<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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Accent Color Sciences, 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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
[ACCENT COLOR SCIENCES LOGO]
ACCENT COLOR SCIENCES, INC.
800 CONNECTICUT BOULEVARD
EAST HARTFORD, CT 06108
November 2, 1999
Dear Shareholder:
You are cordially invited to attend the sixth Annual Meeting of
Shareholders of Accent Color Sciences, Inc. on Monday, November 29, 1999, at
2:00 p.m. at the offices of the Company. As part of this year's Annual Meeting,
you will have an opportunity to hear a report on the operations of the Company,
as well as ask questions that you might have about the Company.
There are several important matters on the agenda for the meeting. Your
vote is important, regardless of the number of shares that you hold. We would
appreciate it if you would promptly execute and return the proxy card enclosed
with this material.
Sincerely,
/s/ Richard J. Coburn
RICHARD J. COBURN
Chairman of the Board
Charles E. Buchheit signature
CHARLES E. BUCHHEIT
President and Chief Executive Officer
Enclosures
<PAGE> 3
ACCENT COLOR SCIENCES, INC.
800 CONNECTICUT BOULEVARD
EAST HARTFORD, CT 06108
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 2, 1999
To the Shareholders of Accent Color Sciences, Inc.:
The Annual Meeting of Shareholders of Accent Color Sciences, Inc. will be
held at the offices of the Company, at 800 Connecticut Boulevard, East Hartford,
Connecticut on Monday, November 29, 1999, at 2:00 p.m., local time, for the
following purposes:
1. To elect three Class 3 directors;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of the Company's Common
Stock from 35,000,000 shares to 50,000,000 shares;
3. To approve an amendment to the Company's 1995 Stock Incentive Plan
increasing the number of shares of Common Stock issuable thereunder from
2,000,000 shares to 4,000,000 shares;
4. To approve the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's auditors for the year ending
December 31, 1999; and
5. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only shareholders of record at the close of business on October 29, 1999,
will be entitled to notice of and to vote at the Annual Meeting or any
adjournments or postponements thereof. Shareholders may vote in person or by
proxy. The stock transfer books of the Company will not be closed.
By order of the Board of Directors
/s/ Willard F. Pinney
WILLARD F. PINNEY, JR.
Secretary
------------------------
IMPORTANT
It is important that your shares be represented at the Annual Meeting. Please
sign,
date and return the enclosed proxy card promptly in order that your shares will
be
voted at the Annual Meeting. A return envelope which requires no postage if
mailed in the United States is enclosed for your convenience.
------------------------
<PAGE> 4
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Accent Color Sciences, Inc. (the "Company")
to be used in voting at the Annual Meeting of Shareholders of the Company to be
held on Monday, November 29, 1999, and at any adjournments or postponements
thereof (the "Annual Meeting") at the offices of the Company, at 800 Connecticut
Boulevard, East Hartford, Connecticut 06108. The close of business on October
29, 1999 is the record date for determining shareholders entitled to notice of
and to vote at the Annual Meeting. At such record date, there were outstanding
18,865,865 shares of the Company's Common Stock, no par value ("Common Stock"),
each of which is entitled to one vote on each matter to be presented before the
shareholders of the Company, and 1,828 shares of the Company's Series B
Convertible Preferred Stock, no par value (the "Series B Stock"). Holders of
Series B Stock vote together with holders of Common Stock as a single class
(unless otherwise required by law). As of the record date, the holders of Series
B Stock were entitled to 18,828,812 votes, being the number of shares of Common
Stock into which the Series B Stock was then convertible (giving effect to
certain limitations on conversion of the Series B Stock contained in the
Company's Restated Certificate of Incorporation). This Proxy Statement, the
accompanying form of proxy and the 1998 Annual Report to Shareholders are being
first sent to shareholders on or about November 2, 1999.
VOTING
Shares may be voted by shareholders of record in person or by proxy, and
shares represented by a properly executed proxy will be voted with respect to
all shares represented by it in accordance with the instructions, if any, given
therein. If no instructions are given, the proxy will be voted as recommended by
the Board of Directors and, in the discretion of the persons designated on the
proxy card, the proxy will be voted with respect to any other matter which may
properly come before the meeting or any adjournments or postponements thereof.
Any proxy received by the Board of Directors may be revoked by the
shareholder at any time prior to its use at the meeting by a subsequent written
instrument signed in the same manner as the proxy and received by the Company
either at the Annual Meeting or before the Annual Meeting at Accent Color
Sciences, Inc., 800 Connecticut Boulevard, East Hartford, Connecticut 06108
Attention: Secretary.
Under Connecticut law and the governing instruments of the Company, the
presence, either in person or by proxy, of the holders of shares representing a
majority of the votes entitled to be cast on a matter to be considered at the
Annual Meeting is necessary to constitute a quorum for the transaction of
business with respect to that matter. Assuming the presence of a quorum,
directors will be elected by a plurality of the votes cast at the Annual Meeting
by shareholders entitled to vote in the election. Approval of each of the other
proposals set forth in the Notice of the meeting and approval of any other
matters voted on at the Annual Meeting will be achieved if the votes cast in
favor of the proposal exceed the votes cast against the proposal.
All matters to be considered at the Annual Meeting will be voted upon by
holders of Common Stock and Series B Stock, voting together as a single class,
except that, pursuant to Connecticut law, holders of Common Stock will also
vote, as a separate class, on the proposed amendment increasing the authorized
number of shares of Common Stock of the Company discussed in Item 2 below.
An inspector of election will tabulate all votes cast at the Annual
Meeting. For purposes of the foregoing voting requirements, the inspector of
election will treat shares represented by proxies that withhold authority to
vote for a nominee for election as a director or that reflect abstentions as
shares that are present and entitled to vote on the matters for purposes of
determining the presence of a quorum, but neither proxies that withhold
authority (without naming an alternative nominee) nor abstentions will be
counted as votes cast at the Annual Meeting. Accordingly, such proxies will not
have any effect on the outcome of the voting on the election of directors, or
the approval of the other proposals. In the event that any other matters are
submitted to shareholders at the Annual Meeting, abstentions will have no impact
on the voting with respect to those matters.
