FORM 8-K
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 17, 2010 (AMENDMENT) (SEPTEMBER 13, 2010)
DATE OF AMENDMENT (DATE OF ORIGINAL REPORT)
COMPETITIVE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF INCORPORATION)
1-8696 36-2664428
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(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
777 COMMERCE DRIVE, FAIRFIELD, CONNECTICUT 06825
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(203) 368-6044
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
ON SEPTEMBER 13, 2010 COMPETITIVE TECHNOLOGIES FILED FORM 8-K STATING THE
FOLLOWING:
On September 3, 2010, the Board of Directors of Competitive Technologies,
Inc. removed John B. Nano as an Officer of the Corporation in all capacities for
cause, consisting of violation of his fiduciary duties to the Corporation and
violation of the Competitive Technologies, Inc. Corporate Code of Conduct. Mr.
Nano was previously Chairman of the Board of Directors, President and Chief
Executive Officer of Competitive Technologies, Inc.
On September 13, 2010, the Board of Directors of Competitive Technologies,
Inc. removed John B. Nano as a Director of the Corporation in all capacities for
cause, consisting of violation of his fiduciary duties to the Corporation and
violation of the Competitive Technologies, Inc. Corporate Code of Conduct,
consisting of violations of his duty of undivided loyalty, conflicts of
interest, improper utilization of company assets for personal benefit,
inaccurate and incomplete communications with the Board of Directors and the
public, withholding information from the Board of Directors and other matters.
Mr. Nano did not serve on any committees of the Board of Directors.
On September 3, 2010 the Board of Directors of Competitive Technologies,
Inc. elected Johnnie Johnson as Chief Executive Officer and Chief Financial
Officer of the Corporation and William Reali, a current director, as Chairman of
the Board of Directors of the Company.
Information with respect to Mr. Johnson is stated in detail in the
previous Form 8-K filed September 13, 2010
William Reali's biographical background is as set forth in the Company's
most recently filed proxy statement.
Mr. Johnson and Mr. Reali have been provided with a copy of the disclosures
contained in this Report on Form 8-K, have been given an opportunity to review
and agree to such disclosures. Mr. Johnson and Mr. Reali have advised the
registrant that they agree with such disclosures.
Mr. Nano was also provided with a copy of the disclosures contained in the
original filing of this Report on Form 8-K, and was given an opportunity to
review and agree to such disclosures. In response, Mr. Nano provided a statement
with respect to the original filing on Form 8-K which is attached hereto as an
exhibit. which Competitive Technologies is required to file with United States
Securities and Exchange Commission
RESPONSE TO STATEMENT:
In response to Mr. Nano's statement, the Company and its Board of Directors
respond as follows:
Mr. Nano's statement with respect to his termination is materially and
substantially inaccurate in numerous respects. Because Mr. Nano has challenged
the termination for cause of his employment by the Board of Directors of the
Company, the Company is required to articulate publicly the reasons for the
termination of his employment.
To provide context to these discussions, shareholders are advised that
during the course of the past two years, Mr. Nano had taken several actions
which were noted by the Board as being conflicts of interest, actions taken for
personal gain and potentially in violation of Mr. Nano's fiduciary duties and
potentially breaches of the Competitive Technologies, Inc. Corporate Code of
Conduct. Mr. Nano received communications from the Board reflecting these
concerns with strong admonitions to resolve the issues and no longer undertake
similar actions.
Furthermore, the Board had become aware from sources working for the
Company that Mr. Nano's method of leadership was negatively impacting the
Company, some employees and overall Company objectives. The Directors determined
that it was time to review Mr. Nano's employment, relationship and employment
contract with the Company. Realizing that Mr. Nano's Contract 180 day automatic
renewal clause was about to kick in, Mr Nano
was advised on August 5, 2010 (the date required by the automatic renewal clause
of his contract) that the Board would not be allowing the automatic renewal of
the contract, which gave the Board sufficient time to discuss the matter of Mr.
