<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
AMERICAN SCIENCE AND ENGINEERING, INC.
829 MIDDLESEX TURNPIKE
BILLERICA, MA 01821
August 23, 1999
To our stockholders:
You are cordially invited to attend the Special Meeting in Lieu of Annual
Meeting of Stockholders of American Science and Engineering, Inc. to be held
September 23, 1999 at 10:30 a.m. at the Renaissiance Bedford Hotel. The Board of
Directors and management look forward to personally greeting those shareholders
able to attend.
The accompanying proxy statement asks for your vote in favor of a new stock
option plan for our employees. We recognize that option plans have come under
increasing scrutiny in recent years and we have designed a plan that is
responsive to your concerns as stockholders.
We are a high technology company located in an area where high-tech
professionals are in great demand. Our engineers, scientists and other
professionals are, and must be, among the very best available anywhere in order
for us to realize our ambitions for AS&E. Stock options are an important
recruiting tool for us in several ways.
Most obviously, the companies with which we compete for talent almost all
have option plans and it has virtually become almost a requirement to be able to
offer highly skilled employees a compensation package that includes options.
Additionally, we are a small company competing against many companies with more
financial resources. We cannot always match the cash compensation that those
companies offer. Options are a valuable recruiting tool and an important part of
the compensation package which offers the extra advantage of tying employees'
interests directly to our stockholders' interests. In an increasingly mobile job
market, the ability to encourage and increase employee loyalty by using options
which increase in value over time is a useful way to build and maintain a
stable, highly productive organization.
Options also enable us to provide valuable compensation to our employees
without impacting either cash flow or profitability. If we were to substitute
cash compensation, in the form of either salary or bonus, for options, we would
immediately feel the drain on cash, and the expense would have to be recognized
every quarter as a direct reduction from the bottom line.
Experience indicates that our employees do understand the value of their
options, and do make use of the benefits of a successful option program, which
in turn provides direct benefits to the company. Last fiscal year, for example,
the company received over $800,000 in cash from employees who exercised their
options. That cash, in turn, was available to the company for investment in
research, infrastructure, marketing, and all of the other important functions
that are necessary for our success.
One of the concerns stockholders have expressed about option plans is that
when their stock price decreases, many companies reprice options, so that
employees share the upside benefits with stockholders, but not the downside
risk. You should be aware that for at least as long as I have been CEO, AS&E has
not repriced options, and the plan we have asked you to approve formalizes that
previously unstated policy by prohibiting the repricing of options issued under
this plan.
To further align the interests of our senior people with yours, the plan
also provides that all employees eligible for our incentive program, which
generally covers our most senior, experienced personnel, cannot exercise options
unless the price is at least $2.00 per share higher than the price at which the
option was granted. Thus, our most senior employees will not benefit from
options granted under this plan unless and until all stockholders have
benefited.
The directors of your company recommend that you vote FOR this plan because
of the important benefits it provides. If you have any questions about the plan,
please call me, our Chairman, General William Odom, or Jeff Bernfeld, our Vice
President and General Counsel, at 800-225-1608. Thank you for your
consideration, and I look forward to seeing you at our Annual Meeting on
September 23rd.
Very truly yours,
/s/ Ralph S. Sheridan
--------------------------------------
Ralph S. Sheridan
President and CEO
<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 23, 1999
------------------------
The Special Meeting in Lieu of Annual Meeting of Stockholders of American
Science and Engineering, Inc. (the "Company") will be held Thursday, September
23, 1999, 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;
(2) To consider and act upon the adoption of the Company's 1999
Combination Stock Option Plan; and
(3) 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 9, 1999 are
entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors
/s/ Jeffrey A. Bernfeld
--------------------------------------
Jeffrey A. Bernfeld
Clerk
August 23, 1999
- --------------------------------------------------------------------------------
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 23,
1999, 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 9, 1999 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 9, 1999, 4,904,493 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 23, 1999. A copy of the Annual Report of the
Company for its fiscal year ended March 31, 1999 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 eight members, whose terms expire at the
Meeting. The directors are recommending that the size of the Board be set at
seven members due to the retirement of one director and that the seven
continuing 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 OF DATE ASSUMED
NAME AGE COMPANY HELD EACH POSITION
- ------------------------------ --- ------------------------ --------------
<S> <C> <C> <C>
Herman Feshbach............... 82 Director September 1975
Roger P. Heinisch............. 61 Director June 24, 1999
Hamilton W. Helmer............ 52 Director February 1993
Donald J. McCarren............ 59 Director February 1993
William E. Odom............... 66 Director September 1996
Chairman September 1998
Ralph S. Sheridan............. 49 Director January 1994
President & CEO September 1993
Carl W. Vogt.................. 63 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 a
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.
Dr. Roger P. Heinisch worked at Honeywell corporation from 1968 to 1991 in
various engineering positions before becoming Director of Research in 1978;
Director of the Systems and Research Center and Vice President in 1982; Vice
President of Flight Systems Operations in 1985; Corporate Vice President of
Advanced Technology in 1988; and Vice President of Materials and Manufacturing
for the Defense Systems Group in 1990. He assumed the position of Vice
President, Engineering with Alliant Techsystems when that company was spun off
from Honeywell in 1991. From 1995 until April of 1997, Dr. Heinisch also assumed
responsibility for Information Systems and Technology at Alliant. Dr. Heinisch
holds a B.S. and an M.S. in Nuclear Engineering from Marquette University and a
Ph.D. in Engineering Science from Purdue University. Currently, Mr. Heinisch
serves on the boards of Nichols Research Corp., Nonvolatile Electronics, Inc.,
Theseus Logic Inc., Third Wave Systems, Point Cloud and Superior Vocabulary.