<PAGE> 5
Shares represented at the Annual Meeting that are held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote and over which the broker or nominee does not
have discretionary voting power on a particular matter (so-called, "broker
non-votes") will be treated as present for purposes of determining the presence
of a quorum. However, such shares will not be treated as shares that are
entitled to vote on the particular matter as to which the broker or nominee does
not have discretionary authority, nor will they be treated as votes cast at the
Annual Meeting. Accordingly, broker non-votes will have no impact on the voting
with respect to any matter to come before the Annual Meeting.
SOLICITATION
The cost of this solicitation will be borne by the Company. Solicitation
will be made by use of the mails, except that, if necessary, directors, officers
and regular employees of the Company (none of whom will receive any additional
compensation therefor) may make solicitations of proxies by telephone, telecopy,
telegram or personal interview. The Company may also engage a proxy soliciting
firm at the Company's expense. The Company will reimburse brokers and other
persons holding shares of Common Stock in their names, or in the names of
nominees, for their expenses incurred in sending proxy materials to beneficial
owners and obtaining their proxies.
ITEM 1. ELECTION OF DIRECTORS
INFORMATION ON NOMINEES
The Company's Restated Certificate of Incorporation provides for three
classes of directors, with each class to serve a term of three years. The Board
is presently composed of seven directors, two of whom are members of Class 1,
two of whom are members of Class 2 and three of whom are members of Class 3. The
current terms of the members of Class 3 are scheduled to expire at this Annual
Meeting. The Board has nominated for re-election as Class 3 directors the three
persons who are now serving as Class 3 directors of the Company.
The three Class 3 nominees standing for election at this Annual Meeting are
Richard J. Coburn, Norman L. Milliard and Willard F. Pinney, Jr. If elected,
their terms will expire in 2002. Biographical summaries of each nominee and of
the continuing directors appear below.
All nominees have consented to be so named and to serve if elected. If a
nominee becomes unavailable for election, it is the intention of the persons
named in the accompanying proxy card to vote for such other person, if any, as
the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES:
NOMINEES
For Class 3 Directors whose terms expire in 2002:
Richard J. Coburn, age 67, has been Chairman of the Board since May 1996
and is a co-founder of the Company. Mr. Coburn served as President of the
Company from May 1993 until May 1996 and served as Chief Executive Officer of
the Company from May 1993 until August 1996. From 1991 until 1993, Mr. Coburn
worked as an independent consultant to development stage companies. Mr. Coburn
was a co-founder of KCR Technology, Inc., a manufacturer of high-speed,
black-on-white printers, and served in various roles, both consulting and
managerial, including President from 1977 to 1991. Mr. Coburn was also the
founder of Coburn Technology, Inc., a developer of a xerographic printer product
for word processing, the rights to which were sold to Wang Laboratories, Inc.,
and served as its President from 1974 to 1977. From 1968 to 1974, Mr. Coburn was
president of Scan-Optics, Inc., a manufacturer of data capture equipment, of
which he was a co-founder and currently serves as a director. Prior to 1968, Mr.
Coburn had served in various
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<PAGE> 6
engineering management positions in aerospace over a 14 year period. Mr. Coburn
received his degree in engineering from Yale University.
Norman L. Milliard, age 57, has been Vice Chairman and Chief Technology
Officer of the Company since May 1998. Mr. Milliard served as President of the
Company from May 1996 through May 1998 and served as Chief Executive Officer of
the Company from August 1996 through May 1998. Mr. Millard was elected a
director of the Company in 1995. Mr. Milliard served as Vice President of the
Company from January 1994 until May 1996. From 1988 through 1993, Mr. Milliard
served as head of the Special Product Group at AEG Schneider Automation, Inc.
(formerly Modicon, Inc.), an industrial automation company, and as the Director
of Engineering and Operations for KCR Technology, a manufacturer of high-speed,
black-on-white printers, from 1982 to 1988. Mr. Milliard founded two companies
in the electronic music field and holds a number of patents in both the printing
and electronic music fields. Mr. Milliard received his degree in physics, with
honors, from The Citadel, the Military College of South Carolina.
Willard F. Pinney, Jr., age 56, has been Secretary of the Company since
December 1993 and became a director of the Company in 1996. Mr. Pinney has been
a partner since 1973 in the Connecticut law firm of Murtha, Cullina, Richter and
Pinney LLP, which serves as counsel to the Company. He received his degree in
political science from Yale University and his JD, with honors, from the
University of Michigan Law School.
CONTINUING DIRECTORS
Class 1 directors, whose terms expire in 2000:
Charles E. Buchheit, age 59, became President and Chief Executive Officer
of the Company in May 1998 and became a director of the Company in March 1998.
Mr. Buchheit served as a Corporate Officer and Division President at Moore
Corporation from 1995 to 1997, where he also served as a member of the Moore
Executive Committee. At Moore, Mr. Buchheit developed Integrated Customer
Solutions, a division which had the capability of managing all forms of print.
Prior to that time, Mr. Buchheit was a Corporate Officer and Vice President at
Xerox Corporation from 1989 to 1995. At Xerox, he was responsible for launching
the multi-billion dollar Docutech program worldwide. From 1975 to 1989, he held
several executive positions at IBM Corporation, including Group Marketing
Executive, Director of Operations and Director of Product Programs and
Practices. At IBM, Mr. Buchheit was responsible for the worldwide marketing of
mainframes, system software, storage and printing devices. He has served on the
Board of Directors for Infomart and NEPS, a wholly owned subsidiary of Moore
Corporation, and is currently a member of the Board of Directors for Intercon
Associates, Incorporated.
Robert H. Steele, age 60, became a director of the Company in 1996 and is
Chairman of the Executive Compensation Committee. Mr. Steele is currently Vice
Chairman of John Ryan Company, a banking services Company, of which he
previously served as Senior Vice President since 1992. Mr. Steele was President
of RHS Consulting, Inc., a business consulting firm, in 1991. From 1985 to 1990,
Mr. Steele was Chairman and Chief Executive Officer of Dollar Dry Dock Bank of
New York. Mr. Steele also served as President and CEO of Norwich Savings
Society. Mr. Steele is a former U.S. Congressman from the State of Connecticut
and currently serves as a director of Moore Medical Corp., a medical supplies
distributor, Scan-Optics, Inc., a manufacturer of data capture equipment, NLC
Insurance Companies, SmartServ Online, Inc., an online information provider and
the New York Mercantile Exchange, a commodities exchange. Mr. Steele received
his undergraduate degree from Amherst College and his Master's Degree from
Columbia University and holds an honorary Doctor of Laws from Sacred Heart
University.