Nano's agreement in the upcoming Board meeting which was scheduled after the
notification date
During June, July and August 2010, the Company was vigorously seeking to
complete a financing transaction which if successful would have obtained
sufficient shareholder equity to avoid a delisting action by the NYSE Amex
Equities market. In a Board Meeting on August 26, 2010, in discussions which did
not include Mr. Nano, the Board determined that there was substantial cause for
termination but at that time it would be in the best interest of the Company and
its shareholders that an agreement be implemented that kept him on the board and
as Chairman, but did not give any authority over operational decisions. The
Board believed that some arrangement with Mr. Nano would be better than
potential ongoing litigation, particularly given the proposed financing and
upcoming potential for delisting. An immediate termination of Mr. Nano had the
potential to disrupt the market, jeopardize the financing, and hasten the
delisting process.
During that Board meeting Mr. Nano and the Board reached a very specific
oral understanding of what employment terms as Chairman but not CEO would be
acceptable to the Board, and Mr. Nano agreed with those terms. Shortly
thereafter, counsel for the Company presented Mr. Nano's counsel with an
agreement which specifically set forth the agreed upon terms. Counsel for the
Company had a very specific discussion with Mr. Nano's counsel in which the
Company's counsel advised that there was no room for additional demands and that
the proposal already contained more compensation than the Board desired to
provide to Mr. Nano. Nevertheless, Mr. Nano's counsel responded with a "counter
proposal" with terms that were materially different and substantially more
excessive than what was agreed to by the Board and Mr. Nano. As a consequence,
the Board determined it was in the best interests of shareholders and the
Company to proceed with termination and summarily rejected the counter proposal.
Mr. Nano alleges in his Statement attached hereto that he advised members
of the Board of Directors during the Summer that he was concerned about apparent
unauthorized dissemination of confidential insider information by certain
Directors "in the midst of a critical fund raising effort." In fact, Mr. Nano
advised both the Board and the NYSE Amex Equities at the delisting hearing that
the Company's stock had declined in price and the fund raising impaired
principally because of short sales, institutional sales and other investors who
were selling based on the notice of delisting. During the summer the Board was
not provided any support or evidence to unauthorized dissemination of
confidential information. Thus the Board could not pursue an investigation of
any alleged claims of insider trading unless documentation could be provided or
source of such claims. Mr. Nano never came forward with any documentation nor
did he pursue the matter further.
In its private session the Board discussed representations from at least
one Director that if Mr. Nano were terminated and from the Company's counsel and
from a key outside contractor that Mr. Nano had advised that if the compensation
in his existing contract were not paid in full he would take actions to "destroy
the Company". We believe this is a breach of fiduciary duty.
In addition to matters which were previously known to the Board, and which
were a component of his initial removal, subsequent to Mr. Nano's removal the
Board has discovered additional matters with respect to cause for Mr. Nano's
termination.
The Company's causes for terminating Mr. Nano's employment can be
categorized broadly into two categories. First, Mr. Nano took actions in his
own personal interest and in the interest of family members that have been
detrimental to the Company. Second, Mr. Nano has not fulfilled his
responsibilities to the Company as required by the Code of Conduct and the
standards for the President and Chief Executive Officer of a publicly traded
company. Some but not all of these matters are set forth below.
At the time of the termination of Mr. Nano's employment for cause, the
Board was aware of some circumstances relating to a contract Mr. Nano made on
behalf of the Company with his son who does not have the same last name. Mr.
Nano had the Company enter into a contract with his son as a consultant without
disclosure to the Board. In addition, Mr. Nano never disclosed the following
facts to the Board of Directors. Mr. Nano had the Company pay his son's
relocation costs from Pennsylvania to Connecticut even though consultant
relocation is not
reimbursed under Company policy and reimbursement was not authorized by the
Board. Mr. Nano approved his son's consultant invoices and had the Company pay
state sales taxes on his son's invoices for services. When Mr. Nano finally
allowed the Company's contract with his son to lapse two years later, Mr. Nano
(i) had the Company pay his son contractor payments as "severance" for a month
in which the son did not work; and (ii) urged his son to apply for unemployment
compensation even though his son had received IRS Form 1099 from the Company and
had the Company refrain from resisting his son's unemployment compensation
claim. As a result, the State of Connecticut billed the Company both for
unemployment compensation insurance premiums on the payments to Mr. Nano's son,
and for employer state unemployment payroll taxes, interest and penalties on the
income paid by the Company to Mr. Nano's son. Because Mr. Nano had urged his
son to apply for unemployment compensation, Mr. Nano directed the Company's
payment without protest of the unemployment premiums and withholding taxes,
penalties and interest on payments to Mr. Nano's son.
