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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT #1
FORM 10-K/A
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-6549
AMERICAN SCIENCE AND ENGINEERING, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2240991
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
829 Middlesex Turnpike, Billerica, Massachusetts 01821
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (978) 262-8700
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
<S> <C>
Common Stock ($.66 2/3 par value) American Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ---
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 voting stock held by non-affiliates of the
registrant on June 30, 1998 was $67,776,063
4,780,202 shares of Registrant's Common Stock were outstanding on June 30, 1998.
The Exhibit Index is located on page 49
PAGE 1 OF 76 PAGES
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The undersigned registrant hereby amends the following portion of its
Annual Report on Form 10-K dated July, 1998 ("Form 10K") as set forth below:
ITEM 11. EXECUTIVE COMPENSATION
/ / The following chart provides information concerning compensation paid by the
Company during the year ended March 31, 1998 to the Chief Executive Officer
and each of the four most highly compensated executive officers of the
Company whose aggregate compensation exceeded $100,000.
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
Long-Term
Annual Compen-
Compensation sation
-----------------------------
All
Name and Principal Fiscal Option Other Compen-
Position Year Salary ($) Bonus ($) Awards (#) sation ($) (1)
- ------------------------ ------ --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Ralph S. Sheridan 1998 240,000 230,000 0 7,729
President and CEO 1997 222,213 270,385(3) 225,000 4,479
1996 200,000 202,168(3) 0 2,486
Jeffrey A. Bernfeld 1998 130,000 30,000 20,000 408
Vice President, General 1997 120,408 19,000 16,000 408
Counsel 1996(2) 7,846 N.A. 24,000 408
Peter W. Harris 1998 120,192 45,000 0 403
Vice President, 1997 111,941 45,000 30,000 403
Sales / Marketing 1996 110,000 40,000 0 403
Alan H. Rutan 1998 115,112 12,000 16,000 1,748
Vice President, 1997(2) 87,132 -- 24,000 1,748
Engineering
Lee C. Steele 1998 125,077 29,750 30,000 752
Vice President and CFO 1997 120,560 27,000 0 752
1996 110,752 27,000 0 1,344
</TABLE>
(1) All Other Compensation includes imputed income from taxable life insurance
premiums paid by the Company, and, for Mr. Sheridan, a leased automobile.
(2) The indicated years were years of partial employment with the Company for
the named executive.
(3) Mr. Sheridan's bonus is paid in respect of "contract years" ending
September 30th in each year and is paid in cash, except in fiscal years
1996 and 1997 when the bonus also included Company stock and payments made
to him to alleviate the tax impact of the stock bonus.
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Mr. Sheridan has an employment contract with the Company that provides for his
employment as President and Chief Executive Officer, and as a Director, through
September 1999, at an annual salary of $240,000, subject to annual review, plus
performance bonuses tied to specific accomplishments. This contract replaces Mr.
Sheridan's original contract with the Company, which expired in September 1996.
Under the contract, Mr. Sheridan is eligible to receive an annual bonus of up to
$230,000 in each contract year, based on his accomplishment of goals established
by the Compensation Committee. Under the previous contract, but not under the
current contract, Mr. Sheridan also received a bonus of up to 10,000 shares of
common stock and an amount calculated to compensate him for the taxes due on the
stock portion of this bonus. In addition, in October 1996 the Company granted
Mr. Sheridan options to purchase 225,000 shares of the Company's Common Stock at
an exercise price of $14.00 per share, the fair market value of the Company's
Common Stock on the date of grant. The options become exercisable at the rate of
75,000 options per year on the first three anniversaries of the grant.
Mr. Sheridan recognized no income upon the issuance of the options. When the
options are exercised, Mr. Sheridan will recognize ordinary income in an amount
equal to the difference between the fair market value of the Common Stock
received upon the exercise of the option and the amount paid for the Common
Stock. At that time, the Company will be allowed a deduction equal to the amount
recognized as ordinary income by Mr. Sheridan. The options provide that to the
extent that exercise of an option would give rise to compensation expense that
the Company reasonably expects will not be deductible for tax purposes in any
given taxable year pursuant to Section 162(m) of the Internal Revenue Code of
1986, as amended, the number of shares as to which the options may be exercised
during that taxable year shall be limited.
