UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment #3)
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2000 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____
to ____
Commission file number: 0-9919
PSC Inc.
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Exact name of registrant as specified in its charter
New York 16-0969362
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State or other jurisdiction of incorporation IRS Employer ID No.
or organization
4800 SW Meadows Rd., Suite 300, Portland, Oregon 97035
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: 503-534-3550
Securities registered pursuant to Section 12(b) of the Act:
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None
Securities registered pursuant to Section 12(g) of the Act: Nasdaq Stock Market
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Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
1
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
As of March 30, 2001, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $14,156,775. (Assumes
officers, directors and any shareholder holding 5% of the outstanding shares are
affiliates.)
As of March 30, 2001, there were 12,458,071 outstanding Common Shares.
Documents incorporated by reference: None
PSC Inc. is filing this Amendment No. 3 on Form 10-K/A (Amendment #3) to its
Annual Report on Form 10-K for the year ending December 31, 2000 (Form 10-K) for
the purpose of restating part III, Items 10, 11, 12 and 13 thereof in their
entirety.
2
TABLE OF CONTENTS
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Page No.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............. 4
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ITEM 11. EXECUTIVE COMPENSATION.......................................... 7
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. 18
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 21
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3
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
---------
The Company's Restated Certificate of Incorporation provides for a
Board of Directors to serve in three classes having staggered terms of three
years each. At present, there are nine directors, seven of whom have been
elected by the holders of the Common Shares, one of whom has been elected by the
holders of the Series A Convertible Preferred Shares, and one of whom has been
appointed by the Board of Directors. Under the Company's Restated Certificate of
Incorporation, as amended, so long as Hydra Investissements S.A. holds at least
27,500 Series A Convertible Preferred Shares, the holders of Series A
Convertible Preferred Shares have the exclusive right, voting separately as a
class, to elect one director (the "Series A Director") and are entitled to vote
together with the holders of the Common Shares as a single class in the election
of the other directors. Four directors have terms of office expiring at the
2001 Annual Meeting of Shareholders (one of whom is the Series A Director and
one of whom is Edward J. Borey, the Company's President and Chief Executive
Officer, who was appointed a director by the Board in December 2000); three
directors have terms of office expiring at the 2002 Annual Meeting; and three
directors have terms of office expiring at the 2003 Annual Meeting.
Directors whose terms expire in 2001:
------------------------------------
Edward J. Borey, age 50, has served as President, Chief Executive Officer
and a director since December 2000. Prior to joining the Company, Mr. Borey was
President and CEO of TranSenda (May 2000 to December 2000). Previously, Mr.
Borey held senior positions in the automated data collection industry. At
Intermec Technologies Corporation (1995-1999), he was Executive Vice President
and Chief Operating Officer and also Senior Vice President/General Manager of
the Intermec Media subsidiary. Prior to that, Mr. Borey also held Vice
President/General Manager positions at Paxar (1992-1995) and at Monarch
Marketing Systems (1989-1992). Mr. Borey also held senior marketing positions
at companies in the retail automation industry, including Seimans Nixdorf, ICL
and National Semiconductor Datachecker. Currently, Mr. Borey serves as a Board
member at Centura Software, recently renamed MBrane, and he is on the Advisory
Board of TranSenda Software and NextRx. Mr. Borey holds a B.S. degree in
Economics from the State University of New York, College of Oswego; an M.A.
degree in Public Administration from the University of Oklahoma and an M.B.A.
degree in Finance from Santa Clara University.
Robert S. Ehrlich, age 63, has served as a director of the Company since
1983 and has been Chairman of the Board of Directors since April 1997 and was
interim Co-Chief Executive Officer from August 25, 2000 until December 4, 2000.
He was Vice Chairman of the Board of Directors from February 1997 until April
1997. He was also Chairman of the Board of Directors from December 1987 until
July 1992. From January 1995 until December 1996, Mr. Ehrlich was engaged to
provide consulting services to the Company. From August 1991 until December
1994, Mr. Ehrlich was employed by the Company as a senior management executive.
Mr. Ehrlich has been Chairman of the Board of Electric Fuel Company ("EFC")
since January 1993
4
and Chief Financial Officer of EFC since May 1991. EFC is an Israel-based
company engaged in the research, development and commercialization of advanced
zinc air battery products.
Jack E. Rosenfeld, age 62, has served as a director of the Company
since 1989. He has been President and Chief Executive Officer of Potpourri
Collection, Inc., a consumer catalog company in Medfield, Massachusetts, since
1998. Prior thereto, he was President and Chief Executive Officer of Hanover
Direct, Inc. (formerly Horn & Hardart Co.) from September 1990 until January
1996 and President and Chief Executive Officer of its direct marketing
subsidiary from May 1988 until January 1996. He is also a director of EFC and
Thane International, an electronic retailer.
Roberto Tunioli, age 42, is the Series A Director and has served as a
director of the Company since June 2000. Mr. Tunioli is the President and Chief
Executive Officer of Datalogic S.p.A., an Italian corporation which manufactures
auto identification and data collection systems. Mr. Tunioli is a member of the
Board of Directors of I.E.S. S.p.A., an automation components company in
Bologna, Italy, Peppercom S.p.A., a telecom company in Bologna, Italy, and Hydra
S.p.A., an industrial and real estate holding company in Bologna, Italy.
Directors whose terms expire in 2002:
-------------------------------------
Dr. Jay M. Eastman, age 52, has served as a director of the Company
since April 1996. He also served as Senior Vice President, Strategic Planning
from December 1995 until October 1997 and as Executive Vice President of the
Company from December 1987 until December 1995. Dr. Eastman is President, Chief
Executive Officer and major shareholder of Lucid, Inc., Rochester, New York, a
corporation he founded in November 1991. Lucid designs and manufactures custom
electro-optical instrumentation for application in fields such as desktop
publishing and medical diagnosis. Dr. Eastman holds Ph.D. and Bachelor degrees
in Optics from the University of Rochester and is an inventor on 18 United
States patents owned by the Company. Dr. Eastman is also a director of EFC and
Centennial Technologies, Inc., Wilmington, Massachusetts, a manufacturer of PC
card-based solutions to original equipment manufacturers.