Class 2 directors, whose terms expire in 2001:
Joseph T. Brophy, age 65, became a director of the Company in March 1998
upon his election by the Board of Directors of the Company to fill a vacancy
created by the retirement of Raymond N. Smith, a co-founder and former Chairman
of the Board of Directors of the Company. Mr. Brophy retired as President of
Travelers Insurance Company, a subsidiary of The Travelers Corporation, in 1993.
Since then, he has served as a consultant with Actuarial Sciences Associates
working with major companies such as AT&T, Equifax and
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<PAGE> 7
others in developing their business strategies for health care. His prior
experience with The Travelers included service as its Chief Information Officer
in charge of data processing operations. Mr. Brophy is a fellow of the Society
of Actuaries, holds memberships in the American Academy of Actuaries, New York
Academy of Sciences, Acoustical Society of America and American Arbitration
Association and has received awards including the Distinguished Information
Sciences Award from the Data Processing Management Association in 1986 and the
Award of Achievement in Managing Information Technology from Carnegie Mellon and
American Management Systems in 1987. Mr. Brophy currently serves as a trustee of
St. Joseph College and as a director of the Connecticut Opera. He has also
served as a director of LIMRA International, Inc., trustee of RPI-Hartford
Graduate Center, and director of the Connecticut Academy for Education in
Mathematics, Sciences and Technology and the Greater Hartford Chamber of
Commerce. He is currently an owner, director and co-founder of Solution Point,
an information company that provides decision support tools, analysis and data
for employers and health systems. Mr. Brophy is a cum laude graduate of Fordham
University, from which he received a Bachelors of Science degree. He has also
attended NYU Graduate School and completed the Advance Management Program at the
Sloane School, MIT.
Richard Hodgson, age 82, became a director of the Company in 1996 and is
Chairman of the Audit Committee. Since 1980, Mr. Hodgson has been a director of
McCowan Associates, Inc., an investment management firm, where he is currently
in charge of technology investment strategies. Mr. Hodgson had previously been
Corporate Senior Vice President of ITT Company, a hotels, gaming, entertainment
and information publishing company, where he was worldwide Product Group Manager
for the Engineered Products Group. Prior to joining ITT in 1968, Mr. Hodgson was
President and CEO of Fairchild Camera, where he initiated Fairchild's entry into
the semiconductor industry. Mr. Hodgson is a co-founder and a Director Emeritus
of Intel Corporation, a manufacturer of microprocessor, communications and
semiconductor products, and is also a director of IBIS Technology Corp., I-Stat
Corp., the Aegis Fund and Continental Capital Corp. Mr. Hodgson received his
degree in engineering from Stanford University and his MBA from Harvard
University.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to a review of the Company's records, all required filings under
Section 16(a) of the Securities Exchange Act were made in compliance with such
section with the exception of the following two delinquent filings. George T.
Dolan, who, as of December 31, 1998, was no longer an employee of the Company,
became Vice President of Operations on January 19, 1998 and was required to file
Form 3 by January 29, 1998, but instead filed this form on February 13, 1998.
Joseph T. Brophy was required to file Form 4 by June 10, 1998 for the purchase
of 1,000 shares of the Company's Common Stock on May 31, 1998, but instead filed
this form on September 1, 1998.
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees of the Company receive a
monthly retainer of $750 and a per meeting fee of $750 for each meeting of the
Board of Directors and any committee meetings attended in person by such
director. The Company also reimburses directors for reasonable travel expenses
incurred in order to attend meetings.
Under its 1995 Stock Incentive Plan, the Company has established a stock
incentive program for non-employee directors, whereby each newly elected
director receives an initial option to purchase 5,000 shares of Common Stock and
will receive an option to purchase an additional 5,000 shares of Common Stock on
the date of the annual meeting of the Board each year through 2000 as long as
the director remains in office. Under this program, Messrs. Brophy and Buchheit
each received an option to purchase 5,000 shares upon their election to the
Board on March 23, 1998 and each of Messrs. Brophy, Hodgson, Pinney and Steele
received at the time of the Annual Meeting of Shareholders on May 8, 1998 an
option to purchase 5,000 shares at an exercise price equal to the fair market
value of the common stock as of the date of grant, as determined under the
Company's 1995 Stock Incentive Plan, as amended. Although not as part of this
program for non-employee directors, each such director also received, on a
one-time basis, an option award to
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<PAGE> 8
purchase 25,000 shares of Common Stock of the Company in the context of a
comprehensive grant of options to all employees and non-employee directors on
April 30, 1999.
The Company, as permitted by Connecticut law, has purchased directors and
officers liability insurance policies covering all of the Company's directors
and officers on an annual basis and on a one time three-year basis with respect
to the Company's initial public offering. The aggregate premiums for these
policies paid or accrued during 1998 was approximately $72,800.
ATTENDANCE; BOARD COMMITTEES
The business and affairs of the Company are managed under the direction of
the Board of Directors. Members of the Board may serve on one or more committees
to carry out certain responsibilities. The standing committees of the Board of
Directors are the Audit Committee and the Executive Compensation Committee.
The Board of Directors held a total of seven regular and special meetings
during 1998. Each director attended at least 75% of the aggregate number of
meetings of the Board and Board committees on which such director served except
for Mr. Brophy, who was elected in March 1998 to fill a vacancy and attended
five out of seven such meetings.
An Audit Committee was established in May 1996. This Committee is
responsible for overseeing and reviewing the audit of the Company's books and
accounts, for reviewing the audited financial statements of the Company, for
reviewing the Company's internal control procedures and for reviewing the
independence of the Company's independent public accountants. No member of this
Committee is an employee of the Company. The Audit Committee met once during
1998. The current members of the Audit Committee are Richard Hodgson (Chairman)
and Robert H. Steele.