Dr. Hamilton W. Helmer has, for the last 16 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 President of an early stage, privately held,
functional genomics research organization, AlphaGene, Inc. Previously, Dr.
McCarren served as President of 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 assuming that position in 1997, Dr. McCarren was the
founder 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 small molecule cancer research and development
company located in Cambridge, Massachusetts. Prior to that, Dr. McCarren spent
almost 9 years in Erbamont N.V. serving as 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)
2
<PAGE>
and Vice President of Far East and Austral-Asian Operations (1986 to 1989) of
Erbamont, N.V. Dr. McCarren holds a Ph.D. in Developmental Economics.
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 OF DATE ASSUMED
NAME AGE COMPANY HELD EACH POSITION
- ------------------------- --- --------------------------------- --------------
<S> <C> <C> <C>
William L. Adams......... 66 Vice President, Operations September 1998
Jeffrey A. Bernfeld...... 42 Vice President, General Counsel & February 1996
Clerk
Joseph Callerame......... 49 Vice President, Technology Chief June 1998
Technology Officer
Alan H. Rutan............ 58 Vice President, Engineering July 1996
Lee C. Steele............ 50 Vice President, Finance, September 1994
Treasurer & CFO
</TABLE>
Dr. William Adams is President of Adtech Consulting, Inc., a technology and
management consulting firm located in Columbus, Ohio. Dr. Adams joined AS&E in
July 1997 as acting Chief Technology Officer. In August 1998 he became the
acting Vice President of Operations and was elected to that position in
September. Prior to joining AS&E, Dr. Adams spent over thirty years in
engineering and general management in process automation firms including
AccuRay, Combustion Engineering, and ABB. During this period he held positions
as Vice President of Field Service, VP of Engineering, Senior Vice President of
Engineering, Manufacturing, and Marketing, and Vice President of Quality. Dr.
Adams holds a B.S. in
3
<PAGE>
Electrical Engineering from Michigan Technological University, an M.S. in
Electrical Engineering from MIT, and a Ph.D. from Purdue University
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.
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. 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, 1999, the Board of Directors of the
Company met 7 times. All of the eight incumbent directors except Dr. Feshbach
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. Hamilton W. Helmer and Dr. Donald J.
McCarren. This Committee, which met once during fiscal 1999, 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 Mr. Carl W. Vogt and Gen. William E.
Odom. This Committee, which met once during fiscal 1999, is responsible for
making recommendations to the Company's Board of Directors concerning the levels
and types of compensation and benefits to be paid
4
<PAGE>
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 Gen. William E. Odom and Mr. Ralph S.
Sheridan. The Committee did not formally meet during fiscal 1999. The Committee
is charged with the responsibility of identifying appropriate candidates for
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 3,000 shares of Common Stock on January 10th in each year and
the former Chairman, Dr. Feshbach, received 2,500 shares on January 10(th), as
well as an annual retainer in the amount of $14,330 which was paid to Dr.
Feshbach after the end of the fiscal year. 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 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.
5
<PAGE>
OWNERSHIP OF COMMON STOCK OF THE COMPANY BY CERTAIN PERSONS
As of August 9, 1999, 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 9, 1999.
BENEFICIAL HOLDINGS OF THE COMPANY'S COMMON STOCK BY DIRECTORS AND EXECUTIVE
OFFICERS AS OF AUGUST 9, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------ ---------------------- -----------
<S> <C> <C>
Jeffrey A. Bernfeld......................................... 49,258 (2)
William L. Adams............................................ 20,000 (2)
Joseph Callerame............................................ 31,600 (2)
Herman Feshbach............................................. 19,040 (2)
Al Gladen................................................... 62,055 1.26
Roger P. Heinisch........................................... 333 (2)
Hamilton W. Helmer.......................................... 55,781 1.13
Donald J. McCarren.......................................... 63,581 1.28
William E. Odom............................................. 23,000 (2)
Alan H. Rutan............................................... 46,874 1.0
Ralph S. Sheridan........................................... 476,743 9.21
Lee C. Steele............................................... 82,917 1.7
Carl W. Vogt................................................ 26,166 (2)
Directors and Officers as a Group (12 persons).............. 957,348 17.3
</TABLE>
- ------------------------
(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--46,667; Dr. Adams--10,000; Dr. Callerame-- 25,000; Dr.
Feshbach--9,500; Mr. Gladen--21,000; Dr. Heinisch--0; Dr. Helmer--53,000;
Dr. McCarren--54,000; Mr. Odom--21,000; Mr. Rutan--29,334; Mr.
Sheridan--270,000; Mr. Steele--63,300; Mr. Vogt--14,000; and all Directors
and Officers as a group--616,801. 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, 1999 to the Chief Executive Officer and
each of the four most highly compensated executive officers of the Company whose
aggregate compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
------------------------ OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) (#) COMPENSATION ($)(1)
- ------------------------------------------- ----------- ----------- ----------- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
Ralph S. Sheridan.......................... 1999 245,495 230,000(2) -- 5,658
President and CEO 1998 240,000 230,000(2) -- 7,729
1997 222,213 270,385(2) 225,000 4,479
William L. Adams........................... 1999 174,500 -- 10,000 --
Vice President Operations 1998 112,800 -- -- --
Jeffrey A. Bernfeld........................ 1999 166,350 --(3) -- 980
Vice President, General Counsel 1998 130,000 30,000 20,000 408
1997 120,408 19,000 16,000 408
Joseph Callerame........................... 1999 160,828 --(3) 50,000 2,212
Vice President and CTO 1998 -- -- -- --
Lee C. Steele.............................. 1999 135,664 45,000(3) 10,000 774
Vice President and CFO 1998 125,077 29,750 30,000 752
1997 120,560 27,000 -- 752
</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) 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 year 1997 when the
bonus also included Company stock and payments made to him to alleviate the
tax impact of the stock bonus.
