<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
HOWTEK, INC.
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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> 2
HOWTEK, INC.
21 PARK AVENUE
HUDSON, NH 03051
April 22, 1997
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
which will be held on Friday, May 30, 1997, at 3:30 p.m. at the Hudson Community
Center, 1 Constitution Drive, Hudson, New Hampshire 03051.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, may I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
Your vote is important. We will appreciate a prompt return of your signed
proxy card and hope to see you at the meeting.
Cordially,
/s/ ROBERT HOWARD
----------------------------------
ROBERT HOWARD
Chairman of the Board of Director
<PAGE> 3
HOWTEK, INC.
21 PARK AVENUE
HUDSON, NEW HAMPSHIRE 03051
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 1997
------------------------
To The Stockholders of HOWTEK, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Howtek, Inc. (the "Company") will be held on Friday, May 30, 1997,
at 3:30 P.M. at the Hudson Community Center, Hudson, New Hampshire 03051 for the
following purposes:
1. To elect six (6) directors to hold office until the 1998 Annual Meeting
of Stockholders and until their respective successors have been duly elected and
qualified;
2. To ratify the selection of BDO Seidman, LLP as the Company's independent
auditors for the fiscal year ending December 31, 1997; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 4, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF
YOU ARE PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT
TIME AND EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
- --------------------------------------------------------------------------------
By Order of the Board of Directors,
/s/ STEWART K. HALL
--------------------------
STEWART K. HALL, Secretary
April 22, 1997
<PAGE> 4
HOWTEK, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 1997
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HOWTEK, INC. (the "Company") for use at the
Annual Meeting of Stockholders to be held on Friday, May 30, 1997, including any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting. Management intends to mail this proxy statement
and the accompanying form of proxy to stockholders on or about April 22, 1997.
The costs of soliciting proxies will be borne by the Company. It is estimated
that said costs will be nominal.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
VOTING SECURITIES
Only holders of the Company's common stock, par value $.01 per share, (the
"Common Stock") at the close of business on April 4, 1997, (the "Record Date")
are entitled to receive notice of and to vote at the Annual Meeting. As of the
Record Date, the Company had 9,031,856 shares of Common Stock outstanding. Each
share of Common Stock is entitled to one vote on all matters. No other class of
securities will be entitled to vote at the Annual Meeting. There are no
cumulative voting rights.
The six nominees receiving the greatest number of votes cast by the holders
of the Company's shares of Common Stock entitled to vote at the meeting will be
elected directors of the Company.
The affirmative vote of a majority of the votes cast at the meeting is
necessary for the ratification of the selection of independent auditors.
Shares represented by executed proxies received by the Company will be
counted for purposes of establishing a quorum, regardless of how or whether such
shares are voted on any specific proposal.
Votes cast in person or by proxy at the meeting will be tabulated by the
inspector of elections appointed for the meeting. In accordance with Delaware
law, abstentions and "broker non-votes" (i.e. proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) will be
treated as present for purposes of determining the presence of a quorum. For
purposes of determining approval of a matter presented at the meeting,
abstentions will be deemed present and entitled to vote and will, therefore,
have the same legal effect as a vote "against" a matter presented at the
meeting. Broker non-votes will be deemed not entitled to vote on the subject
matter as to which the non-vote is indicated and will, therefore, have no legal
effect on the vote on that particular matter.
The address of the principal executive offices of the Company is 21 Park
Avenue, Hudson, New Hampshire 03051, Telephone No. (603) 882-5200.
Proxies which are executed but which do not contain any specific
instructions will be voted in favor of the proposals contained herein.
1
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the Common
Stock owned on April 1, 1997, by (i) each person who is known to the Company to
own beneficially more than 5% of the outstanding shares of the Company's Common
Stock, (ii) each executive officer named in the Summary Compensation Table
below, (iii) each director of the Company, and (iv) all current executive
officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER(1) OWNED(2)(3) OF CLASS
- ------------------- ----------- ----------
<S> <C> <C>
Robert Howard.............................................. 2,182,929(4)(5) 22.9%
303 East 57th Street
New York, New York 10022
David R. Bothwell.......................................... 9,000 *
Sheila Horwitz............................................. 9,000 *
Richard Lehman............................................. 8,000(6) *
M. Russell Leonard......................................... 1,000 *
Nat Rothenberg............................................. 500 *
Ivan Gati.................................................. 0 *
Harvey Teich............................................... 0 *
All current executive officers and directors as a group (10
persons)................................................. 2,210,429(4)(5)(6) 24.4%
</TABLE>
- ---------------
* Less than one percent.