An Executive Compensation Committee was also established in May 1996 and is
generally responsible for reviewing and recommending to the Board of Directors
salaries and incentive compensation for the Company's executive officers. This
Committee met three times in 1998. The current members of the Executive
Compensation Committee are Robert H. Steele (Chairman), Joseph T. Brophy and
Willard F. Pinney, Jr.
The Company does not have a nominating committee.
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<PAGE> 9
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 1, 1999
regarding the beneficial ownership of the Company's Common Stock by (i) each
person (or group of affiliated persons) known by the Company to own more than 5%
of the outstanding shares of Common Stock, (ii) each of the directors of the
Company, and each nominee for election as director, (iii) each of the Named
Executive Officers and (iv) all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY OF COMMON
NAME AND ADDRESS(1) OWNED(2) STOCK
------------------- ------------ ----------
<S> <C> <C>
Richard J. Coburn(3)........................................ 459,303 2.4%
Charles E. Buchheit(4)...................................... 125,000 *
Norman L. Milliard(5)....................................... 260,500 1.4%
Patrick J. Pedonti.......................................... 2,500 *
Joseph T. Brophy(6)......................................... 75,649 *
Richard Hodgson(7),(8)...................................... 93,750 *
Willard F. Pinney, Jr.(7),(9)............................... 114,799 *
Robert H. Steele(7),(10).................................... 101,618 *
All directors and officers of the Company as a group (8
persons)(11).............................................. 1,233,119 6.4%
</TABLE>
- ------------
* Less than 1%
(1) The address of all persons who are executive officers or directors of the
Company is in care of the Company, 800 Connecticut Boulevard, East
Hartford, Connecticut 06108.
(2) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares, subject to
community property laws where applicable. Shares not outstanding but deemed
beneficially owned by virtue of the right of a person or group to acquire
them within 60 days of October 1, 1999 ("currently exercisable options")
are treated as outstanding only for purposes of determining the amount and
percent owned by such person or group.
(3) Includes 23,334 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(4) Includes 5,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan and 100,000
shares of Common Stock subject to currently exercisable warrants.
(5) Includes 145,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(6) Includes 35,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(7) Includes 65,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan.
(8) Includes 3,750 shares of Common Stock subject to currently exercisable
warrants.
(9) Includes 30,000 shares of Common Stock subject to currently exercisable
options granted to Murtha, Cullina, Richter and Pinney LLP, counsel to the
Company, of which Mr. Pinney is a partner.
(10) Includes 17,118 shares of Common Stock owned by Mr. Steele's spouse and
1,500 shares of Common Stock subject to currently exercisable warrants
issued to Mr. Steele's spouse, as to all of which he disclaims beneficial
ownership.
(11) Includes 433,334 shares of Common Stock subject to currently exercisable
options granted pursuant to the 1995 Stock Incentive Plan and 105,250
shares of Common Stock subject to currently exercisable warrants.
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<PAGE> 10
EXECUTIVE OFFICERS
The current Executive Officers of the Company are set forth in the section
entitled "Election of Directors". The term of each of the Executive Officers
expires as of the next Annual Meeting of the Board of Directors.
EXECUTIVE COMPENSATION
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
Executive Compensation for 1998. The compensation of senior executives of
the Company for 1998 was determined by the Board of Directors of the Company
based upon recommendations of the Executive Compensation Committee of the Board
of Directors (the "Committee"). The base salaries of the Company's executive
officers have been determined at levels which management and the Board of
Directors believe to be appropriate and competitive in order to attract and
retain individuals with talents and experience necessary to carry out the
Company's business plan, but only when viewed in combination with awards made to
such executive officers under the Company's 1995 Stock Incentive Plan (the
"Stock Incentive Plan"). In view of the continuing priority on cash management,
awards under the Stock Incentive Plan have become a critical component of
executive compensation, including awards which are contingent upon shareholder
approval of an additional allocation of shares of common stock to the Stock
Incentive Plan. In keeping with the Company's focus on cash management during
1998, no significant cash bonuses were paid with respect to such year.
Furthermore, the base salary level of Charles E. Buchheit, who joined the
Company as its President and Chief Executive Officer in May 1998, was
established at a relatively low level for a person of his experience but was
supplemented with substantial stock option incentives.
Repricing of Options. Concurrent with the grant of options under the Stock
Incentive Plan to Mr. Buchheit on April 14, 1998, and in recognition of his
desire that other employees of the Company be appropriately incented to work
with him in achieving the Company's objectives, the Board of Directors approved
the repricing of all options granted under such Stock Incentive Plan, with
exercise prices in excess of the exercise price of options granted to Mr.
Buchheit, to the fair market value of the Company's Common Stock at which Mr.
Buchheit's options were granted ($3.13 per share). The Board of Directors
concurred with management's recommendation that all employees with higher-priced
options should be placed on the same footing as Mr. Buchheit in order to foster
a sense of unity in moving forward with the Company's business plan.
Subsequently, in September 1998, the fair market value of the Company's Common
Stock having fallen to approximately one-third of its value in April 1998,
management was again struggling with the need to provide adequate incentives to
maintain key personnel during a difficult period in the Company's development.
The Board of Directors again concurred with management that a further repricing
of outstanding options under the Stock Incentive Plan to the current then fair
market value of the Company's Common Stock ($1.00 per share) would be
appropriate, but only on the condition that an additional one-year vesting
requirement be imposed on each person accepting the repricing. Thus, the vesting
period for options held by each person accepting the repricing was extended by
one year, including options which otherwise were fully vested. It was the
judgment of the Board of Directors that the combination of repricing with
extended vesting requirements would constitute a viable incentive for option
holders to remain with the Company under the circumstances.
Responsibilities and Policies of Executive Compensation Committee. The
responsibilities of the Executive Compensation Committee include formulating
policies and making recommendations to the Board of Directors with respect to
compensation of executive officers of the Company. The Committee held three
meetings in 1998 in order to consider base salary adjustments and incentive
stock option awards for senior executive officers and formulate policies with
respect to Executive Compensation generally.