(3) The bonus amount for these officers has not been determined for fiscal year
1999.
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 initial annual salary of $240,000 (presently
$255,000), 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.
7
<PAGE>
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.
Dr. Callerame and Mr. 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 1999 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
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION FOR
OPTIONS OPTION TERM ($)
OPTIONS GRANTED TO EXERCISE EXPIRATION ----------------------
GRANTED ALL EMPLOYEES PRICE ($) DATE 5%/YEAR 10%/YEAR
----------- --------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ralph S. Sheridan............................ 0 N/A N/A N/A N/A N/A
William L. Adams............................. 10,000 3% 13.00 * 0 54,804
Jeffrey A. Bernfeld.......................... 0 N/A N/A N/A N/A N/A
Joseph Callerame............................. 50,000 14% 13.50 6/01/08 0 249,021
Lee C. Steele................................ 10,000 3% 11.50 11/10/08 1,059 69,804
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END-- AT FISCAL YEAR END--
SHARES MARCH 31, 1999 (#) MARCH 31, 1999 ($)
ACQUIRED ON VALUE -------------------------- ------------------------------
EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- ----------------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ralph S. Sheridan........... 0 0 270,000 75,000 480,000 --
William L. Adams............ 0 0 10,000 -- -- --
Joseph Callerame............ 0 0 12,500 37,500 -- --
Jeffrey A. Bernfeld......... 0 0 46,667 13,333 -- --
Lee C. Steele............... 0 0 63,300 26,700 271,875 --
</TABLE>
- ------------------------
* Options expire one year after his service with American Science and
Engineering, Inc. has ended.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During the fiscal year ended March 31, 1999, the Company's Compensation
Committee consisted of Mr. Carl Vogt and General William E. Odom. No reportable
relationship existed with respect to any member of the Compensation Committee.
9
<PAGE>
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 was the lowest trading price of the stock on
the American Stock Exchange during the term of the loan. All of the warrants
were exercised and 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, 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, former 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 1999, the compensation paid to Dabster, Inc., a
corporation of which Mr. Gladen is the President, for such services was
$212,000. Mr. Gladen is retiring as a Director as of September 23, 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (consisting of the two
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 provides
for annual cash compensation of $240,000, subject to annual adjustment, 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.
10
<PAGE>
For the contract year ended in September 1998, the Committee awarded Mr.
Sheridan a cash bonus of $230,000, representing 100% of the potential award
under his contract. This award represents the Committees 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: Mr. Carl W. Vogt and Gen. William E. Odom.
/ / 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
Years Ending
AMERICAN SCIENCE S&P 500 COMP-LTD TECHNOLOGY-500
ENGINEERING
Mar-94 100.00 100.00 100.00
Mar-95 161.29 115.57 126.54
Mar-96 254.84 152.67 170.85
Mar-97 312.90 182.93 230.96
Mar-98 351.61 270.74 349.06
Mar-99 183.87 320.72 559.93
</TABLE>
<TABLE>
<CAPTION>
INDEXED RETURNS
--------------------------------------
BASE YEARS ENDING
PERIOD --------------------------------------
COMPANY/INDEX MAR94 MAR95 MAR96 MAR97 MAR98 MAR99
- ----------------------------------- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
AMERICAN SCIENCE AND ENGINEERING... 100 161.29 254.84 312.90 351.61 183.87
S&P 500 COMP-LTD................... 100 115.57 152.67 182.93 270.74 320.72
TECHNOLOGY-500..................... 100 126.54 170.85 230.96 349.06 559.93
</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.
11
<PAGE>
PROPOSAL NO. 2
TO ADOPT THE AMERICAN SCIENCE AND ENGINEERING, INC.
1999 COMBINATION STOCK OPTION PLAN
In August 1999, the Board of Directors adopted, subject to stockholder
approval, the Company's 1999 Combination Stock Option Plan (the "1999 Plan").
The 1999 Plan is intended to provide long-term incentives and rewards to the
employees of the Company and its subsidiaries and other persons who are in a
position to contribute to the long-term success and growth of the Company and
its subsidiaries, to assist the Company in retaining and attracting executives
and employees with requisite experience and ability and to associate more
closely the interests of such officers with those of the Company's stockholders.
The following is a summary of certain material features of the 1999 Plan and is
qualified in its entirety by reference to the full text of the 1999 Plan, which
is set forth as Exhibit A to this Proxy Statement.
1999 PLAN. Under the 1999 Plan, the Company may grant both incentive stock
options ("incentive stock options") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code"), and other stock options which are not qualified as incentive stock
options ("nonqualified stock options"). Incentive stock options may only be
granted to employees of the Company at the time of grant. Nonqualified stock
options may be granted to employees and other persons selected by the committee
designated by the Board of Directors to administer the 1999 Plan.
STOCK AVAILABLE FOR OPTIONS. Under the 1999 Plan, an aggregate of 600,000
shares of Common Stock are available for issuance, subject to adjustment for any
recapitalization, reclassification, stock split, stock combination, stock
dividend or certain other corporate reorganizations. Shares to be delivered
under the 1999 Plan may be either authorized but unissued shares of Common Stock
or treasury shares. Shares subject to options that cease to be exercisable for
any reason will be available for subsequent stock option grants under the 1999
Plan.
ADMINISTRATION. The 1999 Plan is administered by a committee designated by
the Board of Directors of the Company, which shall consist, at the discretion of
the Board of Directors, of either two or more non-employee directors designated
by the Board of Directors or all of the members of the Board of Directors.
