<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))
/ / Definitive Proxy Statement
/x/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
American Science and Engineering, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / 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>
AMERICAN SCIENCE AND ENGINEERING, INC.
829 Middlesex Turnpike
Billerica, Massachusetts 01821
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 1998
The Special Meeting in Lieu of Annual Meeting of Stockholders of
American Science and Engineering, Inc. (the "Company") will be held
Thursday, September 24, 1998, at 10:30 A.M., at the Renaissance
Bedford Hotel, 44 Middlesex Turnpike, Bedford, Massachusetts, for
the following purposes:
(1) To fix the number of Directors of the Company at seven
for the ensuing year, and to elect the seven persons
named in the accompanying Proxy Statement to serve as
Directors until the next Annual Meeting and until their
successors are elected and qualified; and
(2) To consider and act upon any other business that may
properly come before the meeting and any adjournment or
adjournments thereof.
Stockholders of record at the close of business on August 14, 1998 are entitled
to notice of, and to vote at, the meeting.
By Order of the Board of Directors
Jeffrey A. Bernfeld
Clerk
August 24, 1998
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING IN
PERSON, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY
AND VOTE YOUR SHARES IN PERSON.
- -------------------------------------------------------------------------------
<PAGE>
AMERICAN SCIENCE AND ENGINEERING, INC.
829 Middlesex Turnpike
Billerica, Massachusetts 01821
PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors of American Science
and Engineering, Inc. (the "Company") for use at the Special Meeting in Lieu of
Annual Meeting of Stockholders to be held on Thursday, September 24, 1998, at
10:30 a.m. at the Renaissance Bedford Hotel, 44 Middlesex Turnpike, Bedford,
Massachusetts, and at any adjournment of the meeting (the "Meeting"). The
matters to be considered and acted upon at the Meeting are described in the
attached notice of the Meeting and in this Proxy Statement.
Stockholders of record at the close of business on August 14, 1998 are entitled
to notice of and to vote at the Meeting. Each share of Common Stock of the
Company outstanding on the record date is entitled to one vote. As of the close
of business on August 14, 1998, 4,791,632 shares of Common Stock of the Company
were outstanding.
This Proxy Statement and the accompanying Proxy will first be mailed to
stockholders on or about August 24, 1998. A copy of the Annual Report of the
Company for its fiscal year ended March 31, 1998 accompanies this Proxy
Statement.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors of the Company shall
consist of not less than three nor more than twelve directors. The Board of
Directors currently consists of seven members, whose terms expire at the
Meeting. The Directors are recommending that the size of the Board be set at
seven members and that the seven incumbent directors identified below be
re-elected.
The affirmative vote of a majority of the shares of Common Stock of the Company
voted in person or by proxy at the Meeting is required to fix the number of
directors and a plurality of the affirmative votes cast is required to elect
each of the seven directors. Each director will serve for one year and until his
successor is elected and qualified. If any nominee at the time of the election
is unable or unwilling to serve or is otherwise unavailable for election, the
Board of Directors may designate another nominee and the persons named as
proxies will vote all proxies for such nominee. The Board of Directors has no
reason to believe that any nominee is unwilling or unable to serve. There are no
arrangements between any nominee and any other person relating to such nominee's
nomination.
Proxies solicited by the Board of Directors of the Company, if properly signed
and returned and containing no instructions to the contrary, will be voted FOR
fixing the number of directors at seven and electing the seven nominees listed
below as directors of the Company.
<PAGE>
Nominees
The names of, and certain information with respect to, the persons nominated by
the Board of Directors for election as directors are as follows:
<TABLE>
<CAPTION>
Positions and Offices Date Assumed
Name Age of Company Held Each Position
- ----- --- ---------------------- -------------
<S> <C> <C> <C>
Herman Feshbach 81 Director September 1975
Chairman July 1993
Al Gladen 60 Director September 1995
Hamilton W. Helmer 51 Director February 1993
Donald J. McCarren 58 Director February 1993
William E. Odom 65 Director September 1996
Ralph S. Sheridan 48 Director January 1994
President and Chief Executive Officer September 1993
Carl W. Vogt 62 Director June 1997
</TABLE>
Dr. Herman Feshbach is an Institute Professor Emeritus at the Massachusetts
Institute of Technology, a position he has held for more than five years, and
has previously served as Chairman of the Physics Department at MIT and Director
of the MIT Center for Theoretical Physics. He is a past President of the
American Physical Society and the American Academy of Arts and Sciences and is
Fellow of both those Organizations and of the American Association for the
Advancement of Sciences. He is on the Board of Governors for Tel Aviv University
and the Weizmann Institute of Science, is on the Board of Editors for Daedalus
and Editor of the Annals of Physics, and has served as Chairman or Member on
numerous committees for the Department of Energy, the National Science
Foundation, the National Academy of Sciences, and the American Physical Society.
