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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
[X] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PERCEPTRON, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THOMAS S. VAUGHN, ESQ.
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any party of the fee is offset as provided by Exchange
Act Rule 1-11(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 of Schedule and the date of filing.
(1) Amount Previously Paid:
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[PERCEPTRON LETTERHEAD May 16, 1997LOGO]
April 28, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held on Friday, June 20, 1997,5, 1998, at 9:00 a.m., local time, at 47827 Halyard
Drive, Plymouth, Michigan 48170.
The proposalsattached notice of the meeting and Proxy Statement describe the items
of business to be presentedtransacted: (i) the election of seven directors, and (ii) such
other business as may properly come before the meeting or any adjournment
thereof. After the formal business session, there will be a report to the
shareholders on the progress of the Company along with a discussion period.
I look forward to seeing you at the Annual Meeting are (a)and hope you will make
plans to attend. Whether you plan to attend the election of
directorsmeeting, I urge you to sign,
date and (b)return your proxy in the approval of an amendment toaddressed envelope enclosed for your
convenience so that as many shares as possible may be represented at the
Company's 1992 Stock
Option Plan to increase, by 300,000,meeting. No postage is required if the shares of Common Stock available for
grant under such plan (the "1992 Amendment").
The past year has been an exciting period of growth for Perceptron. Our
revenues grew 33% from $37.3 millionenvelope is mailed in 1995 to $49.7 million in 1996. New order
bookings during this same period grew 29% from $42.3 million to $54.4 million.
Our new order bookings backlog at March 31, 1997 was an all-time record $28
million.
During the past year, we branched into exciting new market segments and
industries, both by reapplication ofUnited States.
Returning the Perceptron product portfolio and
through acquisition, completing three key acquisitions since January 1, 1997. In
February 1997, we acquired Autospect, Inc., a manufacturer of information-based
coatings inspection and defect detection systems. In April 1997, we acquired
Trident Systems, Inc., a full service systems integrator for the solid woods
sector of the forest and wood products industry, and a partner since 1995, and
Nanoose Systems Corporation, a software design and engineering company,
specializing in industrial scanning and optimization systems, including systems
sold by Trident.
We intend to continue our current growth strategy within our core team and
through selective acquisitions, though it is important to note that weproxy will not be making acquisitions for their own sake. Any acquisition candidate is
subjectedaffect your right to specific metrics for market and technology position, key management
strength, and accretive earnings potential.
The Company needs to continually build and strengthen its team to meetattend the challenges of our growth strategy. In that regard, we continue to add key team
members at all levels within the organization. In particular, in the last year,
a new Vice President and Chief Financial Officer and new Vice President of
Engineering joined the team. We also filled out our senior management team with
the addition of a Vice President of Quality Assurance and a Vice President of
Marketing. As a result of our growth and recent acquisitions, during the last
year our team in total has grown from 173 to 262, including 70 new team members
due to acquisitions.
The Company's philosophy is to link team compensation to individual and
Company performance. Consistent with that philosophy, stock-based compensation
incentives, in particular, stock option grants, have been an essential part of
our compensation program for all team members, including directors, management
and other employees. Since May 1, 1996, we have granted options to purchase a
total of 175,950 shares of Common Stock under the 1992 Stock Option Plan. These
grants included options to purchase 110,000 shares issued to new senior
management team members, with the remainder granted to existing team members in
recognition of superior performancemeeting or to new team members to attract them to
the Perceptron team.
The Board of Directors has carefully considered the 1992 Amendment in light
of its performance-based compensation philosophy and the Company's current
growth strategy and has determined that there are insufficient shares of Common
Stock available under the 1992 Stock Option Plan to continue the Company's
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successful history of providing compensation that is tied to increasing
shareholder value. As a result, the Board of Directors has amended the 1992
Stock Option Plan, subject to shareholder approval, to increase the number of
option shares available for future grant in order to permit the Company to
continue to use stock option grants to build and strengthen its team. These
options will be granted to long-term management team members, some of whom have
not received new option grants in over three years, to existing management and
team members to reward ongoing superior performance, to new management and team
members and to management and team members at our new acquisitions in order to
more closely align their interests with the interests of the Company and its
shareholders.
The Board of Directors believes that the 1992 Amendment will prove to be of
significant benefit to the Company for the following reasons:
- The Board of Directors believes that, historically, grants of stock
options to team members have provided significant performance incentives
to the team and have contributed to the Company's strong financial
performance and increased shareholder value.
- Grants of stock options have been of significant importance to the
Company in attracting and retaining the high quality management team we
have built and will continue to play a significant role in the
competitive recruitment process as we continue to grow.
- Stock option grants to team members joining us through acquisition are an
important element of the process of integrating these team members into
our organization and focusing their efforts on Company-wide objectives.
- Stock option agreements issued under the 1992 Stock Option Plan include a
vesting or holding period requirement which require team members to
contribute to the Company over an extended period of time in order to
benefit from these options.
- The 1992 Stock Option Plan has been designed to encourage Common Stock
ownership, with the intention of further aligning the interests of the
Company's team members with the interests of shareholders.
The enclosed Proxy Statement offers a more complete description of the 1992
Amendment. The Board of Directors encourages you to read the Proxy Statement
carefully.
THE BOARD OF DIRECTORS BELIEVES IT IS OF CRITICAL IMPORTANCE THAT THE
AMENDMENT TO THE 1992 STOCK OPTION PLAN BE ADOPTED, AND WE NEED YOUR VOTE.
We are proud of our accomplishments and look forward to building the team
required to continue our efforts. We need your
vote to help us attract
additional talent, more fully integrate team members joining us through
acquisitions and retain our exceptional team who have built shareholder value.
Please take the time nowright to vote in favor of each of the proposals to be
presented at the Annual Meeting by promptly returning the enclosed proxy,
marked, dated and signed.person.
Sincerely,
/s/ ALFRED A. PEASE
Alfred A. Pease
Chairman of the Board of Directors,
President
and Chief Executive Officer
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PERCEPTRON LOGO
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PERCEPTRON, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1997
----------------------------------5, 1998
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The Annual Meeting of Shareholders of Perceptron, Inc., a Michigan
corporation, will be held on Friday, June 20, 1997,5, 1998, at 9:00 a.m., local time, at
47827 Halyard Drive, Plymouth, Michigan 48170 for the following purposes:
1. To elect seven directors to serve until the 19981999 Annual Meeting of
Shareholders.
2. To approve and adopt an amendment to the Company's 1992 Stock Option
Plan which would increase by 300,000 shares the total number of shares
of the Company's Common Stock available for grant under such plan.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on May 9, 1997,April 23, 1998,
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting. A certified list of shareholders entitled to vote at
the meeting will be available for examination by any shareholder during the
meeting at the corporate offices at 47827 Halyard Drive, Plymouth, Michigan
48170.
By the Order of the Board of Directors
/s/ THOMAS S. VAUGHN
Thomas S. Vaughn, Secretary
47827 Halyard Drive
Plymouth, Michigan 48170
May 16, 1997April 28, 1998
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THE VOTE OF EVERY SHAREHOLDER IS IMPORTANT, AND YOUR COOPERATION IN
PROMPTLY RETURNING YOUR MARKED, DATED AND SIGNED PROXY WILL BE APPRECIATED. THE
PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ATTEND THE MEETING. YOUR PROXY WILL, HOWEVER, HELP TO ASSURE A QUORUM AND TO
AVOID ADDED PROXY SOLICITATION COSTS.
- --------------------------------------------------------------------------------
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PROXY STATEMENT
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PERCEPTRON, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:00 A.M. ON JUNE 20, 19975, 1998
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INTRODUCTION
This Proxy Statement and the accompanying form of proxy, which were first
mailed to shareholders on approximately May 16, 1997,April 30, 1998, are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Perceptron, Inc. (the "Company") for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held at the corporate
offices of the Company on Friday, June 20, 1997,5, 1998, at 9:00 a.m., local time, and at
any adjournments thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting of Shareholders and in this Proxy Statement. The corporate
offices of the Company are located at 47827 Halyard Drive, Plymouth, Michigan,
48170, and the Company's telephone number is (313) 414-6100.
Only holders of record of the Company's Common Stock, $0.01 par value (the
"Common Stock") at the close of business on May 9, 1997April 23, 1998 (the "Record Date")
will be entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. Shareholders of record on the Record Date are entitled to
one vote per share on any matter that may properly come before the Annual
Meeting. As of the Record Date, there were 8,016,8748,321,531 shares of Common Stock
outstanding and entitled to vote. The presence, either in person or by properly
executed proxy, of the holders of a majority of the outstanding shares of Common
Stock is necessary to constitute a quorum at the Annual Meeting. See "Further
Information
- -- Share Ownership of Management and Certain Shareholders" for a
description of the beneficial ownership of the Common Stock.
Directors and officers and other employees of the Company may solicit,
without additional compensation, proxies by any appropriate means, including
personal interview, mail, telephone, courier service and facsimile
transmissions. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries which are record holders of the Company's
Common Stock to forward proxy soliciting material to the beneficial owners of
such shares and the Company will reimburse such record holders for their
reasonable expenses incurred in connection therewith. The cost of soliciting
proxies, including the preparation, assembling and mailing of the Notice of
Meeting, Proxy Statement, form of proxy and any other soliciting material, as
well as the cost of forwarding such material to the beneficial owners of Common
Stock, will be borne by the Company.
Shares represented by a duly executed proxy, unless previously revoked,
will be voted at the Annual Meeting in accordance with the instructions of the
shareholder thereon if the proxy is received by the Company before the close of
business on June 19, 1997.4, 1998. Shares represented by a proxy received after that date
will be voted if the proxy is received by the Company in sufficient time to
permit the necessary examination and tabulation of the proxy before the vote of
shareholders is taken. Any proxy given pursuant to this solicitation may be
revoked by the person giving it at any time before it is voted. Proxies may be
revoked by (i) filing with the Secretary of the Company, at or before the Annual
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company at the Company's corporate offices
at or before the Annual Meeting, or (iii) attending the Annual Meeting and
voting in person (although attendance at the Annual Meeting will not in and of
itself constitute a revocation of a proxy).
For purposes of determining the number of votes cast with respect to the
election of directors, and the proposal to amend the 1992 Stock Option Plan, only those cast "for" or "against" are included.
Abstentions are counted only for purpose of determining whether a quorum is
present at the Annual Meeting. Broker non-votes are not counted for any purpose.
