| Perceptron, Inc. | ||
| (Name of Registrant as Specified In Its Charter) | ||
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||
September 29, 2015
Jeffrey M. Armstrong
47827 Halyard Drive, Plymouth, Michigan 48170
| TIME AND DATE | 9:00 a.m., Eastern Time, on |
PLACE | Perceptron, Inc. Corporate Headquarters 47827 Halyard Drive Plymouth, MI |
| ITEMS OF BUSINESS | 1. To elect seven directors to serve until the 2. To approve the compensation of our named executive officers; 3. To ratify the selection of BDO USA, LLP as the Company’s independent registered public accounting firm for fiscal 2017; and 4. To transact such other business as may properly come before the meeting or any adjournments thereof. |
2. To ratify the First Amended and Restated Rights Plan;
3. To approve the amendment to the Amended and Restated Bylaws regarding advance notice provisions for shareholder business and director nominations;
4. To approve the amendment to the Amended and Restated Bylaws regarding the authority of the Board of Directors of the Company to amend the Amended and Restated Bylaws;
5. To approve the compensation of our named executive officers;
6. To ratify the selection of BDO USA, LLP as the Company’s independent registered public accounting firm for fiscal 2016; and
7. To transact such other business as may properly come before the meeting or any adjournments thereof.
| RECORD DATE | In order to vote, you must have been a shareholder at the close of business on September |
MATERIALS TO REVIEW: | We are distributing our proxy materials to our stockholders primarily via the Internet under the “Notice and Access” rules of the Securities and Exchange Commission (“SEC”). This approach saves printing and mailing costs and reduces the environmental impact of our Annual Meeting, while providing a convenient way to access the materials and vote. On September 29, 2016, we commenced mailing a Notice of Internet Availability of Proxy Materials to stockholders of record at the close of business on September 16, 2016, containing instructions about how to access our proxy materials and vote online. |
PROXY VOTING | It is important that your shares be represented and voted at the Annual Meeting. If you hold your shares beneficially in street name with a broker, you |
48170-2461.
| By the Order of the Board of Directors | |
  | |
Thomas S. Vaughn | |
Secretary | |
September |
2015
2015
2016
September 30, 2016.
2016.
If a shareholder owns shares through a bank or brokerage firm in street name, the shareholder’s bank or brokerage firm is required to vote the shares according to the shareholder’s instructions. In order to vote the shares, a shareholder will need to follow the directions that the bank or brokerage firm provides. Many banks and brokerage firms also offer the option of voting over the Internet or by telephone, instructions for which would be provided by the bank or brokerage firm on its vote instruction form. Under the rules of The New York Stock Exchange (“NYSE”), if a shareholder does not give instructions to a brokerage firm, it may still be able to vote your shares with respect to certain “discretionary” matters that are deemed by the NYSE to be routine (e.g., the ratification of the appointment of independent auditors), but it will not be allowed to vote shares with respect to certain “non-discretionary” items. If a shareholder does not provide voting instructions to a broker with respect to non-discretionary items such as the election of directors ratification of the First Amended and Restated Rights Plan, approval of the amendment to the Bylaws to add advance notice provisions for shareholder business and director nominations, approval of the amendment to the Bylaws regarding the Board’s authority to amend the Bylaws or the advisory vote on executive compensation, the shares will not be voted for any such proposal. In such case, the shares will be treated as “broker non-votes.” The ratification of the Company’s independent auditors is considered a routine matter, so a bank or broker will have discretionary authority to vote such shares held in street name on that proposal. A broker non-vote may also occur if a broker fails to vote shares for any reason.
Name and Age | Position, Principal Occupations and Other Directorships |
| W. Richard Marz, | Director since 2000, Mr. Marz brings to the Company extensive sales, marketing and design engineering experience in semiconductor and related industries. For nearly 30 years, Mr. Marz managed |
| |
| John F. Bryant, 32 | Director since August 2016. Mr. Bryant has been a Director and Co-Portfolio Manager of the |
| Mr. Bryant’s brings extensive financial capital market and investment management experience to the Board. |
Name and Age | Position, |
| |
| |
| C. Richard Neely, Jr., | Director since 2014. Mr. Neely has been Senior Vice President and Chief Financial Officer at Intermolecular, Inc., an intellectual property development and services company, since October 2013. From August 2012 to June 2013, Mr. Neely was Executive Vice President and Chief Financial Officer at Tessera Technologies Inc., a company that develops, invests in, licenses and delivers innovative miniaturization technologies and products for next-generation electronic devices. Mr. Neely served as Chief Financial Officer and Vice President of Supply Chain at Livescribe, Inc. from February 2011 to August 2012 and Senior Vice President and Chief Financial Officer at Monolithic Power Systems, Inc. from 2005 to January 2011. Mr. Neely served as a director of one other public company, Aviza Technology, Inc., during the past five years. Mr. Neely’s extensive financial and executive management experience and financial expertise provide important insight to the Board. |
| Robert S. Oswald, | Director since 1996. Mr. Oswald has been Chief Executive Officer and a director of Paice, LLC, which is in the business of developing hybrid electric power train technology, since March 2006. Mr. Oswald was Chairman, Bendix Commercial Vehicle Systems, LLC, a manufacturer of air brakes and other safety systems, from October 2003 to December 2009 and served as Chairman and Chief Executive Officer from March 2002 to September 2003. Mr. Oswald was Chairman, President and Chief Executive Officer of Robert Bosch Corporation, a manufacturer of automotive components and systems, and a member of the Board of Management of Robert Bosch, GmbH from July 1996 to December 2000. Mr. Oswald brings a deep understanding of the automotive and commercial products industries from his many years serving in senior leadership roles at automotive and commercial product companies, as well as technical expertise from his engineering education and various operational positions throughout his career. |
| James A. Ratigan, 68 |
Director since August 2016. Mr. Ratigan has served as an Adjunct Professor of Business Administration at Delaware Valley University since 2015. Prior to that, he served as Chief Financial Officer of Nitric BioTherapeutics, Inc., a privately held specialty pharmaceutical, drug delivery systems and | Mr. Ratigan’s historical knowledge of the Company and its operations, including his previous experience serving on the Company’s Board, his extensive financial and executive management experience and financial expertise, provide important insight to the Board. |
| Terryll R. Smith, | Director since 1996. Mr. Smith has been President and Chief Executive Officer of Water Security Corp., an early stage technology start-up focused on drinking water applications, since January 2007. He was President and Chief Executive Officer of Novation Environmental Technologies Inc., a water purification company, from January 2000 to January 2007. From 1998 to 1999, Mr. Smith was President and Chief Executive Officer of picoNetworks, an integrated circuits and software services company. From 1989 to 1998, Mr. Smith held various senior sales and marketing positions including Group Vice President, Sales and Marketing, Group Vice President, Applications Solutions Products and Vice President, International Sales and Marketing with Advanced Micro Devices, Inc., a manufacturer of integrated circuits. Mr. Smith brings considerable sales and marketing experience to the Board including extensive experience in international markets. |
| William C. Taylor, 65 | Director since August 2016. Mr. Taylor has served as President of the Economic Development Partnership of Alabama (the “EDPA”), a private, statewide organization that works to attract and retain business and industry and address other critical issues affecting economic development such as workforce development, since 2009. Prior to joining the EDPA, Mr. Taylor worked for Mercedes-Benz U.S. International, Inc., where he served as President and CEO from 1999 to 2009 and Vice President Operations from 1993 to 1999. Prior to joining Mercedes-Benz, Mr. Taylor served as the Vice President Manufacturing of Toyota Motor Manufacturing Canada from 1987 to 1993 and held various roles with Ford Motor Company Canada from 1969 to 1987. Mr. Taylor’s automotive background, knowledge of global operations and executive management bring important expertise to the Board. |
2016
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1)(2) | Total ($) |
| W. Richard Marz | 100,000 | 24,993 | 124,993 |
| David J. Beattie(3) | 22,500 | 0 | 22,500 |
| Kenneth R. Dabrowski | 61,000 | 24,993 | 85,993 |
| Philip J. DeCocco | 66,000 | 24,993 | 90,993 |
| C. Richard Neely, Jr. | 63,000 | 24,993 | 87,993 |
| Robert S. Oswald | 62,250 | 24,993 | 87,243 |
| Terryll R. Smith | 59,875 | 24,993 | 84,868 |
| Name | Stock Options | Stock Awards |
| W. Richard Marz | 82,000 | 2,369 |
| David J. Beattie | 0 | 0 |
| Kenneth R. Dabrowski | 32,000 | 2,369 |
| Philip J. DeCocco | 40,000 | 2,369 |
| C. Richard Neely, Jr. | 8,000 | 2,369 |
| Robert S. Oswald | 40,000 | 2,369 |
| Terryll R. Smith | 24,000 | 2,369 |
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Options ($) (2)(3) | Total ($) |
Kenneth R. Dabrowski(4) | 44,500 | 29,843 | 74,343 |
Philip J. DeCocco(4) | 48,250 | 29,843 | 78,093 |
| C. Richard Neely, Jr. | 46,000 | 29,843 | 75,843 |
| Robert S. Oswald | 46,000 | 29,843 | 75,843 |
| Terryll R. Smith | 44,500 | 29,843 | 74,343 |
| Name | Stock Options | Stock Awards |
Kenneth R. Dabrowski(1) | 41,570 | 2,369 |
Philip J. DeCocco(1) | 49,570 | 2,369 |
| C. Richard Neely, Jr. | 17,570 | 2,369 |
| Robert S. Oswald | 49,570 | 2,369 |
| Terryll R. Smith | 33,570 | 2,369 |
Type of Compensation |
Director | Non-Executive Board Chair |
| Board Annual Retainer | $45,000 | $100,000 |
| Committee Chair Annual Retainers: | ||
| Audit and Management Development | $8,000 | - |
| Nominating | $5,000 | - |
| Committee Annual Retainers Per Committee | $3,000 | - |
Type of Compensation | Director | Non-Executive Board Chair |
| Board Annual Retainer | $45,000 | $100,000 |
| Committee Chair Annual Retainers: | ||
| Audit and Management Development | $8,000 | - |
| Nominating | $5,000 | - |
| Committee Members Annual Retainers Per Committee | $3,000 | - |
DirectorsDirectors’ fees are typically payable in cash on September 1, December 1, March 1 June 1, September 1 and DecemberJune 1 of each year. On each of these dates, we will determine the number of shares of the Common Stock each Eligible Director who has elected to participate in the Directors Stock Purchase Rights Option has earned on that date. This determination will beis made by dividing all director’s fees payable on each of those dates that the Eligible Director has elected to exchange for Common Stock, by the fair market value of the Common Stock on that date. Any portion of the director’s fees payable on each of those dates that the Eligible Director has not elected to receive in Common Stock will be paid to the Eligible Director in cash. The fair market value of the Common Stock will be determined by using the closing price of the Common Stock on the NASDAQ Global Market on the grant date (the first day of the month in which the quarterly payment date for directors’ fees falls). We will issue share certificates for all shares of Common Stock purchased in a calendar year by December 15th of such year unless a directoran Eligible Director requests to receive his or her share certificate at any time during the year by sending written notice to the Company.