(1) The address of Messrs. Bothwell, Gati, Leonard, Lehman, Rothenberg and
Teich, and Ms. Horwitz is 21 Park Avenue, Hudson, New Hampshire 03051.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from April 1, 1997, upon the exercise
of options, warrants or rights; through the conversion of a security;
pursuant to the power to revoke a trust, discretionary account or similar
arrangement; or pursuant to the automatic termination of a trust,
discretionary account or similar arrangement. Each beneficial owner's
percentage ownership is determined by assuming that the options or other
rights to acquire beneficial ownership as described above, that are held by
such person (but not those held by any other person) and which are
exercisable within 60 days from April 1, 1997, have been exercised.
(3) Unless otherwise noted, the Company believes that the persons referred to in
the table have sole voting and investment power with respect to all shares
reflected as beneficially owned by them.
(4) Includes 495,447 shares exercisable on conversion of $3,078,600 principal
amount of indebtedness outstanding as of April 1, 1997, pursuant to a loan
made by Mr. Howard to the Company, which is convertible into 258,064 shares
of Common Stock at $3.88 per share, 9,114 shares at $8.625 per share,
112,676 at $8.875 per share, 54,054 shares at $9.25 per share and 61,539
shares at $8.125 per share. See "Certain Relationships and Related
Transactions."
(5) Includes 7,000 shares owned by Mr. Howard's wife.
(6) Includes 2,000 shares owned by Mr. Lehman's wife.
2
<PAGE> 6
ELECTION OF DIRECTORS
The proxies granted by stockholders will be voted individually at the
Annual Meeting for the election of the persons listed below as directors of the
Company, to serve until the next annual meeting of stockholders and until their
successors are duly elected and qualified. In the event any of the nominees
listed below shall be unable to serve, it is intended that the proxy will be
voted for such other nominees as are designated by the Board of Directors. Each
of the persons named has indicated to the Board of Directors of the Company that
he or she will be available as a candidate.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- --------
<S> <C> <C> <C>
Robert Howard.................... 73 Chairman of the Board, and Director 1984
David R. Bothwell................ 48 President, Chief Executive Officer and Director 1988
Ivan Gati........................ 49 Director 1989
Sheila Horwitz................... 60 Director 1996
Nat Rothenberg................... 66 Director 1988
Harvey Teich..................... 77 Director, Chairman Audit Committee 1988
</TABLE>
All persons listed above are currently serving a term of office as
directors which continues until the next annual meeting of stockholders.
Robert Howard, the founder and Chairman of the Board of Directors of the
Company, was the inventor of the first impact dot matrix printer. Mr. Howard was
Chief Executive Officer of the Company from its establishment in 1984 until
December of 1993. He was the founder, and from 1969 to April 1980 he served as
President and Chairman of the Board, of Centronics Data Computer Corp.
("Centronics"), a manufacturer of a variety of computer printers. He resigned
from Centronics' Board of Directors in 1983. From April 1980 until 1983, Mr.
Howard was principally engaged in the management of his investments. Commencing
in mid-1982, Mr. Howard, doing business as R.H. Research, developed the ink jet
technology upon which the Company was initially based. Mr. Howard contributed
this technology, without compensation, to the Company. Mr. Howard serves as
Chairman of the Board of Presstek, Inc. ("Presstek"), a public company which has
developed proprietary imaging and consumables technologies for the printing and
graphic arts industries. In February 1994 Mr. Howard entered into a settlement
agreement in the form of a consent decree with the Securities and Exchange
Commission (the "Commission") in connection with the Commission's investigation
covering trading in the Company's Common Stock by an acquaintance of Mr. Howard
and a business associate of such acquaintance. Mr. Howard, without admitting or
denying the Commission's allegations of securities laws violations, agreed to
pay a fine and to the entry of a permanent injunction against future violations
of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
David R. Bothwell joined the Company in June 1988, as President and became
a director and the Chief Financial Officer in August 1988. On February 26, 1993,
Mr. Bothwell resigned as President from the Company for health reasons. He
rejoined the Company on December 8, 1993, as Chief Executive Officer and on May
30, 1995, he resumed the position of President. From October 1985, to June 1988,
Mr. Bothwell served as Executive Vice President and Chief Operating Officer of
Daymarc Corporation, a manufacturer of automatic test handlers for the
semiconductor industry.