Limitation of Deductibility of Executive Compensation. Section 162(m) of
the Internal Revenue Code of 1986, generally denies a publicly held corporation,
such as the Company, a federal income tax deduction for compensation in excess
of $1,000,000 per year paid or accrued for its chief executive officer or any of
the four other most highly compensated executive officers. Certain "performance
based" compensation is not subject to the limitation on deductibility provided
certain stockholder approval and independent director requirements
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<PAGE> 11
are met. Because the compensation paid to each of the Company's executive
officers have not exceeded nor approached $1,000,000 in any year, the Committee
does not believe that this limitation on deductibility of executive compensation
is currently of any concern to the Company. However, the Committee will continue
to review this limitation in light of future events with the objective of
achieving deductibility of executive compensation, as appropriate.
EXECUTIVE COMPENSATION COMMITTEE
ROBERT H. STEELE, CHAIRMAN
JOSEPH T. BROPHY
WILLARD F. PINNEY, JR.
8
<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Executive Compensation Committee members, Robert H. Steele,
Joseph T. Brophy and Willard F. Pinney, Jr., nor any executive officer of the
Company served during 1998 as a member of the Compensation Committee of any
other company. All members of the Executive Compensation Committee are outside
directors, except that Willard F. Pinney, Jr., is Secretary of the Company and a
partner of Murtha, Cullina, Richter and Pinney LLP, counsel to the Company.
SUMMARY EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities to the Company for the fiscal year
ended December 31, 1998 of (i) the chief executive officer and (ii) the
Company's other most highly compensated executive officers whose total salary
and bonus for the year ended December 31, 1998 exceeded $100,000 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME & PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS/SARS (#)
------------------------- ---- ---------- --------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Richard J. Coburn.................. 1998 120,000 500 -- 120,000(1)
Chairman 1997 121,923 24,663 -- 10,000
1996 128,846 -- 30,000
Charles E. Buchheit................ 1998 166,667 500 19,547(2) 610,000(1)(3)
President and CEO
Norman L. Milliard................. 1998 181,344 500 -- 220,000(1)
Vice Chairman and CTO 1997 161,077 46,480 -- 15,000
1996 155,692 -- 26,000(4) 30,000
Patrick J. Pedonti................. 1998 130,000 500 59,277(5) 205,000(1)(6)
Vice President and CFO 1997 99,038 -- 36,256(5) 150,000
</TABLE>
- ------------
(1) Includes the re-pricing of previously granted options. Outstanding options
at October 1, 1999 for the named executive officers were Mr. Coburn 60,000,
Mr. Buchheit 255,000, Mr. Millard 110,000 and Mr. Pedonti -0-.
(2) Consists of various living expense reimbursements to Mr. Buchheit pursuant
to his employment agreement with the Company.
(3) Includes a common stock warrant to purchase 100,000 shares of the Company's
Common Stock, commencing on September 29, 1999, at an exercise price of
$1.00 per share and expiring in 2003.
(4) Reflects reimbursement of expenses of Mr. Milliard relating to his
relocation to Connecticut consisting of rent expense in 1996 under an
arrangement which expired in February 1997.
(5) Reflects various living and relocation expense reimbursements to Mr. Pedonti
in connection with his relocation to Connecticut.
(6) Mr. Pedonti resigned his employment with the Company in May 1999 and all of
his options have subsequently lapsed.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in fiscal 1998. No stock
appreciation rights were granted during such year.
9
<PAGE> 13
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE OR APPRECIATION FOR
UNDERLYING GRANTED TO BASE PRICE OPTION TERM (2)
OPTIONS/SAR EMPLOYEES IN PER SHARE EXPIRATION --------------------
NAME GRANTS (#) FISCAL YEARS ($/SH)(1) DATE 5% ($) 10% ($)
---- ----------- ------------ -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Buchheit......... 5,000(3) 19.6 % 2.19 03/23/03 3,022 6,677
250,000(3) 9.79% 3.13 04/14/08 491,324 1,245,112
250,000(3) 9.79% 1.00 04/14/08 148,234 370,767
5,000(3) 19.6 % 1.00 03/23/03 1,221 2,663
Richard J. Coburn........... 20,000(3) .8 % 2.31 01/20/08 29,086 73,711
10,000(3) .4 % 3.13 03/20/07 17,067 41,956
30,000(3) 1.18% 3.13 04/09/06 44,669 106,949
30,000(3) 1.18% 1.00 04/09/06 13,310 31,467
10,000(3) .39% 1.00 03/20/07 5,118 12,421
20,000(3) .78% 1.00 01/20/08 11,499 28,571
Norman L. Milliard.......... 20,000(3) .78% 2.31 01/20/08 29,086 73,711
45,000(3) 1.76% 3.13 10/09/00 18,147 37,627
13,947(3) .55% 3.13 03/20/07 23,804 58,517
1,053(3) .04% 3.13 03/20/07 1,797 4,418
30,000(3) 1.18% 3.13 02/02/06 43,453 103,520
30,000(3) 1.18% 1.00 02/02/06 12,930 30,417
1,053(3) .04% 1.00 03/20/07 539 1,308
13,947(3) .55% 1.00 03/20/07 7,138 17,323
20,000(3) .78% 1.00 01/20/08 11,499 28,571
45,000(3) 1.76% 1.00 10/09/00 4,679 9,592
Patrick J. Pedonti.......... 5,000(3) .20% 2.31 01/20/08 7,272 18,428
75,000(3) 2.94% 3.13 03/20/07 128,005 314,673
45,000 1.76% .91 09/21/08 25,647 64,995
5,000(3) .20% 1.00 01/20/08 2,875 7,143
75,000(3) 2.94% 1.00 03/20/07 38,386 93,154
</TABLE>
- ------------
(1) All options were granted at the fair market value on the date of grant as
determined by the Board of Directors.
(2) The 5% and 10% assumed annual rates of compound stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
reflect the Company's estimates or projections of future Common Stock
prices. There can be no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock price
appreciation over the term will be at the assumed 5% or 10% levels or at any
other defined level. Unless the market price of the Common Stock appreciates
over the option term. no value will be realized from the option grants made
to the executive officers.
(3) Reflects options that were re-priced during the year pursuant to a stock
option re-pricing and a stock option modification occurring on April 14,
1998 and September 29, 1998, respectively, as approved by the Board of
Directors of the Company.