2016.
2016.
Nine
Nominating and Corporate Governance Committee. The Nominating Committee is currently comprised of three outside members of the Board:Board. Members of the Nominating Committee prior to August 9, 2016 were: Messrs. Oswald, who serves as the Chairman, DeCocco and Smith. Until November 11, 2014, theSubsequent to August 9, 2016, members of the Nominating Committee wereare: Messrs. Beattie, DeCoccoOswald, who serves as the Chairman, Bryant and Oswald, with Mr. Beattie serving as Chairman.Smith The Board determined that all members of the Nominating Committee are independent as required by the NASDAQ listing standards for nominating committee members. The committee held threefour meetings in fiscal 2015.
2016.
The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, issued by the PCAOB, and, with and without management present, discussed and reviewed the results of the independent registered public accounting firm’s examination of the financial statements, their evaluation of the Company’s internal controls over financial reporting, and the overall quality of the Company’s accounting and financial reporting.
The
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Background
The Company is a party to a First Amended and Restated Rights Agreement with American Stock Transfer & Trust Company, LLC, as rights agent, dated as of August 20, 2015 (the “Rights Agreement”). The Rights Agreement amended and restated that certain Rights Agreement, dated March 28, 1998 between the Company and American Stock Transfer & Trust Company, LLC, as amended by a First Amendment to Rights Agreement dated March 17, 2008.
We are asking our shareholders to vote to ratify the Rights Agreement for the reasons stated below. Neither our Articles of Incorporation, Bylaws or other governing documents or applicable law require shareholder approval of the Rights Agreement. However, the Board has determined to request shareholder ratification of the Rights Agreement as a matter of good corporate governance practice.
The Rights Agreement encourages persons seeking to acquire control of the Company to negotiate in good faith with the Board in order to discourage potential acquirors from using abusive or otherwise undesirable takeover tactics and to provide the Board with the opportunity to negotiate a fair premium for shareholders. The Rights Agreement accomplishes this by making an acquisition of the Company that is not approved by the Company’s Board prohibitively expensive for the acquiror by significantly diluting the acquiror’s stock interest in the Company and increasing the number of shares of Common Stock that would have to be acquired.
Under the Rights Agreement, if the acquiror accumulates 20% or more of the Common Stock, each right granted under the Rights Agreement (“Right”) would permit the holder of a Right to acquire newly issued shares of Common Stock of the Company or, in certain circumstances, common stock of the acquiror, at a price equal to half their market value for the $73.00 exercise price of the Rights. Rights held by the acquiror and by certain related persons and transferees would become void. However, before an acquiror acquires more than 20% of the outstanding Common Stock, the Rights may be redeemed by the Board or, in certain circumstances, by vote of the shareholders, or the terms of the Rights may be modified by the Board to, among other things, exempt a particular acquiror from the dilutive effects of the Rights. These provisions have the effect of encouraging potential acquirors to negotiate with the Board before acquiring 20% or more of the Common Stock so that the Board may redeem or modify the Rights as part of an acquisition without triggering the dilutive effects of the Rights.
The Board’s decision to amend and restate the Rights Agreement was not made in response to, or in anticipation of, any acquisition proposal, and is not intended to prevent a non-coercive takeover bid from being made for the Company or to keep management or the directors in office.
If shareholder approval of the Rights Agreement is not obtained, the Rights Plan will automatically terminate upon final adjournment of the Company’s 2015 Annual Meeting of Shareholders.
Reasons for the Rights Agreement
The Board believes that the Rights Agreement strikes an appropriate balance between allowing the Board to use a rights agreement to increase its negotiating leverage to maximize shareholder value and current best practices providing a role for shareholders in the acquisition process under certain circumstances. The Company’s Rights Agreement was recently amended to make it more shareholder friendly, including (i) use of a three year term rather than a ten year term as had been used in the past, (ii) an increase in the ownership threshold from 15% to 20% before the Rights become exercisable, (iii) inclusion of a “qualified offer” provision which allows shareholders to approve a resolution authorizing the redemption of all, but not less than all, of the outstanding Rights by majority vote at a special meeting of the shareholders to permit certain “qualified offers” to be consummated even if the Board does not support the offer, and (iv) the elimination of so called “dead-hand” provisions that would limit the right of a future Board to redeem the Rights and take other actions under the Rights Agreement.
The Board believes that the continuation of the Rights Agreement at this time is of particular importance as the Company continues to implement its new corporate strategy and integrates the companies it acquired in fiscal 2015. The continuation of the Rights Agreement gives the Board and management the time to complete these efforts so that they can be more fully reflected in the market price of the Common Stock.
The Board believes that the Rights Agreement is in the best interests of the Company’s shareholders because it:
Anti-Takeover Effects
The Board believes that the continuation of the Rights Agreement for the reasons described above is in the shareholders’ best interests. In making your voting decision, however, you should consider that, while the Rights Agreement is not intended to prevent a takeover of the Company, it may discourage the accumulation by any person or group of 20% or more of the outstanding Common Stock and may have the effect of rendering more difficult or discouraging any acquisition of the Company deemed undesirable by the Board, even if shareholders disagree with the Board’s conclusion. The Rights Agreement will cause substantial dilution to a person or group that attempts to acquire the Company on terms or in a manner not approved by the Board, except pursuant to an offer conditioned upon the elimination, purchase or redemption of the Rights. Because the Rights Agreement may increase the price required to be paid by a potential acquiror in order to obtain control of the Company and thus discourage certain transactions, the continuing effectiveness of the Rights Agreement may reduce the likelihood of a takeover proposal being made for the Common Stock and discourage some offers from being made at all. This effect and the perception that it may be less likely that the Company will be acquired could have an adverse impact on the market price for the Common Stock.
Our Bylaws include provisions that may discourage, delay or prevent a change in control or takeover attempt of the Company by a third party that is opposed by our Board, including the following: (i) authorization of “blank check” preferred stock that could be issued by our Board to make it more difficult to acquire, or to discourage a third party from acquiring, a majority of our outstanding voting stock; (ii) non-cumulative voting for directors; (iii) control by our Board of the size of our Board within parameters set in the Bylaws and (iv) if the Bylaw amendment set forth below in Proposal 3 is approved by the shareholders, advance notice requirements for nomination of candidates for election to our Board or for proposing matters that can be acted upon by our shareholders at a meeting of the shareholders. Our Board does not currently have any plans to implement additional measures that may have an anti-takeover effect.
Summary of Rights Agreement
The following is a summary of the material terms of the Rights Agreement. The statements below are only a summary, and we refer you to the full text of the Rights Agreement in its original form, which was filed with the Securities and Exchange Commission as an Exhibit to the report on Form 8-K filed on August 24, 2015 and as an Exhibit to Form 8-A/A, filed on August 24, 2015. Each statement in this summary is qualified in its entirety by reference to these documents.
General
Currently, under the terms of the Rights Agreement, each share of Common Stock outstanding has one Right attached to it, so that the purchase of a share of Common Stock is also a purchase of the attached Right. Certificates representing the Common Stock also represent the attached Rights. The Rights are not currently exercisable or separately tradable. Until a Right is exercised as described below, the holder of the Right will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.
After the “Distribution Date,” which is described below, and, if later, the expiration of the Company’s right to redeem the Rights, each Right will become separately tradable and, initially will entitle the holder to purchase from the Company one one-hundredth of a fully paid non-assessable share of Series A Preferred Stock, no par value (the “Preferred Stock”), of the Company, at a purchase price of $73.00 per one one-hundredth of a share (the “Purchase Price”), subject to adjustment. Each one one-hundredth of a share of Preferred Stock has rights that are roughly equivalent to one share of Common Stock. The Rights will expire at the close of business on f 2018 (the “Final Expiration Date”), or, if earlier, (i) the final adjournment of the Company’s 2015 Annual Meeting of the Shareholders, if shareholder approval of the Rights Agreement has not been obtained, (ii) redemption or call for exchange of Rights by the Company as described below or (iii) expiration upon the consummation of certain transactions as described below.
Events Causing Exercisability and Separate Transferability
Except for Permitted Offers discussed below, a “Distribution Date” will occur and the Rights will become exercisable and separately tradable upon the earlier of:
As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.
Events Causing Adjustment of the Shares Acquirable Upon Exercise or the Purchase Price
In the event that (i) the Company were the surviving corporation in a merger or other combination with an Acquiring Person or affiliated or associated persons of an Acquiring Person and its Common Stock were not changed or exchanged; (ii) an Acquiring Person engages in one of a number of self-dealing transactions specified in the Rights Agreement; (iii) in certain circumstances, an Acquiring Person becomes the beneficial owner of 20% or more of the outstanding shares of Common Stock, except pursuant to a Permitted Offer, or (iv) during such time as there is an Acquiring Person, there shall occur certain failures to pay, or reductions in, dividends on outstanding common or preferred stock of the Company or a recapitalization of the Company which has the effect of increasing the Acquiring Person’s proportionate share of the outstanding Common Stock by more than 1%, each holder of a Right, other than the Acquiring Person (and any affiliates and certain transferees), will then have the right to receive upon exercise and payment to the Company of the Purchase Price, instead of one one-hundredth of a share of Preferred Stock, that number of shares of Common Stock having an average market value equal to two times the Purchase Price. Any Rights that are beneficially owned by any Acquiring Person (or any affiliate or certain transferees) will be null and void. In other words, the Rights holders, other than the Acquiring Person and certain others, may at that time purchase Common Stock at a 50% discount.
Alternatively, in the event that, after the first public announcement that a person or group has become an Acquiring Person, the Company is a party to a merger or other business combination transaction in connection with which the Company is not the continuing or surviving corporation or in which all or a part of the Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property, then each holder of a Right, other than the Acquiring Person (and any affiliates and certain transferees), shall have the right to receive upon exercise and payment to the Company of the Purchase Price, instead of one one-hundredth of a share of Preferred Stock, common shares of the acquiring or surviving company having an average market value equal to two times the Purchase Price. In other words, the Rights holders, other than the Acquiring Person and certain others, may at that time purchase the acquiring or surviving company’s common shares at a 50% discount.
A “Permitted Offer” is tender or exchange offer for all outstanding shares at a price and on terms determined by a majority of the Board, prior to the consummation of the offer, after receiving advice from an investment banking firm selected by a majority of the Board, to be a price that is fair to shareholders and in the best interests of the Company and its shareholders. A “Permitted Combination” is merger or combination with an Acquiring Person who becomes such in a Permitted Offer if the price per share of Common Stock offered in such transaction is no less than the price per share of Common Stock paid to all holders in the Permitted Offer tender or exchange offer and the form of consideration being offered in such transaction is the same as the form of consideration paid in the Permitted Offer tender or exchange offer. The Rights expire upon the consummation of a Permitted Offer or a Permitted Combination.