Thomas J. Morgan, age 65, has served as a director of the Company
since April 1996. Mr. Morgan was the President and Chief Executive Officer from
October 1984 until January 1993 and Chairman of the Board from January 1993
until January 1995 of Verax Systems, Inc., Rochester, New York, a manufacturer
of data collection and specialized software for statistical process control.
Mr. Morgan is also a director of Tru II Form, Inc., Seal Beach, California, a
woman's fitness studio.
Bert W. Wasserman, age 68, has served as a director of the Company
since May 1999. He was interim Co-Chief Executive Officer from August 25, 2000
until December 4, 2000. Mr. Wasserman served as Executive Vice President and
Chief Financial Officer of Time Warner, Inc. from 1990 until his retirement in
1995 and served on the Board of Directors of Time Warner, Inc. and its
predecessor company, Warner Communications, Inc., from 1981 to 1995. He joined
Warner Communications, Inc. in 1966 and had been an officer of that company
since 1970. Mr.
5
Wasserman is a director of several investment companies in the Dreyfus Family of
Funds. He is a director of Malibu Entertainment International, Inc., Winstar
Communications, Inc. and Lillian Vernon Corporation.
Directors whose terms expire in 2003:
------------------------------------
James C. O'Shea, age 55, has served as a director of the Company since
1989. He has been Chairman of the Board and Chief Executive Officer of Bioject
Medical Technologies, Inc., a medical device manufacturer of needle-free
injection systems in Portland, Oregon, since April 1995. Prior thereto, he was
President of Biopure Corporation, a biotechnology company in Cambridge,
Massachusetts, from January 1989 until April 1995.
Terry R. Peets, age 56, has served as a director of the Company since
December 2000. Mr. Peets has been Chairman of the Board of Bruno's
Supermarkets, Inc. since 1999. He served as President, Chief Executive Officer
and director of PIA Merchandising Company, Inc., a provider of nationwide retail
merchandising services, from 1997 until 1999, and as Executive Vice President of
The Vons Companies, Inc., a supermarket chain in Southern California, from 1995
until 1997. From 1977 until 1995, Mr. Peets served in various sales, marketing
and operation roles for Ralphs Grocery Co., the most recent of which was as
Executive Vice President (1993-1995). Mr. Peets is also a director of Diamond
Brands Inc., a consumer products company, and Super Markets Online, a division
of Catalina Marketing Corporation, a provider of in-store electronic marketing
services.
Executive Officers
------------------
The executive officers of the Registrant are set forth in Part I of
the Registrant's Annual Report on Form 10-K filed with the Securities and
Exchange Commission ("SEC") on April 16, 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
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Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the SEC
reports of ownership and changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during the 2000 fiscal year, all filing requirements
applicable to its officers, directors and greater-than-10% beneficial owners
were complied with.
6
ITEM 11. EXECUTIVE COMPENSATION
Overview
On August 22, 2000, Robert C. Strandberg resigned as President and
Chief Executive Officer and as a director of the Company, and Messrs. Robert S.
Ehrlich, Chairman of the Board, and Bert W. Wasserman, a director, were
appointed interim Co-Chief Executive Officers and served as such until December
4, 2000 when Edward J. Borey was appointed President and Chief Executive
Officer. The following data incorporates compensation data resulting from Mr.
Strandberg's resignation and the appointment of Messrs. Ehrlich and Wasserman as
interim Co-Chief Executive Officers. For information regarding remuneration to
Messrs. Ehrlich and Wasserman as directors, see "EXECUTIVE COMPENSATION -
Compensation of Directors".
Summary Compensation Table
Set forth below is information concerning the cash and non-cash
compensation for services in all capacities to the Company for the fiscal years
2000, 1999 and 1998 received by
(i) all persons who served as the Chief Executive Officer in 2000 and (ii) the
four other most highly paid executive officers in the employ of the Company at
December 31, 2000 (the individuals in (i) and (ii), collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
--------------------------
Long-term
Compensation
-----------------------------------------------
Annual Compensation
---------------------------------------------- Awards
Restricted Securities
Other Annual Stock Underlying All Other
Name & Principal Position Year Salary($) Bonus($)(1) Compensation ($)(2) Awards ($)(3) Options(#) Compensation ($)(4)
--------------------------- ---- ----------- ------------ ------------------- -------------- ------------- -------------------
Edward J. Borey (5) 2000 $ 13,846 --- $ 2,724 --- 500,000 ---
President and Chief
Executive Officer
Robert C. Strandberg (6) 2000 $215,815 --- $ 47,453 --- 37,500 $125,435
President and Chief 1999 319,800 $152,208 50,442 --- 37,500 5,000
Executive Officer 1998 165,000(7) 133,380 132,170 $403,125 --- 4,500
and Director
Cecil F. Bowes 2000 $261,646 --- --- --- --- $ 3,182
Vice President, Sales - 1999 243,995 --- --- --- 5,000 3,007
The Americans, Asia 1998 196,316 $ 75,005 --- --- --- 3,012
Pacific Rim
G. Lloyd West (8) 2000 $228,027 --- $ 34,696 --- --- $ 43,650
Senior Vice President - 1999 42,986 --- 83,515 --- 100,000 ---
Global Sales Operations
Nigel P. Davis 2000 $215,390 --- $ 29,691 --- --- ---
Vice President, Sales - 1999 227,326 --- 30,366 --- 5,000 ---
Europe, Middle East, 1998 234,705 $ 90,789 --- --- --- ---
Africa
7
George A. Plesko(9) 2000 $200,000 --- $ 20,238 --- 20,000 $ 2,308
Senior Vice President 1999 --- --- --- --- --- ---
Robert S. Ehrlich (10) 2000 $ 72,000 --- --- --- 25,000 ---
Interim Co-Chief
Executive
Officer and Director
Bert W. Wasserman (10) 2000 $ 72,000 --- --- --- 50,000 ---
Interim Co-Chief
Executive
Officer and Director
(1) For 1999, the amounts in this column reflect annual incentive awards under
the Company's Management Incentive Plan ("MIP"). For 1998, the amounts in
this column reflect bonus payments made in lieu of stock options.
(2) Except as noted, none of the Named Executive Officers received personal
benefits in excess of the lesser of $50,000 or 10% of such individual's
reported salary and bonus for 2000, 1999 or 1998. The amounts in this
column for 2000 include the following: Mr. Borey - $2,724 for automobile
expenses and premiums on enhanced life and disability policies; Mr.