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MATTERS TO COME BEFORE THE MEETING
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PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, Shareholders will be asked to elect a board of seven
directors to hold office, in accordance with the Bylaws of the Company, until
the 19981999 annual meeting and until the election and qualification of their
successors, or until their resignation or removal. The following table sets
forth information regarding the nominees for election to the Company's Board of
Directors. The shares represented by properly executed proxies will be voted in
accordance with the specifications made therein. PROXIES WILL BE VOTED "FOR" THE
ELECTION OF SUCH NOMINEES UNLESS THE SPECIFICATION IS MARKED ON THE PROXY
INDICATING THAT AUTHORITY TO DO SO IS WITHHELD. If a nominee is unable to serve
or, for good cause, will not serve, the proxy confers discretionary authority to
vote with respect to the election of any person to the Board. The nominees
receiving a plurality of votes cast at the Annual Meeting will be elected to the
Board of Directors. Shares may not be voted cumulatively for the election of
directors.
The nominees named below have been selected by the Board of Directors of
the Company. The following information with regard to business experience has
been furnished by the respective nominees for director.
POSITION, PRINCIPAL OCCUPATIONS AND
NAME AND AGE OTHER DIRECTORSHIPS
------------ -----------------------------------
David J. Beattie, 55..............56.............. Mr. Beattie has been a director of the Company since 1997.
Mr. Beattie has been Senior Vice President Sales and
Marketing of McNaughton -- McKay Electric Company ("MME")
since February 1997, where he is responsible for all sales
and marketing activities, strategic planning, engineering
and related services. In addition, he serves as Chief
Operating Officer of MME's Southern Region. He has been
employed by MME since 1978 in various capacities including
Chief Engineer, Sales Manager and Vice President. MME is a
distributor of industrial automation products and services.
Mr. Beattie served as a director of Trident Systems, Inc.
prior to its acquisition by the Company in April 1997.
Philip J. DeCocco, 59.............60............. Mr. DeCocco has been a director of the Company since 1996.
Mr. DeCocco has been President of Sturges House, Inc., a
company founded by Mr. DeCocco, since 1983. Sturges House,
Inc. offers executive recruiting and management consulting
services in human resources, strategic planning, executive
development and organization design and development to
various companies.
Robert S. Oswald, 55..............56.............. Mr. Oswald has been a director of the Company since 1996.
Mr. Oswald has been Chairman, President and Chief Executive
Officer of Robert Bosch Corporation, a manufacturer of
automotive components and systems, since July 1996 and prior
to that time, from January 1994 to June 1996 was President
and Chief Executive Officer of such company. From October
1990 to December 1993, Mr. Oswald was President of the
Original Equipment Manufacturer's Division of Robert Bosch
Corporation. Mr. Oswald serves as a director and member of
the management board of Robert Bosch, Gmbh Associated Fuel Pump Systems Corporation and Bosch
Corporation.
Alfred A. Pease, 51............... Mr. Pease has been a director of
the Company since 1996 and
Chairman of the Board since July 1996. Since February 1996,
Mr. Pease has been President and Chief Executive Officer of
the Company. From November 1993 to February 1996, Mr. Pease
was President and founder of Digital Originals, Inc., a
manufacturer of digital imaging products and related
software. From December 1990 to October 1993, Mr. Pease
served as Product Line Director of Advanced Micro Devices,
Inc., a manufacturer of semi-conductor products.Robert Bosch Corporation.
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POSITION, PRINCIPAL OCCUPATIONS AND
NAME AND AGE OTHER DIRECTORSHIPS
------------ -----------------------------------
Alfred A. Pease, 52............... Mr. Pease has been a director of the Company since 1996 and
Chairman of the Board since July 1996. Since February 1996,
Mr. Pease has been President and Chief Executive Officer of
the Company. From November 1993 to February 1996, Mr. Pease
was President and founder of Digital Originals, Inc., a
manufacturer of digital imaging products and related
software. From December 1990 to October 1993, Mr. Pease
served as Product Line Director of Advanced Micro Devices,
Inc., a manufacturer of semi-conductor products.
Harry T. Rein, 52.................53................. Mr. Rein has been a director of the Company since 1985.
Since 1987, he has been Managing General Partner and founder
of Canaan Partners, a venture capital firm. Mr. Rein also
serves as a director of Anadigics, Inc. and a director of
various private corporations.
Louis R. Ross, 65.................66................. Mr. Ross has been a director of the Company since 1996. Mr.
Ross owns and operates Ross Consulting Inc., a company which
provides consulting services in quality management,
manufacturing and investments. Mr. Ross retired in January
1996 as Vice Chairman and Chief Technical Officer of Ford
Motor Company ("Ford") and as a member of Ford's Office of
Chief Executive and its Board of Directors. Mr. Ross was a
member of Ford's Board of Directors and Ford's Office of
Chief Executive since 1985, and Vice Chairman since 1993.
From October 1991 to January 1993, he served as Executive
Vice President and Chief Technical Officer of Ford, and from
May 1989 to October 1991, he was Executive Vice President
International Automotive OperationsFord. Mr. Ross
also serves as a director of Ford.a private non-profit
corporation.
Terryll R. Smith, 47..............48.............. Mr. Smith has been a director of the Company since 1996.
SinceFrom February 1996 to March 1998, Mr. Smith has beenwas Group Vice
President, Sales and Marketing of Advanced Micro Devices,
Inc. ("AMD"), a manufacturer of integrated circuits. From
January 1994 to February 1996, Mr. Smith was Group Vice
President, Applications Solutions Products of AMD. From
October 1992 to January 1994, Mr. Smith was Vice President,
International Sales and Marketing and from March 1989 to
October 1992, was Vice President, European Sales, Marketing
and Operations of AMD.
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BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors is responsible for direction of the overall affairs
of the Company. Directors of the Company are elected to serve until their
successors are elected. The Board of Directors and each committee thereof meet
formally from time to time and also take action by consent resolutions. During
the year ended December 31, 1996,1997, the Board of Directors met a total of seveneight
times and took action by consent resolution on occasion. All of the current
directors,
who are standingexcept for re-electionMessrs. Beattie and Smith, attended at least 75% of the total
meetings of the Board of Directors, and of any committee on which they served,
held during the period in 19961997 in which they served as directors or members of
any such committees.
The Board of Directors has delegated certain authority to an Audit
Committee, a Management Development and Compensation Committee, aand Stock Option Committee
and an Executive and Nominating Committee to assist it in executing its duties.
The composition and principal functions of each Committee are as follows:
Audit Committee. The Audit Committee is comprised of two members of the
Board of Directors: Messrs. Oswald and Ross. The principal functions of the
Audit Committee are to nominate the accounting firm to be appointed as the
Company's independent certified public accountants and to review the plan and
scope of the audit, the report of the audit upon its completion and the adequacy
of the Company's internal accounting procedures and controls. The Audit
Committee also reviews the nature and extent of all services provided to the
Company by such accountants and evaluates their fees and the effects of such
services upon their independence. The Audit Committee held twothree meetings in
1996.1997.
Management Development and Compensation and Stock Option Committee. The
Management Development and Compensation and Stock Option Committee ("Management
Development Committee") is comprised of three members of the Board of Directors:
Messrs. DeCocco, Rein and Paul E. Rice, who is not standing for reelection to the Board of Directors.Ross. The principal functions of the Committee are to
review the Company's compensation programs, to establish the compensation
programs for the Company's executive officers, and to review and approve annual
bonuses to be paid to such executive officers.officers and to administer the Company's
Stock Option Plans. The Committee met onceseven times in 1996,1997, and took action by
consent resolution on a number of occasions in 1996.
Stock Option Committee. The Stock Option Committee is comprised of two
members of the Board of Directors: Messrs. Rein and Rice. The Committee
administers the Company's Stock Option Plans. The Committee met twice in 1996
and took action by consent resolution on a number of occasions in 1996.1997.
Executive and Nominating Committee. The Executive and Nominating Committee
is comprised of fivefour members: Messrs. Pease, Dwight D. Carlson, who is not
standing for reelection to the Board of Directors, Rein, RiceBeattie and Smith. The
Committee is generally authorized to act on behalf of the Board of Directors
between meetings of the Board. The Committee's duties also include recommending
to the Board of Directors the nominees to stand for election as directors at
each annual meeting of shareholders and recommending to the Board of Directors
the directors to serve on the standing committees of the Board. Recommendations
by shareholders of possible director nominees may be addressed to the Executive
and Nominating Committee of the Board of Directors in care of the Secretary of
the Company and will be forwarded to the Committee for consideration. The
Committee met four timesonce in 19961997 and took action by consent resolution on a number of
occasions in 1996.
PROPOSAL 2 -- AMENDMENT TO THE 1992 STOCK OPTION PLAN
PROPOSED AMENDMENT TO THE 1992 PLAN
The Company proposes to amend the 1992 Stock Option Plan (the "1992 Plan")
to increase the total number of shares of Common Stock available for grant under
such plan by 300,000 shares, from 1,814,286 to 2,114,286. Of the 1,814,286
shares available under the 1992 Plan, as of March 31, 1997, 127,283 shares are
available for future grants, 944,311 shares are reserved for outstanding grants
under the 1992 Plan and the remainder have been issued upon exercise of stock
options previously granted under the 1992 Plan.1997.
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This amendment is necessitated by the fact that there are insufficient
shares of Common Stock currently available under the 1992 Plan for the Company
to continue to grant options to new and existing officers, managers and other
team members. This amendment, if approved by the shareholders of the Company,
will permit the continued use of options to attract new executives and other
team members, to more fully integrate team members joining the Company in
connection with recent acquisitions and to retain and incent the Company's
existing team.
The Company's executive officer and management compensation program
reflects the Company's philosophy that executive compensation should be linked
to performance. As a result, a substantial portion of each such executive's cash
compensation is paid in the form of a bonus which is earned only if the Company
achieves established performance standards. Similarly, the Company's Stock
Option Committee (the "Stock Option Committee") has historically favored
stock-based compensation incentives for the Company's executives, such as stock
options which permit the executives to buy a specified number of shares of
Common Stock at the fair market value on the date an option is granted. Such
stock options gain value only if the price of the Common Stock increases above
the exercise price.
The Company has also historically utilized stock option grants as part of
its compensation program for all team members, reflecting the Company's
philosophy of linking compensation to performance. The Board of Directors
believes that it is appropriate to link compensation at all levels within the
organization to performance and to continue such practice through future grants
of stock options. In addition, the Company believes that the use of stock option
grants to team members helps to provide an incentive for their continued
employment and otherwise more closely aligns their interests with those of the
Company and its shareholders.