The Purchase Price payable and the number of shares issuable upon exercise of the Rights are subject to adjustment from time to time to prevent dilution upon the occurrence of specified events affecting the Preferred Stock. The number of outstanding Rights and the Purchase Price are also subject to adjustment in the event of a stock dividend on the Common Stock payable in Common Stock or subdivisions or combinations of the Common Stock occurring before the Distribution Date.
Exchange Right
At any time after any person becomes an Acquiring Person but prior to the time such Acquiring Person has acquired 50% or more of the outstanding Common Stock, the Board may cause shareholders to exchange all or part of their Rights for shares of Common Stock or Preferred Stock at a ratio of one share of Common Stock or one one-hundredth of a share of Preferred Stock per Right, subject to adjustment. As soon as the Board has determined to make such exchange, the Rights may no longer be exercised.
Redemption of the Rights
At any time prior to a person or group of affiliated or associated persons becoming an Acquiring Person (or if pursuant to a Permitted Offer, such later date as fixed by the Board), the Board may redeem the Rights in whole, but not in part, at a price of $.001 per Right (the “Redemption Price”). Thereafter, the Company’s right of redemption may be reinstated, prior to certain triggering events, (i) if an Acquiring Person reduces his beneficial ownership to less than 20% of the outstanding shares of Common Stock in a transaction or series of transactions not involving the Company; and (ii) there are no other persons, immediately following the event described in clause (i), who are Acquiring Persons. Additionally, the Board may at any time prior to the occurrence of certain triggering events, redeem the then outstanding Rights in whole, but not in part, at the Redemption Price, if such redemption is in connection with the consummation of a merger or other business combination involving the Company, but not involving an Acquiring Person or its affiliates or associates, which is determined to be in the best interests of the Company and its shareholders by the Board.
In addition, if the Company receives a “Qualified Offer,” the Rights may be redeemed by way of shareholder action taken at a special meeting of shareholders called for the purpose of voting on a resolution accepting the Qualified Offer and authorizing the redemption of the Rights pursuant to the provisions of the Rights Agreement. In order for a special meeting of the shareholders to be called, the Company must receive a written notice complying with the terms set forth in the Rights Agreement, not earlier than 60 business days nor later than 80 business days following the commencement of a Qualified Offer. The notice must be properly executed by the holders of record (or their duly authorized proxy) of not less than 10% of the Common Shares then outstanding (excluding the acquirer and its affiliates and associates). The special meeting must be held within 90 business days after the Company receives a request from shareholders to hold such a meeting, subject to certain exceptions. If a resolution to redeem the Rights is approved at the special meeting by holders of a majority of the Common Shares then outstanding (excluding the acquirer or its affiliates and associates) (or if the special meeting is not held on or before the 90th business day after receipt of the request for a meeting to vote on such a resolution or such later date at which an acquisition agreement approved by the Board is voted on by shareholders), it will become effective immediately prior to the consummation of any Qualified Offer consummated within 60 days after the earlier of the special meeting or the 90th business day after receipt of a request for a special meeting of shareholders.
A “Qualified Offer” is a tender offer for all outstanding Common Stock not already beneficially owned by the person making the offer that meets certain conditions, including all of the following:
Amendments
The Rights Agreement may be amended without shareholder approval prior to the Distribution Date at the Board’s discretion. After the Distribution Date, the Board generally may amend the Rights Agreement without the consent of the Rights holders to cure any ambiguity, correct defects or inconsistencies, shorten or lengthen time periods or supplement or change any other provision which does not adversely affect the Rights holders; provided that the lengthening of any time period is for the purpose of protecting, enhancing or clarifying the rights of, and/or for the benefit of the holders of the Rights (other than the Acquiring Person and its affiliated and associated persons). However, if the Rights are not then redeemable, the Board may not lengthen a time period relating to when the Rights may be redeemed.
Required Vote
Ratification of the Rights Agreement requires the affirmative vote of a majority of the votes cast on the matter.
proxies WILL BE VOTED “FOR” THE RATIFICATION OF THE RIGHTS AGREEMENTUNLESS OTHERWISE INDICATED ON THE PROXY.
PROPOSAL 3 — APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED ANDRESTATED BYLAWS REGARDING ADVANCE NOTICE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3
Background
We are asking our shareholders to approve the adoption of an amendment to the Company’s bylaws to add a new section requiring advance notice to the Company of shareholder nominations for election of directors and for other business to be brought by shareholders before a meeting of the shareholders (the “Advance Notice Amendment”). The Board approved the Advance Notice Amendment on August 18, 2015. Its effectiveness is subject to the approval of the shareholders. If the Advance Notice Amendment is adopted, it would not apply to the 2015 Annual Meeting of Shareholders, but would apply to subsequent meetings of shareholders.
The Company’s current Bylaws do not contain any procedures or requirements for shareholders to nominate directors or propose other business before a meeting of the shareholders. Therefore, a shareholder could potentially nominate directors or make other proposals for shareholders to vote on at an annual or special meeting of the shareholders, without providing the Company, or its shareholders, with any advance notice. In addition, important information regarding any such proposal, or information regarding the background and experience of director nominees, might not be available to shareholders for their review and consideration prior to the meeting of the shareholders.
We believe that implementing such advance notice procedures will provide an orderly procedure for the notification of the Company of business which is to be presented at shareholders’ meetings. This will enable the Board to plan such meetings and result in better information being made available to our shareholders in advance of any meetings of the shareholders with respect to any such shareholder proposals or nominees. It will also permit the Board will make a recommendation or statement of its position so as to enable shareholders to better determine whether they desire to attend the meeting or grant a proxy to the Company as to the disposition of any such business. In addition, by requiring advance notice, the Company will be able to carefully review and determine, in advance of the meeting of the shareholders, whether such proposals are the proper subject matter for a shareholder vote under applicable law.
If shareholders do not approve the proposed Advance Notice Amendment to the Bylaws, the proposed Advance Notice Amendment to the Bylaws will not be adopted and, under applicable Michigan law, shareholders will be permitted to make director nominations or shareholder proposals at shareholders meetings without advance notice to the Company.
Summary of Advance Notice Amendment
The following summary of the Advance Notice Amendment is qualified in its entirety by reference to the full text of Article I, Section 10 of the Bylaws as proposed to be amended, a copy of which is attached hereto as Appendix A. Shareholders are urged to read carefully the full text of Article I, Section 10 of the Bylaws as it is proposed to be amended by this Proposal 3.
If approved by the shareholders, the Advance Notice Amendment would set deadlines and procedures with respect to when and how a shareholder must give advance written notice of a proposed director nomination or proposal to be considered at an annual meeting of the shareholders or a special meeting of the shareholders. The advance notice provisions and procedures include the following key terms.
Director Nominations
Other Business
Timely Notice
Anti-Takeover Effects
If adopted, the Advance Notice Amendment could also be construed as making it more difficult for shareholders to nominate directors or bring shareholder proposals up for a vote at meetings of the shareholders, since the proposed Bylaw amendment adds deadlines as well as other procedures that must be followed. Although the Board does not believe that the Advance Notice Amendment would have a significant impact on any attempt by a third party to obtain control of the Company, it is possible that the amendment might deter a third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company or effect a change in the Company’s Board or management. While the proposed amendment does not give the Board power to approve or disapprove of any shareholder proposal or director nomination, the failure by a shareholder to follow the requirements set forth in the proposed Article, I, Section 10 of the Bylaws would result in such defective proposal or nomination being disregarded.
Our Articles of Incorporation and Bylaws include provisions that may discourage, delay or prevent a change in control or takeover attempt of the Company by a third party that is opposed by our Board, including the following: (i) authorization of “blank check” preferred stock that could be issued by our Board to make it more difficult to acquire, or to discourage a third party from acquiring, a majority of our outstanding voting stock; (ii) non-cumulative voting for directors; and (iii) control by our Board of the size of our Board. In addition, as discussed in Proposal 2, the Board has adopted the Rights Agreement that may discourage the accumulation by any person or group of more than 20% of the outstanding Common Stock and may have the effect of rendering more difficult or discouraging any acquisition of the Company deemed undesirable by the Board. Our Board does not currently have any plans to implement additional measures that may have an anti-takeover effect.
Required Vote
The approval of this proposal requires the affirmative vote of a majority of the votes cast on the matter.
PROXIES WILL BE VOTED “FOR” THE APPROVAL OF AMENDMENT TOTHE COMPANY’S AMENDED AND RESTATED BYLAWS REGARDINGADVANCE NOTICE PROVISIONS FOR SHAREHOLDER BUSINESS AND DIRECTORNOMINATIONS UNLESS OTHERWISE INDICATED ON THE PROXY.
PROPOSAL 4 — APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED ANDRESTATED BYLAWS REGARDING POWER TO AMEND THE BYLAWS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 4
Background
We are asking our shareholders to approve the adoption of an amendment to the Article X of the Company’s Bylaws to expand the Board’s authority to amend the Bylaws by the vote of a majority of the directors in office (the “Article X Amendment”). The Board approved the Article X Amendment on August 18, 2015. Its effectiveness is subject to the approval of the shareholders.
The Board believes that Article X Amendment is in the best interest of the shareholders. By expanding the Board’s authority to amend the Bylaws, the Board will have additional flexibility to manage the Company. Additionally, the shareholders ability to amend the Bylaws would not be affected by this amendment.
In the past, the Board has found the language limiting the Board’s power to amend the provisions of the Bylaws that affect the qualifications, classification or term of office of directors or the rights of any class of shareholders to be vague and overly restrictive. This has made it difficult for the Board to amend the Bylaws if the amendment could be argued to impact in any way the rights of any class of shareholders, even if the amendment has an immaterial impact on shareholders or positively impacts the rights of shareholders.
In addition, if the Board should happen to approve an amendment to a provision of the Bylaws that is not acceptable to shareholders, the Bylaws permit shareholders, by vote of holders of a majority of the outstanding shares of Common Stock, to amend the Bylaws to remove or change that provision. The existence of this provision serves as a limitation on the authority of the Board to continue in effect amendments to the Bylaws disfavored by a majority of the shareholders.
If shareholders do not approve the proposed Article X Amendment to the Bylaws, the proposed Article X Amendment to the Bylaws will not be adopted.
Summary of Amendment
The following summary of the Article X Amendment is qualified in its entirety by reference to the full text of Article X of the Bylaws as proposed to be amended, a copy of which is attached hereto as Appendix B. Shareholders are urged to read carefully the full text of Article X of the Bylaws as it is proposed to be amended by this Proposal 4.
Article X of the current Bylaws grants the shareholders the power to alter, amend, add to, rescind or repeal the Bylaws of the Company by the affirmative vote of a majority of the outstanding shares of Common Stock at any regular or special meeting of the shareholders. Article X of the current Bylaws also grants the Board the power to alter, amend, add to, rescind or repeal the Bylaws of the Company by a majority of the Directors in office at any meeting of the Board, provided, however, that the Board may not amend the Bylaws so as to affect the qualifications, classification or term of office of Directors or the rights of any class of shareholders. The proposed amendment to Article X eliminates the restrictions on the Board’s power to amend provisions of the Bylaws that affect the qualifications, classification or term of office of Directors or the rights of any class of shareholders. The Article X Amendment would allow the Board to alter, amend, add to, rescind or repeal any provision of the Bylaws by a majority of the Directors in office at any meeting of the Board.