Subject to the 1999 Plan, the committee selects persons to whom options are
granted, the exercise price for options, the number of shares covered by any
option, the term of any option, any restrictions on any options, the time during
which any option is exercisable and the vesting of any option, provided that all
options shall be fully vested within 9 years of the date granted. The committee
also has the authority to adopt rules and make other determinations with respect
to the administration of the 1999 Plan.
ELIGIBILITY. Under the 1999 Plan, options may be granted to employees of
the Company and to other persons who are in a position to contribute to the
long-term success and growth of the Company and its subsidiaries. Currently,
there are approximately 310 employees eligible to participate in the 1999 Plan.
EXERCISE PRICE. Under the 1999 Plan, the committee has the authority to
grant nonqualified stock options at any price not less than the par value
($.66 2/3 per share) of the Common Stock. The purchase price per share of Common
Stock subject to an incentive stock option under the 1999 Plan may not be less
than the fair market value of a share of Common Stock on the date of grant, or,
in the case of persons owning Common Stock possessing ten percent or more of the
voting power of all outstanding capital stock of the Company on the date of
grant, not less than 110% of the fair market value of the Common Stock on the
date of grant. The purchase price of shares of Common Stock issuable upon
exercise of any options may not be changed, amended or repriced after the option
is granted.
LIMITATION ON INCENTIVE STOCK OPTIONS. To the extent that the aggregate
fair market value of Common Stock (measured at the time of grant) with respect
to which incentive stock options are first exercisable
12
<PAGE>
during any calendar year under the 1999 Plan and any other plan of the Company
providing for incentive stock options exceeds $100,000, such incentive stock
options shall be treated as nonqualified options.
EXERCISE OF OPTIONS. Options granted under the 1999 Plan may not be
exercised more than ten years from the date of grant, and in the case of
incentive stock options issued to persons owning Common Stock possessing ten
percent or more of the voting power of all outstanding capital stock of the
Company on the date of grant, more than five years from the date of grant.
Options granted to an employee eligible to participate in the Company's
Incentive Bonus Program may not be exercisable unless the fair market value of
the Common Stock on the date of exercise exceeds the exercise price of such
option by at least $2.00. The exercise price of options granted under the 1999
Plan may be paid in cash, by delivery of shares of Common Stock (valued at their
fair market value on the date of exercise), by delivery of any other property
(valued at its fair market value on the date of exercise), by a combination of
cash, shares of Common Stock and other property, or by exercise of the option on
a net issuance basis (a "cashless exercise"), as the committee may permit.
RIGHTS IN THE EVENT OF TERMINATION OR DEATH. Incentive stock options
granted under the 1999 Plan may not be exercised beyond three months after the
option holder ceases to be an employee of the Company, except that exercise is
permitted for up to one year after termination of employment by reason of death
or permanent and total disability. Further, to the extent that an option granted
as an incentive stock option is not treated as such, the option may be exercised
by an option holder who has ceased to be an employee of the Company until ten
years from the date of grant. Nonqualified stock options granted under the 1999
Plan may be exercised by an option holder who has ceased to be an employee of
the Company until ten years from the date of grant.
AMENDMENT OR TERMINATION OF THE 1999 PLAN. The 1999 Plan may be amended,
suspended or terminated at any time by the Board of Directors, provided that no
amendment may be made without stockholder approval if such approval is necessary
under the Internal Revenue Code, any applicable rules and regulations of the
Securities and Exchange Commission, or the rules and regulations of the American
Stock Exchange or any other exchange or stock market on which the Company's
securities are listed or quoted.
DURATION OF THE 1999 PLAN. Options under the 1999 Plan may not be granted
after August 13, 2009.
FEDERAL TAX CONSEQUENCES. The following general discussion of the Federal
income tax consequences of the issuance and exercise of options granted under
the 1999 Plan is based upon the provisions of the Code as in effect on the date
of this proxy statement, current regulations thereunder, and existing
administrative rulings of the Internal Revenue Service. It is not intended to be
a complete discussion of all of the Federal income tax consequences of the 1999
Plan or of the requirements that must be met in order to qualify for the
described tax treatment. Changes in the law and regulations may modify the
discussion, and in some cases the changes may be retroactive. No information is
provided as to state tax laws. The 1999 Plan is not qualified under Section 401
of the Code and is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
INCENTIVE STOCK OPTIONS UNDER THE 1999 PLAN. An option holder generally
will not recognize taxable income upon either the grant or the exercise of an
incentive stock option. However, under certain circumstances, there may be
alternative minimum tax or other tax consequences, as discussed below.
An option holder will recognize taxable income upon the disposition of the
shares of Common Stock received upon exercise of an incentive stock option. Any
gain recognized upon a disposition that is not a "disqualifying disposition" (as
defined below) will be taxable as a long-term capital gain.
A "disqualifying disposition" means any disposition of shares of Common
Stock acquired on the exercise of an incentive stock option within two years of
the date the option was granted or within one year of the date the shares were
transferred to the option holder. The use of shares acquired pursuant to the
exercise of an incentive stock option to pay the option exercise price under
another incentive stock option
13
<PAGE>
is treated as a disposition for this purpose. In general, if an option holder
makes a disqualifying disposition, an amount equal to the excess of (i) the
lesser of (a) the fair market value of the shares on the date of exercise or (b)
the amount actually realized over (ii) the option exercise price will be taxable
as ordinary income and the balance of the gain recognized, if any, will be
taxable as either long-term or short-term capital gain, depending on the option
holder's holding period for the shares. In the case of a gift or certain other
transfers, the amount of ordinary income taxable to the option holder is not
limited to the amount of gain which would be recognized in the case of a sale.