Strandberg - $47,453 for automobile expenses, club membership dues and fees
and premiums on enhanced life and disability insurance policies; Mr. West-
$34,696 for automobile expenses, club membership dues and fees and premiums
on enhanced life and disability insurance policies; Mr. Davis- $29,691 for
automobile expenses and premiums on enhanced life and disability insurance
policies; Mr. Plesko - $20,238 for automobile expenses and premiums on
enhanced life and disability insurance policies.
The amounts in this column for 1999 include the following: Mr. Strandberg -
$50,442 for automobile expenses, club membership dues and fees and premiums
on enhanced life and disability policies; Mr. West - $70,000 for sign-on
bonus and other amounts for automobile expenses and premiums on enhanced
life and disability policies; Mr. Davis - $30,366 for automobile expenses
and premiums on enhanced life and disability policies.
The amounts in this column for 1998 include the following: Mr. Strandberg -
$97,412 for relocation expenses and other amounts for automobile expenses,
club membership dues and fees, and premiums on enhanced life and disability
insurance policies, and a related tax gross-up.
(3) Restricted stock awards are valued in the table above at their fair market
value based on the closing price for the Company's Common Shares as
reported by The Nasdaq Stock Market(R) on the date of award. On March 25,
1998, Mr. Strandberg was awarded 37,500 restricted shares. The closing
price of the Company's Common Shares on that date was $10.75. At the end
of the 1998 fiscal year, the fair market value of Mr. Strandberg's
restricted stock holdings was $356,250, based upon the closing price of the
Company's Common Shares on December 31, 1998 of $9.50. As set forth in the
original award, the restrictions on 50% of such shares would lapse in four
equal annual installments on March 25, 1999, March 25, 2000, March 25, 2001
and March 25, 2002 so long as Mr. Strandberg was an officer on such dates.
The restrictions on the other 50% of the shares would not lapse unless and
until certain performance levels for the Company's shares were attained -
with respect to 6,250 shares, at such time as the trading price of the
Company's Common Shares equals or exceeds $14.30 per share for seven
consecutive days at any time prior to March 25, 2002; with respect to 6,250
shares, at such time as the trading price of the Company's Common Shares
equals or exceeds $16.87 per share for seven consecutive days at any time
prior to March 25, 2002; and with respect to 6,250 shares, at such time as
the trading price of the Company's Common Shares equals or exceeds $19.57
per share for seven consecutive days at any time prior to March 25, 2002.
If the trading price of the shares did not reach the specified performance
levels by March 25, 2002, all shares still subject to the restrictions
would be returned to or cancelled by the Company. In connection with Mr.
Strandberg's resignation, the Board, as of August 22, 2000, waived all
restrictions still remaining on the shares and all of the restrictions were
deemed to have lapsed. See "EXECUTIVE COMPENSATION - Employment Contracts
and Severance and Change-in-Control Agreements - Robert C. Strandberg."
8
(4) The amounts in this column for 2000 consist of the following:
(a) The Company's matching contributions to its 401(k) Plan as follows:
Mr. Strandberg - $5,250; Mr. Bowes- $3,182; Mr. West - $1,641; Mr.
Plesko - $2,308.
(b) The amounts paid pursuant to severance agreements: Mr. Strandberg -
$120,185; Mr. West - $42,009.
The amounts in this column for 1999 consist of the following:
The Company's matching contributions to its 401(k) Plan as follows: Mr.
Strandberg - $5,000; Mr. Bowes - $3,007.
The amounts in this column for 1998 consist of the following:
The Company's matching contributions to its 401(k) Plan as follows: Mr.
Strandberg- $4,500; Mr. Bowes - $3,012.
(5) Mr. Borey joined the Company as President and Chief Executive Officer on
December 4, 2000. See "EXECUTIVE COMPENSATION - Employment Contracts and
Severance and Change-in-Control Agreements - Edward J. Borey".
(6) Mr. Strandberg resigned as President and Chief Executive Officer on August
22, 2000. See "EXECUTIVE COMPENSATION - Employment Contracts and Severance
and Change-in-Control Agreements - Robert C. Strandberg".
(7) The amounts set forth as salary for 1998 represents the cash payment to Mr.
Strandberg for the period June 1, 1998 through December 31, 1998. Pursuant
to his Employment Agreement, Mr. Strandberg elected to receive all of his
base salary ($240,000) for the period between June 1, 1997 and May 31, 1998
in the form of stock options. Accordingly, on June 2, 1997, Mr. Strandberg
received a stock option to purchase 73,846 shares at an exercise price of
$6.50 per share (the fair market value of the Company's Common Shares on
the date of grant). Said option vested in four equal quarterly
installments on August 31, 1997, November 30, 1997, February 28, 1998 and
May 31, 1998 and, as amended, expires on December 31, 2000.
(8) Mr. West terminated employment on October 17, 2000. See "EXECUTIVE
COMPENSATION - Employment Contracts and Severance and Change-in-Control
Agreements - Severance/Change-in-Control Agreements."
(9) Mr. Plesko joined the Company on December 21, 1999 in connection with the
acquisition of GAP Technologies, Inc. and GEO Labs, Inc.
(10) Messrs. Wasserman and Ehrlich were interim Co-Chief Executive Officers from
August 25, 2000 to December 4, 2000, at which time Edward J. Borey joined
the Company as President and Chief Executive Officer.
Options and Stock Appreciation Rights
The following tables summarize option grants to, and exercises by, the
Named Executive Officers in fiscal 2000, and the value of the options held by
such persons at the end of fiscal 2000. No stock appreciation rights have ever
been granted by the Company.
9
OPTION GRANTS IN 2000
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
---------------------------------------------------------------------------- -------------------
Percent of Total
Number of Securities Options Granted to Exercise or
Underlying Employees in Fiscal Base Price
Name Options Granted (#) 2000 (2) ($/Share)(3) Expiration Date (4) 5% ($) 10% ($)
---- ------------------- -------- ------------ ------------------- ------ -------
Edward J. Borey (5) 500,000 48.8% $1.750 12/4/05 $241,746 $534,196
Robert C. Strandberg (6) 37,500 3.7% $6.000 3/25/05 $ 62,163 $137,365
George A. Plesko (7) 20,000 2.0% $2.500 1/3/05 $ 13,814 $ 30,526
Robert S. Ehrlich (8) 25,000 2.4% $3.594 8/25/05 $ 24,824 $ 54,854
Bert W. Wasserman (8) 50,000 4.9% $3.594 8/25/05 $ 49,648 $109,709
(1) The potential realizable value portion of the table illustrates the value
that might be realized upon exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Shares over the term of the options.