Required Vote
The approval of this proposal requires the affirmative vote of a majority of the votes cast on the matter.
PROXIES WILL BE VOTED “FOR” THE APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED BYLAWS REGARDING POWER OF THE BOARD OF DIRECTORS TO AMEND THE BYLAWS UNLESS OTHERWISE INDICATED ON THE PROXY.
PROPOSAL 5 — ADVISORY VOTE ON EXECUTIVE COMPENSATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 5
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, provides shareholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers. This advisory vote is commonly known as “Say-on-Pay.” Accordingly, the Board is asking our shareholders to indicate their support for the compensation of the Company’s named executive officers, as disclosed in this Proxy Statement.
3
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class |
Ariel Investments, LLC 200 E. Randolph Dr., Suite 2900 Chicago, IL 60601 | 1,628,189(2) | |
Royce & Associates, LLC 745 Fifth Avenue New York, NY 10151 | 890,726(3) | |
Moab Capital Partners, LLC, Moab Partners, L.P. and Michael R. Rothenberg 15 East 62nd Street New York, NY 10065 | 844,898(4) | 9.01 |
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746 | 664,552(5) | |
Harbert Discovery Fund, LP, Harbert Discovery Fund GP, LLC, Harbert Fund Advisors, Inc., Harbert Management
2100 Third Avenue North, Suite 600 Birmingham, AL 35203 | 504,100(6) | |
Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation 800 Third Avenue New York, New York 10022 |
| 5.33 |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class |
| Jeffrey M. Armstrong(2)(3) | 38,100 | * |
| Kenneth R. Dabrowski(2)(4) | 90,676 | * |
| Philip J. DeCocco(2)(5) | 133,437 | 1.42 |
| W. Richard Marz(2)(6) | 160,148 | 1.70 |
| C. Richard Neely, Jr.(2)(7) | 4,369 | * |
| Robert S. Oswald(2)(8) | 150,370 | 1.60 |
| Terryll R. Smith(2)(9) | 33,369 | * |
| Song Yop Chung(10) | 26,400 | * |
| Mark S. Hoefing(11) | 100 | * |
| Keith R. Marchiando(12) | - | * |
| All current executive officers and directors as a group (8 persons)(13) | 636,869 | 6.64 |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class |
John C. Bryant(2)(3) | 504,100 | 5.38 |
W. Richard Marz(2)(4) | 273,680 | 2.87 |
C. Richard Neely, Jr.(2)(5) | 6,369 | * |
Robert S. Oswald(2)(6) | 156,174 | 1.66 |
James A. Ratigan(2) | 0 | * |
Terryll R. Smith(2)(7) | 35,369 | * |
William C. Taylor(2) | 0 | * |
Jeffrey M. Armstrong(8) | 22,100 | * |
Song Yop Chung(9) | 9,199 | * |
David L. Watza(10) | 14,000 | * |
All current executive officers and directors as a group (8 persons)(11) | 989,692 | 10.31 |
Beneficial Ownership Reporting Compliance
| Name and Age | Position and Principal Occupations |
| Chairman of the Board, President and Chief Executive Officer of the Company since | |
| Senior Vice President, Finance and Chief |
basis. The Management Development Committee generally reviews the components of executive compensation on an annual basis to determine whether there should be any adjustments in base salary, to establish the annual cash incentive plan, to establish a long term equity incentive plan, to determine if other stock-based incentives should be granted and to review the terms of our other executive compensation programs. Each year the Chief Executive Officer presents an evaluation of the performance of the NEOs and other executive team members to the Management Development Committee. Based upon this evaluation, the Chief Executive Officer makes recommendations to the Management Development Committee regarding compensation for the NEOs and other executives, other than himself. The Chief Executive Officer may make recommendations regarding changes in a particular NEO or other executive’s compensation more frequently than annually as a result of changes in circumstances, such as the assumption of increased executive level responsibilities. The Management Development Committee considers the recommendations of the Chief Executive Officer, as well as the other information provided to them by the Company, and then establishes compensation for the NEOs and other executives, either annually or periodically as the need arises. Key Elements of Compensation for Fiscal 2016 18% from his predecessor and consistent with competitive market pay considerations. Mr. Watza also received a standard signing bonus of $25,000, which was payable in January 2016, as an incentive for Mr. Watza to leave his prior employment to join the Company. The signing bonus has to be repaid to the Company by Mr. Watza if he terminates his employment with the Company prior to the first anniversary of his start of employment. Our fiscal achieved. Under the Fiscal The Management Development Committee generally provides for stock options grants and restricted stock awards to become exercisable immediately upon a Change in Control. This provides executives with the appropriate incentives to act in the best interests of the Company and its shareholders, without concern for their own personal interests, and to provide for continuity of management during the pendency of a transaction that could result in a Change in Control of the Company. In March 2016, as part of our financial improvement plan, the Company indefinitely suspended the Company match for all employees, including our NEOs and other executives. relocation. Payments under the severance agreements, when aggregated with any other “parachute payments” (defined under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) Golden Parachute Excise Tax Name and Principal Position Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($)(1) All Other Compensa- tion ($)(2) Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) Estimated Future Payouts Under Equity Incentive Plan Awards(2) Target ($) Maximum ($) 2016. Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Number of Shares That Have Not Vested (#) Market Value of Shares of Stock That Have Not Vested ($)(5) 2016. Number of Shares Acquired on Exercise Value Realized on Exercise(1) ($) “Change in Control” for purposes of the severance agreements and the 2004 Stock Plan is generally defined as: agreements. 2015. 2015. All Other Fees 2015.·Base salary;·Annual cash incentive opportunities;·Long-term incentives represented by stock-based awards;·Employee benefits; and·Severance and change in control benefits. During fiscal 2015, we continued our emphasis on performance based compensation and providing long-term incentives. For instance, in fiscal 2015, we increased the vesting requirements on our restricted stock grants from grants vesting in one year to grants vesting in three equal increments over three years. In fiscal 2015, we also tied a portion of short term cash incentives to the achievement of personal objectives tied to the Company’s strategic objectives.diversification,diversification; and maintain operational excellence and fiscal discipline.basis, as well as for achieving goals and objectives within their control that drive the implementation of the strategy.In fiscal 2015, weThe Management Development Committee determined to implement equity ownership guidelines for our executive team. We are in the process of implementing these guidelines. As currently contemplated, the guidelines would encourage our executive team to hold Company Common Stock with a value at least equal to their annual base salary.2015,2016, all members of this Committee were non-employee directors of the Company. The Management Development Committee generally meets in conjunction with regularly scheduled Board meetings although occasionally the Committee meetsand between Board meetings at the request of the Chief Executive Officer to deal with more immediate executive compensation matters.
or the Management Development Committee.27282015Chung’s promotionMarz as interim President and Chief Executive Officer in January 2016, the Management Development Committee set Mr. Marz’ base salary at $217,500. This amount was determined in order to provide Mr. Marz with a senior vice president duringbase salary level for his full time services that, when taken together with his $150,000 annual retainer as Chairman of the Board, was commensurate with that of the former President and Chief Executive Officer. In March 2016, in conjunction with the implementation of the financial improvement plan, the Board reduced the annual retainer for the Chairman of the Board to $100,000.2015,2016, the Management Development Committee increased Mr. Armstrong’s base salary by 5%, his first increase since he was hired in 2013, and increased Mr. Chung’s base salary by 6.0%6%. No increasesbase salary were approved for Mr. Armstrong or the other executive officers of the Company during fiscalSeptember 2015, with the Management Development Committee deferring considerationset his base salary at $260,000, an increase of such increases until fiscal 2016.2015,2016, the Management Development Committee adopted the Fiscal 20152016 Executive Short Term Incentive Plan, which applied to Mr. Armstrong, the other NEOs excluding Mr. Marz, our other executives and director-level team members. Under the Fiscal 20152016 Executive Short Term Incentive Plan, participants could earn annual incentive cash compensation based upon performance against pre-established Company financial targets and individual strategic objectives.20152016 Executive Short Term Incentive Plan for fiscal 20152016 performance was based on the Company’s achievement of specified results with respect to Company revenue and operating income targets for fiscal 2015,2016, as well as the achievement of individual strategic objectives. The weightings of these targets for fiscal 20152016 were as follows:Fiscal 20152016 TargetsWeighting Company Revenue 40% Company Operating Income 40% Individual Strategic Objectives 20% 20152016 Executive Short Term Incentive Plan if either financial target equals or exceeds 85% of its specified minimum performance threshold point or at least 85% of the individual strategic objectives are achieved. The specific amount that such participant receives is dependent on company financial performance, a scaled payout multiplier (75% at threshold, 100% at target and 150% at maximum) applied to his or her predetermined participation level, a discretionary multiplier (80% to 120%), the participant’s base salary and his or her predetermined participation level stated as a percentage of base salary (50%(60% for Mr. Armstrong and 40% for the other NEOs).20152016 Executive Short Term Incentive Plan ranged from 0% (assuming the threshold objectives were not met) to 90%108% (assuming the maximum objectives were met) of base salary, with a cash incentive amount of 50%60% of base salary if both of the target financial performance objectives are met, the individual strategic objectives are met and a 100% discretionary multiplier is used. For each of the other NEOs, the amount such officers could have received under the Fiscal 20152016 Executive Short Term Incentive Plan ranged from 0% (assuming the threshold objectives were not met) to 72% (assuming the maximum objectives were met) of base salary, with a threshold cash incentive amount of 40% of base salary if both of the target financial performance objectives are met, the individual strategic objectives were met and a 100% discretionary multiplier is used.20152016 Executive Short Term Incentive Plan had to be employed on or before December 31, 20142015 in order to be eligible, except that executives who joined the Company, in connection with acquisitions that closed after December 31, 2014 were permitted to participate in the plan.eligible. Participating team members hired between July 1, 20142015 and December 31, 2014, and those hired in connection with acquisitions closing thereafter,2015, were eligible for a pro-rata portion of their individual participation level. Participating team members had to be employed by the Company at the date of the paymentspayouts in fiscal 2016,2017, except as otherwise provided under any severance agreement applicable to the participant. See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” The Management Development Committee reserved the right to increase, decrease or eliminate any payout under the Fiscal 20152016 Executive Short Term Incentive Plan for any participant, including to provide for no payout even if the financial performance targets or strategic objectives were achieved by the participant.2920152016 adjusted revenue and operating income for purposes of the Fiscal 20152016 Executive Short Term Incentive Plan were approximately 105%83% and 52%(123%), respectively, of the target thresholds. Accordingly, ano cash incentive was earned for the revenue target, but not fornor the operating income target. Because adjusted revenue was above the target level, a scaled payout multiplier of approximately 117% applied for the portion of the cash incentive based upon revenue. Because the executive officers also achieved their individual strategic goals,Based on these results, the Management Development Committee approved the use of a scaled payout multiplier of 120% for the portion of their cash incentive based upon strategic goals. The Management Development Committee approved the use of a discretionary multiplier of 100% for the executive officers. In calculating our fiscal 2015 adjusted revenue and operating income for purposes of the Fiscal 2015 Executive Short Term Incentive Plan, the Management Development Committeealso determined that it was appropriate to exclude from the calculations revenue and operating income from the two companies acquired by the Company in fiscal 2015 from their date of acquisition, expenses incurred by the Company during fiscal 2015 in connection with completing these acquisitions and fiscal 2015 bonus accruals.Cash payments to Mr. Armstrong and the other NEO at June 30, 2015 under the Fiscal 2015 Executive Short Term Incentive Plan totaled approximately 36% and 28% of their average base salary for fiscal 2015, respectively. Two of our NEOs terminated their employment prior to June 30, 2015 and so didindividual strategic objectives were not receive any cash payments under the Fiscal 2015 Executive Short Term Incentive Plan.The Management Development Committee also awarded discretionary cash spot bonuses to members of the executive team, including to Mr. Armstrong and the other NEOs, in October 2014 in recognition of the significant efforts undertaken to develop and implement several strategic projects, including development of a comprehensive mergers and acquisitions strategy, new executive compensation plans and a new five year strategic and financial plan.2015,2016, the Management Development Committee adopted the Fiscal 20152016 Executive Long Term Incentive Plan, which applied to Mr. Armstrong, the other NEOs excluding Mr. Marz, our other executives and director-level team members. Under the Fiscal 20152016 Executive Long Term Incentive Plan, each of our executives and director-level team members, including the NEOs, had a set target percentage of their base salary that could be earned in the form of a restricted stock award of Common Stock or an option to purchase Common Stock, as determined by the Management Development Committee, based upon an earned award denominated in dollars for performance against pre-established Company-wide financial targets.stock options shares to be awarded under the Fiscal 20152016 Executive Long Term Incentive Plan for fiscal 20152016 performance was based on the Company’s achievement of specified results with respect to Company revenue and operating income targets for fiscal 2015.2016. The weightings of these targets for fiscal 20152016 were as follows:Fiscal Targets Weighting Company Revenue 50% Company Operating Income 50% 20152016 Executive Long Term Incentive Plan if either financial target equals or exceeds 85% of its specified minimum threshold point. The specific number of shares of restricted stock or stock options that such participant receives is determined by dividing a dollar amount dependent on Company financial performance, a scaled payout multiplier (75% to 150%) applied to his or her predetermined participation level, a discretionary multiplier (50% to 200%), the participant’s base salary and his or her predetermined participation level stated as a percentage of base salary (40% for Mr. Armstrong and 25% for the other NEOs), by (i) the closing price of the Common Stock on the NASDAQ Stock Market’s Global Market on the equity award date in fiscal 2016,2017, in the case of restricted stock awards, or (ii) the value of an option share on the grant date, determined using a Black Scholes option-pricing model valuation, in the case of stock option grants.