Under his initial employment contract, Mr. Sheridan purchased 160,000 treasury
shares of the Company's Common Stock payable by promissory note. The note is due
on the earlier of September 15, 2003 or the termination of Mr. Sheridan's
employment. The Company has agreed to reimburse Mr. Sheridan for the interest
payable under the note in most circumstances.
Mr. Sheridan is entitled to receive the same benefits as other senior executives
of the company, as well as to the use of a car.
In the event that Mr. Sheridan's employment with the Company is terminated
without Cause, or by him for Good Reason (as defined in the employment
contract), he will receive twelve months' pay and any previously earned bonuses.
In the event that Mr. Sheridan's employment with the Company is terminated for
Cause, or by him other than for Good Reason (as defined in the employment
contract), or by his death or disability, he will not be entitled to receive any
salary beyond the date of termination, and he will only be entitled to receive
previously earned bonuses if the termination is caused by death or disability.
Mr. Bernfeld has an agreement with the Company which provides for a minimum base
salary of $120,000, adjustable at the discretion of the President, and a bonus
of up to $20,000 subject to the achievement of individual and corporate goals;
and 24,000 stock options granted at market price, which vest according to a
schedule. The agreement is for a three year term ending in February, 1999, and
grants Mr. Bernfeld severance payments equal to one year's salary if he is
terminated in connection with a change of the control of the Company as defined
in the agreement. The agreement also provides that if Mr. Bernfeld is terminated
for any reason other than "Cause" as defined in the agreement, he will be
entitled to receive an amount equal to at least six months salary.
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Dr. Callerame and Messrs. Rutan and Steele have agreements with the Company
granting each of them severance payments equal to one year's salary if he is
terminated in connection with a change of control of the Company as defined in
the agreement. The agreement also provides that if each of them is terminated
for any reason other than "Cause" as defined in the agreement, he will be
entitled to receive an amount equal to at least six months salary.
/ / The following tables provide information concerning the grant of options
in Fiscal Year 1998 to Executive Officers named in the Summary Compensation
Table and options exercised by those officers.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value at
--------------------------------------------------- Assumed Annual Rates of Stock
Price Appreciation for Option
Term ($)
------------------------------
% of Total
Options
Options Granted to All Exercise Expiration
Granted Employees Price ($) Date 5%/year 10%/year
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ralph S. Sheridan 0 N/A N/A N/A N/A N/A
Jeffrey A. Bernfeld 20,000 6.98 11.125 11/20/07 221,374 484,295
Peter W. Harris 0 N/A N/A N/A N/A N/A
Alan H. Rutan 16,000 5.58 11.125 11/20/07 177,099 387,436
Lee C. Steele 30,000 10.47 11.125 11/20/07 332,061 726,442
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised In-
Unexercised Options The-Money Options at
Shares at Fiscal Year End - Fiscal Year End -
Acquired March 31, 1998 (#) March 31, 1998 ($)
on Value -------------------- ------------------
Exercise Realized Exer- Unexer- Exer- Unexer-
(#) ($) cisable cisable cisable cisable
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ralph S. Sheridan 0 0 195,000 150,000 2,176,875 0
Jeffrey A. Bernfeld 0 0 30,000 30,000 107,250 85,750
Peter W. Harris 0 0 40,000 20,000 318,250 75,000
Alan H. Rutan 0 0 12,000 28,000 43,500 83,500
Lee C. Steele 0 0 50,000 30,000 409,375 75,000
</TABLE>
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/ / Compensation of Directors
Directors who are also employees of the Company do not receive additional
compensation as Directors. Non-Employee Directors (other than the Chairman)
receive annual compensation of 2,000 shares of Company Common Stock issuable on
January 10th in each year, and options to purchase 7,000 shares of Common Stock
at the closing price on the date of the Annual Meeting in each year. The
Chairman receives 2,500 shares of Common Stock on January 10th in each year as
well as cash payments totaling $14,331 in fiscal 1998 and continues to receive
deferred compensation under a now discontinued plan described below. No meeting
fees or other fees are payable to any Director. See Item 13 - Certain
Relationships and Related Transactions for additional information concerning
certain Directors.
Dr. Feshbach, the Company's Chairman, is covered by a nonfunded deferred
compensation plan (adopted in 1976 and amended in 1977, 1980, 1986, 1990 and
1992) that provides for periodic payments beginning at age 65, based on length
of service. During the year, Dr. Feshbach received $4,752 under the Plan. The
Company accrues the current cost of the plan, which amounted to $10,000 in
fiscal 1998.