He was awarded the National Medal of Science by President Reagan in 1986. Dr.
Feshbach received his Ph.D. from MIT.
Mr. Al Gladen is President of Dabster, Inc., a technology consulting firm
specializing in engineering and technology management assistance, with offices
in Kent, Washington. Mr. Gladen's consulting activities have included strategic
technology planning, new product development, project management and acquisition
review. Mr. Gladen has acted as a technology and engineering consultant to the
Company since 1993, and it is expected that he will continue to provide such
assistance on a part-time basis. Mr. Gladen holds four U.S. patents and is a
director of four other privately held corporations.
Dr. Hamilton W. Helmer has, for the last 15 years, been Managing Partner of
Helmer & Associates, a strategic consulting firm located in Los Altos,
California. Prior to that, Dr. Helmer worked for Bain & Co. Dr. Helmer holds a
Ph.D. in Economics from Yale University.
Dr. Donald J. McCarren is affiliated with the National Center for Genome
Resources, a non-profit corporation located in Santa Fe, New Mexico, which
supports genome projects and related research by providing resources such as
expertise in bioinformatics. Prior to being elected President of the NCGR in
1997, Dr. McCarren was President and Chief Executive Officer of Tacora
Corporation, a medical technology company located in Seattle, Washington. From
July 1992 to June 1994, he was President and Chief Operating Officer of
ImmunoGen, Inc., a bio-tech research and development company located in
Cambridge, Massachusetts. Prior to that, he was President (1990 to 1992) of the
Adria Laboratories Division of Erbamont N.V. in Columbus, Ohio, and Corporate
Vice President of Worldwide Marketing and Business Development (1989 to 1990)
and Vice President of Far East and Australian Operations (1986 to 1989) of
Erbamont, N.V. Dr. McCarren holds a Ph.D. in Developmental Economics.
2
<PAGE>
General William E. Odom is the Director of National Security Studies for the
Hudson Institute in Washington, D.C. and an adjunct Professor in the Department
of Political Science at Yale University. Prior to joining the Hudson Institute
in 1988, General Odom spent 34 years as an officer in the United States Army,
retiring with the rank of Lieutenant General. While on active duty, General Odom
served as Director of the National Security Agency for three years, Assistant
Chief of Staff for Intelligence for the Department of the Army for four years
and Military Assistant to the President's National Security Advisor for four
years. General Odom received his B.S. degree from West Point and Masters and
Ph.D. degrees from Columbia University. General Odom is on the Board of
Directors of Nichols Research Corporation of Huntsville, Alabama, V-ONE
Corporation of Rockville, Maryland, Middlebury College, from which he received
an honorary doctorate, and the Institute for the Study of Diplomacy at
Georgetown University. General Odom is the author of five books and numerous
articles.
Mr. Ralph S. Sheridan was elected President and Chief Executive Officer of the
Company in September 1993, and in January of 1994, he was elected a Director.
Prior to joining the Company, Mr. Sheridan ran his own consulting and investment
firm, Value Management Corporation, in Waltham, Massachusetts. Prior to that,
Mr. Sheridan was President and CEO (1988-1989) and Vice President of Marketing
and Operations (1987-1988) of HEC Energy Corp., in Boston, Massachusetts. Before
joining HEC, Mr. Sheridan held the position of Vice President of Operations for
the Engineered Systems and Controls Group (1984-1986) and Vice President of
Corporate Business Development (1981-1984) at Combustion Engineering, Inc. in
Stamford, Connecticut. Mr. Sheridan holds a B.S. in Chemistry and an M.B.A.,
both from Ohio State University.
Mr. Carl W. Vogt was elected to the Board in June, 1997. He is a partner in the
Washington, D.C. office of the national law firm of Fulbright & Jaworski. Mr.