Further, as the Company continues to grow, it has a continuing need to
attract highly qualified executives and other team members to meet the Company's
personnel requirements. The Company utilizes stock options as part of a standard
compensation package developed to attract such candidates.
The Company has completed three acquisitions since January 1, 1997 and
continues to explore other acquisition opportunities. A key to the success of
these acquisition efforts is the process of integrating these new team members
into the organization. The Company believes that stock option grants to these
new team members are an important element of this process and help to more
quickly align their interests with the interests of the Company and its
shareholders.
If the 1992 Plan is amended as proposed, the Company intends to continue to
use stock options as a key component of its executive and team compensation
program as described above.
If the proposed amendment to the 1992 Plan is not approved, the Company
believes that the number of available option shares under the 1992 Plan would be
inadequate to meet the Company's needs and would significantly impede the
Company's ability to attract new team members, including new executives, to
integrate team members joining the Company in connection with acquisitions and
to retain existing key team members.
REQUIRED VOTE
Approval of the proposed amendment to the 1992 Plan requires the
affirmative vote of holders of a majority of the shares present, or represented,
and entitled to be voted at the Annual Meeting. Abstentions will have the effect
of a vote against approval of the 1992 Plan and broker non-votes will have no
effect.
PROXIES WILL BE VOTED "FOR" THE APPROVAL OF THE AMENDMENT TO THE 1992 PLAN
UNLESS OTHERWISE INDICATED ON THE PROXY.
THE 1992 STOCK OPTION PLAN
The 1992 Plan was adopted by the Board of Directors on April 21, 1992 and
approved by the shareholders on April 27, 1992 and has been amended on several
occasions thereafter. Most recently the Plan was amended on May 13, 1997 to
increase the total number of shares of Common Stock available for grant under
such plan
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from 1,814,286 to 2,114,286. Such amendment is being submitted to the
shareholders for approval at the Annual Meeting.
As of March 31, 1997, an aggregate of 1,071,594 shares of the Common Stock
are currently reserved for issuance upon the exercise of options granted under
the 1992 Plan, and an additional 300,000 will be reserved upon approval of the
proposed amendment to the 1992 Plan. If, for any reason, an option lapses,
expires or terminates without having been exercised in full, the unpurchased
shares covered thereby are again available for grants of options under the 1992
Plan. In addition, if the option is exercised by an optionee through the
retention by the Company of a portion of the option in payment of the exercise
price of such option or by delivery to the Company of shares previously acquired
pursuant to options granted under the 1992 Plan, then shares of Common Stock
underlying the retained option and shares of Common Stock delivered in payment
of the exercise price of an option as described above will again be available
for grants of options under the 1992 Plan.
Pursuant to the 1992 Plan, employees of the Company (approximately 262
persons) may be granted incentive stock options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
other persons (including employees) may be granted nonqualified options to
acquire Common Stock. The purpose of the 1992 Plan is to encourage employees of
the Company and certain other key persons to acquire Common Stock. The Company
believes that stock option grants to employees help to provide an incentive for
their continued employment and otherwise more closely align their interests with
those of the Company and its shareholders.
The 1992 Plan presently is administered by the Stock Option Committee.
Subject to the express provisions of the 1992 Plan, the Stock Option Committee
has authority, in its discretion, to determine which employees and other persons
receive options, the times when options shall be granted, the exercise price of
each option, the period during which each option may be exercised, the number of
shares subject to each option and the terms of the respective option agreements
covering each option granted under the 1992 Plan. The Stock Option Committee may
set aside a fixed number of shares of Common Stock out of the shares available
under the 1992 Plan for grants by the President to employees of the Company who
are not executive officers of the Company.
Stock options granted under the 1992 Plan are exercisable upon such terms
as the Stock Option Committee, in its discretion, may determine. No option
granted under the 1992 Plan may be exercisable more than ten years from the date
upon which it was granted. In addition, no option granted under the 1992 Plan
may be exercisable within six months from the date of grant by persons subject
to Section 16(b) of the Securities Exchange Act of 1934, as amended. No ISO
shall be exercisable by any employee who has not been in the continuous employ
of the Company for a period of at least one year from the date of grant.
Employees possessing more than ten percent of the voting stock of the Company
are eligible to receive ISOs; provided, however, that the option price of ISOs
granted to such employees shall not be less than 110% of the fair market value
of the shares covered by the ISOs on the date of grant and such ISOs shall not
be exercisable more than five years after the date of grant. The exercise price
of nonqualified options granted under the 1992 Plan shall be no less than fair
market value of the Common Stock on the date of grant. The last reported sale
price of the Common Stock, as quoted on The Nasdaq Stock Market's National
Market (the "Nasdaq National Market"), on May 13, 1997 was $29.125 per share.
The exercise price is payable in full in cash at the time of purchase; or
in shares of Common Stock, (but generally, only if such shares have been owned
for at least six months); or, in the case of nonqualified stock options or in
the case of ISOs issued on or after May 21, 1993, the exercise price may be paid
by delivery to the Company of a properly executed exercise notice, acceptable to
the Company, together with irrevocable instructions to the participant's broker
to deliver to the Company sufficient cash to pay the exercise price and any
applicable income and employment withholding taxes, in accordance with a written
agreement between the Company and the brokerage firm ("cashless exercise"
procedure); or, in the case of nonqualified stock options or in the case of ISOs
issued on or after October 21, 1994, the option exercise price may be paid
through the retention by the Company of shares of Common Stock which would
otherwise be transferred to the optionee upon the exercise of exercisable
options, with such retained shares having a value equal to the
6
10
difference between the fair market value of the shares being retained
(determined as of the date of exercise of the options), less the exercise price
of such options, (but, generally, only if the optionee then owns, and has owned
for at least six months, at least an equal number of shares of Common Stock as
the option shares being retained); or, in the case of ISOs issued prior to
January 1, 1997, may be paid in three installments as hereinafter provided; or,
a combination of the foregoing. In the event of payments in installments, 50% of
the purchase price shall be paid on the date of exercise and on such date the
exercising optionee shall execute and deliver to the Company such optionee's
promissory note making such optionee personally liable to pay the balance of the
purchase price in two installments on the first and second anniversaries of the
date of exercise. Such promissory note shall bear interest at a rate determined
by the Stock Option Committee and shall be secured by a pledge of the Common
Stock being purchased.
Generally, if the employment by the Company of any optionee who is an
Employee (as defined in the 1992 Plan) shall terminate for any reason, other
than by death or total and permanent disability, any option which such optionee
is entitled to exercise on the date of such termination shall be exercisable by
the optionee at any time on or before the earlier of the expiration date of the
option or three months after the date of such termination, but only to the
extent of the accrued right to purchase at the date of such termination. If the
employment of any optionee who is an Employee shall be terminated because of
total and permanent disability of such optionee, the option shall be exercisable
by the optionee at any time on or before the earlier of the expiration date of
the option or one year after the date of such termination of employment, but
only to the extent of the accrued right to purchase at the date of such
termination. If any optionee shall die while employed by the Company and, if at
the date of death, the optionee shall be entitled to exercise an option, such
option may be exercised by any person who acquires the option by bequest or
inheritance or by reason of the death of the optionee, or by the executor or
administrator of the estate of the optionee, at any time before the earlier of
the expiration date of the option or one year after the date of death of the
optionee, but only to the extent of the accrued right to purchase at the date of
death.
Certain option agreements issued to officers of the Company contain a
provision accelerating the exercisability of options granted under the 1992 Plan
in the event of their termination of employment under certain circumstances,
including terminations of an officer's employment without cause. All agreements
issued to date under the 1992 Plan contain provisions accelerating the
exercisability of options granted under the 1992 Plan in the event of certain
mergers and sales of all or substantially all of the assets of the Company.
See "Further Information -- Compensation of Directors and Executive
Officers -- Termination of Employment and Change of Control Arrangements" for a
description of additional provisions applicable to the executive officers named
in the Summary Compensation Table.
AMENDMENT OR TERMINATION
The 1992 Plan may be suspended or terminated in its entirety at any time by
the Board of Directors. In addition, the Board of Directors may suspend,
terminate or amend the 1992 Plan at any time without the approval of
shareholders; provided, however, that the approval of shareholders is required
for any amendment which: (i) increases the total number of shares of stock which
may be issued and sold under the 1992 Plan; (ii) decreases the minimum option
price; (iii) alters the class of employees eligible for grants of options; (iv)
increases the maximum term of options granted under the 1992 Plan; (v) reduces
the period of time after the date of grant during which an employee must remain
in the employ of the Company in order to exercise an option; (vi) increases the
term of the 1992 Plan; (vii) withdraws the administration of the 1992 Plan from
the Board of Directors; or (viii) otherwise materially increases the benefits
accruing to participants under the 1992 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Under the Code as now in effect, at the time an
ISO is granted or exercised, the optionee will not recognize income and the
Company will not be entitled to any deduction. However, the difference between
the exercise price and the fair market value of the purchased shares on the date
of exercise is a tax preference item which may be subject to the federal
alternative minimum tax in the year the ISO is
7
11
exercised. The holder of an ISO generally will be accorded long-term capital
gain or loss treatment on the disposition of Common Stock acquired by exercise
of the option; provided that the disposition (i) occurs more than two years from
the date of grant, and (ii) one year from the date of exercise. An optionee who
disposes of shares acquired upon exercise of an ISO prior to the expiration of
the foregoing holding periods recognizes ordinary income upon the disqualifying
disposition equal to the difference between the option price and the lesser of
the fair market value of the shares on the date of exercise or the date of
disposition. Any appreciation between the date of exercise and date of
disposition is taxed as long or short-term capital gain, depending upon the
holding period of the shares. Payment of the exercise price by surrendering
shares of Common Stock generally will not result in the recognition of a gain or
loss on the shares surrendered. If an ISO is exercised by the retention by the
Company of shares of Common Stock underlying ISOs under the 1992 Plan, the
optionee will recognize ordinary income in the year the option is exercised
equal to the difference between the fair market value of the Common Stock
underlying the retained options on the date of exercise and the exercise price
of such options. The optionee's basis for the newly acquired shares will be
equal to the fair market value of the shares on the exercise date and the
optionee's holding period will begin on the day after the date of exercise. To
the extent ordinary income is recognized by the optionee, the Company may deduct
a corresponding amount as compensation.