awards.3020152016 Executive Long Term Incentive Plan, the grant date value of the equity award that could be received by Mr. Armstrong ranged from 0% (assuming the threshold objectives were not met) to 120% (assuming the maximum objectives were met) of base salary, with a grant date value of 40% of base salary if both of the target financial performance objectives are met and a discretionary multiplier of 100% is used. Under the Fiscal 20152016 Executive Long Term Incentive Plan, the grant date value of the equity award that could be received by the Company’s other NEOs ranged from 0% (assuming the threshold objectives were not met) to 75% (assuming the maximum objectives were met) of base salary, with a grant date value of 25% of base salary if both of the target financial performance objectives are met and a discretionary multiplier of 100% is used.2015,2016, the Management Development Committee determined the extent to which the specified goals relating to the financial targets were achieved, the discretionary multiplier to be used and the type of equity award to be used.20152016 Executive Long Term Incentive Plan had to be employed on or before December 31, 20142015 in order to be eligible, except that executives who joined the Company in connection with acquisitions that closed after December 31, 2014 were permitted to participate in the plan.eligible. Participating team members hired between July 1, 20142015 and December 31, 2014, and those hired in connection with acquisitions closing thereafter,2015 were eligible for a pro-rata portion of their individual participation level. Participating team members had to be employed by the Company at the date of the paymentspayout in fiscal 2016,2017, except as otherwise provided under any severance agreement applicable to the participant. See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” The Management Development Committee reserved the right to increase, decrease or eliminate any payout under the Fiscal 20152016 Executive Long Term Incentive Plan for any participant, even if the financial performance targets were achieved.20152016 adjusted revenue and operating income for purposes of the Fiscal 2015 Executive Long Term Incentive Plan were approximately 105%83% and 52%(123%), respectively, of the target thresholds. Accordingly, an equity award was not earned for either the revenue target but not foror the operating income target. Because adjusted revenue was above the target level, a scaled payout multiplier of approximately 117% applied for the portion of the equity incentive based upon revenue. The Management Development Committee approved the use of a discretionary multiplier of 200% for the executive officers. In calculating our fiscal 2015 adjusted revenue and operating income for purposes of the Fiscal 2015 Executive Long Term Incentive Plan, the Management Development Committee determined that it was appropriate to exclude from the calculations revenue and operating income from the two companies acquired by the Company in fiscal 2015 from their date of acquisitions, expenses incurred by the Company during fiscal 2015 in connection with completing these acquisitions and fiscal 2015 bonus accruals.Messrs. Armstrong and the other current NEO were awarded stock options under the 2015 Executive Long Term Incentive Plan based upon the level of achievement of the financial targets and the application of the scaled payout multiplier and the discretionary multiplier as described above, representing an equity incentive equal to approximately 46% and 29% of Mr. Armstrong and the other NEO’s average base salary for fiscal 2015, respectively. The stock option awards become exercisable one-third on each anniversary of the grant date, provided the participant remains employed with the Company on each of the relevant vesting dates. Due to their resignations prior to June 30, 2015, no equity incentives were awarded to Messrs. Hoefing and Marchiando under the Fiscal 2015 Executive Long Term Incentive Plan.when he was appointed President and Chief Executive Officer in November 2013 and in November 2014,2015, on the firstsecond anniversary of his hire date, as required by his offer letter. In addition, as part of his offer letter, subject toconditioned upon the future approval of the Management Development Committee, Mr. Armstrong will be awarded an option to purchase an additional 100,000 shares of Common Stock this year on the anniversary of his hire date so long as he remains employed as the Company’s President and Chief Executive Officer on that date. The Management Development Committee believes that this additional option grant to Mr. Armstrong is appropriate to continue to more closely align his interests with those of our shareholders.31Options granted to Mr. Armstrong to date become exercisableAnalysis, in four equal annual installments, beginning one year from their date of initial grant, at an exercise price equal to 100% of the fair market value of the Common Stock on the date of grant. The options expire ten years from the date of grant, or if earlier, one year after the executive’s death or permanent disability or three months after the executive’s termination of employment. In addition, any portion of these options that is not exercisable becomes exercisable immediately upon a Change in Control of the Company as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” All of the options granted were non-qualified stock options.The Management Development Committee does not have a set time of the year in which it makes discretionary equity awards under the 2004 Stock Plan, nor does it make such awards every year.In October 2014, the Management Development Committee made a restricted stock award of 10,100 shares to Mr. Armstrong and restricted stock awards of between 2,500 and 6,800 shares to the other NEOs. These awards were made in recognition of the level of effort made by Mr. Armstrong and the other NEOs in the implementation of the Company’s new corporate strategy and as retention awards. One-third of the restricted stock award vests and risk of forfeitures and other restrictions lapse on such shares on each anniversary of the date of grant if the executive’s services or employment have not terminated on or prior to such date. Messrs. Hoefing and Marchiando’s restricted stock awards were forfeited upon their termination of employment during fiscal 2015. These restricted stock awards become immediately vested and risk of forfeiture and other restrictions lapse in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.”In September 2015, the Management Development Committee made stock option grants under the 2004 Stock Plan to purchase 24,000 and 16,000 shares of Common Stock to Messrs. Armstrong and Chung, respectively. These awards were made in recognition of the level of effort made by Messrs. Armstrong and Chung in connection with the identification, negotiation, closing and integration of the acquisitions of Coord3 s.r.l. and Next Metrology Software s.r.o during fiscal 2015. These options were issued on September 29, 2015.an exercise price equala grant date effective November 2, 2015 in connection with his appointment as Senior Vice President, Finance and Chief Financial Officer, which is consistent with the level of options granted to other executive officers when they joined the closing market price on that date. TheseCompany.20152016 Executive Long Term Incentive Plan, Mr. Armstrong and the other NEOs, became eligible forother than Mr. Marz, has the opportunity to earn an award of restricted stock or stock options under the 2004 Stock Plan in fiscal 20152016 as described above under “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 20152016 – Long Term Equity Incentive Plan.”During fiscal 2015, the Management Development Committee determined to reduce the vesting period for stock option grants from four to three years and increase the vesting period for restricted stock grants from one year to three years. These changes were implemented based on a peer and industry practices review and make our stock option grants a more competitive element of compensation when attracting and retaining executives and to structure our restricted stock awards to provide a longer term incentive to our executives. The Management Development Committee believes that awarding restricted stock and stock options in this fashion provides an incentive for continued employment and otherwise more closely aligns the interests of recipients with those of the Company and its shareholders.322015,2016, the annual maximum contribution limit is $18,000 for employees under 50 years of age and $24,000 for employees 50 years of age or older. In addition, the Board of Directors may authorize the Company, from time to time, to match a portion of the team members’ contributions to the 401(k) Plan. During fiscal 2015 and 2014 and 2013,as well as a portion of fiscal 2016, until early March 2016, the Company matched 50% of each team member’s voluntary contributions to the 401(k) Plan up to the annual maximum contribution limit set forth above, including those made by the NEOs and our other executives.relocation, to key employees when they join us.Uponupon Termination or Change in Control.” The Board determined it appropriate to formalize the Company’s general severance policies and practices for its executive team and at the same time institute enhanced severance arrangements payable in the event of a termination of the executive’s employment following a change in control of the Company. The Board and Management Development Committee believe that the enhanced severance arrangements are necessary in order to provide executives with the appropriate incentives to act in the best interests of the Company and its shareholders, without concern for their own personal interests, and to provide for continuity of management during the pendency of a transaction that could result in a change in control of the Company. The Management Development Committee, in developing its recommendations to the Board, consulted with an outside compensation consultant hired by the Committee and the Company’s outside legal counsel. Based upon the foregoing, the Management Development Committee believes that the severance agreements contain terms and conditions which are comparable to those used by other companies that are similar in size to the Company.33, Section 280G as compensation that becomes payable or accelerated due to a Change in Control) payable under any of our other plans, agreements or policies, are capped so as to not be treated as “excess parachute payments” under Code Sections 280G and 4999. See “Compensation of Executive Officers – Compensation Discussion and Analysis – Golden Parachute Excise Tax” below for a further discussion of our policy with respect to golden parachute amounts.and soto not likely to result in payments to any executive officer in any year which would be subject to such restrictions.FASB ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718“Compensation – Stock Compensation” to record compensation expense associated with stock awards to our employees, including the NEOs, as more fully discussed in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.2016. As discussed above, the Management Development Committee does consider the impact of FASB ASC Topic 718 in determining to use grants of non-qualified stock options and restricted stock as our principal long-term incentive program for the executive team. Further, the Management Development Committee does consider the amount of compensation expense required to be recorded in determining the size of stock option grants and restricted stock awards to the Chief Executive Officer and the aggregate grants and awards made to the remainder of the executive team and team members generally.34to the extentif they exceed a specified level. These penalties include a 20% excise tax on executives receiving these excess payments and the elimination of a portion of our tax deduction forwhen these excess payments.payments are triggered. Payments under our severance agreements and from the acceleration of the exercisability of our stock options and vesting of our restricted stock in the event of a Change in Control of the Company are potentially subject to these tax penalties. Currently, payments under our severance agreements are capped at an amount that will not trigger the excise tax. There is no similar limitation on the acceleration of the exercisability of stock options and vesting of restricted stock since we believe it is unlikely that the acceleration of options and vesting of restricted stock alone would cause an executive to exceed the specified level. The Management Development Committee recognizes the need to retain flexibility to make compensation decisions that may cause payments to executives to exceed the levels specified in Code Section 280G to enable us to attract, retain and motivate highly qualified executives. It therefore has the authority to approve compensation that would exceed the specified level or to remove the cap contained in the severance agreements in appropriate circumstances.has reviewed and discussedBoard