Vogt has been with that firm since 1966, with various periods away from the firm
to perform government service. In 1992, he was appointed by President Bush as
the Chairman of the National Transportation Safety Board, where he served until
1994. Mr. Vogt earned his bachelor's degree from Williams College and his law
degree from the University of Texas Law School.
.
Executive Officers (Who are not also Directors)
<TABLE>
<CAPTION>
Positions and Offices Date Assumed
Name Age of Company Held Each Position
- ---- --- --------------------- -------------
<S> <C> <C> <C>
Jeffrey A. Bernfeld 41 Vice President, General Counsel and Clerk February 1996
Joseph Callerame 48 Vice President, Technology and Chief June 1998
Technology Officer
Peter W. Harris 44 Vice President, Sales and Marketing March 1994
Alan H. Rutan 57 Vice President, Engineering July 1996
Lee C. Steele 49 Vice President of Finance, Treasurer and Chief September 1994
Financial Officer
</TABLE>
Mr. Jeffrey A. Bernfeld joined AS&E as Vice President, General Counsel and Clerk
in February 1996. Prior to that time, he was Vice President and General Counsel
of Spire Corporation in Bedford, Massachusetts for three and one-half years; a
founder and Managing Director of Global Solutions, Inc. in Wellesley,
Massachusetts for one year; Vice President and General Counsel of The Mediplex
Group in Wellesley, Massachusetts for two years; and a partner at Goldstein &
Manello, a law firm in Boston, Massachusetts, where he began his career as an
Associate in 1981. Mr. Bernfeld received his B.A. from Brandeis University and
his J.D. from New York University School of Law. Mr. Bernfeld is a director of
Summit Technology, Inc. of Waltham, Massachusetts.
3
<PAGE>
Dr. Joseph Callerame joined American Science and Engineering, Inc. in June
1998 as Vice President, Technology, and Chief Technology Officer. Prior to
joining AS&E, Dr. Callerame spent over twenty years at Raytheon Company, most
recently as Manager, Engineering and Technology Development and Consulting
Scientist, at Raytheon Electronic Systems. Prior to that appointment, Dr.
Callerame was Deputy General Manager of Raytheon's Corporate Research
Division. Dr. Callerame received his B.A. in Physics from Columbia College,
and his M.A. and Ph.D., also in Physics, from Harvard University. After
receiving his Ph.D. and prior to his employment at Raytheon, Dr. Callerame
served as a Post-Doctoral Fellow in Nuclear Physics at M.I.T.
Mr. Peter W. Harris joined the Company in February 1994 as Vice President, Sales
and Marketing. Prior to joining the Company, Mr. Harris was Manager of External
Affairs for Stone & Webster, an architectural engineering firm in Boston,
Massachusetts, where he held a number of positions beginning in 1988. During his
time at Stone & Webster, Mr. Harris concentrated on Federal government and
international sales. Mr. Harris, a graduate of the U.S. Naval Academy, holds the
rank of Captain in the U.S. Naval Reserve and commanded several units during his
twelve years of active duty and seven years in the Naval Reserve. In addition,
Mr. Harris holds a Master's degree in National Security Studies from Georgetown
University.
Mr. Alan H. Rutan joined the Company in July 1996 as Vice President of
Engineering. Prior to that time, Mr. Rutan spent 11 years at Raytheon Company,
most recently as Manager of the Air Defense Systems Department, where his work
focused on radar systems engineering and signal processing. Prior to his
Raytheon experience, Mr. Rutan spent seven years at GTE Laboratories as a Senior
Member of the Technical Staff. From 1974 to 1978, Mr. Rutan ran his own
consulting firm, Signal Processing Associates, Inc., which specialized in image
processing applications for various government security organizations. Mr. Rutan
received his B.A. in Physics from Harvard University.
Mr. Lee C. Steele joined the Company in September 1994 as Vice President of
Finance and Chief Financial Officer. From 1991 until he joined the Company, Mr.
Steele was a principal of Asset Management Corporation, a Waltham, Massachusetts
consulting firm specializing in the analysis and resolution of complex financial
and operational challenges for small and medium size businesses. Until 1991, Mr.
Steele was a Partner at Deloitte & Touche, specializing in profit planning,
corporate finance and troubled company situations. He holds an M.B.A. from
Harvard Business School and an engineering degree from Case Western Reserve
University.