Nonqualified Stock Options. Upon the exercise of a nonqualified option, an
optionee will recognize ordinary income equal to the difference between the
option price and the fair market value of the Common Stock at the time of
exercise. When the optionee disposes of shares acquired by the exercise of an
option, the amount received in excess of the fair market value on the date of
exercise will be treated as long or short-term capital gain, depending on the
holding period of the shares. Payment of the option price for shares of Common
Stock by surrender of shares of Common Stock previously owned by the optionee
will not give rise to a recognized gain on the shares surrendered. If a
nonqualified option is exercised with payment by Common Stock, to the extent the
number of new shares received upon the exercise of a nonqualified option exceeds
the number of shares surrendered upon the exercise of such option, the fair
market value of the additional shares on the date the option is exercised,
reduced by the amount of any cash paid by the optionee upon the exercise of the
option, will be taxable to the optionee as ordinary income in the year the
option is exercised. The optionee's basis and holding period for the number of
newly-acquired shares equal to the number of surrendered shares will carry over
from the surrendered shares on a share-for-share basis. The optionee's basis in
the remaining shares will equal the fair market value of the shares on the
exercise date, and the optionee's holding period will begin on the day after the
date on which the optionee's tax basis is determined. If a nonqualified option
is exercised by the Company's retention of shares of Common Stock underlying
options under the 1992 Plan, the optionee will recognize ordinary income in the
year the option is exercised equal to the difference between the fair market
value of the Common Stock underlying the retained options on the date of
exercise and the exercise price of such options. The optionee's basis for the
newly acquired shares will be equal to the fair market value of the shares on
the exercise date and the optionee's holding period will begin on the day after
the date of exercise. To the extent ordinary income is recognized by the
optionee, the Company may deduct a corresponding amount as compensation.
8
12
STOCK OPTIONS GRANTED UNDER THE 1992 PLAN
The following table lists each person named in the Summary Compensation
Table under "Further Information -- Executive Compensation -- Summary
Compensation Table" below, all director nominees, all current executive officers
as a group, all current directors (other than executive officers) as a group,
each associate of the foregoing persons, each other person who received or is to
receive at least five percent of the options under the 1992 Plan, and all
current team members of the Company (other than executive officers) as a group,
indicating the number and weighted average exercise price of options granted
under the 1992 Plan to each of the foregoing, as of March 31, 1997. The table
does not include options previously granted under the Company's 1983 Stock
Option Plan or Directors Stock Option Plan.
OPTIONS GRANTED WEIGHTED AVERAGE
NAME AND PRINCIPAL POSITION UNDER 1992 PLAN (1) EXERCISE PRICE
--------------------------- ------------------- ----------------
Alfred A. Pease, President, Chief Executive Officer and
Chairman of the Board, Director Nominee................... 200,000(2) $20.87
Neil E. Barlow, Executive Vice President -- International... 62,961(3) 6.21
Dwight D. Carlson, Vice Chairman of the Board, Former
President and Chief Executive Officer..................... 263,191(4) 5.14
James Ratigan, Former Executive Vice President and Chief
Financial Officer......................................... 172,500(5) 7.33
All Current Executive Officers as a Group (3 persons)....... 297,961(2)(3) 19.61
All Current Directors (other than Executive Officers) as a
Group (7 persons)......................................... 263,191(4) 5.14
David J. Beattie, Director Nominee.......................... 0
Philip J. DeCocco, Director Nominee......................... 0
Robert S. Oswald, Director Nominee.......................... 0
Harry T. Rein, Director Nominee............................. 0
Paul E. Rice, Director Nominee.............................. 0
Louis R. Ross, Director Nominee............................. 0
Terryll R. Smith, Director Nominee.......................... 0
James E. McGrath, Former Chairman of the Board and Former
Director.................................................. 120,000(6) 3.71
All Current Team Members (other than Executive Officers) as
a Group................................................... 687,703 14.42
- -------------------------
(1) All options are ISOs, except that 182,980, 7,002, 193,973, 131,595, 120,000,
and 66,488 shares held by Messrs. Pease, Barlow, Carlson, Ratigan, McGrath,
one other executive officer and certain other officers or former officers,
respectively, are nonqualified options. The exercise price of all options is
equal to 100% of the fair market value of the Common Stock on the date of
grant.
(2) Mr. Pease's options become exercisable in cumulative annual installments of
25% beginning February 14, 1997 and expire on the earlier of February 14,
2006 or, if earlier, one year after Mr. Pease's death or permanent
disability or three months after Mr. Pease's termination of employment. In
the event that Mr. Pease's employment is terminated without cause, after
July 14, 1996, options for 66,667 shares that are not then exercisable
become exercisable. As of March 31, 1997, Mr. Pease held unexercised options
for 200,000 shares of Common Stock under the 1992 Plan, of which 50,000
options are exercisable.
(3) Options for 37,500 shares held by Mr. Barlow expire on July 6, 2003 and
options for 25,461 shares held by Mr. Barlow, expire on December 31, 1998,
or, if earlier, one year after Mr. Barlow's death or permanent disability or
three months after Mr. Barlow's termination of employment. Options for
18,750 shares held by Mr. Barlow, become exercisable in cumulative annual
installments of 25% beginning July 6, 1994, and such options become
exercisable in the event that Mr. Barlow's employment is terminated without
cause.
9
13
Options for 18,750 shares held by Mr. Barlow, become exercisable in
cumulative annual installments of 25% beginning April 1, 1995. Options for
25,461 shares held by Mr. Barlow become exercisable in cumulative annual
installments of 25% beginning December 31, 1994. As of March 31, 1997, Mr.
Barlow held unexercised options for 21,610 shares of Common Stock, of which
no options are exercisable.
(4) Options for 225,000 shares held by Mr. Carlson expire on July 6, 2003 and
options for 38,191 shares held by Mr. Carlson expire on December 31, 1998,
or, if earlier, one year after Mr. Carlson's death or permanent disability
or three months after Mr. Carlson's termination of employment. Options for
112,500 shares held by Mr. Carlson became exercisable in cumulative annual
installments of 25% beginning July 6, 1994. Options for 112,500 shares held
by Mr. Carlson become exercisable in cumulative annual installments of 25%
beginning on April 1, 1995. The remaining options for 38,191 shares become
exercisable in cumulative annual installments of 25% beginning December 31,
1994. In the event that Mr. Carlson's employment is terminated without
cause, all options held by Mr. Carlson, to the extent not then exercisable,
will become immediately exercisable. As of March 31, 1997, Mr. Carlson held
unexercised options for 108,470 shares of Common Stock under the 1992 Plan,
of which 5,000 options are exercisable.
(5) Mr. Ratigan's options were fully exercised prior to their expiration in
November 1996. Pursuant to the terms of Mr. Ratigan's options, such options
expired on December 13, 1998, or, if earlier, one year after Mr. Ratigan's
death or permanent disability or three months after Mr. Ratigan's
termination of employment. Of the options held by Mr. Ratigan, options for
30,000 shares originally became exercisable in cumulative 50% increments on
December 13, 1995 and 1996. In August 1996, the terms of such options were
amended so that they became exercisable as follows: 11,250 on August 16,
1993, 3,750 on December 13, 1995 and 2,500 on each of January 1, 1996,
February 1, 1996, April 1, 1996, May 1, 1996 and June 1, 1996. The remaining
options for 142,500 shares originally became exercisable in cumulative
installments as follows: 43,125 on June 13, 1994, 43,125 on December 13,
1994, 28,125 on December 13, 1995, 14,490 on December 13, 1996 and 13,635 on
January 1, 1997. In August 1995, the terms of such options were amended so
that the options that were not exercisable became exercisable as follows:
21,094 on August 16, 1995, 7,030 on December 13, 1995, 4,688 on each of
January 1, 1996, February 1, 1996, March 1, 1996 and April 1, 1996, and
4,687 on each of May 1, 1996 and June 1, 1996. In April 1996, the terms of
such options were amended so that all such options would become exercisable
upon the termination of Mr. Ratigan's employment without cause prior to
August 31, 1996.
(6) Mr. McGrath's options have been fully exercised. Mr. McGrath's options
expired on May 21, 2003 or, if earlier, one year following Mr. McGrath's
death.
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FURTHER INFORMATION
EXECUTIVE OFFICERS
The officers listed below were appointed by the Board of Directors and
serve in the capacities indicated. Executive officers are normally appointed
annually by the Board of Directors and serve at the pleasure of the Board.
POSITION, PRINCIPAL OCCUPATIONS AND
NAME AND AGE OTHER DIRECTORSHIPS
------------ -----------------------------------
Alfred A. Pease, 51...............52............... President and Chief Executive Officer since February 1996.
Mr. Pease's business experience is described under "Proposal
1 -- Election of Directors."
Neil E. Barlow, 41................ Mr. Barlow is Executive Vice President -- International and
has been an Executive Vice President of the Company in
various capacities since January 1990. In addition, Mr.
Barlow is and has been Managing Director of the Company's
European subsidiaries for more than five years. Prior to
that, he had held various positions at the Company including
Director of Manufacturing and Vice President of Engineering.
John G. Zimmerman, 56.............57............. Mr. Zimmerman has been Vice President and Chief Financial
Officer of the Company since June 1996. Prior to that time,
he was, from 1994 to 1996, Group Vice President and Chief
Financial Officer of Sandy Corporation, a training,
communications and consulting corporation primarily focused
in the automotive industry, and from, 1990 to 1993, was
Senior Vice President, Finance and Treasurer of Software
Alternatives, Inc,Inc., a company which providesprovided software
applications and solutions for businesses. Software
Alternatives, Inc. filed a Chapter 11 bankruptcy petition in
June 1992, which was dismissed in 1993.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Common Stock by each person known by management of the Company
to be the beneficial owner of more than five percent of its outstanding Common
Stock. The number of shares reported is as of the dates indicated in the
footnotes below. The percentage of class is based on 7,698,8368,321,531 shares of Common
Stock outstanding on April 25, 1997.23, 1998. The information as to each person has been
furnished by such person and, except as where otherwise indicated, each person
has sole voting power and sole investment power with respect to all shares
beneficially owned by such person.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENTOWNER OF CLASS
------------------- ----------------------- ----------------------------------- --------
Pilgrim Baxter & Associates,
Harold J. BaxterFranklin Resources, Inc.,
Charles B. Johnson and
Gary L. Pilgrim
1255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087.............................. 692,700(1) 9.0%
U.S. Trust Company of New York
14 W. 47thRupert H. Johnson, Jr.
777 Mariners Island Boulevard
San Mateo, California 94404............................... 896,280(1) 10.8
J.P. Morgan Co., Incorporated
60 Wall Street
New York, New York 10036............................... 412,131(2) 5.4%10260.................................. 539,600(2) 6.5
- -------------------------
(1) Based upon their statement on Schedule 13G dated and filed with the
Securities and Exchange Commission on March 12, 1997. Messrs.