Ivan Gati has served as Chairman of Turner Management, Inc. since 1983.
Turner Management, Inc. is a vertically integrated real estate investment
company with offices located in New York, Texas and Tennessee, and whose
subsidiary companies provide property management and finance services. Mr. Gati
is a member of the Board of Directors of Universal Automation Systems, Inc.
3
<PAGE> 7
Sheila Horwitz is a Senior Vice President of Schroder Wertheim & Co., Inc.,
a broker dealer firm. She has an extensive background in the securities
brokerage industry, having worked at her current firm, formerly known as
Wertheim, Schroder & Co., since 1990. Previously Ms. Horwitz worked for
Oppenheim & Co. from 1988 to 1990, and for L. F. Rothschild & Co. from 1978 to
1988, in similar capacities.
Nat Rothenberg is President of Micro Management Ltd. and has served in such
capacity since he founded that company in 1978. Micro Management Ltd. is a
supplier of computer hardware, software, training, service and support to the
real estate industry. Previously, he was President of Drum Research &
Development Corp., an affiliate of Fidelity Corp. of Virginia that provided
computer services to that company.
Harvey Teich is a practicing certified public accountant. On January 1,
1992, the accounting firm of Merman & Teich, where Mr. Teich had been a
principal for the past seventeen years, ceased to operate as a partnership. He
is a member of the New York and Florida State Societies for Certified Public
Accountants.
BOARD OF DIRECTOR MEETINGS AND COMMITTEES
During the last fiscal year, the Board of Directors held one meeting, the
Stock Option Committee of the Board of Directors held five meetings, the
Directors Incentive Plan Committee held one meeting and the Audit Committee held
two meetings. The board meetings were attended by all directors. The Company
does not have standing nominating or compensation committees of the Board of
Directors, or committees performing similar functions.
The members of the Stock Option Committee during the last fiscal year
consisted of Ivan Gati and Sheila Horwitz and currently consists of the same
persons. The function of the Stock Option committee is to administer the
Company's 1993 Stock Option Plan. The Committee consists of not fewer than two
directors who are appointed by and serve at the pleasure of the Board of
Directors. Members of the Committee are not eligible to have participated in the
Plan during the prior twelve months or to be currently participating in the Plan
while serving as members.
The Directors Incentive Plan Committee consists of one member, Robert
Howard, who serves as Chairman. The purpose of this Committee is to administer
the Company's Directors Incentive Plan pursuant to which the Directors are
eligible to receive grants of stock options for shares of Company Common Stock
as compensation for serving on the Board of Directors.
The members of the Audit Committee during the last fiscal year consisted of
Harvey Teich, Chairman, Ivan Gati and Nat Rothenberg and currently consists of
the same persons. The Audit Committee provides an independent review and
advisory function for the independent auditors, the Board and the Company's
management with regard to financial reporting, internal controls and corporate
integrity.
4
<PAGE> 8
EXECUTIVE COMPENSATION
The following table provides information on the compensation provided by
the Company during fiscal years 1996, 1995 and 1994 to the person serving as the
Company's Chief Executive Officer during fiscal 1996 and the Company's four most
highly compensated executive officers, serving at the end of the 1996 fiscal
year. Included in this list are only those executive officers whose total annual
salary and bonus exceeded $100,000 during the 1996 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS(#)
- --------------------------- ---- --------- ----------
<S> <C> <C> <C>
David Bothwell................................................. 1996 151,303 61,585(1)
Chief Executive Officer 1995 141,870 15,000(2)
1994 145,470 0
M. Russell Leonard............................................. 1996 128,231 47,000(1)
Executive Vice President, Chief Operating Officer 1995 122,858 20,000(2)
1994 110,591 0
Richard Lehman................................................. 1996 102,082 26,500(1)(3)
Vice President, Engineering 1995 95,461 1,000(2)
1994 92,135 0
</TABLE>
- ---------------
(1) Represents options to purchase Common Stock which had been granted in
previous years pursuant to the 1993 Stock Option Plan and which were
relinquished by the optionee and canceled by the Company in exchange for an
equal number of new options granted in 1996 and exercisable at $1.72 per
share. See Ten Year Option Repricings Table.