The Board also became aware of Mr. Nano's impropriety on another
unemployment compensation matter as cause for his termination. On March 25,
2010, a female employee resigned from the Company. The employee applied for
unemployment compensation on the grounds of a hostile workplace environment. On
behalf of the Company, Mr. Nano sent a letter to the State incorrectly
indicating that the employee had been laid off for lack of work. Although the
employee had resigned, Mr. Nano then entered into a severance agreement with the
employee to pay her three month's salary as severance. Like Mr. Nano's son,
this former employee collected unemployment compensation that the State of
Connecticut has billed to the Company's account. Mr. Nano subsequently approved
rehiring this former employee as an independent contractor.
The Board terminated Mr. Nano's employment for numerous other instances of
dealings for the Company with parties related to Mr. Nano without disclosure to
the Board. These dealings include Mr. Nano's award of a distribution contract
for the Company to a group that included Mr. Nano's nephew, who likewise does
not have the same last name as Mr. Nano, without disclosing that relationship to
the Board. The group did not perform and the contract had to be terminated.
Mr. Nano contracted numerous relatives and friends to be sales representatives
for the Company without disclosing these relationships to the Board. Mr. Nano
allowed a friend to occupy one of the Company's offices without payment of rent.
In addition to self-dealing favoring family and friends at the expense of
CTT, Mr. Nano also failed both to discharge properly his duties to the Company
and to make full disclosure to the Board of Directors. As only one example, Mr.
Nano made a loan of approximately $50,000 of the Company's funds by making
payments on behalf of a shareholder without disclosure to or approval by the
Board.
The above statements of the Company's cause for the Board's termination of
Mr. Nano's employment are not intended to be exhaustive. However, they are
indicative that the Board terminated Mr. Nano for cause because the Board
determined that Mr. Nano's actions violate the following requirements of the
Company's Code of Conduct:
(1) "Without prior approval by both a majority of the Company's Board
of Directors and a majority of the Company's disinterested directors who
are not employees of the Company, no sale or purchase of property, supplies
or services shall be made by the Company to or from any director or officer
of the Company, members of a director's or officer's family, or entities in
which any of these persons is a director, officer or owner of 5% or more of
that entity's equity interests."
(2) "Company assets are meant for Company and not personal use."
(3) "However, you owe a duty of undivided loyalty to the Company, and
therefore your personal activities and relationships must not conflict, or
appear to conflict, with the interests of the Company."
(4) "The Company's communications with the public must be accurate."
Further, the Board determined that Mr. Nano's conduct violated the
following requirements of the Company's Corporate Governance Principles:
"[T]he Board takes an engaged and focused approach to its responsibilities and
duties, and sets standards to better ensure that we are committed to business
success and enhancement of stockholder value by maintaining the highest standard
of responsibility and ethics."
As a consequence of the foregoing and due to Mr. Nano's unwillingness to reach
an amicable transition, the Board of Directors of Competitive Technologies, Inc.
terminated Mr. Nano for cause, removed him as Chief Executive Officer and any
other officer positions he held, and removed him as a Director of the Company.
ITEM 9.01. EXHIBITS
99.1 Letter from John B. Nano
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 hereunto duly authorized.
COMPETITIVE TECHNOLOGIES, INC.
(Registrant)
Dated: September 17, 2010 By: /s/Johnnie D. Johnson
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Johnnie D. Johnson
Chief Executive Officer