This hypothetical value is based entirely on assumed annual growth rates of
5% and 10% in the Company's stock price over the term of the options
granted in 2000. The assumed rates of growth were selected by the
Securities and Exchange Commission for illustration purposes only, and are
not intended to predict future performance and prospects. These numbers do
not take into account provisions of certain options providing for
termination of the option following termination of employment,
nontransferability or vesting over various periods.
(2) Percentages indicated are based on a total of 1,025,000 options granted to
21 individuals (13 employees and 8 directors) during 2000.
(3) The exercise price per share is 100% of fair market value of the Company's
Common Shares on the date of grant.
(4) All stock options expire five years from the date of grant.
(5) See "EXECUTIVE COMPENSATION - Employment Contracts and Severance and
Change-in-Control Arrangements - Edward J. Borey".
(6) See "EXECUTIVE COMPENSATION - Employment Contracts and Severance and
Change-in-Control Arrangements - Robert C. Strandberg".
(7) See "EXECUTIVE COMPENSATION - Employment Contracts and Severance and
Change-in-Control Arrangements - George A. Plesko".
(8) See "EXECUTIVE COMPENSATION - Other Remuneration Arrangements".
10
AGGREGATE OPTION EXERCISES IN 2000
AND 2000 YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at December 31, 2000 (#) December 31, 2000 ($)(1)
--------------------------------------------------------------------------------------- --------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
------------------------ ---------------- --------------- ----------- ------------- ----------- -------------
Edward J. Borey -- 500,000 -- --
Robert C. Strandberg -- -- 423,846 -- -- --
Cecil F. Bowes -- -- 61,250 3,750 -- --
G. Lloyd West -- -- 100,000 -- -- --
Nigel P. Davis -- -- 23,750 11,250 -- --
George A. Plesko -- -- -- 20,000 -- --
Robert S. Ehrlich -- -- 149,770 78,230 -- --
Bert W. Wasserman -- -- 3,250 59,750 -- --
(1) An individual, upon exercise of an option, does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead,
the amounts contained in the Value Realized column reflect the increase in
the price of the Company's Common Shares from the option grant date to the
option exercise date. Value is calculated based on the difference between
the option price and the closing market price of the Common Shares on the
date of exercise multiplied by the number of shares to which the exercise
relates. No cash is realized until the shares received upon exercise of an
option are sold.
(2) The closing price for the Company's Common Shares as reported by The Nadsaq
Stock Market(R) on December 31, 2000 was $0.75. Value is calculated on the
basis of the difference between the option price and $0.75 multiplied by
the number of Common Shares underlying the option. An option is in-the-
money if the market value of the Common Shares subject to the option
exceeds the option price.
Employment Contracts and Severance and Change-in-Control Arrangements
---------------------------------------------------------------------
Edward J. Borey
On December 4, 2000, the Company and Edward J. Borey entered into an
Employment Agreement (the "Borey Agreement") pursuant to which Mr. Borey was
employed as President and Chief Executive Officer. The "Initial Term" under the
Borey Agreement will expire on December 31, 2003. However, unless written
notice is given to the contrary by either the Company or Mr. Borey at least four
months prior to the expiration date, the employment period will automatically be
extended for an additional one-year term (each an "Additional Term"). Under the
Borey Agreement, Mr. Borey will receive a base salary at the annual rate of
$360,000. In addition, under the Borey Agreement, for 2001 Mr. Borey will
receive a performance bonus in an amount not less than $360,000, and for
calendar years thereafter, if certain performance goals and targets determined
by the Company's Board of Directors for the Company's Management Incentive Plan
("MIP") are met, he will be entitled to receive a performance bonus ranging from
30% to 150% of his base salary with no performance bonus if the performance goal
is not achieved. Mr. Borey is eligible to participate in employee benefit plans
generally made available
11
by the Company to its executive officers and to receive reimbursement for
reasonable relocation expenses.
Pursuant to his Agreement, on December 4, 2000, Mr. Borey received a stock
option for 500,000 Common Shares at an exercise price of $1.75, the Fair Market
Value of the Company's Common Shares on the Date of Grant. In January 2001, the
options were repriced to $1.1875. The options vest in three equal annual
installments commencing one year from the Date of Grant, but no options may be
exercised unless and until the trading price of the Company's Common Shares
equals or exceeds $3.00 per share for twenty consecutive days. If the trading
price does not reach the specified goal, the options may nevertheless be fully
exercisable after June 4, 2005. The options expire on December 4, 2005.
In the event the Company is adjudicated insolvent, Mr. Borey will be
entitled to additional compensation to offset the decrease in the likelihood
that there will be any value to his equity potential and bonus potential;
accordingly, he will be entitled to a twofold increase in base salary and
payment of 2% of the total gross sales of the Company assets in lieu of the
bonus payments. Also, in the event the Company is adjudicated insolvent, Mr.
Borey will be entitled, at his discretion, to terminate his employment
relationship with the Company upon sixty (60) days written notice. If such
termination option is exercised and occurs prior to December 4, 2001, he will be
entitled to a severance payment equal to his base salary for one year and his
bonus for one year at 100% of target. If such termination option is exercised
and occurs after December 4, 2001, he will be entitled to a severance payment
equal to the greater of (a) his base salary and bonuses for the unexpired
portion of the term or (b) his base salary for one year and his bonus for one
year at 100% of target.
The Borey Agreement contains provisions relating to confidentiality, non-
competition and Change-in-Control (as defined below).
In the event of the termination of Mr. Borey's services by the Company for
any reason other than Cause (as defined below) or a Change-in-Control (as
defined below) or upon the resignation of Mr. Borey for Good Reason (as defined
below), the Company will pay Mr. Borey an amount equal to the greater of (a) Mr.