(2) Options which were granted pursuant to the 1993 Stock Option Plan in 1995
and which were included in those options that were subsequently relinquished
by the optionee in 1996 in exchange for an equal number of new options. See
note 1 above and the Ten Year Option Repricings Table.
(3) Includes options to purchase 8,000 shares of Common Stock granted in 1996.
Mr. Lehman subsequently exchanged these options in 1996, along with options
to purchase 18,500 shares of Common Stock granted in prior years, for an
equal number of new options with an exercise price of $1.72 per share. See
note 1 above and the Ten Year Repricings Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OF FOR OPTION TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION ------------------
NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($)
- ---- --------- ------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
David R. Bothwell.............. 61,585 13.3 1.719 12/20/2006 66,578 168,720(1)
M. Russell Leonard............. 47,000 10.2 1.719 12/20/2006 50,810 128,763(2)
Richard Lehman................. 26,500 4.9 1.719 12/20/2006 28,648 72,600(3)
</TABLE>
5
<PAGE> 9
- ---------------
(1) These options, which are exercisable on June 20, 1997, replace options that
were granted on April 9, 1996, for 61,585 shares of Common Stock,
exercisable at $3.625 per share, expiring on April 9, 2006 and which were
cancelled on December 20, 1996.
(2) These options, which are exercisable on June 20, 1997, replace options that
were granted on April 9, 1996, for 47,000 shares of Common Stock,
exercisable at $3.625 per share, expiring on April 9, 2006 and which were
cancelled on December 20, 1996.
(3) These options, which are exercisable with regard to 18,500 shares on June
20, 1997, and 2000 shares on December 20, 1997, 2,000 shares on December 20,
1998, 2,000 shares on December 20, 1999, and 2,000 shares on December 20,
2000, replace (i) options that were granted on April 9, 1996, for 18,500
shares of Common Stock, exercisable at $3.625 per share, expiring on April
9, 2006 and which were cancelled on December 20, 1996, and (ii) options that
were granted on October 22, 1996, exercisable at $2.375 per share, expiring
on October 22, 2006 and which were cancelled on 12/20/96
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information on an aggregated basis regarding
each exercise of stock options during the Company's last completed fiscal year
by each of the named executive officers and the fiscal year-end value of
unexercised options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(1)
SHARES --------- ------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------- --------------
<S> <C> <C> <C> <C>
David Bothwell(2).......................... 0 0 0/61,585 0/5,789
M. Russell Leonard(2)...................... 0 0 0/47,000 0/4,418
Richard Lehman(2).......................... 0 0 0/26,500 0/2,491
</TABLE>
- ---------------
(1) Based upon the closing price of the Common Stock on December 31, 1996, of
$1.813 per share.
(2) Options granted pursuant to the Company's 1993 Stock Option Plan, as
amended.
6
<PAGE> 10
REPORT ON REPRICING OF OPTIONS
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
SECURITIES OF STOCK AT PRICE AT OPTION TERM
UNDERLYING TIME OF TIME OF REMAINING AT
OPTIONS REPRICING OR REPRICING OR NEW DATE OF
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED $ $ PRICE($) AMENDMENT
- ---- -------- ----------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
David R. Bothwell.............. 04/09/96 11,585 3.63 4.50 3.63 5 years
04/09/96 10,000 3.63 10.25 3.63 6 years
04/09/96 10,000 3.63 7.00 3.63 9 years
04/09/96 5,000 3.63 7.00 3.63 9 years
04/09/96 25,000 3.63 6.50 3.63 7 years
12/20/96 61,585 1.72 3.63 1.72 9.5 years
M. Russell Leonard............. 04/09/96 11,000 3.63 4.50 3.63 5 years
04/09/96 6,000 3.63 10.25 3.63 6 years
04/09/96 10,000 3.63 8.75 3.63 7 years
04/09/96 5,000 3.63 7.00 3.63 9 years
04/09/96 10,000 3.63 7.63 3.63 9 years
04/09/96 5,000 3.63 7.00 3.63 9 years
12/20/96 47,000 1.72 3.63 1.72 9.5 years
Richard Lehman................. 04/09/96 4,500 3.63 4.50 3.63 5 years
04/09/96 3,000 3.63 5.25 3.63 5 years
04/09/96 5,000 3.63 8.75 3.63 7 years
04/09/96 5,000 3.63 6.50 3.63 7 years
04/09/96 1,000 3.63 7.00 3.63 9 years
12/20/96 18,500 1.72 3.63 1.72 9.5 years
12/20/96 8,000 1.72 2.38 1.72 9.7 years
</TABLE>
In April 1996, pursuant to the Company's 1993 Stock Option Plan, the
Company's Board of Directors determined that because of the decline in the
market price of the Company's stock, that in order to retain qualified employees
and provide adequate incentive to such employees, it would be in the best
interests of the Company to offer all employee optionees, including the
executive officers listed above, the opportunity to exchange already granted
options for a like number of new options, exercisable at the then current market
price. Following the stock option repricing in April 1996, the Company's stock
price continued to decline, and in December 1996, the Board of Directors, based
upon a similar conclusion, again determined that it would be appropriate to
offer the holders of all previously granted options, including the executive
officers named in the table above, the opportunity to exchange such options for
newly granted options at the then current market price, under the Company's 1993
Stock Option Plan.