who participated in the review, discussions and recommendations of the Management Development Committee covered by the foregoing Compensation Discussion and Analysis has reviewed and discussed the same with management. Based on ourthe review and discussion with management, we havehe has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.MANAGEMENT DEVELOPMENT Philip J. DeCocco, ChairmanCOMPENSATION AND STOCK Kenneth R. DabrowskiOPTION COMMITTEE Terryll R. Smith, Chairman 20142015 Annual Meeting of Shareholders, approximately 90.1%95.5% of the votes cast by the shareholders were voted to approve the compensation of the Company’s named executive officers as discussed and disclosed in the 20142015 Proxy Statement. The Board and the Management Development Committee appreciate and value the views of our shareholders. In considering the results of this advisory vote on executive compensation, the Management Development Committee concluded that the compensation paid to our named executive officers and the Company’s overall pay practices enjoy shareholder support and did not make any material changes to the executive compensation program in response to the shareholder vote.48170.48170-2461. Communications should be sent by overnight or certified mail, return receipt requested. Such communications will be delivered directly to the Board, the Management Development Committee or the individual director(s), as designated on such communication.352014 and 20132014 (except as otherwise noted) to (i) persons serving as our Chief Executive Officer at any time during fiscal 2015,2016, (ii) persons serving as our Chief Financial Officer at any time during fiscal 2015,2016, (iii) our other executive officer as of June 30, 20152016 (as to compensation paid by us for services rendered in all capacities to the Company during fiscal 2015)2016); and (iv) persons serving as our executive officers at any time during fiscal 2015,2016, who were not serving as our executive officers as of June 30, 2015,2016, whose total compensation exceeded $100,000 in fiscal 20152016 (collectively, the “named executive officers” or “NEOs”). Please see the Compensation Discussion and Analysis for additional detail regarding the Company’s compensation philosophy, practices and fiscal 20152016 compensation decisions. Fiscal Year Total Jeffrey M. Armstrong, President and 2015 350,000 50,000 92,920 (4) 548,968 (5) 124,250 31,267 $ 1,197,405 Chief Executive Officer (3) 2014 220,769 ─ 39,570 (6) 290,102 (7) ─ 30,522 580,963 Song Yop Chung, Senior Vice President and Chief Technology Officer (8) 2015 205,569 28,000 49,680 (4) 51,500 (5) 58,504 11,088 404,341 Mark S. Hoefing, 2015 125,250 36,000 62,500 (4) 84,544 (5) ─ 9,452 317,746 Former Senior Vice 2014 240,407 ─ 39,570 (6) 46,912 (7) ─ 23,925 350,814 President and Chief
Operating Officer (9) 2013 231,527 ─ 16,170 (10) 33,651 (7) 75,803 22,426 379,577 Keith R. Marchiando, 2015 195,462 ─ 23,000 (4) 55,000 (5) ─ 25,106 298,568 Former Vice President – Finance and Chief Financial Officer(11) 2014 75,308 ─ ─ 105,032 (7) ─ 3,840 184,180 __________________(1)Represents cash incentive payments earned under our Fiscal 2015 Executive Short Term Incentive Plan. As discussed under “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 2015 – Annual Non-Equity Incentive Plan,” the plan provides for annual cash incentive payments based on annual Company revenue and operating income performance goals and achievement of individual strategic performance goals for fiscal 2015. Messrs. Hoefing and Marchiando did not receive any cash payments under the Fiscal 2015 Executive Short Term Incentive Plan because their employment terminated prior to June 30, 2015.(2)“All Other Compensation” in fiscal 2015 is comprised of (i) contributions made by us to the accounts of the named executives under our 401(k) Plan with respect to fiscal 2015 as follows: Mr. Armstrong $17,200, Mr. Chung $2,000, Mr. Hoefing $5,050, Mr. Marchiando $17,201, (ii) reimbursements for personal commuting expenses for Mr. Armstrong, (iii) the dollar value of any life insurance premiums we paid in fiscal 2015 with respect to term life insurance for the benefit of the named executives, (iv) the dollar value of any supplemental executive disability insurance premiums we paid in fiscal 2015 for the benefit of the named executives, (v) the dollar value of a monthly automobile allowance to the named executives, and (vi) the dollar value of payments made to Messrs. Armstrong and Marchiando for periods during which they opted out of the Company’s health plans.(3)Mr. Armstrong also served as the Company’s principal financial officer following the termination of Mr. Marchiando’s employment with the Company on May 8, 2015.(4)Represents the full grant date fair value associated with restricted stock awards, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for those awards. There can be no assurance that the FASB ASC Topic 718 restricted stock award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. As set forth under “Compensation of Executive Officers – Compensation Discussion and Analysis – Grants of Plan Based Awards” below, on October 13, 2014, Messrs. Armstrong, Chung, Hoefing and Marchiando received restricted stock awards for 10,100 shares, with a full grant date fair value of $92,920; 5,400 shares, with a full grant date fair value of $49,680; 6,800 shares, with a full grant date fair value of $62,500; and 2,500 shares, with a full grant date fair value of $23,000; respectively. One third of these restricted stock award vests and risk of forfeiture and other restrictions lapse on such shares on each anniversary of the date of grant if the executive’s services or employment has not terminated on or prior to such date.36(5)Represents the full grant date fair value associated with stock option awards, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for these awards. There can be no assurance that the FASB ASC Topic 718 option award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. With respect to an option for 100,000 shares of Common Stock granted to Mr. Armstrong, twenty-five percent of the option becomes exercisable on each anniversary of the date of grant if Mr. Armstrong’s services or employment have not terminated on or prior to such date. As discussed under “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 2015 – Long Term Equity Incentive Plan,” the remainder of the stock options were awarded pursuant to the Fiscal 2015 Executive Long Term Incentive Plan. The full grant date fair value was determined assuming achievement of the performance goals was at target levels, which would result in application of a 100% scaled payout multiplier, and assuming the Management Development Committee applied a 100% discretionary multiplier. If the highest level of performance conditions had been met under the Fiscal 2015 Executive Long Term Incentive Plan, the full grant date fair value associated with stock option awards during fiscal 2015 under such plan, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for those awards, would have been as follows: Mr. Armstrong $419,999, Mr. Chung $154,499, Mr. Hoefing $253,630, and Mr. Marchiando $164,999. Pursuant to the Fiscal 2015 Executive Long Term incentive Plan, Messrs. Armstrong and Chung received a grant of an option to purchase 53,597 and 19,716 shares, respectively, of Common Stock under the 2004 Stock Plan, based upon the level of achievement of the corporate revenue and operating income goals established under the Fiscal 2015 Executive Long Term Incentive Plan. These options were issued on September 29, 2015 and have an exercise price equal to the closing market price on that date. The full grant date fair value associated with these options is $162,400 and $59,740, respectively. One third of the option becomes exercisable on each anniversary of the date of grant if Messrs. Armstrong and Chung’s service or employment have not terminated on or prior to such date. The option shares become immediately exercisable in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” These options expire ten years from their date of grant or, if earlier, one year after the optionee’s death or permanent disability or three months after the optionee’s termination of employment. Messrs. Hoefing and Marchiando did not receive stock awards under the Fiscal 2015 Executive Long Term Incentive Plan because they terminated employment prior to June 30, 2015.(6)Represents the full grant date fair value associated with restricted stock awards under our 2014 Annual Incentive Plan, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for those awards. There can be no assurance that the FASB ASC Topic 718 restricted stock award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. The restricted stock awards were earned based on an individual’s achievement of performance goals during fiscal 2014 with a subsequent one year service vesting after the issuance date. The full grant date fair value was determined assuming achievement of the performance goals was at target levels. Compensation expense related to the restricted stock awards for fiscal 2014 is based on the closing price of the Common Stock on November 12, 2013, the date of grant, multiplied by the number of restricted stock awards expected to be issued and is amortized over the combined performance and service periods. Pursuant to the 2014 Annual Incentive Plan, Messrs. Armstrong and Hoefing received a grant of 3,000 and 2,000 shares, respectively, of restricted stock under the 2004 Stock Plan on October 13, 2014, based upon their level of achievement of their personal goals. The restricted stock award vests and risk of forfeiture and other restrictions will lapse on Mr. Armstrong’s shares on October 13, 2015 if his services or employment have not terminated on or prior to such date. The restricted stock awards become immediately vested and risk of forfeiture and other restrictions lapse in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” Mr. Hoefing’s shares were forfeited upon his termination of employment with the Company. Mr. Marchiando was not eligible for an award of restricted stock for fiscal 2014.37(7)Represents the full grant date fair value associated with stock option awards calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for these awards. There can be no assurance that the FASB ASC Topic 718 option award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. Twenty-five percent of the option becomes exercisable on each anniversary of the date of grant. The option shares become immediately exercisable in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” These options expire ten years from their date of grant or, if earlier, one year after the optionee’s death or permanent disability or three months after the optionee’s termination of employment.(8)Mr. Chung was appointed as an executive officer of the Company on May 19, 2015.(9)Mr. Hoefing resigned as Senior Vice President and Chief Operating Officer on December 12, 2014.(10)Represents the full grant date fair value associated with restricted stock awards under our 2013 Annual Incentive Plan, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for those awards. There can be no assurance that the FASB ASC Topic 718 restricted stock award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. The restricted stock awards were earned based on an individual’s achievement of performance goals during fiscal 2013 with a subsequent one year service vesting after the issuance date. The full grant date fair value was determined assuming achievement of the performance goals was at target levels. Compensation expense related to the restricted stock awards is based on the closing price of the Common Stock on November 13, 2012, the date of grant, multiplied by the number of restricted stock awards expected to be issued and is amortized over the combined performance and service periods. Pursuant to the 2013 Annual Incentive Plan, Mr. Hoefing received a grant of 3,000 shares of restricted stock under the 2004 Stock Plan on August 27, 2013 based upon his level of achievement of his personal goals. The restricted stock award vested and risk of forfeiture and other restrictions lapsed on Mr. Hoefing’s shares on August 27, 2014.