Borey's base salary and bonuses at 100% of target for the unexpired portion of
the term or (b) Mr. Borey's base salary for one year and his bonus for one year
at 100% of target, and all benefits will continue for a period equal to the
greater of the periods set forth in (a) or (b) above. Under certain
circumstances, the severance payments to Mr. Borey may be offset if he receives
compensation from a third party.
In the event Mr. Borey terminates his employment for any reason within
ninety days after the occurrence of a Change-in-Control or in the event of the
termination of Mr. Borey's services within the two-year period following a
Change-in-Control of the Company and such termination is (a) by the Company or
its successor for any reason other than Cause or (b) by Mr. Borey for Good
Reason (as defined below) following a Change-in-Control, the Company will pay
Mr. Borey an amount equal to the product of the sum of (x) his base salary and
(y) the highest annual bonus paid to him in the three full fiscal years
preceding termination multiplied by 2.9. Said amount will be payable in the
manner elected by Mr. Borey (in a lump sum cash payment, in
12
three equal annual installments or in equal bi-weekly installments over a
three-year period). All benefits will also continue for a period of three years
after such termination.
If any of the payments to Mr. Borey are considered "excess parachute
payments" as defined in Section 280G of the Internal Revenue Code, the payments
will be reduced to avoid such a characterization.
Robert C. Strandberg
Employment Agreement
Effective June 2, 1998, the Company entered into an Employment Agreement
with Mr. Strandberg, which was amended in December 1998 and July 1999 (the
Employment Agreement, as amended, is referred to as the "Strandberg Agreement"),
and which would have expired on December 31, 2000. However, Mr. Strandberg
resigned as President and Chief Executive Officer on August 22, 2000. Under the
Strandberg Agreement, Mr. Strandberg received an annual base salary of $336,000.
In addition, under the Strandberg Agreement, if certain performance goals and
targets determined annually by the Company's Board of Directors for the
Company's Management Incentive Plan ("MIP") were met, Mr. Strandberg was
entitled to receive a performance bonus for that year ranging from 40% to 170%
of his base salary with no performance bonus if the performance goal was not
achieved in a particular year. Mr. Strandberg was also eligible to participate
in employee benefit plans generally made available by the Company to its
executive officers.
The Strandberg Agreement contained provisions relating to confidentiality,
non-competition and Change-in-Control (as defined below).
Pursuant to the Strandberg Agreement, in March 1998 Mr. Strandberg received
an award of 37,500 restricted shares which could not be sold, transferred or
otherwise disposed of until the restrictions lapse. See Footnote (3) to the
Summary Compensation Table for further details with respect to the restricted
shares. Pursuant to the Strandberg Agreement, on March 25, 1999, Mr. Strandberg
received an option for 37,500 Common Shares at an exercise price of $8.625 per
share (the Fair Market Value of the Company's Common Shares on the date of
grant). This option replaced the award of 37,500 restricted shares which would
have been awarded on March 25, 1999 and represented a 50% reduction in the size
of the option grant to which he otherwise would have been entitled. Of the
37,500 stock options granted, options for 18,750 shares vested as follows:
4,688 on March 25, 2000; 4,687 on March 25, 2001; 4,688 on March 25, 2002; and
4,687 on March 25, 2003. The options for the remaining 18,750 shares did not
vest unless and until certain performance levels for the Company's Common Shares
were attained. The options expire on March 25, 2004.
Pursuant to the Strandberg Agreement, effective as of March 25, 2000, Mr.
Strandberg received an option for 37,500 Common Shares, at an exercise price of
$6.00 per share (the Fair Market Value of the Company's Common Shares on the
date of grant). This option represented a 50% reduction in the size of the
option grant to which he otherwise would have been entitled pursuant to his
Agreement. Of the 37,500 stock options granted, options for 18,750 shares
vested as follows: 4,688 on March 25, 2001; 4,687 on March 25, 2002; 4,688 on
March 25,
13
2003; and 4,687 on March 25, 2004. The remaining 18,750 shares did not vest
unless and until certain performance levels for the Company's Common Shares were
attained -- with respect to 6,250 shares, at such time as the Fair Market Value
of the Company's Common Shares equals or exceeds $7.98 per share for seven
consecutive days; with respect to 6,250 shares, at such time as the Fair Market
Value of the Company's Common Shares equals or exceeds $9.41 per share for seven
consecutive days; and with respect to 6,250 shares, at such time as the Fair
Market Value of the Company's Common Shares equals or exceeds $10.92 per share
for seven consecutive days. If the specified performance goals were not reached,
the options would nevertheless become fully exercisable after December 1, 2004
in order to maintain favorable accounting treatment. The options expire on March
25, 2005.
Severance Arrangements
On August 22, 2000, Mr. Strandberg resigned all his positions and offices,
including those of President, Chief Executive Officer and member of the Board of
Directors. Pursuant to resolutions adopted by the Board, the Company will
continue to pay Mr. Strandberg, for a period of one year, his base salary of
$336,000 and all current health, dental, life and accidental death and
dismemberment insurance benefits and certain incidental benefits. In addition,
all options held by Mr. Strandberg were deemed fully vested as of August 22,
2000 and may be exercised until the earlier of (i) the date on which the option
expires by its terms or (ii) August 22, 2003. Also, all restrictions on the
restricted shares owned by Mr. Strandberg were waived by the Board and were
deemed to have lapsed as of August 22, 2000. Certain obligations in Mr.
Strandberg's prior Employment Agreement relating to confidentiality and non-
competition remain in effect in accordance with their terms.
George A. Plesko
Following the acquisition of GAP Technologies, Inc. and GEO Labs, Inc., the
Company on December 21, 1999 entered into an Employment Agreement and a Non-
Competition and Confidentiality Agreement (the "Plesko Agreements") with George
A. Plesko, pursuant to which Mr. Plesko was employed as a Senior Vice President.
The "Initial Term" under the Plesko Agreements will expire on December 20, 2002.
Under the Plesko Agreements, Mr. Plesko will receive a base salary at the annual
rate of $200,000. In addition, if certain performance goals and targets
determined annually by the Company's Board of Directors are met, Mr. Plesko will
be entitled to receive a performance bonus of up to 35% of base salary.