Baxter6, 1998, Franklin Advisers, Inc.
has sole power to vote and Pilgrim share votingdispose of 890,500 shares of Common Stock and
Franklin Management, Inc. has sole power with respect to dispose of 5,780 shares of
Common Stock. Further, based upon their statement on Schedule 13G, the
shares of Common Stock.Stock are beneficially owned by one or more open or
closed-end investment companies or other managed accounts which are advised
by direct and indirect investment advisory subsidiaries (the "Adviser
Subsidiaries") of Franklin Resources, Inc. ("FRI"). Such advisory contracts
grant to such Adviser Subsidiaries all investment and/or voting power over
the securities owned by such advisory clients. Charles B. Johnson
5
9
and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding
common stock of FRI and are the principal shareholders of FRI.
(2) Based upon its statement on Schedule 13G dated December 31, 1997 and filed
with the Securities and Exchange Commission on February 14, 1996.
11
1513, 1998, J.P.
Morgan has sole power to vote 444,600 shares and sole power to dispose
539,600 shares of Common Stock. Further, based upon its statement on
Schedule 13G, virtually all of J.P. Morgan's accounts involve outside
persons who have the right to receive or direct the receipt of dividends
from, or the proceeds from the sale of, securities in such accounts with
respect to the Common Stock. However, no such person's rights relate to more
than five percent of the Common Stock.
BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to beneficial
ownership of the Common Stock by each of the directors and director nominees,
the persons named in the Summary Compensation Table and by all directors and
executive officers as a group as of April 25, 1997,28, 1998, unless otherwise indicated.
The information as to each person has been furnished by such person and, except
as where otherwise indicated, each person has sole voting power and sole
investment power with respect to all shares beneficially owned by such person.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------------- ----------------------- ------------------------
David J. Beattie......................................... -- --
Dwight D. Carlson(2)Beattie(2)(3).................................. 73,289...................................... 15,000 *
Philip J. DeCocco(2)(4)..................................... 50016,000 *
Robert S. Oswald(2)...................................... -- --Oswald (2)(5)..................................... 15,500 *
Alfred A. Pease(2)(4).................................... 50,000 *Pease (2)(6)...................................... 100,000 1.2
Harry T. Rein(2)(5)...................................... 16,870(7)......................................... 16,000 *
Paul E. Rice(2)(6)....................................... 165,000 2.1%
Louis R. Ross(2)(8)......................................... 2,00017,500 *
Terryll R. Smith(2)(9)...................................... -- --15,500 *
John G. Zimmerman(10)....................................... 8,906 *
Neil E. Barlow(7)........................................ 15,715 *
James A. Ratigan......................................... 223Barlow(11).......................................... 4,686 *
Directors and executive officers as a group (10(8
persons)(3)(4)(5)(6)(7)............................ 323,597 4.0%(8)(9)(10)......................... 204,406 2.5
- -------------------------
* Less than 1% of class
(1) The address for Messrs. Beattie, Carlson, DeCocco, Oswald, Pease, Rein, Rice, Ross, Smith,
Barlow and RatiganZimmerman is 47827 Halyard Drive, Plymouth, Michigan 48170.
(2) Serves as a member of the Board of Directors of the Company.
(3) Mr. Carlson is not standing for reelection to the Board of Directors.
IncludesRepresents options to purchase 33,12515,000 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 25,
1997.28,
1998.
(4) RepresentsIncludes options to purchase 50,00015,500 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 25,
1997.28,
1998.
(5) Consists of 1,869 shares of Common Stock owned by Canaan Venture Partners
L.P. and 1 share of Common Stock owned by Canaan Venture Offshore
Management, N.V., with respect to which Mr. Rein shares voting and
dispositive power but disclaims beneficial ownership. Also includesRepresents options to purchase 15,000 shares of Common Stock, which are presently exercisable.
(6) Mr. Rice is not standing for reelection to the Board of Directors. Consists
of 150,000 shares of Common Stock owned by the State Treasurer of the State
of Michigan, Custodian of Public School Employees' Retirement System; State
Employees' Retirement System; Michigan State Police Retirement System;
Judges' Retirement System; and Probate Judges' Retirement System ("State of
Michigan Pension Funds"), of which Mr. Rice is the State Administrator. Also
includes options to purchase 15,000 shares of Common Stock, which are
presently exercisable and which will be exercised at the discretion of the
State of Michigan Pension Funds. Shares of Common Stock received by Mr. Rice
in connection with the exercise of such options are required to be delivered
to the State of Michigan Pension Funds. Mr. Rice shares voting and
dispositive power but disclaims beneficial ownership of these shares.
(7) Includes options to purchase 4,68815,500 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 25,
1997.28,
1998.
(6) Represents options to purchase 100,000 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 28,
1998.
(7) Represents options to purchase 16,000 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 28,
1998.
(8) Includes options to purchase 15,500 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 28,
1998.
(9) Represents options to purchase 15,500 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 28,
1998.
(10) Includes options to purchase 8,750 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 28,
1998.
6
10
(11) Includes options to purchase 4,686 shares of Common Stock, which are
presently exercisable or which are exercisable within 60 days of April 28,
1998.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive (and certain other) officers, and any persons holding more than
ten percent of the Common Stock are required to report their ownership of the
Common Stock and any changes in that ownership to the Securities and Exchange
12
16
Commission and the National Association of Securities Dealers, Inc. Specific due
dates for these reports have been established and the Company is required to
report in this proxy statement any failure to file by these dates during the
Company's last fiscal year. All of these filing requirements were satisfied by
the Company's officers, directors and ten percent shareholders, except that
Messrs. Oswald and DeCocco each failed to file on a timely basis one report
relating to a single transaction in Common Stock beneficially owned by him.shareholders. In making these
statements, the Company has relied on the written representations of its
directors, officers and ten percent shareholders and copies of the reports that
have been filed with the Commission.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
All of the members of the Board of Directors who are not employed by the
Company receive $1,000 for each Board meeting attended. In addition, directors
are reimbursed for their out-of-pocket expenses incurred in attending Board and
committee meetings. Directors are also eligible to participate in the Company's
Stock Option Plan (the "1992 Plan").
All of the members of the Board of Directors who are not employed by the
Company (other than the Chairman of the Board) (the "Eligible Directors")
participate in the Directors Stock Option Plan (the "Directors Plan"). On
February 9, 1995, each Eligible Director was granted an option to purchase
15,000 shares of Common Stock ("Initial Option") with an exercise price of
$12.83. Any additional Eligible Director who is first elected or appointed after
February 9, 1995 will receive an Initial Option to purchase 15,000 shares of
Common Stock on the date of his or her election or appointment. In addition,
each Eligible Director who has been a director for six months before the date of
each Annual Meeting of Shareholders held during the term of the Directors Plan
automatically will be granted, as of the date of such Annual Meeting, an option
to purchase an additional 1,500 shares of Common Stock (an "Annual Option"). The
Directors' Plan expires on February 9, 2000. The exercise price of options
granted under the Directors Plan is the last reported sale price per share of
the Company's Common Stock as quoted on The Nasdaq Stock Market's National
Market on the date of grant. Each option granted under the Directors Plan as an
Initial Option becomes exercisable in full on the first anniversary of the date
of grant. Options granted as Annual Options become exercisable in three annual
increments of 33 1/3% of the shares subject to the option. The exercisability of
such options is accelerated in the event of the occurrence of certain changes in
control of the Company. All options granted under the Plan are exercisable for a
period of ten years from the date of grant, unless earlier terminated due to the
termination of the Eligible Director's service as a director of the Company.
In May 1993, the Company engaged James E. McGrath to serve as Chairman of
the Board of the Company. Mr. McGrath was paid $5,000 per month for his services
as Chairman of the Board, through July 12, 1996. Mr. McGrath was granted
nonqualified stock options to purchase 120,000 shares of Common Stock, all of
which were immediately exercisable at an exercise price of $3.71 per share,
which was the fair market value of the Common Stock on the date such options
were granted. Such options expire on the earlier of May 21, 2003 or one year
following Mr. McGrath's death. By April 15 of the year following an exercise of
Mr. McGrath's option, Mr. McGrath will receive a payment equal to the difference
between Mr. McGrath's actual federal income tax liability for the calendar year
in which an exercise of Mr. McGrath's option occurs and the amount Mr. McGrath's
federal income tax liability for the calendar year of such exercise would have
been if Mr. McGrath's option had been an incentive stock option rather than a
nonqualified stock option, the shares received upon exercise of the option had
been sold at the date of exercise at the exercise price and such shares had been
held for more than one year at that date (the "Tax Differential Payment"), plus
an amount required for the payment to be received on a After-Tax Basis.
After-Tax Basis means the amount of the Tax Differential Payment supplemented by
a further payment so that the sum of the two payments, after deduction of all
federal, state and local taxes resulting from the receipt of such two payments,
shall be equal to the Tax Differential Payment. Of the stock options granted to
Mr. McGrath, options to purchase 26,944 shares were exercised in 1996, and no
options were outstanding at April 25, 1997. On February 4, 1997, the Company
paid Mr. McGrath $173,957 representing the Tax Differential Payment due Mr.
McGrath related to the options he exercised in 1996.