Meetings of Board of Directors and Committees
During the fiscal year ended March 31, 1998, the Board of Directors of the
Company met 5 times. Each incumbent director attended 75% or more of the
aggregate of the total number of meetings of the Board held during the period
he was a director and of the meetings of committees of the Board on which he
served. The Board of Directors has three standing Committees: the Audit,
Compensation and Nominating Committees.
The Audit Committee consists of Dr. Feshbach, Dr. Helmer, and Dr. McCarren. This
Committee, which met once during fiscal 1998, is primarily responsible for
reviewing the activities of the Company's independent auditors, reviewing and
evaluating recommendations of the auditors, recommending areas of review to the
Company's management, and reviewing and evaluating the Company's financial
statements, accounting policies, reporting practices and internal controls.
The Compensation Committee consists of Dr. Feshbach, Dr. Helmer, and Dr.
McCarren. This Committee, which met once during fiscal 1998, is responsible for
making recommendations to the Company's Board of Directors concerning the levels
and types of compensation and benefits to be paid and granted to the Company's
Chief Executive Officer and other executive employees of the Company and for the
administration of the Company's stock option plans.
The Nominating Committee consists of Messrs. Helmer, McCarren and Sheridan. The
Committee did not meet during fiscal 1998. The Committee is charged with the
responsibility of identifying appropriate candidates for
4
<PAGE>
nomination to the Board. The Company's By-Laws currently do not set forth any
procedure for the nomination of candidates for director by stockholders.
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.
OWNERSHIP OF COMMON STOCK OF THE COMPANY BY CERTAIN PERSONS
As of August 14, 1998, the Company was not aware of any person or entity
beneficially owning 5% or more of the Company's Common Stock, except as set
forth below. The following table sets forth the Common Stock holdings of the
Company's directors, nominees for director, each named executive officer in the
Summary Compensation Table under "Executive Compensation" below and all
directors and executive officers as a group as of August 14, 1998.
Beneficial Holdings of the Company's Common Stock by Directors and Executive
Officers as of August 14, 1998.
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
- ----------------- ----------------------- --------
<S> <C> <C>
Jeffrey A. Bernfeld 32,997 (2)
Joseph Callerame 19,100 (2)
Herman Feshbach 16,540 (2)
Al Gladen 60,055 1.25
Peter W. Harris 43,678 (2)
Hamilton W. Helmer 53,781 1.11
Donald J. McCarren 61,581 1.27
William E. Odom 19,000 (2)
Alan H. Rutan 35,727 (2)
Ralph S. Sheridan 402,109 8.06
Lee C. Steele 59,636 1.23
Carl W. Vogt 21,166 (2)
Directors and Officers
as a Group (12 persons) 825,370 15.65
</TABLE>
5
<PAGE>
(1) Includes shares that may be acquired under stock options and
warrants exercisable within sixty days after the date of this table,
as follows: Mr. Bernfeld - 30,000; Dr. Callerame - 12,500; Dr.
Feshbach - 2,500; Mr. Gladen - 21,000; Mr. Harris - 40,000; Dr.
Helmer - 46,000; Dr. McCarren - 47,000; Mr. Odom - 14,000; Mr. Rutan
-18,000; Mr. Sheridan - 195,000; Mr. Steele - 50,000; Mr. Vogt -
7,000; and all Directors and Officers as a group - 483,000. All
ownership reported herein includes sole voting and investment power.
(2) Amount owned constitutes less than one percent.
6
<PAGE>
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 $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compen-
Compensation sation
--------------------- All
Name and Principal Fiscal Option Other Compen-
Position Year Salary ($) 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
Counsel 1997 120,408 19,000 16,000 408
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.
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.
7
<PAGE>
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 $20,000 subject to the achievement of individual and corporate goals;
and 24,000 stock options granted at market price, which vest according to a
schedule. The agreement is for a three year term ending in February, 1999, and
grants Mr. Bernfeld severance payments equal to one year's salary if he is
terminated in connection with a change of the control of the Company as defined
in the agreement. The agreement also provides that if Mr. Bernfeld is terminated
for any reason other than "Cause" as defined in the agreement, he will be
entitled to receive an amount equal to at least six months' salary.