Instead, it is equal to the excess of the fair market value of the shares on the
date of exercise over the option exercise price.
Executive officers will generally be subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended ("Section 16(b)") upon their sale of
shares of Common Stock and this may affect their tax liability. If such an
officer makes a disqualifying disposition, the date on which the fair market
value of the shares is determined (the "Determination Date") may be postponed
under certain circumstances. On the Determination Date, the option holder will
generally recognize ordinary taxable income in an amount equal to the excess of
the fair market value of the shares of Common Stock at that time over the option
exercise price. Despite the general rule, if there is a disqualifying
disposition and the Determination Date is after the date of exercise, the option
holder may make an election pursuant to Section 83(b) of the Code in which case
the option holder will recognize ordinary taxable income at the time the stock
option is exercised and not on the later date. In order to be effective, the
83(b) election must be made within 30 days after exercise.
In general, in the year of exercise of an incentive stock option, an
employee must include the excess of the fair market value of the shares issued
upon exercise over the exercise price in the calculation of alternative minimum
taxable income. The application of the alternative minimum tax rules for an
option holder subject to Section 16(b) are more complex and may depend upon
whether the holder makes a Section 83(b) election, as described above.
The Company will not be entitled to any deduction with respect to the grant
or exercise of an incentive stock option provided the option holder does not
make a disqualifying disposition. If the option holder does make a disqualifying
disposition, the Company will generally be entitled to a deduction for Federal
income tax purposes in an amount equal to the taxable income recognized by the
option holder, provided the Company reports the income on a timely provided and
filed Form W-2 or 1099, whichever is applicable.
NONQUALIFIED STOCK OPTIONS UNDER THE 1999 PLAN. The recipient of a
nonqualified stock option under the 1999 Plan will not recognize any taxable
income at the time the option is granted.
Upon exercise, the option holder will generally recognize ordinary taxable
income in an amount equal to the excess of the fair market value of the shares
of Common Stock received on the date of exercise over the option exercise price.
Upon a subsequent sale of the shares of Common Stock, long-term or short-term
capital gain or loss (depending upon the holding period) will generally be
recognized equal to the excess of the difference between the amount realized
over the fair market value of the shares on the date of exercise.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the option holder, provided the Company reports the income on a timely
provided and filed Form W-2 or 1099, whichever is applicable.
An option holder who pays the option exercise price, in whole or in part, by
delivering shares of Common Stock already owned by him or her will recognize no
gain or loss for Federal income tax purposes on the shares surrendered, but
otherwise will be taxed according to the rules described above. To the extent
the shares acquired upon exercise are equal in number to the shares surrendered,
the basis of the shares received will be equal to the basis of the shares
surrendered. The basis of shares received in excess of the shares surrendered
upon exercise will be equal to the fair market value of the shares on the date
of exercise, and the holding period for the shares received will commence on
that date.
14
<PAGE>
CASHLESS EXERCISE. An option holder who pays the option exercise price, in
whole or in part, by delivering shares of Common Stock already owned by him or
her will generally recognize no gain or loss for Federal income tax purposes on
the shares surrendered, but otherwise will be taxed according to the rules
described above. As noted above, if shares received on the exercise of an
incentive stock option are used within the time periods that apply to a
disqualifying disposition, then the rules for disqualifying dispositions,
described above, will apply. To the extent the shares acquired upon exercise are
equal in number to the shares surrendered, the basis and holding period of the
shares received will be equal to the basis and holding period of the shares
surrendered, plus the income, if any, recognized in the case of any applicable
disqualifying disposition. The basis of the shares received in excess of the
shares surrendered upon exercise will be equal to the fair market value of the
shares on the date of exercise, and the holding period for the shares received
will commence on that date.
REQUIRED VOTE. The affirmative vote of a majority of the holders of Common
Stock voting on the proposal is required for adoption of this Proposal No. 2.
The Board of Directors recommends a vote FOR this Proposal No. 2.
15
<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. The Company has engaged D.F. King & Co., Inc. to represent it in
connection with the solicitation of proxies at a cost of approximately $5,000,
plus expenses.
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, 2000.
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 2000 ANNUAL MEETING
Any stockholder proposal to be included in the proxy statement and form of
proxy for the 2000 Annual Meeting of Stockholders must be received at the
principal office of the Company by April 25, 2000. It is suggested that
proposals be submitted by Certified Mail, Return Receipt Requested.
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 1999, the Company believes that all required reports were filed
on time.
16
<PAGE>
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
/s/ Jeffrey A. Bernfeld
--------------------------------------
Jeffrey A. Bernfeld
Clerk
17
<PAGE>
EXHIBIT A
AMERICAN SCIENCE AND ENGINEERING, INC.
1999 COMBINATION STOCK OPTION PLAN
SECTION I. PURPOSE OF THE PLAN.
The purposes of this American Science and Engineering, Inc. 1999 Combination
Stock Option Plan (the "1999 Plan") are (i) to provide long-term incentives and
rewards to those employees (the "Employee Participants") of American Science and
Engineering, Inc. (the "Corporation") and its subsidiaries (if any), and any
other persons who are not directors of the Corporation (the "Non-employee
Participants") who are in a position to contribute to the long-term success and
growth of the Corporation and its subsidiaries, (ii) to assist the Corporation
in retaining and attracting executives and employees with requisite experience
and ability, and (iii) to associate more closely the interests of such
executives and employees with those of the Corporation's stockholders.
SECTION II. DEFINITIONS.
"CODE" is the Internal Revenue Code of 1986, as amended from time to time.