<TABLE>
<S> <C> <C>
Robert Howard, Chairman Ivan Gati Nat Rothenberg
David Bothwell Sheila Horwitz Harvey Teich
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
There is no Compensation Committee or other committee of the Company's
Board of Directors performing similar functions. The person who performed the
equivalent function in 1996 was Robert Howard, Chairman of the Board under the
direction of the Board of Directors. David R. Bothwell, Chief Executive Officer
and a director, participated in discussions with Mr. Howard during the past
completed fiscal year in his capacity as an executive officer in connection with
executive officer compensation.
7
<PAGE> 11
COMPENSATION OF DIRECTORS
Robert Howard, Chairman of the Board of Directors received $72,166.00 in
compensation by the Company during the past fiscal year in his capacity as an
employee of the Company. Similarly, David Bothwell was compensated by the
Company in his capacity as Chief Executive Officer and President, respectively.
Since the Company's inception in 1984, non-employee directors have served
without compensation. On September 21, 1993, the Company's Board of Directors
adopted the Director Incentive Plan (the "Director Plan"). The Company has
reserved for issuance 250,000 shares under the Director Plan. The Director Plan
provides for the award of (i) restricted and unrestricted stock, (ii) qualified
stock options, and (iii) non-qualified stock options. The Director Plan is
administered by a committee of at least one member appointed by the Board. The
term of the Director Plan is ten years and the term of individual grants of
stock options may extend up to ten years. Vesting periods for exercise of
options and restrictions on the transferability of stock awards are determined
by the committee administering the Director Plan. Directors who do not serve on
the Stock Option Committee for the Company's 1993 Stock Option Plan are eligible
to receive grants of non-qualified options under the Company's 1993 Stock Option
Plan. In May 1996, options to purchase 55,000 shares of Common Stock (20,000
shares which had been granted to Mr. Rothenberg and Mr. Teich each and 15,000
shares to Mr. Gati) which had previously been granted to Directors under the
Director Plan at an exercise price of $6.75 per share, were relinquished by the
holders thereof and reissued in an equal amount at an exercise price of $4.25
per share. In May 1996, options to purchase 10,000 shares of Common Stock were
granted to Ms. Horwitz under the Director Plan at an exercise price of $4.875.
In December 1996, options to purchase 65,000 shares, as described above, which
had previously been granted to Directors under the Director Plan, were
relinquished by the holders thereof and reissued in equal amounts at an exercise
price of $1.72 per share. On December 20, 1996, Mr. Howard was granted
non-qualified options to purchase 10,000 shares of the Company's Common Stock,
at an exercise price of $1.72 per share, exercisable on June 20, 1997, pursuant
to the Company's 1993 Stock Option Plan. During 1996, options to purchase 61,585
shares of Common Stock were granted to Mr. Bothwell under the 1993 Stock Option
Plan. See Ten Year Repricings Table.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
There is no Compensation Committee of the Board of Directors or other
committee of the Board of Directors performing an equivalent function. As noted
above, executive compensation in 1996 was determined by the Company's Chairman,
Robert Howard, in consultation with David Bothwell, the Company's Chief
Executive Officer. There is no formal compensation policy for either the Chief
Executive Officer or the other executive officers of the Company. Executive
compensation is based generally on performance and the Company's resources, but
not on specific objective criteria.
Compensation for executive officers consists of a combination of salary and
stock options. In 1996 the Company recorded a loss of $6,060,220 on revenues of
$11,263,253 as compared to a loss of $5,255,047 in 1995 on revenues of
$20,603,654. During 1996 there were no increases in salaries to executive
officers.