137
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EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information as to compensation paid
by the Company for services rendered in all capacities to the Company and its
subsidiaries during the fiscal years ended December 31, 1994, 1995, 1996, and 19961997 to
(i) the Company's Chief Executive Officer, and (ii) the Company's executive
officers at December 31, 19961997 (other than the Chief Executive Officer) whose aggregate
annual salary and bonus exceeded $100,000 and (iii) two former executive
officers, who during portions of the fiscal year ended December 31, 1996 were
classified as executive officers for purposes of the Commission's regulations, whose
aggregate annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION OTHERCOMPENSATION AWARDS
----------------------------------------- -------------------------
NAME AND -----------------------OTHER ANNUAL ------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1)COMPENSATION($)(1) OPTIONS(#) COMPENSATION($)COMPENSATION
------------------ ---- --------- -------- --------------------------------- ---------- ---------------------------
Alfred A. Pease...... 1994Pease.............. 1995 -- -- -- -- --
President, Chief Executive 1996 175,000 104,778 42,120(3) 200,000 51,177(4)
Officer and Chairman of 1997 214,000 37,878 20,821(3) 30,000 29,925(4)(7)
the Board(2)
John G. Zimmerman............ 1995 -- -- -- -- --
ExecutiveVice President and 1996 60,757 5,650 -- 35,000 627(6)
Chief Financial Officer 1996 $175,000 $104,778 $42,120(3) 200,000 $51,177(4)
and Chairman of the
Board(2)1997 123,418 20,025 -- 5,000 7,260(7)
Neil E. Barlow....... 1994 125,000 82,508 -- -- 7,108(5)
Executive ViceBarlow............... 1995 132,500 89,524 -- -- 5,958(6)
President --5,958(5)
Former Executive 1996 141,800 77,299 -- -- 9,098(7)
International
Dwight D. Carlson,... 1994 146,000 88,3549,098(6)
Vice President(8) 1997 149,600 23,040 -- -- 12,059(5)
Vice Chairman 1995 155,000 129,156 -- -- 12,380(6)
of the Board of 1996 155,000 94,026 -- -- 12,510(7)
Directors; Former
President and Chief
Executive
Officer(8)
James A. Ratigan..... 1994 125,000 82,508 18,878(10) -- 25,810(5)
Former Executive 1995 132,500 89,524 -- -- 6,958(6)
Vice President, 1996 116,750 47,508 -- -- 7,954(7)
Chief Financial
Officer and Chief
Operating
Officer(9)10,000 6,388(7)
- -------------------------
(1) Perquisites and other personal benefits were provided to all of the persons
named in the Summary Compensation Table. Disclosure of such amounts is not
required because such amounts were less than 10% of the total annual salary
and bonuses reported for each of the respective individuals for each period
presented.
(2) Mr. Pease became President and Chief Executive Officer in February 1996 and
Chairman of the Board in July 1996.
(3) Includes payment of certain tax "gross up" amounts of $42,120 and $20,821
for certain taxable income received by Mr. Pease in 1996 and 1997,
respectively, as described under "All Other Compensation."
(4) "All Other Compensation" includes reimbursements for temporary housing,
moving and travel expenses related to Mr. Pease's relocation to Michigan in
1996 totaling $22,925 and reimbursements for closing costs in the amount of
$28,252 related to the sale of Mr. Pease's former residence.residence in 1996, and
$23,396 of reimbursements for closing costs relating to the purchase of a
new residence in 1997.
(5) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year
14
18
ended December 31, 1994 as follows: Mr. Barlow $3,675, Mr. Carlson $4,620
and Mr. Ratigan $2,310; (ii) the dollar value of any life insurance
premiums paid by the Company in the fiscal year ended December 31, 1994
with respect to term life insurance for the benefit of each of the named
executives as follows: Mr. Barlow $414, Mr. Carlson $3,075 and Mr. Ratigan
$842; (iii) the dollar value of any disability insurance premiums paid by
the Company in the fiscal year ended December 31, 1994 in excess of the
Company's standard disability coverage for the benefit of each of the
following named executives: Mr. Barlow $3,019 and Mr. Carlson $4,364; and
(iv) temporary housing, moving, travel and other expenses related to Mr.
Ratigan's relocation to Michigan totaling $22,658.
(6) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the Company's
401(k) Plan with respect to the fiscal year ended December 31, 1995 as
follows: Mr. Barlow $2,100, Mr. Carlson $4,620 and Mr. Ratigan
$4,620;$2,100; (ii) the dollar value of any life insurance
premiums paid by the Company in the fiscal year ended December 31, 1995 with
respect to term life insurance for the benefit of each of the named executivesexecutive as
follows:
Mr. Ratigan $2,338, Mr. Carlson $3,396, and Mr. Barlow $838; and (iii) the dollar value of any disability
insurance premiums paid by the Company in the fiscal year ended December 31,
1995 in excess of the Company's standard disability coverage for the benefit
of each of the following named executives:executive: Mr. Barlow $3,020 and Mr. Carlson $4,364.
(7)$3,020.
(6) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the Company's
401 (k)401(k) Plan with respect to the fiscal year ended December 31, 1996 as
follows: Mr. Barlow $4,565, Mr. Carlson $4,750 and Mr. Ratigan
$4,750;$4,565; (ii) the dollar value of any life insurance
premiums paid by the Company in the fiscal year ended December 31, 1996 with
respect to term life insurance for the benefit of each of the named executives as
follows: Mr. Barlow $1,513 Mr. Carlson $3,396 and Mr. Ratigan $3,204;Zimmerman $627; and (iii) the dollar
value of any disability insurance premiums paid by the Company in the fiscal
year ended
8
12
December 31, 19951996 in excess of the Company's standard disability coverage
for the benefit of each of the following named executives:executive: Mr. Barlow $3,020$3,020.
(7) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of the named executive officers under the Company's
401(k) Plan with respect to the fiscal year ended December 31, 1997 as
follows: Mr. Pease $4,750, Mr. Barlow $4,750, and Mr. Carlson $4,364.Zimmerman $4,750; and
(ii) the dollar value of any life insurance premiums paid by the Company in
the fiscal year ended December 31, 1997 with respect to term life insurance
for the benefit of the named executives as follows: Mr. Pease $1,779, Mr.
Barlow $1,638 and Mr. Zimmerman $2,510.
(8) Mr. Carlson served as President and Chief Executive Officer until February
1996, at which time he was appointed Vice Chairman of the Board of
Directors.
(9) Mr. RatiganBarlow served as Executive Vice President and Chief Operating OfficerInternational until April 19, 1996, at which time he was appointed Executive Vice
President and Chief Financial Officer. He served as Executive Vice
President and Chief Financial Officer of the Company until June 1996December
31, 1997, and resigned as an employee of the Company in August 1996.
(10) Includes payment of certain tax "gross up" amounts of $18,878 for certain
taxable income received by Mr. Ratigan in 1994 as described under "All
Other Compensation."
15
19effective December 31,
1997.
GRANTS OF OPTIONS
The following table sets forth certain information concerning individual
grants of stock options to each of the persons named in the Summary Compensation
Table made during the fiscal year ended December 31, 1996.1997. All grants described
in the following table were made under the Company's 1992 Stock Option Plan and
contain the Option Acceleration Provision (as defined under "Further Information
- -- Compensation of Directors and Officers -- Executive Officers -- Termination
of Employment and Change of Control Arrangements").
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
VALUE -------------------------------------- AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
--------------------------------------- STOCK PRICE
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE APPRECIATION FOR
SECURITIES OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM(3)
UNDERLYING OPTION EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SH) DATE(2) 5%($) 10%($)
---- ----------------- ------------------ ----------- ---------- ----- ------
Alfred A. Pease...... 182,980(4) 53.90% $20.63 2/14/2006 $2,374,000 $6,016,382
17,020(5) 5.00% $23.50 2/14/2006 251,556 637,400Pease....... 30,000(4) 10.4% 26.55 11/01/07 260,400 887,000
John G. Zimmerman..... 5,000(5) 1.7% 31.40 08/01/07 19,200 123,500
Neil E. Barlow....... 0 0 -- -- -- --
Dwight D. Carlson.... 0 0 -- -- -- --
James A. Ratigan..... 0 0 -- -- -- --Barlow........ 10,000(6) 3.5% 31.40 08/01/07 38,300 247,000
- -------------------------
(1) Options to purchase a total of 339,300288,427 shares of Common Stock were granted
to team members in the fiscal year ended December 31, 1996.1997.
(2) Options expire on the date indicated, or, if earlier, one year after the
optionee's death or permanent disability or three months after the
optionee's termination of employment.
(3) Represents the value of such options at the end of its 10 year term (without
discounting to present value) assuming the market prices of the Common Stock
appreciates from the grant date at an annually compounded rate of 5% or 10%.
These amounts represent rates of appreciation only. Actual gains, if any,
will be dependent on overall market conditions and on the future performance
of the Common Stock. There can be no assurance that the amounts reflected in
this table will be achieved.
(4) Consists of 26,234 of nonqualified options and 3,766 of incentive stock
options. Nonqualified options become exercisable in three annual
installments of 7,500 shares of Common Stock beginning November 1, 1998 and
a final installment of 3,734 shares of Common Stock on November 1, 2001. The
Incentive Options become exercisable on November 1, 2001.
(5) Consists of 3,750 of nonqualified options and 1,250 of incentive stock
options. Nonqualified options become exercisable in three annual
installments of 1,250 shares of Common Stock beginning August 1, 1998. The
Incentive Options become exercisable on August 1, 2001.
(6) Consists of 10,000 incentive stock options which become exercisable in
cumulative annual installments of 25% beginning February 14, 1997 and are nonqualified options. See "Further
Information -- Compensation of Directors and Executive Officers -- Executive
Officers -- Employment Agreements."
(5) Options become exercisable in cumulative annual installments of 25%
beginning February 14, 1997 and are incentive stock options. See "Further
Information -- Compensation of Directors and Executive Officers -- Executive
Officers -- Employment Agreements."
16August 1, 1998.
9
2013
EXERCISE AND VALUE OF OPTIONS
The following table sets forth certain information concerning exercises of
stock options during the fiscal year ended December 31, 19961997 by each of the
persons named in the Summary Compensation Table and the number of and the value
of unexercised stock options held by such persons as of December 31, 19961997 on an
aggregated basis.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-ENDS($)(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISEEXERCISE(#) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------------- -------------- ----------- ------------- ----------- -------------
Alfred A. Pease........ 0 $Pease...... 0 0 200,000 $50,000 180,000 45,745 137,235
John G. Zimmerman.... 0 $2,675,2000 8,750 31,250 0 0
Neil E. Barlow......... 28,693 595,878 5,186 21,610 132,700 613,100
Dwight D. Carlson...... 137,218(3) 3,825,586 5,000 103,470 148,600 3,001,000
James Ratigan.......... 43,125(4) 954,275 0 0 0 0Barlow....... 15,742 375,886 6,365 14,686 82,490 80,084
- -------------------------
(1) Represents the total gain which would have been realized if all such options
had been exercised on December 31, 1996.1997.
(2) Represents the fair market value of the shares of Common Stock relating to
exercised options, as of the date of exercise, less the exercise price of
such options.
(3) Includes 2,991 shares of Common Stock underlying stock options retained by
the Company as payment for the exercise price of 18,587 shares of Common
Stock.
(4) Includes 8,844 shares of Common Stock underlying stock options retained by
the Company as payment for the exercise price of 34,281 shares of Common
Stock.