"COMMON STOCK" is the $.66 2/3 par value common stock of the Corporation.
"COMMITTEE" is defined in Section III, paragraph (a).
"CORPORATION" is defined in Section I.
"CORPORATION ISOS" are all the stock options (including the 1999 Plan ISOs)
which (i) are Incentive Stock Options and (ii) are granted under any plans
(including this 1999 Plan) of the Corporation, a Parent Corporation and/or a
Subsidiary Corporation.
"EMPLOYEE PARTICIPANTS" is defined in Section I.
"FAIR MARKET VALUE" of any property is the value of the property as
reasonably determined by the Committee.
"INCENTIVE STOCK OPTION" is a stock option that is treated as an incentive
stock option under Section 422 of the Code.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, or any
similar or successor statute, and any rules, regulations, or policies adopted or
applied thereunder.
"1999 PLAN" is defined in Section I.
"1999 PLAN ISOS" are Stock Options which are Incentive Stock Options.
"NON-EMPLOYEE PARTICIPANTS" is defined in Section I.
"NON-QUALIFIED OPTION" is a Stock Option which does not qualify as an
Incentive Stock Option or for which the Committee provides, in the terms of such
option and at the time such option is granted, that the option shall not be
treated as an Incentive Stock Option.
"PARENT CORPORATION" has the meaning provided in Section 424(e) of the Code.
"PARTICIPANTS" are all persons who are either Employee Participants or
Non-employee Participants.
"PERMANENT AND TOTAL DISABILITY" has the meaning provided in Section
22(e)(3) of the Code.
"RULE 16B-3" means Securities and Exchange Commission Rule 16b-3.
A-1
<PAGE>
"SECTION 16" means Section 16 of the 1934 Act, or any similar or successor
statute, and any rules, regulations, or policies adopted or applied thereunder.
"STOCK OPTIONS" are rights granted pursuant to this 1999 Plan to purchase
shares of Common Stock at a fixed price.
"STOCKHOLDER APPROVAL" means the affirmative vote of at least a majority of
the shares of Common Stock present and entitled to vote at a duly held meeting
of the stockholders of the Corporation, unless a greater vote is required by
state law or Section 16, if applicable to the Corporation, in which case such
greater requirement shall apply. Stockholder approval may be obtained by written
consent or other means, to the extent permitted by applicable state law.
"SUBSIDIARY CORPORATION" has the meaning provided in Section 424(f) of the
Code.
"TEN PERCENT STOCKHOLDER" means, with respect to a 1999 Plan ISO, any
individual who directly or indirectly owns stock possessing more than 10% of the
total combined voting power of all classes of sock of the Corporation or any
Parent Corporation or any Subsidiary Corporation at the time such 1999 Plan ISO
is granted.
SECTION III. ADMINISTRATION.
(a) THE COMMITTEE. This 1999 Plan shall be administered by the Board of
Directors or by a compensation committee consisting solely of two or more
"non-employee directors", as defined in Rule 16b-3, who shall be designated by
the Board of Directors of the Corporation (the administering body is hereafter
referred to as the "Committee"). The Committee shall serve at the pleasure of
the Board of Directors, which may from time to time, and in its sole discretion,
discharge any member, appoint additional new members in substitution for those
previously appointed and/or fill vacancies however caused. A majority of the
Committee shall constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present shall be deemed the action
of the Committee. No person shall be eligible to be a member of the Committee if
that person's membership would prevent the plan from complying with Rule 16b-3,
if applicable to the Corporation.
(b) AUTHORITY AND DISCRETION OF THE COMMITTEE. Subject to the express
provisions of this 1999 Plan and provided that all actions taken shall be
consistent with the purposes of this 1999 Plan, and subject to ratification by
the Board of Directors only if required by applicable law, the Committee shall
have full and complete authority and the sole discretion to: (i) determine those
persons who shall constitute employees eligible to be Employee Participants;
(ii) select the Participants to whom Stock Options shall be granted under this
1999 Plan; (iii) determine the size and the form of the Stock Options, if any,
to be granted to any Participant; (iv) determine the time or times such Stock
Options shall be granted including the grant of Stock Options in connection with
other awards made, or compensation paid, to the Participant; (v) establish the
terms and conditions upon which such Stock Options may be exercised and/or
transferred, including the exercise of Stock Options in connection with other
awards made, or compensation paid, to the Participant; (vi) make or alter any
restrictions and conditions upon such Stock Options and the Common Stock
received on exercise thereof, including, but not limited to, providing for
limitations on the Participant's right to keep any Common Stock received on
termination of employment; (vii) determine whether the Participant or the
Corporation has achieved any goals or otherwise satisfied any conditions or
requirements that may be imposed on or related to the exercise of Stock Options;
and (viii) adopt such rules and regulations, establish, define and/or interpret
these and any other terms and conditions, and make all determinations (which may
be on a case-by-case basis) deemed necessary or desirable for the administration
of this 1999 Plan. Notwithstanding any provision of this 1999 Plan to the
contrary, only Employee Participants shall be eligible to receive 1999 Plan
ISOs.
(c) APPLICABLE LAW. This 1999 Plan and all Stock Options shall be governed
by the law of the state in which the Corporation is incorporated.
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SECTION IV. TERMS OF STOCK OPTIONS.
(a) AGREEMENTS. Stock Options shall be evidenced by a written agreement
between the Corporation and the Participant awarded the Stock Option. This
agreement shall be in such form, and contain such terms and conditions (not
inconsistent with this 1999 Plan) as the Committee may determine. If the Stock
Option described therein is not intended to be an Incentive Stock Option, but
otherwise qualifies as an Incentive Stock Option, the agreement shall include
the following or a similar statement: "This stock option is not intended to be
an Incentive Stock Option, as that term is described in Section 422 of the
Internal Revenue Code of 1986, as amended."