Dr. Callerame and Messrs. Rutan and Steele have agreements with the Company
granting each of them severance payments equal to one year's salary if he is
terminated in connection with a change of control of the Company as defined in
the agreement. The agreement also provides that if each of them is terminated
for any reason other than "Cause" as defined in the agreement, he will be
entitled to receive an amount equal to at least six months' salary.
8
<PAGE>
/ / The following tables provide information concerning the grant of options in
Fiscal Year 1998 to Executive Officers named in the Summary Compensation
Table and options exercised by those officers.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term ($)
----------------------------------------------------- --------------------------------------
% of Total
Options
Granted to
Options All Exercise Expiration
Granted Employees Price ($) Date 5%/year 10%/year
----------- ------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ralph S. Sheridan 0 N/A N/A N/A N/A N/A
Jeffrey A. Bernfeld 20,000 6.98 11.125 11/20/07 221,374 484,295
Peter W. Harris 0 N/A N/A N/A N/A N/A
Alan H. Rutan 16,000 5.58 11.125 11/20/07 177,099 387,436
Lee C. Steele 30,000 10.47 11.125 11/20/07 332,061 726,442
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares Unexercised Options at Value of Unexercised In-The-
Acquired Fiscal Year End - Money Options at Fiscal Year
on Value March 31, 1998 (#) End - March 31, 1998 ($)
Exercise Realized ---------------------- ----------------------------
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
<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>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
9
<PAGE>
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.
RELATED PARTY TRANSACTIONS
In April, 1995 a group that included three of the Company's Officers and one
Company Director made a loan to the Company in the total amount of $650,000. The
proceeds of the loan were used for general working capital purposes. The loan
was paid off in full on a timely basis.
The Board of Directors determined that the loan was necessary and the terms
appropriate. The Company had been seeking short-term financing from several
banks, but conclusion of a conventional line of credit arrangement was delayed
pending resolution of the lawsuit brought by the Company's founder, in which the
Company has now received a favorable jury verdict. In addition, portions of the
Company's working capital had been tied up in slow-paying foreign accounts
receivable and as collateral for letters of credit supporting certain
international sales. These factors justified a form of short-term "bridge loan"
while the Company worked on a more permanent financing alternative.
The loan terminated on August 15, 1995, and bore interest at the prime rate plus
two percent. The Company granted a security interest in all of its assets to the
lending group during the pendency of the loan. As additional consideration, the
Company issued a total of 6,500 shares of its Common Stock and warrants to
purchase 65,000 shares of its Common Stock proportionally to the lenders. The
warrant exercise price is the lowest trading price of the stock on the American
Stock Exchange during the term of the loan. The Company has registered these
shares.
Ralph S. Sheridan, the Company's President and CEO, provided $200,000 of the
loan funds. Al Gladen, who subsequently became a Director of, and remains a
Consultant to, the Company, provided $300,000. Lee C. Steele, the Company's Vice
President of Finance and CFO, provided $75,000. Donald J. McCarren, a Director
of the Company, provided $50,000. Peter W. Harris, the Company's Vice President
of Sales and Marketing, provided $25,000.
Mr. Gladen provides engineering and management services to the Company on a
regular basis. In fiscal year 1998, the compensation paid to Dabster, Inc., a
corporation of which Mr. Gladen is the President, for such services was
$256,750.
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
10
<PAGE>
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 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.
11
<PAGE>
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.
TOTAL SHAREHOLDER RETURNS
/ / Stock Performance Chart
<TABLE>
<CAPTION>
AMERICAN SCIENCE
Years Ending ENGINEERING S&P 500 Technology-500
- ------------ ----------- ------- --------------
<S> <C> <C> <C>
Mar-93 $100.00 $100.00 $100.00
Mar-94 $ 46.97 $101.48 $117.62
Mar-95 $ 75.76 $117.25 $148.84
Mar-96 $119.70 $154.77 $200.95
Mar-97 $146.97 $185.40 $271.66
Mar-98 $165.15 $274.39 $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.
12
<PAGE>
OTHER MATTERS
Voting
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock of the Company is necessary to provide a
quorum at the Meeting. Directors are elected by a plurality of the affirmative
votes cast. Abstentions and broker "non-votes" are each counted as present in
determining whether the quorum requirement is satisfied. Abstentions and
"non-votes" have the effect of votes against proposals presented to the
stockholders other than the election of directors. A "non-vote" occurs when a
broker or other nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the broker or other
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner.