Pursuant to the Plesko Agreements, on January 3, 2000 Mr. Plesko received a
stock option for 20,000 Common Shares at an exercise price of $7.625, the Fair
Market Value of the Company's Common Shares on the Date of Grant. On October
23, 2000, the options were repriced to $2.50 per share. The options vest and
are exercisable in four equal annual installments commencing one year from the
Date of Grant. Mr. Plesko is also eligible to participate in employee benefit
plans generally made available by the Company to its executive officers.
The Plesko Agreements contain provisions relating to confidentiality, non-
competition and Change-in-Control (as defined below).
In the event of termination of employment or a Change-in-Control, Mr.
Plesko's severance payments will be as described in "Severance/Change-in-Control
Agreements" below,
14
except that if Mr. Plesko is terminated by the Company prior to the expiration
of the initial three-year term, he will be entitled to severance payments for a
period equal to the then remaining portion of the three-year term.
Severance/Change-in-Control Agreements
--------------------------------------
Severance/Change-in-Control Agreements have been entered into with all
senior executive officers in order to assure the Company of the continued
services of those executives to the Company in an effective manner without
distraction by reason of the possibility of a termination of employment by the
Company or a change in control of the Company. In general, all provide that in
the event of the termination of the executive's employment by the Company, for
any reason other than Termination for Cause (as defined below), death,
disability or a Change-in-Control (as defined below), the Company will continue
to pay the executive for a period of one year (two years in the case of William
L. Parnell, Executive Vice President and Chief Operating Officer) following
such termination an amount equal to the executive's salary at the annual rate
then in effect. In addition, the Company will provide the executive with the
executive's then current health, dental, life and accidental death and
dismemberment insurance benefits for a period of one year following such
termination. Each agreement also contains a covenant not-to-compete during the
one-year period (two year period in the case of Mr. Parnell) in which
severance benefits are being paid. In the event of the termination of the
executive's employment within the two-year period following a Change-in-Control
(as defined below) of the Company, and such termination is (i) by the Company
for any reason other than Termination for Cause (as defined below) or (ii) by
the executive if the executive terminates such employment for Good Reason (as
defined below), or in the case of Mr. Parnell, in addition, if he terminates his
employment for any reason within 90 days after the occurrence of a
Change-in-Control, the Company will pay the executive either over a period of
three years or in a lump sum payment an amount equal to the product of the sum
of (x) the executive's salary at the annual rate then in effect and (y) the
highest annual bonus paid to the executive under the Company's current
Management Incentive Plan or any successor plan in the three full fiscal years
preceding termination multiplied by 2.9. In addition, the executive will be
immediately vested in any retirement, incentive or option plans then in effect
and the Company will continue to provide the executive with his or her then
current health, dental, life and accidental death and dismemberment insurance
benefits for a period of three years.
If any of the payments to the executive are considered "excess parachute
payments" as defined in Section 280G of the Internal Revenue Code, the payments
will be reduced to avoid such a characterization.
Certain Definitions. As used in the Borey Agreement, the Plesko Agreement,
the Ehrlich Agreement (as defined below) and the Severance/Change-in-Control
Agreements:
(a) Change-in-Control generally means the acquisition of 30% of the
Company's voting securities, or a change of one-third of the incumbent Board of
Directors without the prior approval of the members of the incumbent Board of
Directors, or the merger or consolidation of the Company with another
corporation where the shareholders of the Company would not, immediately after
the merger or consolidation, own at least 50% of the voting securities of the
corporation issuing the cash or securities in the merger or consolidation, or
the sale of substantially all of the assets of the Company.
15
(b) Termination for Cause generally means the termination of the employment
of an officer because the officer has failed or refused to perform such services
as may reasonably be delegated to the officer consistent with the officer's
position, or has been grossly negligent in connection with the performance of
his or her duties, or has committed acts involving dishonesty, willful
misconduct, breach of fiduciary duty, fraud, or any similar offense which
materially affects the officer's ability to perform his or her duties for the
Company or may materially adversely affect the Company, or has been convicted of
a felony.
(c) Good Reason generally means an officer's annual rate of salary is
reduced from the annual rate then currently in effect or the officer's other
employee benefits are in the aggregate materially reduced from those then
currently in effect, (unless such reduction of employee benefits applies to
employees of the Company), or the officer's place of employment is moved from
its then current location, or the officer is assigned duties that are demeaning
or are otherwise materially inconsistent with the duties then currently
performed by the officer.
(d) Termination without Cause generally means the termination of the
employment of an officer for reasons other than death, disability, termination
for cause or termination upon Change-in-Control.
Other Remuneration Arrangements
On August 22, 2000, Messrs. Ehrlich and Wasserman were appointed interim
Co-Chief Executive Officers to serve until the appointment of a new President
and Chief Executive Officer, which occurred on December 4, 2000. During such
interim period, Mr. Wasserman received no fees as an outside director and Mr.
Ehrlich received no fees under the Ehrlich Agreement (as defined below), but
each received fees at the rate of $18,000 per month for so long as they served
as interim Co-Chief Executive Officers.
In addition, Mr. Ehrlich received an option for 25,000 Common Shares and
Mr. Wasserman received an option for 50,000 Common Shares. Each option was
granted at an exercise price of $3.594 per share and each option vested in five
equal monthly installments commencing on September 1, 2000. However, neither
option may be exercised until such time as the fair market value of the
Company's Common Shares equals or exceeds $5.391 per share for seven consecutive
days. If the $5.391 price per share is not reached, the options will
nevertheless become fully exercisable after April 1, 2005 in order to maintain
favorable accounting treatment. Each option expires on August 25, 2005.
Compensation of Directors
In 2000, each non-employee director was paid $500 for each Board and
Committee meeting attended by him, except that no more than $500 was paid if
more than one meeting occurred on the same day. Also, each non-employee
director received a retainer at the annual rate of $12,500 (the "Director
Retainer"), and each Chairman of a Board Committee (except Mr. Erhlich) received
an additional annual retainer of $2,500 (the "Chairman Retainer"). Both the
Director Retainer and the Chairman Retainer were paid in four equal installments
on the last day of each calendar quarter. For 2000, an aggregate of $147,417 in
meeting fees and retainers was paid in cash or in stock to the non-employee
directors. Each non-employee director is also
16
reimbursed the reasonable expenses incurred in attending the meeting. As noted
above, Mr. Wasserman received no fees as a non-employee director between
September 1, 2000 and December 31, 2000.