(b) TERM. Stock Options shall be for such periods as may be determined by
the Committee, provided that in the case of 1999 Plan ISOs, the term of any such
1999 Plan ISO shall not extend beyond three months after the time the
Participant ceases to be an employee of the Corporation. Notwithstanding the
foregoing, the Committee may provide in a 1999 Plan ISO that in the event of the
Permanent and Total Disability or death of the Participant, the 1999 Plan ISO
may be exercised by the Participant or his estate (if applicable) for a period
of up to one year after the date of such Permanent and Total Disability or
death. In no event may a 1999 Plan ISO be exercisable (including provisions, if
any, for exercise in installments) subsequent to ten years after the date of
grant, or, in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
more than five years after the date of grant. A Stock Option granted to a
Participant eligible to participate in the Corporation's Incentive Bonus Program
may not be exercisable (including provisions, if any, for exercise in
installments) unless the Fair Market Value of the Common Stock on the date of
exercise exceeds the exercise price of such Stock Option by at least $2.00.
(c) PURCHASE PRICE. The purchase price of shares purchased pursuant to any
Stock Option shall be determined by the Committee, and shall be paid by the
Participant or other person permitted to exercise the Stock Option in full upon
exercise, (i) in cash, (ii) by delivery of shares of Common Stock (valued at
their Fair Market Value on the date of such exercise), (iii) any other property
(valued at its Fair Market Value on the date of such exercise), (iv) any
combination of cash, stock and other property, or (v) by way of cashless
exercise and the netting of the number of shares of Common Stock subject to the
Stock Option having an aggregate Fair Market Value equal to the purchase price,
with any payment made pursuant to subparagraphs (ii), (iii), (iv) or (v) only as
permitted by the Committee, in its sole discretion. In no event will the
purchase price of Common Stock be less than the par value of the Common Stock.
Furthermore, the purchase price of Common Stock subject to a 1999 Plan ISO shall
not be less than the Fair Market Value of the Common Stock on the date of the
issuance of the 1999 Plan ISO, provided that in the case of 1999 Plan ISOs
granted to Ten Percent Stockholders, the purchase price shall not be less than
110% of the Fair Market Value of the Common Stock on the date of issuance of the
1999 Plan ISO. The purchase price of shares of Common Stock issuable upon
exercise of any Stock Option may not be changed or amended after a Stock Option
is granted to a Participant
(d) FURTHER RESTRICTIONS AS TO INCENTIVE STOCK OPTIONS. To the extent that
the aggregate Fair Market Value of Common Stock with respect to which the
Corporation ISOs (determined without regard to this section) are exercisable for
the first time by any Employee Participant during any calendar year exceeds
$100,000, such Corporation ISOs shall be treated as options which are not
Incentive Stock Options. For the purpose of this limitation, options shall be
taken into account in the order granted, and the Committee may designate that
portion of any Corporation ISO that shall be treated as not an Incentive Stock
Option in the event that the provisions of this paragraph apply to a portion of
any option, unless otherwise required by the Code or regulations of the Internal
Revenue Service. The designation described in the preceding sentence may be made
at such time as the Committee considers appropriate, including after the
issuance of the Stock Option or at the time of its exercise. For the purpose of
this section, Fair Market Value shall be determined as of the time the Stock
Option with respect to such Common Stock is granted.
(e) RESTRICTIONS. At the discretion of the Committee, the Common Stock
issued pursuant to the Stock Options granted hereunder may be subject to
restrictions on vesting or transferability, provided that
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<PAGE>
all Stock Options granted hereunder shall be fully vested within 9 years of the
date granted. For the purposes of this limitation, Stock Options shall be taken
into account in the order granted.
(f) WITHHOLDING OF TAXES. Pursuant to applicable federal, state, local or
foreign laws, the Corporation may be required to collect income or other taxes
upon the grant of a Stock Option to, or exercise of a Stock Option by, a holder.
The Corporation may require, as a condition to the exercise of a Stock Option,
or demand, at such other time as it may consider appropriate, that the
Participant pay the Corporation the amount of any taxes which the Corporation
may determine is required to be withheld or collected, and the Participant shall
comply with the requirement or demand of the Corporation. In its discretion, the
Corporation may withhold shares to be received upon exercise of a Stock Option
if it deems this an appropriate method for withholding or collecting taxes.
(g) SECURITIES LAW COMPLIANCE. Upon exercise (or partial exercise) of a
Stock Option, the Participant or other holder of the Stock Option shall make
such representations and furnish such information as may, in the opinion of
counsel for the Corporation, be appropriate to permit the Corporation to issue
or transfer Common Stock in compliance with the provisions of applicable federal
or state securities laws. The Corporation, in its discretion, may postpone the
issuance and delivery of Common Stock upon any exercise of a Stock Option until
completion of such registration or other qualification of such shares under any
federal or state laws, or stock exchange listing, as the Corporation may
consider appropriate. Furthermore, the Corporation is not obligated to register
or qualify the shares of Common Stock to be issued upon exercise of a Stock
Option under federal or state securities laws (or to register or qualify them at
any time thereafter), and it may refuse to issue such shares if, in its sole
discretion, registration or exemption from registration is not practical or
available. The Corporation may require that prior to the issuance or transfer of
shares of Common Stock upon exercise of a Stock Option, the Participant enter
into a written agreement to comply with any restrictions on subsequent
disposition that the Corporation deems necessary or advisable under any
applicable federal and state securities laws. Certificates representing shares
of Common Stock issued hereunder shall bear a legend reflecting such
restrictions.