In October of 1996, Mr. Bothwell's rate of compensation was reduced from an
annualized rate of $141,000 to $78,000. The actual amount he received in 1996 of
$151,303, was an increase over the $141,870 he received in 1995, as a result of
the payment for unused accrued vacation.
<TABLE>
<S> <C> <C>
Robert Howard, Chairman Ivan Gati Nat Rothenberg
David Bothwell Sheila Horwitz Harvey Teich
</TABLE>
8
<PAGE> 12
PERFORMANCE GRAPH
The following chart sets forth a line graph comparing the performance of
the Company's Common Stock, over the past five years. This graph assumes the
investment of $100 on December 31, 1991, in the Company's Common Stock, and
compares the performance with the NASDAQ Composite Index and the NASDAQ Computer
Manufacturer Index. Measurement points are at December 31 for each respective
year.
On July 13, 1995, the Company's Common Stock ceased trading on the American
Stock Exchange and commenced trading on the NASDAQ National Market.
Those companies which compete with the Company in its principal market,
image scanning, are either small subsidiaries or divisions of large United
States corporations or are foreign companies which are either not quoted on a
stock exchange or for which data is difficult to obtain. For this reason a more
generic index of NASDAQ technology stocks has been adopted. The Company pays no
dividends. The NASDAQ Composite Index and the NASDAQ Computer Manufacturer Index
reflect a cumulative total return based upon the reinvestment of dividends of
the stocks included in those indices.
<TABLE>
<CAPTION>
NASDAQ Computer
Measurement Period Manufacturer
(Fiscal Year Covered) Howtek NASDAQ Index Index
<S> <C> <C> <C>
12/31/91 $100.000 $100.000 $100.000
12/31/92 $413.000 $116.400 $134.400
12/31/93 $179.655 $133.627 $127.411
12/30/94 $242.894 $130.554 $139.897
12/29/95 $182.899 $184.603 $220.199
12/31/96 $ 48.285 $227.062 $295.727
</TABLE>
9
<PAGE> 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a Convertible Revolving Credit Promissory Note ("the
Convertible Note") and Revolving Loan and Security Agreement (the "Loan
Agreement") with Mr. Robert Howard, Chairman of the Company, under which Mr.
Howard has agreed to advance funds, or to provide guarantees of advances made by
third parties in an amount up to $8,000,000. Such outstanding advances are
collateralized by substantially all of the assets of the Company and bear
interest at prime interest rate plus 2% (10.25% on December 31, 1996). The
Convertible Note entitles Mr. Howard to convert outstanding advances into shares
of the Company's common stock at any time based on the outstanding closing
market price of the Company's common stock at the time each advance is made.
As of April 1, 1997, the Company owed $3,078,604, in principal plus
interest, under its Loan Agreement with Mr. Howard which is convertible into
495,447 shares of the Company's Common Stock. See footnote 4 to the "Principal
Stockholders Table" in this Proxy Statement.
In February 1984, the Company entered into a lease of its Hudson, New
Hampshire facility with Mr. Howard, at an annual rent of $78,500, plus taxes and
operating expenses. The Company continues to renew this lease each year at the
same rent and the current lease term expires on September 30, 1997.
On April 4, 1996, the Company borrowed $1,000,000 from Dr. Lawrence Howard,
son of the Company's Chairman, Robert Howard, pursuant to a Convertible
Promissory Note (the "Note") due January 4, 1999, and related Security Agreement
of even date. The holder of the Note has the right at any time prior to
repayment in full of the principal, to convert the principal balance of the Note
to the Company's Common Stock at a conversion price of $3.00 per share, which
represents the estimated fair market value of the shares on the date of the
Note. In addition, at the Note holder's option, (a) the entire outstanding
principal amount of the Note and all accrued interest, may be converted into
shares of Common Stock at the conversion price then in effect, prior to the
closing of a firmly underwritten public offering, pursuant to a registration
statement filed by the Company under the Securities Act of 1933 with aggregate
net proceeds to the Company of $2,000,000 and a price of not less than $5.00 per
share, subject to adjustments of the stock (an "Offering"), (b) the entire
principal amount of the Note and all interest accrued under the Note shall be
paid to the holder upon the closing of an Offering, or (c) the Note shall remain
outstanding after the closing of an Offering. Under the terms of the Note
interest accrues monthly at the rate of Citibank's prime rate plus two percent
(10.25% on December 31, 1996) and is payable on demand or not later than the
maturity date of the Note. The Note is secured by substantially all of the
assets of the Company. The shares issuable upon conversion are subject to
certain registration rights. As of April 1, 1997, the Company owed Dr. Lawrence
Howard $400,000 pursuant to the Note.