AGGREGATE OPTION EXERCISE IN LAST FISCAL YEAR AND OPTION VALUES AS OF DECEMBER
31, 1998
None of the Named Executive Officers exercised stock options during the
year ended December 31, 1998. The following table provides information regarding
the number of shares underlying both exercisable and unexercisable stock options
as of December 31, 1998 and the values of unexercised "in-the-money"
10
<PAGE> 14
options as of that date. An option is "in-the-money" if the per share fair
market value of the underlying share exceeds the option's exercise price per
share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
NUMBER OF DECEMBER 31, 1998 DECEMBER 31, 1998(1)
SHARES --------------------------- ---------------------------
ACQUIRED VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
ON EXERCISE REALIZED (#) (#) ($) ($)
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Buchheit............ -- -- -- 255,000 -- --
Richard J. Coburn.............. -- -- -- 60,000 -- --
Norman L. Milliard............. -- -- 75,000 110,000 -- --
Patrick J. Pedonti............. -- -- -- 125,000 -- --
</TABLE>
- ------------
(1) Based on the closing price at December 31, 1998 of $2 2/32.
EMPLOYMENT AGREEMENTS
Charles E. Buchheit and Norman L. Milliard have entered into employment
agreements with the Company. Both agreements have a three-year term and expire
on April 14, 2001 and June 30, 2001, respectively. If his employment agreement
were terminated without "cause", as defined in the agreement, Mr. Buchheit would
be entitled to receive (i) his base salary for the longer of a two-year period
commencing on the date of termination or the balance of the three-year
employment term; (ii) any accrued vacation; (iii) payment of health benefits for
the balance of the employment term, and (iv) immediate vesting in all
outstanding options, and Mr. Milliard would be entitled to receive his base
salary and payment of health benefits for the balance of the three-year term.
Mr. Buchheit's current base salary is $250,000 and Mr. Milliard's current base
salary is $150,000.
The employment agreements restrict Mr. Buchheit and Mr. Milliard from
directly or indirectly competing with the Company through the participation in
the development or distribution of any product related to the Company's product
or processes during the term of the agreement and for a period of one year after
if they voluntarily resign from the Company or are terminated for cause. The
Employment Agreements do not otherwise restrict Mr. Buchheit and Mr. Milliard
from pursuing any other business interests that do not directly compete with the
Company.
STOCK INCENTIVE PLAN
In January 1995, the Board of Directors and shareholders of the Company
adopted the 1995 Stock Incentive Plan (the "Stock Incentive Plan"). Pursuant to
the Stock Incentive Plan, the Board of Directors or a committee thereof may
grant options or other awards for up to 2,000,000 shares of Common Stock. On
April 30, 1999, the Board of Directors amended the Stock Incentive Plan to
increase the number of shares with respect to which awards may be granted from
2,000,000 shares to 4,000,000 shares, subject to shareholder approval at the
Annual Meeting (see Item 3 below). The Stock Incentive Plan is designed to give
directors, officers and employees of the Company and other persons an expanded
opportunity to acquire Common Stock in the Company or receive other long-term
incentive remuneration in order that they may participate in the Company's
growth and be motivated to remain with the Company and promote its further
development and success.
The Stock Incentive Plan includes provisions for granting both "incentive
stock options" intended to qualify for certain federal tax advantages and
"non-statutory options" which do not qualify for such tax advantages. Qualified
incentive stock options may be granted only to eligible persons who are
full-time employees of the Company while non-statutory options may be granted to
any persons, including directors, consultants and advisors of the Company who,
in the sole opinion of the Board of Directors or a committee thereof are, from
time to time, responsible for the management or growth of all or part of the
business of the Company.
11
<PAGE> 15
The purchase price under each incentive stock option is as determined by
the Board of Directors or a committee thereof but may not be less than 100% of
the fair market value of the shares subject to such option on the date of grant,
provided that such option price may not be less than 110% of such fair market
value in the case of any stock option granted to a principal shareholder. The
purchase price per share of Common Stock deliverable upon the exercise of
non-statutory options is determined by the Committee, but may not be less than
85% of the fair market value of the Common Stock on the date of grant.
Each option granted under the Stock Incentive Plan becomes exercisable on
such date or dates and in such amount or amounts as the Board of Directors or a
committee thereof determines. To date, all incentive stock options granted to
employees are exercisable with respect to not more than one-third of the shares
subject thereto after the expiration of one year following the date of its
grant, and are exercisable as to an additional one-third of such shares after
the expiration of each of the succeeding two years, on a cumulative basis, so
that such option, or any unexercised portion thereof, shall be fully exercisable
on the third anniversary of the date of its grant.
As of October 1, 1999, incentive stock options to purchase 2,587,161 shares
of Common Stock and non-statutory options to purchase 590,589 shares of Common
Stock net of cancellations and exercises have been granted. Such incentive
options include options to purchase 1,824,500 shares which are subject to
shareholder approval at the Annual Meeting. All such options have been granted
to employees of the Company, except for options granted (i) to non-employee
directors, as described above, (ii) to Murtha, Cullina, Richter and Pinney LLP,
counsel to the Company, an option granted in January 1995 entitling it to
purchase 30,000 shares of the Company's Common Stock for a period of five years
at an exercise price of $1.19 per share, (iii) to a consultant of the Company,
an option granted in April 1996 and repriced in April 1998 entitling him to
purchase 2,250 shares of the Company's Common Stock for a period of five years
at an exercise reprice of $3.13, (iv) to the Company's Investor Relations firm,
an option granted in July 1997 and repriced in April 1998 entitling it to
purchase 10,000 shares of the Company's Common Stock for a period of five years
at an exercise reprice of $3.13 and an option granted in April 1998 entitling it
to purchase 5,000 shares of the Company's Common Stock for a period of five
years at an exercise price of $3.13, (v) to a consultant of the Company, an
option granted in October 1997 and repriced in April 1998 entitling him to
purchase 20,000 shares of the Company's Common Stock for a period of five years
at an exercise reprice of $3.13, (vi) to a consultant of the Company, an option
granted in September 1998 entitling him to purchase 20,000 shares of the
Company's Common Stock for a period of 5 years at an exercise price of $0.91 and
(vii) to a consultant of the Company, an option granted in March 1999 entitling
him to purchase 25,000 shares of the Company's Common Stock for a period of 5
years at an exercise price of $0.23. All options, both incentive and non-
statutory, have been granted at fair market value as determined by the Board of
Directors on the date of grant.