(11)Mr. Marchiando resigned as Vice President and Chief Financial Officer on May 8, 2015.38Name and Principal Position Fiscal Year Salary ($) Bonus ($) Total 2016 - - 160,860 $699,030 2016 194,000 25,000 - 7,647 $370,992 2016 215,452 - - 179,957 $924,163 2015 350,000 50,000 124,250 31,267 $1,197,405 2014 220,769 - - 30,522 $580,963 2016 158,227 - - 9,161 $270,808 2015 205,569 28,000 58,504 11,088 $404,341 2015 Name Grant Date Date Approved by Management Development Committee Threshold ($) Target ($) Maximum ($) Threshold ($) All Other Stock Awards: Number of Shares of Stock(3) All Other Option Awards; Number of Securities Underlying Options (#)(4) Exercise or Base Price of Option Awards ($/Sh)(5) Grant Date Fair Value of Stock and Option Awards ($) Jeffrey M. Armstrong 131,251 175,000 314,999 10/13/2014 10/13/2014 105,001 140,000 419,999 140,000 (6) 10/13/2014 10/13/2014 10,100 92,920 (7) 12/1/2014 (8) 11/11/2014 (8) 100,000 9.95 408,968 (9) Song Yop Chung 61,801 82,400 148,320 10/13/2014 10/13/2014 38,626 51,500 154,499 51,500 (6) 10/13/2014 10/13/2014 5,400 49,680 (7) Mark S. Hoefing 75,151 100,200 180,360 10/13/2014 10/13/2014 63,409 84,544 253,630 84,544 (6) 10/13/2014 10/13/2014 6,800 62,500 (7) Keith R. Marchiando 66,001 88,000 158,400 10/13/2014 10/13/2014 (6) 41,251 55,000 164,999 55,000 (6) 10/13/2014 10/13/2014 2,500 23,000 (7) (1)The amount reported in these columns are the cash amounts that would have been paid under our Fiscal 2015 Executive Short Term Incentive Plan if the threshold, target and maximum financial performance objectives and individual strategic goals were met. Pursuant to the terms of the Fiscal 2015 Executive Short Term Incentive Plan, Messrs. Armstrong and Chung will receive cash payments of $124,250 and $58,504, respectively. Messrs. Hoefing and Marchiando did not receive cash payments under the Fiscal 2015 Executive Short Term Incentive Plan because they terminated employment prior to June 30, 2015. See “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 2015 – Annual Non-Equity Incentive Plan.”(2)The amount reported in these columns are the dollar values of the restricted stock or stock options that would have been granted under our Fiscal 2015 Executive Long Term Incentive Plan if the Company’s threshold, target and maximum performance objectives were met. Under the Fiscal 2015 Executive Long Term Incentive Plan, the final awards to reflect actual performance are denominated in dollars and paid in shares of restricted stock or stock options determined by dividing the dollar amount of the award by the closing price of the Common Stock on the NASDAQ Stock Market’s Global Market on the award date, in the case of restricted stock awards, or the value of an option share on the date the Management Development Committee approves the payout under the plan, determined using a Black Scholes option-pricing model valuation, in the case of stock options. Pursuant to the terms of the Fiscal 2015 Executive Long Term Incentive Plan, Messrs. Armstrong and Chung received a grant of an option to purchase 53,597 and 19,716 shares, respectively, of Common Stock under the 2004 Stock Plan. These options were issued on September 29, 2015 and have an exercise price equal to the closing market price on that date. The full grant date fair value associated with these options is $162,400 and $59,740, respectively. One third of the option grant becomes exercisable on each anniversary of the date of grant if Messrs. Armstrong and Chung’s services or employment have not terminated on or prior to such date. The option awards become immediately exercisable in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” Messrs. Hoefing and Marchiando did not receive stock awards under the Fiscal 2015 Executive Long Term Incentive Plan because they terminated employment prior to June 30, 2015. See “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 2015 – Long Term Equity Incentive Plan.”
201639(3)One-third of the restricted stock award vests and risk of forfeitures and other restrictions lapse on such shares on each anniversary of the date of grant if the executive’s services or employment have not terminated on or prior to such date. The restricted stock awards become immediately vested and risk of forfeiture and other restrictions lapse in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” Messrs. Hoefing and Marchiando’s restricted stock awards were forfeited upon their termination of employment.(4)Twenty-five percent of the option becomes exercisable on each anniversary of the date of grant. The option shares become immediately exercisable in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.” These options expire ten years from their date of grant or, if earlier, one year after the optionee’s death or permanent disability or three months after the optionee’s termination of employment.(5)The exercise price of these stock option awards under the 2004 Stock Plan was set at the closing sales price of the Common Stock on the NASDAQ Global Market on the Grant Date. See footnote 8 to this table for a description of the Grant Date.(6)Represents the full grant date fair value associated with stock awards under our Fiscal 2015 Executive Long Term Incentive Plan, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for those awards. There can be no assurance that the FASB ASC Topic 718 stock award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. As discussed under “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 2015 – Long Term Equity Incentive Plan,” the stock awards are earned based on an individual’s achievement of performance goals during fiscal 2015. The full grant date fair value was determined assuming achievement of the performance goals was at target levels, which would result in application of a 100% scaled payout multiplier, and assuming the Management Development Committee applied a 100% discretionary multiplier.(7)Represents the full grant date fair value associated with restricted stock awards, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for those awards. There can be no assurance that the FASB ASC Topic 718 restricted stock award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015. Messrs. Hoefing and Marchiando’s restricted stock awards were forfeited upon their termination of employment.(8)All awards under the 2004 Stock Plan are granted upon approval of the Management Development Committee. During fiscal 2015, the Management Development Committee granted stock option awards under the 2004 Stock Plan. Stock option awards made in fiscal 2015 became effective (the “Grant Date”) on the first business day of the month following the month in which the grant was approved by the Management Development Committee. The exercise price of the option award was set at the closing sales price of the Common Stock on the NASDAQ Global Market on the Grant Date.(9)Represents the full grant date fair value associated with stock options awards, calculated in accordance with FASB ASC Topic 718, excluding any forfeiture reserves recorded for these awards. There can be no assurance that the FASB ASC Topic 718 option award amounts shown above will ever be realized. The assumptions we used to calculate these amounts are included in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2015.40 Name Grant Date Date Approved by Management Development Committee Threshold ($) Target ($) Maximum ($) Threshold ($) Target ($) Maximum ($) All Other Stock Awards: Number of Shares of Stock Grant Date Fair Value of Stock and Option Awards ($) 2/2/2016 2/2/2016 6.41 2/2/2016 2/2/2016 6.41 12/1/2015 11/9/2015 9,570 7.78 David L. Watza 58,500 78,000 140,400 9/26/2015 9/26/2015 36,563 48,750 87,750 11/2/2015 30,000 7.95 162,094 216,125 389,025 9/26/2015 9/26/2015 108,062 144,083 259,350 12/1/2015 11/9/2015 100,000 7.78 9/29/2015 9/26/2015 24,000 7.63 65,835 87,780 158,004 9/26/2015 9/26/2015 41,147 54,863 98,753 9/29/2015 9/26/2015 16,000 7.63 other than Mr. Armstrong, has an employment agreement with us, other than the agreements discussed under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.”Pursuant to his offer letter, Mr. Armstrong receives an annual base salary of $350,000 and participates in the Company’s annual incentive compensation plans. Mr. Armstrong is entitled to receive health, welfare, auto and other benefits generally available to senior management of the Company, and received reimbursement for reasonable relocation costs, such as temporary housing, travel expenses and moving costs through July 2014. In addition to stock options and restricted stock granted to Mr. Armstrong in fiscal 2014 and 2015, subject to and conditioned upon the future approval of the Board’s Management Development Committee, on December 1, 2015, if Mr. Armstrong continues to be employed by the Company as President and Chief Executive Officer at that date, he will be granted non-qualified stock options to purchase 100,000 shares of the Common Stock. As part of the offer letter, Mr. Armstrong is to be appointed to the Company’s Board of Directors so long as he serves as President and Chief Executive Officer.2015.20152016 FISCAL YEAR-ENDName Option Awards(1) Stock Awards(2) Equity Incentive Plan Awards: Number of Shares Underlying Unexercised/ Unearned Options (#)(3) Option Exercise Price ($) Option Expiration Date(4) Jeffrey M. Armstrong ─ ─ 46,204 7.63(6) 9/29/2025 10,100(7) 106,656 ─ 100,000(8) ─ 9.95 12/1/2024 3,000(9) 31,680 25,000 75,000(10) ─ 9.91 12/2/2023 ─ ─ Song Yop Chung ─ ─ 16,996 7.63(6) 9/29/2025 5,400(7) 57,024 1,250 3,750 ─ 10.55 9/3/2023 2,000(9) 21,120 4,000 4,000 ─ 5.70 9/4/2022 ─ ─ 3,000 1,500 ─ 6.14 9/1/2021 ─ ─ 3,000 ─ ─ 6.05 5/2/2021 ─ ─ Mark S. Hoefing(11) ─ ─ ─ ─ ─ ─ ─ Keith R. Marchiando(12) 6,250 ─ ─ 14.33 3/3/2024 ─ ─ (1)The option award becomes immediately exercisable in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.”(2)The restricted stock awards become immediately vested and risk of forfeiture and other restrictions lapse in the event of a change in control as described under “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control.”(3)As discussed under “Compensation of Executive Officers – Compensation Discussion and Analysis – Key Elements of Compensation for Fiscal 2015 – Long Term Equity Incentive Plan,” the stock option awards under the Fiscal 2015 Executive Long Term Incentive Plan identified in the table above are based on the assumption that the Company would achieve at the target level for each of the two performance goals during fiscal 2015, which would result in application of a 100% scaled payout multiplier, assuming the Management Development Committee applied a 100% discretionary multiplier and using a Black Scholes option-pricing model valuation for the Common Stock as of September 29, 2015 of $3.03. Pursuant to the terms of the Fiscal 2015 Executive Long Term Incentive Plan, Messrs. Armstrong and Chung received a grant of an option to purchase 53,597 and 19,716 shares, respectively, of Common Stock under the 2004 Stock Plan. These options were issued on September 29, 2015 and have an exercise price equal to the closing market price of the Common Stock on that date. One third of the option becomes exercisable on each anniversary of the date of grant if the executive’s services or employment have not terminated on or prior to such dates.41(4)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.(5)Market value was determined by multiplying the number of shares that have not vested by the closing market price of the Common Stock on June 30, 2015.(6)The closing market price of the Common Stock on September 29, 2915, the grant date for the options granted under the Fiscal 2015 Executive Long Term incentive Plan.��(7)One third of these shares will vest and risk of forfeiture and other restrictions will lapse on those shares, on each of October 13, 2015, 2016 and 2017 if the executive’s services or employment have not terminated on or prior to such date.(8)One quarter of these shares will vest on each of December 1, 2015, 2016, 2017 and 2018 if the executive’s services or employment have not terminated on or prior to such date.(9)Pursuant to the 2014 Annual Incentive Plan, the executive received these grants of restricted stock under the 2004 Stock Plan on October 13, 2014. These shares will vest and risk of forfeiture and other restrictions will lapse on those shares on the first anniversary of the date of grant if the executive’s services or employment have not terminated on or prior to such date.(10)One third of these shares will vest on each of December 2, 2015, 2016, and 2017 if the executive’s services or employment have not terminated on or prior to such date.(11)Mr. Hoefing terminated employment with the Company on December 12, 2014 so that at June 30, 2015 he held no unexercised, unvested or unearned options or unvested or unearned shares.(12)Mr. Marchiando terminated employment with the Company on May 8, 2015 so that at June 30, 2015 he held no unvested or unearned options or sharesName Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Exercise Price ($) Number of Shares That Have Not Vested (#) - 6.41 2/2/2026 7,390 - - 7.78 12/1/2025 117,000 - 6,000 5.83 12/3/2022 - - - 8,000 - 6.14 9/1/2021 - - - 50,000 - 8.81 2/1/2018 - - - 8,000 - 11.78 9/4/2017 - - - 8,000 - 8.00 9/1/2016 - - - David L. Watza - 7.95 11/2/2025 - - - - - - - - - 7,546 35,317 - - - - - - 22,304 104,383 - - - - - - 8,493 39,747 2015.2015 Option Awards Stock Awards Name Number of Shares Acquired and Vesting Value Realized on Vesting(2) ($) Jeffrey M. Armstrong 0 0 0 0 Song Yop Chung 0 0 3,000 33,630 Mark S. Hoefing 53,250 243,278 3,000 33,630 Keith R. Marchiando 0 0 0 0 (1)Calculated by multiplying the number of shares acquired upon exercise by the closing price of the Common Stock on the NASDAQ Global Market on the day preceding the exercise date less the exercise price of the option.(2)Calculated by multiplying the number of shares acquired upon vesting by the closing price of the Common Stock on the NASDAQ Global Market on the day preceding the vesting date.