On October 15, 1996, the Company sold 243,191 shares of its Common Stock
($.01 per share par value), at $2.056 per share, the estimated fair market value
of the unregistered stock, in a private placement pursuant to Section 4(2) of
the Securities Act of 1933, to Robert Howard, the Company's Chairman.
On December 13, 1996, the Company sold 403,362 shares of its Common Stock
($.01 per share par value), at $1.4875 per share, the estimated fair market
value of the unregistered stock, in a private placement pursuant to Section 4(2)
of the Securities Act of 1933, to Dr. Lawrence Howard.
On December 23, 1996, the Company sold 415,585 shares of its Common Stock
($.01 per share par value), at $1.2031 per share, the estimated fair market
value of the unregistered stock, in a private placement, pursuant to Section
4(2) of the Securities Act of 1933, to Robert Howard, the Company's Chairman.
The transactions described above were private sales to accredited investors
and were carried out to maintain compliance with NASDAQ's net tangible asset
value listing criteria for companies trading on the NASDAQ National Market. The
purchase price per share was 30% less than the then current market price.
10
<PAGE> 14
The securities were not issued pursuant to a registration statement and may only
be resold pursuant to a registration statement or an exemption from registration
pursuant to the securities laws and regulations of the United States.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO Seidman, LLP has audited and reported upon the financial statements of
the Company for the fiscal year ended December 31, 1996, and has been selected
by the Board of Directors to examine and report upon the financial statements of
the Company for the fiscal year ending December 31, 1997. The Board of Directors
recommends to the stockholders that they ratify this selection. BDO Seidman, LLP
has no direct or indirect interest in the Company or any affiliate of the
Company. A representative of BDO Seidman, LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement, if such person desires
to do so, and is expected to be available to respond to appropriate questions.
DEADLINE FOR SUBMISSION OF
1998 STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders to be held in 1998, must submit the
proposals in proper form to the Company at its address set forth on the first
page of this proxy statement not later than December 31, 1997 in order for the
proposals to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such Annual Meeting.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON APRIL 4, 1997. ADDITIONAL COPIES OF THE ANNUAL
REPORT WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
HOWTEK, INC.
21 PARK AVENUE
HUDSON, NEW HAMPSHIRE 03051
ATTENTION: MS. CONNIE WEBSTER
IN ADDITION, COPIES OF ANY EXHIBITS TO THE ANNUAL REPORT WILL BE PROVIDED
FOR A NOMINAL CHARGE TO STOCKHOLDERS WHO MAKE A WRITTEN REQUEST TO THE COMPANY
AT THE ABOVE ADDRESS.
11
<PAGE> 15
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors,
/s/ ROBERT HOWARD
----------------------------------
ROBERT HOWARD
Chairman of the Board of Directors
April 22, 1997
12
<PAGE> 16
HOWTEK, INC.
21 PARK AVENUE
HUDSON, NEW HAMPSHIRE 03051
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT HOWARD and DAVID R. BOTHWELL, and
each of them, Proxies, with full power of substitution in each of them, in the
name, place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of Howtek, Inc. on Friday, May 30, 1997, at 3:30 o'clock in the
afternoon, or at any adjournment or adjournments thereof, according to the
number of votes that the undersigned would be entitled to vote if personally
present, upon the following matters:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Robert Howard, David R. Bothwell, Ivan Gati, Sheila Horwitz, Nat Rothenberg and
Harvey Teich.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE BELOW.)
2. RATIFICATION OF APPOINTMENT OF BDO SEIDMAN, LLP INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS, AS AUDITORS FOR THE CORPORATION FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be Signed on Reverse)
(Continued from other side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS
AND THE RATIFICATION OF THE APPOINTMENT OF THE AUDITORS LISTED ABOVE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
DATED: , 1997
--------------------
---------------------------------
SIGNATURE
---------------------------------
SIGNATURE IF HELD JOINTLY.
Please mark, sign, date and
return this proxy card promptly
using the enclosed envelope.