During 1998, certain options granted under the Stock Incentive Plan were
repriced. See Executive Compensation -- Report of Executive Compensation
Committee.
12
<PAGE> 16
TEN-YEAR OPTIONS/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES LENGTH OF ORIGINAL
UNDERLYING MARKET PRICE OF EXERCISE PRICE OPTION TERM
OPTIONS/SARS STOCK AT TIME OF AT TIME OF NEW REMAINING AT DATE
REPRICED OR REPRICING OR REPRICING OR EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
- ---- -------- ------------ ---------------- -------------- -------- ------------------
(A) (B) (C) (D) (E) (F) (G)
<S> <C> <C> <C> <C> <C> <C>
Charles E. Buchheit...... 09/29/98 5,000 1.00 2.19 1.00 4 yrs & 6 mos
09/29/98 250,000 1.00 3.13 1.00 9 yrs & 6 1/2 mos
Richard J. Coburn........ 09/29/98 20,000 1.00 2.31 1.00 9 yrs & 4 mos
09/29/98 10,000 1.00 3.13 1.00 8 yrs & 6 mos
09/29/98 30,000 1.00 3.13 1.00 7 yrs & 6 mos
Norman L. Milliard....... 09/29/98 20,000 1.00 2.31 1.00 9 yrs & 4 mos
09/29/98 45,000 1.00 3.13 1.00 2 yrs
09/29/98 13,947 1.00 3.13 1.00 8 yrs & 6 mos
09/29/98 1,053 1.00 3.13 1.00 8 yrs & 6 mos
09/29/98 30,000 1.00 3.13 1.00 7 yrs & 6 mos
Patrick J. Pedonti....... 09/29/98 5,000 1.00 2.31 1.00 9 yrs & 4 mos
09/29/98 75,000 1.00 3.13 1.00 8 yrs & 6 mos
</TABLE>
CERTAIN TRANSACTIONS
Willard F. Pinney, Jr. is a partner of the law firm of Murtha, Cullina,
Richter and Pinney LLP, which serves as counsel to the Company.
13
<PAGE> 17
PERFORMANCE GRAPH
The following graph demonstrates a comparison of cumulative total return
based on an initial investment of $100 in the Company's Common Stock as compared
with the Nasdaq Computer Manufacturers Index and the Nasdaq Composite Index and
assumes the reinvestment of dividends, although dividends have not been declared
on the Company's Common Stock. The stock price performance shown on the graph
below is not necessarily indicative of future price performance and only
reflects the Company's relative stock price for the period commencing on
December 18, 1996, the date the Company's Common Stock began trading on the
Nasdaq National Market, and ending on December 31, 1998. The following graph
includes information required by the Securities and Exchange Commission and
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, unless the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such Acts.
[Comparison of Total Return]
ITEM 2. INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has approved an amendment to the
Restated Certificate of Incorporation of the Company increasing the authorized
number of shares of Common Stock of the Company from 35,000,000 shares to
50,000,000 shares. Under Connecticut law, this amendment requires approval by
holders of Common Stock voting as a separate class as well as the Common Stock
and Series B Stock, voting together as a single, combined class.
As of October 29, 1999, there were 18,865,865 shares of Common Stock issued
and outstanding. In addition, as of October 29, 1999, 1,870,250 shares of Common
Stock were reserved for issuance upon exercise of options or other awards
granted by the Company under its 1995 Stock Incentive Plan (the "Stock Incentive
Plan") (not including 1,824,500 shares issuable under options granted subject to
shareholder approval as discussed in Item 3 below), 3,602,607 shares were
reserved for issuance pursuant to other outstanding warrants issued in
connection with previous financings, and 1,375,000 were reserved for issuance
upon the conversion of outstanding convertible debt. Furthermore, pursuant to
the terms of the Series B Stock, 7,022,841 additional shares of Common Stock
have been reserved for issuance upon conversion of or otherwise
14
<PAGE> 18
pursuant to the terms of the Series B Stock and in connection with breaches (if
any) by the Company of its obligations with respect to the Series B Stock.
The number of shares reserved with respect to the Series B Stock may be in
excess of or less than the number of shares actually required to be issued upon
conversion of or otherwise issuable in connection with the Series B Stock. The
two holders of Series B Stock have agreed with the Company to certain
modifications of the terms of the Series B Stock, including a fixed conversion
rate and termination of redemption rights, provided the Company consummates
certain additional financing arrangements at or about the time of the Annual
Meeting.
Accordingly, there are only 1,988,437 shares of Common Stock currently
authorized, unreserved and available to the Company for use in connection with
financings or other corporate purposes.
The Company expects to require additional authorized Common Stock in
connection with its current financing efforts and requirements. The Company also
will require additional authorized shares of Common Stock for its Stock
Incentive Plan assuming approval of the proposal discussed in Item 3 below.
Apart from these requirements, the Company has no current plans requiring
additional authorized Common Stock.
The Board of Directors of the Company believes that the lack of adequate
shares of Common Stock currently available for future corporate requirements may
inhibit the Company's plans and objectives, in which event the Company could be
required to call a special meeting of stockholders in order to authorize
additional shares at a later time at considerable expense and at the risk of
being unable to capitalize upon current opportunities as they arise.
All additional shares of Common Stock authorized pursuant to this proposal
would be subject to issuance by the Board of Directors of the Company without
further shareholder approval except as may be required by law in connection with
any given transaction or pursuant to the rules of any exchange on which shares
of Common Stock of the Company may be listed in the future. Any such issuance
could dilute and adversely affect various rights of the holders of shares of
Common Stock and, in addition, could be used to discourage an unsolicited
attempt to acquire control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
ITEM 3. APPROVAL OF AMENDMENTS TO 1995 STOCK INCENTIVE PLAN.
INCREASE IN AUTHORIZED SHARES
Approval is being sought for an increase in the number of shares issuable
pursuant to the Company's 1995 Stock Incentive Plan (the "Stock Incentive Plan")
from 2,000,000 shares of Common Stock to 4,000,000 shares of Common Stock, as
approved by the Board of Directors in April 1999, subject to shareholder
approval.