EMPLOYMENT AGREEMENTS
Messrs.Mr. Pease and Carlson serveserves in theirhis present capacitiescapacity pursuant to the terms of an
employment agreements. Mr. Ratigan was employed pursuant to the terms
of the employment agreement described below.agreement. Mr. Pease's agreement provides for an annual base salary
of $200,000, subject to increase at the discretion of the Management Development
Committee, benefits comparable to the Company's other executive officers,
including life, disability and health insurance and the use of a Company leased
automobile and an annual performance bonus target level of 60% of his base
salary. Mr. Pease's base salary for 19971998 is $214,000$230,000 and he will receive
reimbursement of reasonable monthly club dues. In addition, such agreement
provides for the reimbursement of temporary housing, travel and relocation
expenses incurred by Mr. Pease, including moving expenses, real estate brokerage
commissions and certain closing and loan costs associated with the sale of Mr.
Pease's prior residence and purchase of a new residence in the state of Michigan
and certain incidental expenses related to the relocation, plus a payment equal
to the income taxes payable by Mr. Pease as a result of the receipt of such
reimbursements and tax payment. In the event Mr. Pease's employment is
terminated without cause, his salary and benefits will continue for twelve
months and he will earn a pro rata portion of any bonus that would have been
earned in the year of the termination.
In 1996, Mr. Pease was granted options to purchase 200,000 shares of Common
Stock under the 1992 Plan. The options consist of nonqualified stock options for
182,980 shares of Common Stock exercisable at an exercise price of $20.625 per
share and the remainder as incentive stock options exercisable at an exercise
price of $23.50 per share. These options become exercisable in cumulative annual
installments of 25% beginning February 14, 1997 and expire on February 14, 2006.
In addition, in the event Mr. Pease's employment is 17
21
terminated without cause
after July 14, 1996,1998, all remaining unexercisable options for 66,667 shares of Common
Stock held by him will become immediately exercisable.
Mr. Carlson's agreement provides for an annual base salary of $155,000,
benefits comparable to the Company's other executive officers, reimbursement of
reasonable monthly club dues, and an annual performance bonus target level of
$95,000. In the event of certain terminations of Mr. Carlson's employment
without cause, his salary, a $7,917 monthly bonus and his benefits will continue
for the longer of (a) the number of months following the termination of the
agreement which is equal to one month for each year Mr. Carlson was employed by
the Company or (b) March 1, 1999, and all options held by him to the extent not
then exercisable, shall become immediately exercisable. If Mr. Carlson's
employment terminates for any reason, he will earn a pro rata portion of any
bonus that would have been earned in the year of the termination.
The Company can elect to convert Mr. Carlson's employment agreement into a
consulting arrangement at any time, with Mr. Carlson receiving the same annual
base salary, bonus and perquisites as set forth above through March 1, 1999 and
the Company extending the term of his stock options so that they continue to
vest through March 1, 1999. Mr. Carlson is required to render at least sixteen
hours of consulting services per month. Upon the termination of the consulting
arrangement, Mr. Carlson will receive the same benefits he would have received,
as described above, upon termination of his employment. Mr. Carlson will also be
entitled to office space and secretarial support for one year after he is no
longer an employee of the Company and so long as he continues to serve as Vice
Chairman of the Board.
Mr. Ratigan's employment agreement provided for an annual base salary of
$132,500, subject to increase at the discretion of the Management Development
Committee, benefits comparable to the Company's other executive officers and an
annual performance bonus target level in 1996 of $72,000. Following termination of Mr. Ratigan'sBarlow's employment in August 1996,on December 31, 1997, he
continuedwill continue as a consultant to receive one-halfthe Company at the gross rate of his salary, together with full life, disability and health insurance benefits
and a $1,585 monthly payment until August$711 per day
for services rendered from January 1, 1998 through July 31, 1997. A pro rata portion of the
bonus that would have been earned in the year of the termination was paid to Mr.
Ratigan in 1996.1998.
10
14
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Payments due to Messrs.Mr. Pease Carlson and Ratigan upon termination of theirhis employment with the
Company are described above under "Further Information
- -- Compensation of
Directors and Executive Officers -- Executive Officers -- Employment
Agreements."
Agreements relating to stock options granted under the 1992 Plan to each of
the executive officers named in the Summary Compensation Table, as well as
certain other officers of the Company, also provide that such options become
immediately exercisable in the event that the optionee's employment is
terminated without cause, or there is a diminishment of the optionee's
responsibilities, following a Change of Control of the Company or, if, in the
event of a Change of Control, such options are not assumed by the person
surviving the Change of Control or purchasing the assets in the Change of
Control. A "Change of Control" is generally defined as a merger of the Company
in which the Company is not the survivor, certain share exchange transactions,
the sale or transfer of all or substantially all of the assets of the Company,
or any person or group of persons (as defined by Section 13(d) the Securities
Exchange Act of 1934, as amended) acquires more than 50% of the Common Stock
("Option Acceleration Provision").
Certain option agreements issued to officers of the Company contain a
provision accelerating the exercisability of options granted under the 1992 Plan
in the event of certain terminations of employment without cause.
1811
2215
REPORT OF THE MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE AND THE STOCK OPTION COMMITTEE
The Management Development and Compensation and Stock Option Committee of
the Board of Directors ("Management Development Committee") is responsible for
the planning, review and administration of the Company's executive compensation
program. The
Stock Option Committee is responsible for the planning, reviewprogram and
administration of the Company's stock-based compensation programs, including the 1992
Stock Option Plan. During the year ended December 31, 1996,1997, all members of these
Committees were non-employee directors of the Company.
The Company's objective is to provide a superior return to its
shareholders. To support this objective, the Company believes it must attract,
retain and motivate top quality executive talent. The Company's executive
compensation program is a critical tool in this process.
The Company's executive compensation program has been designed to link
executive compensation to Company performance through at-risk compensation
opportunities, providing significant reward to executives who contribute to the
Company's success. The Company's executive compensation program consists of base
salary, annual cash incentive opportunities and long-term incentives represented
by stock options.
The base salary, performance bonus, stock option and other compensation
terms of new executive officers are established based upon each executive's
qualifications, position and level of responsibility as compared with the
Company's other executives.
BASE SALARY
The Management Development Committee recognizes the importance of a
competitive compensation structure in retaining and attracting valuable senior
executives. Executive salary levels are reviewed and established annually. The
salaries received by the Company's executives generally reflect their levels of
responsibility, the profitability of the Company and other factors, such as
assessments of individual performance.
Effective February 14, 1996,The Management Development Committee increased the Company engagedbase salary of Alfred A.
Pease, asChairman of the Board, President and Chief Executive Officer of the
Company at an annualby 7% during 1997. The base salary levels of
$200,000. The Management Development Committee established Mr. Pease's base
salary and the other terms and conditions of employment based upon its
assessment of Mr. Pease's qualifications and position and level of
responsibility at the Company and its assessment of the terms of employment
required to attract Mr. Pease to the Company. For a more detailed description of
the terms and conditions of Mr. Pease's employment with the Company see
"Compensation of Directors and Executive Officers -- Executive Officers --
Employment Agreements".
During 1996, the Company engaged John G. Zimmerman as Vice President and
Chief Financial Officer at an annual base salary of $120,000, plus a $5,000
hiring bonus.
In 1996, the salary level of the executive officers, other than those hired
in 1996 or those expected to terminate service as executive
officers of the Company were increased from between 3% and 6% during 1996, was increased by approximately 7%.1997. These
increases principally reflected the Company's strong financial performance in
1995.1996 and the Management Development Committee's evaluation of each of these
executive's contribution to the Company's 1996 financial performance.
ANNUAL BONUS
The Company's executive officers are eligible for annual cash performance
bonuses. At the beginning of each year, the Management Development Committee
develops a Management Bonus Plan applicable to all executives of the Company,
including the Chief Executive Officer of the Company.
The 19961997 Management Bonus PlanProgram provided that bonuses could be earned
only if the Company achieved at least 75% of its targeted operating profitpre-tax income level.
If this minimum performance level was achieved, the Company's executives were
then eligible to earn bonuses, on a pro rata basis, for performance exceeding
75% of targeted revenue levels (30% of bonus), 75% of targeted pre-tax net
income levels (30% of bonus) and 75% of targeted new order bookings levels (40%
of bonus). In addition, bonuses could be earned at a one-half rate for
performance exceeding 100% of the targeted levels. Seventy percent of the
executives' overall bonus was 19
23
payable based solely upon achievement of these
performance standards and the remaining 30% of their bonuses was payable at the
discretion of the Management Development Committee, with all executive officers
earning the same percentage of the discretionary portion of their bonuses.
The Management Development Committee set the 19961997 targeted performance
standards at levels consistent with the 19961997 operating plan approved by the
Company's Board of Directors.
Targeted performance bonus levels for 19961997 were established as a percentage
of base salary. During 1996,1997, Mr. Pease's targeted performance bonus level was
60% of his base salary, while the other executive officers'
12
16
targeted performance levels were approximately 55% of their base salaries. The
Management Development Committee established the targeted performance bonus
levels for Mr. Pease and the other executive officers during 1997 at the same
percent of their base salary as had been established for these individuals in
1996. Targeted performance bonus levels in 19961997 reflected the Management
Development Committee's continued emphasis on providing the Company's executives
with significant reward for superior performance through increased at-risk
compensation opportunities, rather than through increases in base salary.
The Company's actual performanceDuring 1997, the Company achieved in 1996 exceededexcess of the performance target
forminimum 1997 targeted
revenue level, 1997 targeted new order bookings and was slightly below the performance targets for
revenue and1997 targeted pre-tax net income.income
level. As a result, 99%29.5% of the non-discretionary portion of the executive
officers' 19961997 bonus was earned. Based upon this performance, the Management
Development Committee approved the payment of 99%29.5% of the discretionary portion
of the executive officers' 19961997 bonus.
STOCK OPTIONS
Stock option grants have historically been utilized by the Company as part
of its compensation program for all levels of team members, including the
Company's executives. The Company's stock option program permits team members to
buy a specific number of shares of Common Stock, in the future, at the fair
market value of such shares on the date the option is granted. Since stock
options gain value only if the price of the Common Stock increases above the
option exercise price, this use of stock option grants reflects the Company's
philosophy of linking compensation to performance. In addition, the Committee
believes that stock option grants to team members help to provide an incentive
for their continued employment and otherwise more closely align their interests
with those of the Company and its shareholders. The Company also utilizes stock
options as part of its standard compensation package developed to attract highly
qualified employment candidates to the Company.