/ / Compensation Committee Interlocks, Insider Participation and Section 16
Reporting
During the fiscal year ended March 31, 1998, the Company's Compensation
Committee consisted of Dr. Herman Feshbach, Dr. Hamilton W. Helmer and Dr.
Donald J. McCarren. No reportable relationship existed with respect to any
member of the Compensation Committee.
Section 16(a) of the Securities Exchange Act of 1934 requires certain persons,
including the Company's Directors and Executive Officers, to file initial
reports of beneficial ownership of the Company's securities and reports of
changes in beneficial ownership with the Securities and Exchange Commission. For
fiscal year 1998, the Company believes that all required reports were filed on
time.
/ / Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (consisting of the three
outside Directors whose names appear below this Report) has sole responsibility
for compensation issues relating to the Chief Executive Officer. Compensation
practices and policies for the other executive officers are set by the Chief
Executive Officer with the advice of the Compensation Committee.
The Compensation Committee has formulated an approach to all executive
compensation that emphasizes the establishment of goals and objectives for each
executive and for the Company as a whole and ties a substantial portion of
executive compensation to the performance of the executive and the Company with
respect to these goals and objectives. Base compensation for executive officers
(and many other Company employees) is established on the basis of an analysis of
salaries received by comparable employees of high-tech and manufacturing
companies in the Greater Boston area, company financial results and prospects,
and individual contributions relative to the job description and past
performance of each officer.
In line with this approach, the Company entered into a new employment agreement
with its President and Chief Executive Officer, Mr. Ralph S. Sheridan, in 1996
(effective as of September 1996). This Agreement was based, in part, on an
independent consultant's analysis of compensation arrangements for chief
executives of comparable companies, and was also based on a careful review of
the most important goals and objectives for the Company. The Agreement
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provides for annual cash compensation of $240,000, plus annual incentive bonuses
of up to $230,000 tied to specific, agreed upon performance criteria. In
addition, in order to provide for long-term incentives, the Company has issued
to Mr. Sheridan nonstatutory stock options to purchase 225,000 shares of Common
Stock which vest ratably over three years.
For the contract year ended in September 1997, the Committee awarded Mr.
Sheridan a cash bonus of $230,000, representing 100% of the potential award
under his contract. This award represents the Committee's determination that Mr.
Sheridan had done an excellent job over the preceding twelve months and had met
all of the goals and objectives jointly established by the Committee and Mr.
Sheridan.
Also in keeping with its performance-based compensation philosophy, in the
spring of 1994, the Company implemented an incentive compensation program for
all executives who report directly to the Office of the President. Under this
new policy, these executives receive a specified portion of their total
compensation (ranging from 10% to 50%) based upon two factors: their completion
of agreed upon goals and objectives, and the performance of the entire Company.
Report Submitted By: Dr. Herman Feshbach, Dr. Hamilton W. Helmer and Dr. Donald
J. McCarren.
6
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/ / Stock Performance Chart
The following chart graphs the performance of the cumulative total return to
shareholders (stock price appreciation plus dividends) during the previous five
years in comparison to the returns of the Standard & Poor's 500 Composite Stock
Price Index and the Standard & Poor's 500 High-Tech Composite Stock Price Index.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
INDEXED RETURNS
Years Ending
Base
Period
Company/Index Mar93 Mar94 Mar95 Mar96 Mar97 Mar98
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AMERICAN SCIENCE ENGINEERING 100 46.97 75.76 119.70 146.97 165.15
S&P 500 INDEX 100 101.48 117.25 154.77 185.40 274.39
TECHNOLOGY-500 100 117.62 148.84 200.95 271.66 410.57
</TABLE>
Note: Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year (and
reinvestment of dividends) in the Company's Common Stock, Standard &
Poor's 500 Composite Stock Price Index and the Standard & Poor's 500 High-
Tech Composite Stock Price Index.
7
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SIGNATURE
Pursuant to the requirements of Section 12b-15 of the Securities Exchange Act of
1934, the Company has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN SCIENCE AND ENGINEERING, INC.
DATED: OCTOBER, 1998
By: /s/ Jeffrey A. Bernfeld
-----------------------
Jeffrey A. Bernfeld, Vice President
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