The Stock Incentive Plan currently provides for the issuance of up to
2,000,000 shares of Common Stock upon the exercise of options or other awards
granted pursuant to the Stock Incentive Plan. The terms and provisions of the
Stock Incentive Plan are discussed in detail under Item 1 of this Proxy
Statement. As of October 1, 1999, there were 1,353,250 shares of Common Stock
reserved for issuance upon the exercise of outstanding options granted pursuant
to the Stock Incentive Plan with 517,000 shares remaining available for
additional option grants or awards pursuant to the Stock Incentive Plan.
However, this does not include the grant to all employees of the Company on
April 30, 1999 of options to purchase an aggregate of 1,824,500 shares of common
stock, contingent upon the approval by shareholders at the Annual Meeting of the
proposals discussed herein concerning additional authorized shares of common
stock and the allocation of additional shares of Common Stock under the Stock
Incentive Plan.
As of April 30, 1999, it was the judgment of the Company's management that
substantial employee incentives were required to retain experienced personnel at
a time of considerable uncertainty as to the future prospects of the Company. In
view of the Company's limited cash resources, the Board of Directors of the
Company determined that a substantial increase in awards under the Stock
Incentive Plan was required in
15
<PAGE> 19
order to maintain valuable personnel. In reaching this decision, the Board also
took note of the dilutive effects of preferred stock conversions and the
Company's capital funding program. Currently, the 4,000,000 shares issued or
issuable under the Stock Incentive Plan, assuming shareholder approval of this
proposal, would represent approximately 17% of the total number of shares
outstanding and issuable upon conversion of outstanding shares of Series B
Stock. Management believes that the ratio of shares issued and issuable under
the Stock Incentive Plan to all outstanding shares of its common stock,
including shares issuable upon conversion of outstanding shares of its Series B
Stock, is well within the parameters of other companies similarly situated.
Management of the Company regards the Stock Incentive Plan as an important
element of the compensation program of the Company. Management is also
attempting to conserve cash required in the operations of the Company by
providing non-cash equity incentives through the operation of the Stock
Incentive Plan. Furthermore, management believes that the Company has been
fortunate in obtaining the services of many talented, dedicated employees whose
incentive to remain with the Company is substantially enhanced by having a stake
in the Company's future. It has been a policy of management, to the extent
permitted under the terms of the Stock Incentive Plan, to incent all employees
through the grant of options under the Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
ITEM 4. APPOINTMENT OF AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as auditors
of the Company for the year ending December 31, 1999, subject to approval by
shareholders at the Annual Meeting. PricewaterhouseCoopers LLP, has served as
the Company's independent auditors since 1995. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting and will be
given the opportunity to make a statement if they desire to do so and will be
available to respond to questions of shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSALS FOR THE 2000 ANNUAL MEETING
In accordance with the rules of the Securities and Exchange Commission,
shareholder proposals for inclusion in the Company's proxy statement for the
2000 Annual Meeting must be received at the Company's offices at 800 Connecticut
Boulevard, East Hartford, Connecticut 06108, Attention: Secretary within a
reasonable time before the Company begins to print and mail its proxy materials.
OTHER MATTERS
The Board of Directors does not intend to present any other matters before
the meeting and is not informed of any other business which others may bring
before the meeting. However, if any other matters should properly come before
the meeting, or any adjournments or postponements thereof, it is the intention
of the persons named in the accompanying Proxy Card to vote on each such matter
as they, in their sole discretion, may determine.
THE COMPANY'S ANNUAL REPORT ON FORMS 10-K AND 10-K/A FOR THE YEAR ENDED
DECEMBER 31, 1998, FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION, MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY'S OFFICES AT 800
CONNECTICUT BOULEVARD, EAST HARTFORD, CONNECTICUT 06108, ATTENTION: SECRETARY.
16
<PAGE> 20
- Please Detach and Mail in the Envelope Provided -
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR WITHHELD
ALL FROM ALL
NOMINEES* NOMINEES
1. ELECTION
OF THREE [ ] [ ]
DIRECTORS.
(* Instruction: To withhold authority to vote for any nominee, write such
nominee's name(s) below.)
[ ]_____________________________________
CLASS 3 NOMINEES:
Richard J. Coburn
Norman L. Milliard
Willard F. Pinney, Jr.
FOR AGAINST ABSTAIN
2. Proposed approval of an
amendment to the Company's [ ] [ ] [ ]
Restated Certificate of
Incorporation;
3. Proposed approval of amendment
to the Company's 1995 Stock [ ] [ ] [ ]
Incentive Plan;
4. Proposed approval of the
selection of
PricewaterhouseCoopers LLP as [ ] [ ] [ ]
auditors of the Company for the
year ending December 31, 1999.
5. In their discretion, upon the transaction of other business as may
properly come before the meeting or any adjournments or postponements
thereof.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND [ ] TO ATTEND [ ]
NOTE AT LEFT THE MEETING
Signature:_________________________________ Date_______________
Signature:_________________________________ Date_______________
NOTE: Please sign exactly as your name appears hereon. When signing as
attorney, administrator, executor, guardian or trustee, please give your
full title as such. If a corporation, please sign by president or other
authorized officer and indicate title. If shares are registered in the
names of joint tenants or trustees, each tenant or trustee is required to
sign.
<PAGE> 21
ACCENT COLOR SCIENCES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ACCENT COLOR SCIENCES, INC. FOR THE ANNUAL MEETING, NOVEMBER 29, 1999
The undersigned hereby constitutes and appoints RICHARD J. COBURN
and CHARLES E. BUCHHEIT, and each of them, with full power to act with or
without the other and with full power of substitution, his or her true and
lawful agents and proxies to represent the undersigned at the Annual
Meeting of Shareholders of Accent Color Sciences, Inc. (the "Company") to
be held at 800 Connecticut Boulevard, East Hartford, Connecticut, at 2:00
p.m. on Monday, November 29, 1999, and at any adjournments or
postponements thereof, and authorizes said Proxies to vote all shares of
the Company shown on the other side of this card with all the powers the
undersigned would possess if personally present thereat.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE
BOX, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN AND AUTHORIZES THE PROXIES TO TAKE ACTION IN THEIR DISCRETION UPON
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR
PROPOSALS 2, 3 AND 4.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