Pursuant to the PSC Inc. Compensation Plan for Non-Employee Directors, non-
employee directors have the opportunity to receive payment of their compensation
either in cash or in Common Shares. The directors may also elect to receive
their compensation either currently or on a deferred basis. During 2000, no
director chose to defer his compensation. If the amount to be deferred would
have been payable in cash, the Company will credit a Deferral Account maintained
for the director with an amount that would otherwise have been payable to the
director in cash. If the amount to be deferred would have been payable in
stock, the Company will credit units ("Stock Units") to a Unit Account
maintained for the director. Directors make separate elections with respect to
the manner of the payment of the compensation and the time of the payment of the
compensation. The number of Common Shares issued or the number of Stock Units
credited to a director's account will equal the cash amount of the compensation
divided by the fair market value of one share of stock on the date on which such
cash amount would otherwise have been paid. Stock Units and amounts in a
Deferral Account are fully vested at all times. Payment of Stock Units (in full
Common Shares) and the amounts in a Deferral Account must be deferred at least
one year. The director chooses the date of the payment, which may be upon
termination of service as a director. The maximum number of Common Shares that
may be issued under the Plan is 50,000 shares.
The Company's 1994 Stock Option Plan (the "1994 Plan") provides that each
member of the Board of Directors who is not also an employee or consultant of
the Company will automatically receive on the date of the Annual Meeting of
Shareholders a stock option for 6,500 Common Shares. On the date of the 2000
Annual Meeting of Shareholders, non-employee director stock options ("NEDSOs")
to purchase 6,500 shares were granted to each non-employee director, at a
purchase price of $1.625 per share, the fair market value on the date of the
grant. Said NEDSOs are exercisable in their entirety on December 5, 2001 and
terminate on December 5, 2005. No NEDSOs were granted to Messrs. Ehrlich,
Strandberg or Borey in 2000.
In May 1998, the Board approved a compensation agreement with Mr. Ehrlich,
Chairman of the Board, which was amended in December 1998 and July 1999 (the
agreement, as amended, is referred to as the "Ehrlich Agreement") and which
expired on December 31, 2000. Pursuant to the Ehrlich Agreement, for all
services rendered to the Company as Chairman of the Board and as a consultant in
such areas as strategic planning, corporate development, mergers and
acquisitions and development of overseas markets, Mr. Ehrlich received
compensation at the annual rate of $85,000. In 2000, Mr. Ehrlich received an
aggregate of $56,667 pursuant to the Ehrlich Agreement and was also reimbursed
for expenses incurred in the performance of his duties. As noted above, Mr.
Ehrlich received no compensation under the Ehrlich Agreement between September
1, 2000 and December 31, 2000. The Ehrlich Agreement includes confidentiality
and non-compete provisions and provides for a severance payment upon the
termination of his position as Chairman of the Board as the result of a change-
in-control in an amount equal to 2.9 times his annual rate of compensation to be
paid over a period of three years. Pursuant to the Ehrlich Agreement, effective
as of March 25, 2000, Mr. Ehrlich received an option for 17,500 Common Shares,
at an exercise price of $6.00 per share (the Fair Market Value of the Company's
Common Shares on the date of grant). This option represented a 50%
17
reduction in the size of the option grant to which he otherwise would have been
entitled. Of the 17,500 stock options granted, options for 8,750 shares will
vest as follows: 2,188 on March 25, 2001; 2,187 on March 25, 2002; 2,188 on
March 25, 2003; and 2,187 on March 25, 2004. The remaining 8,750 shares will not
vest unless and until certain performance levels for the Company's Common Shares
are attained - with respect to 2,916 shares, at such time as the Fair Market
Value of the Company's Common Shares equals or exceeds $7.98 per share for seven
consecutive days; with respect to 2,917 shares, at such as the Fair Market Value
of the Company's Common Shares equals or exceeds $9.41 per share for seven
consecutive days and with respect to 2,917 shares, at such time as the Fair
Market Value of the Company's Common Shares equals or exceeds $10.92 per share
for seven consecutive days. If the specified performance goals are not reached,
the options will nevertheless become fully exercisable after December 1, 2004 in
order to maintain favorable accounting treatment. The options will expire on
March 25, 2005. In the event of a change-in-control and if Mr. Ehrlich becomes
entitled to receive the severance payment set forth above, all of his options
will immediately vest.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee in 2000 consisted of Messrs.
O'Shea (Chairman), Morgan, Rosenfeld and Dr. Volta (until his resignation in
June 2000). Each member is a non-employee director and does not have any direct
or indirect material interest in or relationship with the Company outside of his
position as director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information regarding beneficial ownership of any class
of the Company's Voting Shares as of March 30, 2001 (except as otherwise noted
below) by (i) each entity or person known by the Company to be the beneficial
owner of more than five percent (5%) of any class of the Company's voting
shares, (ii) each of the Company's current directors, (iii) each of the
Company's executive officers named in the Summary Compensation Table, and (iv)
all current directors and executive officers of the Company as a group. The
information as to each person and entity has been furnished by such person and
entity, and, except as noted, each person and entity named in the table has sole
voting and investment power with respect to all shares shown as beneficially
owned by such person or entity.
Certain Beneficial Owners
-------------------------
Name and Address Shares of Class Percentage of Class
of Beneficial Owner Title of Class Beneficially Owned Beneficially Owned
------------------- -------------- ------------------ ------------------
Dr. Romano Volta (1) Series A Preferred 110,000 100%
Hydra S.p.A. Shares
Via Massino D'Azeglio 57
40123 Bologna, Italy Common Shares 1,990,860 14.38%
Whelan & Gratny Capital Common Shares 1,047,887 8.53%
Management (2)
611 Santa Cruz Avenue, Suite C
Menlo Park, CA 94025
18
Stadium Capital Management, LLC and Common Shares 723,300 5.89%
related parties (3)
430 Cowper Street - Suite 200
Palo Alto, CA 94301
____________________________
(1) Hydra Investissements S.A. ("Hydra Investissements"), a Luxembourg
corporation, is the record owner of 110,000 Series A Preferred Shares and a
warrant ("Warrant") to purchase 180,000 Common Shares. The Series A
Preferred Shares are convertible into Common Shares at the rate of one
Series A Preferred Share for 12.5 Common Shares (subject to adjustment in
certain circumstances). As adjusted to reflect the conversion, Hydra
Investissements owns beneficially 1,375,000 Common Shares. The Warrant is
currently exercisable and accordingly Hydra Investissements owns
beneficially 180,000 Common Shares. On its Schedule 13D dated September
22, 1997, filed with the Securities and Exchange Commission, Hydra
Investissements reported that it has shared voting and dispositive power
with respect to all of the 1,555,000 Common Shares beneficially owned by
it. Dr. Volta directly owns 426,501 Common Shares with sole voting and
dispositive power and may be deemed to be beneficial owner, with shared
voting and dispositive power, of the 1,555,000 Common Shares beneficially
owned by Hydra Investissements by reason of the ownership by Hydra S.p.A.