(h) RIGHT TO STOCK OPTION. No employee of the Corporation or any other
person shall have any claim or right to be a Participant in this 1999 Plan or to
be granted a Stock Option hereunder. Neither this 1999 Plan nor any action taken
hereunder shall be construed as giving any person any right to be retained in
the employ of the Corporation. Nothing contained hereunder shall be construed as
giving any person any equity or interest of any kind in any assets of the
Corporation or creating a trust of any kind or a fiduciary relationship of any
kind between the Corporation and any such person. As to any claim for any unpaid
amounts under this 1999 Plan, any person having a claim for payments shall be an
unsecured creditor.
(i) INDEMNITY. Neither the Board of Directors nor the Committee, nor any
members of either, nor any employees of the Corporation or any parent,
subsidiary, or other affiliate, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with their responsibilities with respect to this 1999 Plan, and the Corporation
hereby agrees to indemnify the members of the Board of Directors, the members of
the Committee, and the employees of the Corporation and its parent or
subsidiaries in respect of any claim, loss, damage, or expense (including
reasonable counsel fees) arising from any such act, omission, interpretation,
construction or determination to the full extent permitted by law.
(j) PARTICIPATION BY FOREIGNERS. Without amending this 1999 Plan, except
to the extent required by the Code in the case of 1999 Plan ISOs, the Committee
may modify grants made to participants who are foreign nationals or employed
outside the United States so as to recognize differences in local law, tax
policy, or custom.
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<PAGE>
SECTION V. AMENDMENT AND TERMINATION: ADJUSTMENTS UPON CHANGES IN STOCK.
The Board of Directors of the Corporation may at any time, and from time to
time, amend, suspend or terminate this 1999 Plan or any portion thereof,
provided that no amendment shall be made without approval of the Corporation's
stockholders if such approval is necessary under the Code, or rules or
regulations thereunder, or to comply with any applicable rules or regulations of
the Securities and Exchange Commission, including Rule 16b-3 (or any successor
rule thereunder), or the rules and regulations of any exchange or stock market
on which the Corporation's securities are listed or quoted. Except as provided
herein, no amendment, suspension or termination of this 1999 Plan may affect the
rights of a Participant to whom a Stock Option has been granted without such
Participant's consent. The Committee is specifically authorized to convert, in
its discretion, the unexercised portion of any 1999 Plan ISO granted to an
Employee Participant to a Non-qualified Option at any time prior to the
exercise, in full, of such 1999 Plan ISO. If there shall be any change in the
Common Stock or to any Stock Option granted under this 1999 Plan through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of the Corporation, appropriate
adjustments may be made by the Committee (or if the Corporation is not the
surviving corporation in any such transaction, the Board of Directors of the
surviving corporation, or its designee) in the aggregate number and kind of
shares subject to this 1999 Plan, and the number and kind of shares and the
price per share subject to outstanding Stock Options, provided that such
adjustment does not affect the qualification of any 1999 Plan ISO as an
Incentive Stock Option. In connection with the foregoing, the Committee may
issue new Stock Options in exchange for outstanding Stock Options.
SECTION VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
The number of shares of Common Stock that may be the subject of awards under
this 1999 Plan shall not exceed an aggregate of 600,000 shares. Shares to be
delivered under this 1999 Plan may be either authorized but unissued shares of
Common Stock or treasury shares. Any shares of Common Stock subject to a Stock
Option hereunder which for any reason terminates, is cancelled or otherwise
expires unexercised, and any shares reacquired by the Corporation due to
restrictions imposed on the shares, shares returned because payment is made
hereunder in shares of Common Stock of equivalent value rather than in cash,
and/or shares reacquired from a recipient for any other reason shall, at such
time, no longer count towards the aggregate number of shares which have been the
subject of Stock Options issued hereunder, and such number of shares shall be
subject to further awards under this 1999 Plan, provided, first, that the total
number of shares then eligible for award under this 1999 Plan may not exceed the
total specified in the first sentence of this Section VI, and second, that the
number of shares subject to further awards shall not be increased in any way
that would cause this 1999 Plan or any Stock Option to not comply with Rule
16b-3, if applicable to the Corporation.
SECTION VII. EFFECTIVE DATE AND TERM OF THIS PLAN.
The effective date of this 1999 Plan is August 13, 1999 (the "Effective
Date") and awards under this 1999 Plan may be made for a period of ten years
commencing on the Effective Date. The period during which a Stock Option may be
exercised may extend beyond that time as provided herein.
DATE OF APPROVAL BY BOARD OF DIRECTORS:
DATE OF APPROVAL BY STOCKHOLDERS:
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<PAGE>
AMERICAN SCIENCE AND ENGINEERING, INC.
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 23, 1999
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 23, 1999 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, FOR THE ADOPTION
OF THE 1999 STOCK OPTION PLAN, 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>
Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------
PLEASE MARK YOUR
A /X/ VOTES AS IN THIS
EXAMPLE
Your shares will be voted FOR the following proposal unless otherwise
indicated:
FOR ALL WITHHOLD FROM
NOMINEES ALL NOMINEES
1. ELECTION OF / / / /
DIRECTORS
To fix the
number of directors at seven and to elect the
nominees listed at right.
For, except vote withheld from the following nominees(s):
- -----------------------------------------------------------
Nominees:
Herman Feshbach
Roger P. Heinisch
Hamilton W. Helmer
Donald J. McCarren
William E. Odom
Ralph S. Sheridan
Carl W. Vogt
FOR AGAINST ABSTAIN
2. APPROVAL OF STOCK OPTION PLAN / / / / / /
To consider and approve the
Company's 1999 Stock Option Plan.
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 1999 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.