Proxies; Revocation of Proxies
All Proxies solicited by the Board of Directors of the Company that are properly
executed and returned, but which are not expressly voted, will be voted at the
Meeting in accordance with the recommendation of the Board of Directors of the
Company, unless such Proxies are revoked prior to the Meeting. A Proxy may be
revoked by delivering a written notice of revocation to the principal office of
the Company or may be revoked in person at the Meeting at any time prior to the
voting thereof. Attendance at the Meeting will not, by itself, revoke a Proxy.
Solicitation
All expenses of this solicitation will be paid by the Company. Brokerage firms,
nominees, fiduciaries and other custodians have been requested to forward proxy
solicitation materials to the beneficial owners of shares of Common Stock of the
Company held of record by such persons, and the Company will reimburse such
brokerage firms, nominees, fiduciaries and other custodians for reasonable
out-of-pocket expenses incurred by them in connection therewith. In addition to
solicitation of Proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit Proxies
from stockholders of the Company by telephone, telegram, in person or by other
means.
Independent Public Accountants
The Board of Directors has selected Arthur Andersen LLP, as the independent
certified public accountants to audit the consolidated financial statements of
the Company for the fiscal year ending March 31, 1999.
A representative of Arthur Andersen LLP will be at the Meeting and will be given
an opportunity to make a statement, if so desired. The representative will be
available to respond to appropriate questions.
Stockholder Proposals for 1999 Annual Meeting
Any stockholder proposal to be included in the proxy statement and form of proxy
for the 1999 Annual Meeting of Stockholders must be received at the principal
office of the Company by May 27, 1999. It is suggested that proposals be
submitted by Certified Mail, Return Receipt Requested.
13
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
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.
Incorporation by Reference
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
sections of the Proxy Statement entitled "Compensation Committee Report on
Executive Compensation" and "Stock Performance Chart" shall not be deemed to be
so incorporated, unless specifically otherwise provided in any such filing.
Other Proposed Action
The Board of Directors knows of no other matters that are to be presented at the
Meeting. If, however, any other business should properly come before the
Meeting, the persons named in the enclosed proxy intend to vote such proxy upon
such matters in accordance with their best judgment.
By Order of the Board of Directors
Jeffrey A. Bernfeld
Clerk
14
<PAGE>
AMERICAN SCIENCE AND ENGINEERING, INC.
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Ralph S. Sheridan, Jeffrey A. Bernfeld and
Paige Cochran, or any of them, with full power of substitution, attorneys and
proxies to represent the undersigned at the Special Meeting in Lieu of Annual
Meeting of Stockholders ("Meeting") of American Science and Engineering, Inc.
("Company") to be held Thursday, September 24, 1998 at the Renaissance
Bedford Hotel, 44 Middlesex Turnpike, Bedford, Massachusetts at 10:30 a.m.
and at any adjournments thereof, to vote in the name and place of the
undersigned, with all powers which the undersigned would possess if
personally present, all of the stock of the Company standing in the name of
the undersigned on the books of the Company, on all matters set forth in the
Notice of the Meeting and upon such other and further business as may
properly come before the Meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS INSTRUCTED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED ON THE REVERSE, AND IN THE
DISCRETION OF THE NAMED PROXIES ON ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENTS OF THE MEETING.
TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE.
<PAGE>
A /x/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
Your shares will be voted FOR the following proposal unless otherwise indicated:
FOR ALL WITHHOLD FROM
NOMINEES ALL NOMINEES
NOMINEES:
1. ELECTION OF DIRECTORS: / / / / Herman Feshbach
To fix the number of Al Gladen
directors at seven and Hamilton W. Helmer
to elect the nominees Donald J. McCarren
listed at right. William E. Odom
Ralph S. Sheridan
Carl W. Vogt
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------------
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING
IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS, THE PROXY STATEMENT FOR THE
MEETING AND THE 1998 ANNUAL REPORT OF THE COMPANY.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
SIGNATURE___________________DATE________SIGNATURE___________________DATE________
NOTE: PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS ON THIS CARD. For joint
accounts, both owners should sign. Fiduciaries and corporate officers should
indicate their full titles.