In connection with the engagement of Mr. Pease as President and Chief
Executive Officer,During 1997, Mr. Pease was granted options to purchase 200,00030,000 shares of the
Common Stock under the 1992 Stock Option Plan. These options become exercisable
in four equal annual installments, beginning one year from their date of grant,
at an exercise price equal to the fair market value of the Common Stock on the
dates of grant. These options were intendedgranted to attract Mr. Pease to
the Company, encourage his continued employment with the Company and provide
incentive to improve Company performance.
During 1996, in connection with the engagementrecognition of Mr.
ZimmermanPease's performance as Vicethe Chairman of the Board, President and Chief FinancialExecutive
Officer of the Company since he was appointed to such position in February 1996.
In particular, these option grants were in recognition of the Company's strong
financial performance in 1996 and Mr. Zimmerman wasPease's efforts in diversifying the
Company's product line and industry concentration and expanding its management
team.
Also during 1997, the Management Development Committee granted an optionoptions to
purchase 35,000 shares of the Common Stock under the 1992 Stock Option Plan.Plan to the officers
of the Company. Each of the officers with more than 2 years of service as an
officer of the Company received options to purchase 10,000 shares of Common
Stock and each of the officers with between 1 and 2 years of service as an
officer of the Company received options to purchase 5,000 shares of Common
Stock. These options become exercisable in four equal annual installments,
beginning one year from their date of grant, at an exercise price equal to the
fair market value of the Common Stock on the date of grant. No other stock optionsThese option grants
were granted to executive officersin recognition of the Company's strong financial performance in 1996. In
addition, these were the first option grants that individuals serving as
executives of the Company for more than 2 years had received since 1993. Since
prior stock options would become fully exercisable during 1996.the course of the next
year, the Management Development Committee granted these individuals additional
stock options to encourage their continued employment with the Company.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Board of Directors of the Company has reviewed the provisions of the
Internal Revenue Code and related regulations of the Internal Revenue Service
which restrict deductibility of executive compensation paid to any of the five
most highly compensated executive officers at the end of the fiscal year to the
extent such compensation exceeds $1,000,000 in any year.
13
17
The Board of Directors of the Company has established certain restrictions
on the granting of options under the Company's 1992 Stock Option Plan so that
compensation realized in connection with the exercise of
20
24 options granted under
such plan would be exempt from the restrictions on deductibility described
above. The 1992 Stock Option Plan restricts to 200,000 the number of shares of
Common Stock that may be subject to options granted to any salaried employee in
any fiscal year. It is important to note that while this restriction allows the
Stock Option Committee continuing discretion in establishing executive officer compensation,
it does limit such discretion by restricting the size of option awards which the Stock Option
Committee may grant to any single individual. The permitted size of the option
awards to a single individual was established based on the Stock Option Committee's
determination of the maximum number of option shares which would be required to
be granted in any fiscal year to retain or attract a chief executive officer of
the Company.
The Board of Directors does not believe that other components of the
Company's compensation program are likely to result in payments to any executive
officer in any year which would be subject to the restriction on deductibility,
and therefore concluded that no further action with respect to qualifying such
compensation for deductibility was necessary at this time. The Board of
Directors will continue to evaluate the advisability of qualifying future
executive compensation programs for deductibility under the Internal Revenue
Code.
DATED: APRIL 29, 199724, 1998 MANAGEMENT DEVELOPMENT AND
COMPENSATION AND STOCK OPTION
COMMITTEE:
Philip J. DeCocco, Harry T. Rein,
Paul
E. Rice
STOCK OPTION COMMITTEE:
Harry T. Rein, Paul E. Rice
21Louis R. Ross
14
2518
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on the
Common Stock from August 20,December 31, 1992, the date the Common Stock began trading
publicly, through December 31, 19961997 with an index
consisting of returns from a peer group of companies, consisting of Cognex
Corp., Cyberoptics Corporation, Medar Inc., PPT Vision, Inc. (formerly Pattern
Processing Technology) and Robotic Vision Systems Inc. (the "Peer Group Index")
and The Nasdaq Stock Market Composite Index (the "Nasdaq Composite Index"). The
returns of each company in the Peer Group Index have been weighted according to
their respective stock market capitalization. The graph assumes that the value
of the investment in the Company's Common Stock, the Peer Group Index and the
Nasdaq Composite Index was $100 on August 20,December 31, 1992 and that all dividends were
reinvested.
The graph displayed below is presented in accordance with Securities and
Exchange Commission requirements. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance. This graph in no way reflects the Company's
forecast of future financial performance.
MEASUREMENT PERIOD PERCEPTRON, INC. PEER GROUPMeasurement Period Perceptron, NASDAQ
(FISCAL YEAR COVERED) COMPOSITE(Fiscal Year Covered) Inc. Peer Group Composite
8/20/12/31/92 100 100 100
12/31/92 116 157 116
12/21/93 200 234 133171 149 115
12/31/94 347 365 131297 226 112
12/31/95 504 960 185431 595 159
12/31/96 775 494 227663 306 195
12/31/97 419 409 240
2215
26
CERTAIN TRANSACTIONS
The Company is a member of the Auto Body Consortium (the "ABC"), a group
comprised of General Motors Corporation, Ford Company and Chrysler Corporation,
companies in the automotive related businesses, including the Company, and
several universities and research organizations. Dwight D. Carlson, Vice
Chairman of the Board and the former President and Chief Executive Officer, and
a director of the Company, is the Chairman of the Board of the ABC, a non-profit
corporation. In October 1995, the ABC received a $8,300,000 grant from the
Department of Commerce. In connection with industry matching commitments for
such grant, the Company has committed to spend approximately $100,000 per year
for three years, commencing in October 1995. Such commitment can be canceled by
the Company upon 60 days' notice.19
INDEPENDENT ACCOUNTANTS
The accounting firm of Coopers & Lybrand, L.L.P. has been appointed by the
Board of Directors to audit the consolidated financial statements for the
Company for the year ending December 31, 1997.1998. Representatives of Coopers &
Lybrand, L.L.P. are expected to be at the Annual Meeting and to be available to
respond to appropriate questions. Such representatives will have the opportunity
to make a statement at such meeting if they desire to do so.
PROPOSALS BY SHAREHOLDERS FOR 19981999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 19981999 annual meeting
are eligible for inclusion in the Company's proxy statement for the meeting
under the applicable rules of the Securities and Exchange Commission if received
by the Secretary of the Company at its executive offices no later than January
16,December
30, 1998. In order to curtail controversy as to the date on which a proposal was
received by the Company, it is suggested that proposals be submitted by
certified mail, return receipt requested.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors is not aware of
any matters to be presented for action at the Annual Meeting other than those
described above. However, if any other matters should come before the meeting,
it is the intention of the persons named in the accompanying proxy to vote such
proxy in accordance with their judgment on such matters.
By order of the Board of Directors,
/s/ T.S. VAUGHN
Thomas S. Vaughn, Secretary
Plymouth, Michigan
MayApril 28, 1998
16
1997
23
2720
PERCEPTRON, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PERCEPTRON, INC.
The undersigned shareholder hereby appoints ALFRED A. PEASE and THOMAS
S. VAUGHN, or either of them, the attorney and proxies of the undersigned, with
power of substitution, to vote all the shares of common stock of Perceptron,
Inc. standing in the name of the undersigned at the close of business on May 9,
1997April
23, 1998 at the Annual Meeting of Shareholders of the Company to be held on
Friday, June 20, 19975, 1998 at 9:00 a.m., local time, and at any and all adjournments
thereof, with all the powers the undersigned would possess if then and there
present.
The shareholder instructs the proxies to vote as specified on this
proxy on the matters described in the Proxy Statement dated May 16, 1997.April 28, 1998.
Proxies will be voted as instructed.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE COMPANY'S NOMINEES AS DIRECTORS (INCLUDING THE ELECTION OF ANY PERSON TO
THE BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS UNABLE
OR, FOR GOOD CAUSE, WILL NOT SERVE).
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT AND FOR THE FOLLOWING AMENDMENT TO THE COMPANY'S
1992 STOCK OPTION PLAN.
The undersigned acknowledges receipt of the Proxy Statement and Notice of
said meeting, both dated May 16, 1997.
SEE REVERSE
SIDENOTICE
OF SAID MEETING, BOTH DATED APRIL 28, 1998.
---------------
(TO BE SIGNED ON REVERSE SIDE)SIDE.) SEE REVERSE
SIDE
---------------
28
/X/21
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
PERCEPTRON, INC.
JUNE 5, 1998
Please mark your
votes asDetach and Mail in this
examplethe Envelope Provided
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------A [X] Please mark your
votes as in this
example.
WITHHELD NOMINEES
FOR from all
all nominees nominees
1. ELECTION OF / / / /[ ] [ ] NOMINEES: David J. Beattie FOR AGAINST ABSTAIN
DIRECTORSBROKERS EXECUTING PROXIES SHOULD
OF Philip J. DeCocco 2. APPROVALINDICATE THE NUMBER OF AN AMENDMENT TO THE
Election ofSHARES WITH
DIRECTORS Robert S. Oswald 1992 STOCK OPTION PLAN / / / / / /
directors toRESPECT TO WHICH AUTHORITY IS
Election of Alfred A. Pease To approve an amendmentCONFERRED BY THIS PROXY IF LESS
directors to the hold office until the Annual Meeting of Harry T. Rein Perceptron, Inc. 1992 Stock Option
the Annual MeetingTHAN ALL SHARES HELD AS NOMINEES
Shareholders in 1999. Louis R. Ross Plan to increase the total number of
of Shareholders in 1998.ARE TO BE VOTED.
Terryll R. Smith shares of the Company's Common Stock
available for grant under such plan by
300,000 shares, as described in the Notice of
Annual Meeting of Shareholders and Proxy
For, except vote withheld from the following nominee(s):__________________ Statement dated May 16, 1997. PLEASE EXECUTE AND RETURN THIS
PROXY IN THE ENCLOSED ENVELOPE
- ------------------------------------------ PROMPTLY.
(INSTRUCTION: toTo withhold authority to vote for any
nominee, write that nominee's name in the space
provided.)
Brokers executing proxies should indicate the number of
shares with respect to which authority is conferred by
this Proxy if less than all shares heldSignature Signature Dated: , 1998
------------------------------------- ---------------------------------- -----------
Note: Please sign exactly as nominees are
to be voted.
Dated:____________________________, 1997 Signature___________________________ Signature____________________________
Pleaseyour name appears. If acting as attorney, executor, trustee or in other representative capacity, sign
exactly as your name appears. If acting as attorney, executor, trustee or in other representative capacity, sign name and title.
PLEASE EXECUTE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROMPTLY.