in the Company's 401(k) plan for Mr. Haggerty.
(7) Includes 2,000 shares held in an IRA for the account of Mr. Richardson.
(8) See notes (2) - (7) above.
Item 13. Certain Relationships and Related Transactions
None.
-15-
<PAGE>
Signature
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.
Date: July 26, 1999 CARLETON CORPORATION
By: /s/ Robert D. Gordon
--------------------------------------
Robert D. Gordon
Chairman of the Board,
Chief Executive Officer
and President
<TABLE>
<S> <C> <C>
Robert D. Gordon* Chairman of the Board, )
Chief Executive Officer, )
Chief Financial Officer, )
Chief Accounting Officer, )
President and Director )
(Principal Executive Officer )
and Principal Financial and )
Accounting Officer) )
*By: /s/ Robert D. Gordon
----------------------
Robert D. Gordon
Pro Se and Attorney-in-Fact
)
Nicholas J. Covatta, Jr.* Director )
)
Michael Dexter-Smith* Director )
) Date: July 26, 1999
)
Robert W. Fischer* Director )
)
George E. Hubman* Director )
)
Arch J. McGill* Director )
)
</TABLE>
-16-
<PAGE>
Carleton Corporation
Index of Exhibits
Annual Report on Form 10-K405/A
For the Year Ended March 29, 1998
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
<S> <C> <C>
27 Financial Data Schedule Electronically Filed
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> MAR-28-1999
<CASH> 3,233
<SECURITIES> 0
<RECEIVABLES> 2,201
<ALLOWANCES> 50
<INVENTORY> 0
<CURRENT-ASSETS> 5,545
<PP&E> 2,666
<DEPRECIATION> 1,845
<TOTAL-ASSETS> 10,781
<CURRENT-LIABILITIES> 3,566
<BONDS> 174
0
0
<COMMON> 836
<OTHER-SE> 6,205
<TOTAL-LIABILITY-AND-EQUITY> 10,781
<SALES> 1,755
<TOTAL-REVENUES> 5,559
<CGS> 3,270
<TOTAL-COSTS> 3,270
<OTHER-EXPENSES> 11,645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> (9,039)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,039)
<DISCONTINUED> 185
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,854)
<EPS-BASIC> (2.65)
<EPS-DILUTED> (2.65)
</TABLE>