("Hydra") of 100% of the capital stock of Hydra Investissements and the
ownership by Dr. Volta of 50% of the capital stock of Hydra. Dr. Volta
also beneficially owns 9,750 Common Shares which are subject to options
currently exercisable.
(2) Based on Schedule 13F filed with the Securities and Exchange Commission on
February 12, 2001, Whelan & Gratny Capital Management reported that it had
sole voting power and sole investment power with respect to 831,887 shares
and shared voting power and shared investment power with respect to 216,000
shares. Whelan & Gratny Capital Management is an institutional investment
manager.
(3) Based on Schedule 13G filed on April 20, 2000, the Company has been advised
that Stadium Capital Management, LLC, a Delaware limited liability company
("SCM"), has shared voting power and shared dispositive power with respect
to 723,300 shares; Stadium Capital Partners, L.P., a California limited
partnership ("SCP"), has shared voting power and shared dispositive power
with respect to 723,300 shares; Alexander M. Seaver ("Seaver") has shared
voting power and shared dispositive power with respect to 723,300 shares
and Bradley R. Kent ("Kent") has shared voting power and shared dispositive
power with respect to 723,300 shares. SCM is an investment advisor whose
clients have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares. SCP is a
client of SCM. Seaver and Kent are the managers of SCM.
Security Ownership of Directors and Executive Officers
Name of Beneficial Common Shares Percent
Owner Beneficially Owned Beneficially Owned
---------------------- -------------------- ----------------------
Jay M. Eastman* 115,725 (1)(2) +
Robert S. Ehrlich* 410,645 (1)(3) 3.30%
Thomas J. Morgan* 29,380 (1) +
James C. O'Shea* 36,674 (1) +
Terry R. Peets** -- +
Jack E. Rosenfeld* 58,152 (1)(4) +
Roberto Tunioli* 1,208 +
Bert W. Wasserman* 106,500 (1) +
Edward J. Borey* -- +
Robert C. Strandberg 470,581 (1) 3.70%
Cecil F. Bowes 69,245 (1) +
19
Nigel P. Davis 34,461 (1) +
G. Lloyd West 100,000 (1) +
George A. Plesko 6,519 (1) +
---------- ---------
All current directors and
executive officers as a group
including those named above
(22 persons) 1,623,239(5) 12.08%
--------------- ---------
* Member of the Board of Directors of the Company
+ Less than 1%
(1) Includes the following Common Shares subject to acquisition by the exercise
of stock options which are, or within 60 days after March 30, 2001 will be,
exercisable and are therefore deemed under Securities and Exchange
Commission regulations to be beneficially owned: Messrs. Morgan, O'Shea
and Rosenfeld, 22,750 shares each; Mr. Ehrlich, 179,145 shares; Dr.
Eastman, 102,203 shares; Mr. Wasserman, 56,500 shares; Mr. Bowes, 61,250
shares; Mr. Davis, 31,250 shares; Mr. Plesko, 5,000 shares; Mr. Strandberg,
423,846 shares; Mr. West, 100,000 shares.
(2) Includes 3,121 shares held by Dr. Eastman's wife, and 7,232 shares held by
his son.
(3) Includes 15,000 shares held by Ehrlich & Co., 80,000 shares held in the R.
S. Ehrlich & Co. Pension Plan Trust (the pension plan for Ehrlich & Co.)
and 50,000 shares held by Red Lion Enterprises, Inc. Mr. Ehrlich is the
senior partner in Ehrlich & Co. and may be deemed to be in control of that
partnership. Red Lion Enterprises, Inc. is a corporation wholly-owned by
Mr. Ehrlich and his wife. Accordingly, Mr. Ehrlich may be deemed to
beneficially own the shares owned by Ehrlich & Co., by the R. S. Ehrlich &
Co. Pension Plan Trust, and by Red Lion Enterprises, Inc. Also includes
10,937 restricted shares (see "Item 11 - Executive Compensation -
Compensation of Directors").
(4) Includes 10,000 shares held by Solana Inc. (Pension Plan), a corporation
wholly-owned by Mr. Rosenfeld and his wife. Accordingly, Mr. Rosenfeld may
be deemed to beneficially own the shares owned by Solana Inc.
(5) Includes 1,155,569 shares subject to acquisition by the exercise of stock
options which are, or within 60 days after March 30, 2001 will be,
exercisable.
20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Severance Payments
In fiscal 2000, the Company, pursuant to a Severance Agreement dated April
30, 1997, paid L. Michael Hone, the Company's former Chairman of the Board and
Chief Executive Officer, $85,100 and forgave $35,136 of indebtedness. In
connection with the forgiveness of the loan, Mr. Hone received a related tax
gross-up of $16,452. No further payments are owing to Mr. Hone under his
Severance Agreement and there is no further indebtedness owing by Mr. Hone to
the Company.
In addition, on November 30, 2000, in consideration of the
surrender of options for 470,833 shares, the Company repriced Mr. Hone's
remaining options for 175,000 shares, resulting in a new exercise price of $1.90
per share. Of the 175,000 shares, 50,000 shares had an original exercise price
of $10.00 and 125,000 shares had an original exercise price of $8.88.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PSC Inc.
DATE: April 30, 2001 By: /s/ Edward J. Borey
------------------------------------
Edward J. Borey
President and Chief Executive Officer
DATE: April 30, 2001 By: /s/ Paul M. Brown
------------------------------------
Paul M. Brown
Vice President and Chief
Financial Officer
22