201642 Option Awards Stock Awards Name Number of Shares Acquired on Exercise Number of Shares Acquired on Vesting W. Richard Marz - - 790 5,783 David L. Watza - - - - Jeffrey M. Armstrong - - 6,367 49,663 Song Yop Chung - - 3,800 29,640 agreementsagreement with Messrs. Armstrong and Chung.Mr. Watza. Under the terms of Mr. Armstrong’sWatza’ severance agreement, in the event that we terminate his employment without “Cause” (provided such termination constitutes a “separation from service” under Code Section 409A), he will be paid an amount of cash severance equal to one timesone-half his current annual base salary, as in effect immediately prior to his termination, a prorated portion of any bonus he would have earned for the year of termination had Mr. ArmstrongWatza been employed at the end of the applicable bonus period, and continuation of Company-provided health, welfare and automobile benefits for oneone-half of a year or, if earlier, his date of death. Under the terms of Mr. Chung’s severance agreements, in the event his employment is terminated without “Cause” (provided such termination constitutes a “separation from service” under Code Section 409A), he will be paid an amount of severance equal to six months of his current annual base salary, as in effect immediately prior to his termination, a prorated portion of any bonus he would have earned for the year of termination had he been employed at the end of the applicable bonus period, and continuation of Company-provided health, welfare and automobile benefits for six months or, if earlier, his date of death. All severance payments and benefits will be paid or provided over the period during which we are required to provide the benefit.Theagreementsagreement also provideprovides that, if the employment of our executive officersMr. Watza is terminated for any reason other than death, disability or Cause (provided such termination constitutes a “separation from service” under Code Section 409A), or they resignhe resigns for “Good Reason,” six months prior to or within two years after a “Change in Control,” in lieu of the severance described in the prior paragraph, Mr. ArmstrongWatza will be entitled to an amount of severance equal to two timesone time his current annual base salary, as in effect immediately prior to his termination, a prorated portion of his target bonus for the year of termination, based on the number of days worked in the year of termination, continuation of Company-provided health benefits for two yearsone year or, if earlier, his date of death, automobile benefits for one year or, if earlier, his date of death, other welfare benefits for two years and continued coverage under director and officer liability insurance policies for six years, and Mr. Chung will be entitled to an amount of severance equal to one times his current annual base salary, as in effect immediately prior to his termination, a prorated portion of his target bonus for the year of termination, based on the number of days worked in the year of termination, continuation of Company-provided health, welfare and automobile benefits for one year or, if earlier, his date of death and continued coverage under director and officer liability insurance policies for six years. Base salary and bonus severance payments will be paid in a lump sum at the time of termination of employment and other benefits will be provided over the period during which we are required to provide the benefit. To the extent that any severance payments would not be exempt from Code Section 409A and the ExecutiveMr. Watza is determined to be a “specified employee” as defined under Code Section 409A, then such payments will be suspended for six months from the date of the Executive’sMr. Watza’ termination of employment. Suspended payments will be paid in a lump-sum, plus interest at the prime rate, plus two percent, at the end of the suspension period. The special severance expires three years from the date of the severance agreement, except that such expiration date shall be extended for consecutive one year periods, unless, at least 180 days prior to the expiration date, we notify the executiveMr. Watza in writing that we are not extending the term of these provisions.The NEOs have allthe executive’shis right to compete with us for the longer of twelve months or the period in which we are required to make payments to the executive, and standard employee proprietary information and inventions agreement, containing confidentiality provisions and a two-year restriction on soliciting our employees. We have the right to cease all further payments under the NEOsMr. Watza’ severance agreementsagreement in the event that the NEOhe violates the executive non-competition agreement. The NEOsMr. Watza must sign a standard release to receive payments under the severance agreements, including standard non-disparagement provisions.43·A merger of the Company in which the Company is not the survivor,·A share exchange transaction in which our shareholders own less than 50% of the stock of the survivor,·The sale or transfer of all or substantially all of our assets, or·Any person, or group of persons who agree to act together to acquire, hold, vote or dispose of the Common Stock, acquires more than 50% of the Common Stock.·Personal dishonesty in connection with the performance of services for the Company,·Willful misconduct in connection with the performance of services for the Company,·Conviction for violation of any law involving (A) imprisonment that interferes with performance of duties or (B) moral turpitude,·Repeated and intentional failure to perform stated duties, after written notice is delivered identifying the failure, and it is not cured within 10 days,·Breach of a fiduciary duty to the Company,·Breach of executive agreement not to compete or employee proprietary information and inventions agreement, or·Prior to Change in Control, engaging in activities detrimental to interests of the Company that have a demonstrable adverse effect on the Company.· with the Company immediately prior to the Change in Control,·Material diminution in the executive’s base salary in effect immediately prior to the Change in Control which shall be a reduction in such base salary in effect immediately prior to the Change in Control which shall be a reduction in such base salary of five (5%) percent or more unless a greater reduction is required by Code Section 409A to constitute an “involuntary separation” from service,·Material required relocation of the executive’s principal place of employment which shall be a relocation of more than 50 miles from his or her place of employment prior to the Change in Control unless a relocation of a greater distance is required by Code Section 409A to constitute an “involuntary separation” from service, or·Breach of any provision in the severance agreements.Messrs. Hoefing and Marchiando were also parties to a severance agreement similar to the other NEO’s (other than Mr. Armstrong). They terminated their employment with the Company on December 12, 2014 and May 8, 2015, respectively. Theirimmediately prior to the Change in Control,agreements did not provide for payments to them upon their voluntary termination of employment.2015,2016, except as otherwise noted.44NameType of Payment BenefitPrior to Change in ControlFollowing Change in ControlRetirement, Voluntary Termination by NEO or For Cause Termination By CompanyInvoluntary Termination Without Cause By Company (1)No Terminationof EmploymentVoluntary Termination by NEO, Without Good Reason, or For Cause TerminationBy CompanyVoluntary Termination By NEO, For Good Reason, or Involuntary Termination By Company, Other Than For Cause (2)Jeffrey M. ArmstrongCash PaymentStock Options(3)Stock Awards(4)BenefitsTotal$ 0$ 0$ 0$ 0$ 0$473,821$ 0$ 0$13,317$487,138$ 0$ 109,750$ 138,336$ 0$ 248,086$ 0$ 109,750$ 138,336$ 0$ 248,086$875,000$109,750$138,336$19,435$1,142,521Song Yop ChungCash PaymentStock Options(3)Stock Awards(4)BenefitsTotal$ 0$ 0$ 0$ 0$ 0$163,302$ 0$ 0$12,839$176,171$ 0$ 26,107$ 78,144$ 0$104,251$ 0$ 26,107$ 78,144$ 0$104,251$292,400$ 26,107$ 78,144$ 25,678$422,329Mark S. Hoefing(5)Cash PaymentStock Options(3)Stock Awards(4)BenefitsTotal$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0Keith R. Marchiando(6)Cash PaymentStock Options(3)Stock Awards(4)BenefitsTotal$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0(1)In preparing the above estimates we assumed that the annual bonus was payable at the same level as the bonus was earned for fiscal 2015, valued the executive life insurance and automobile benefits at the actual cost incurred by the Company in fiscal 2015 for such benefits, and valued the health and welfare plan benefits, other than executive life insurance, at the cost of COBRA coverage for that employee as of June 30, 2015, except for Mr. Armstrong, for whom we valued the benefits at the dollar value of payments made to him in fiscal 2015 in lieu of coverage under such plans.(2)In preparing the above estimates we assumed that the executive would receive his or her full target bonus for the year of termination, valued the executive life insurance and automobile benefits at the actual cost incurred by the Company in fiscal 2015 for such benefits, and valued the health and welfare plan benefits, other than executive life insurance, at the cost of COBRA coverage for that employee as of June 30, 2015, except for Mr. Armstrong, for whom we valued the benefits at the dollar value of payments made to him in fiscal 2015 in lieu of coverage under such plans.(3)Calculated by multiplying the number of shares underlying unexercisable options the exercisability of which is accelerated, and the exercise price of which is less than such closing price, by $10.56, the closing price of the Common Stock on the NASDAQ Global Market on June 30, 2015, less the exercise price of such option.45(4)Calculated by multiplying the number of unearned shares of restricted stock the vesting of which is accelerated, by $10.56, the closing price of the Common Stock on the NASDAQ Global Market on June 30, 2015.(5)Mr. Hoefing resigned from the Company on December 12, 2014 as Senior Vice President and Chief Operating Officer. Mr. Hoefing was not eligible to receive any payments under a severance agreement nor acceleration of the vesting of any stock options or restricted stock awards upon termination of his employment.(6)Mr. Marchiando resigned from the Company on May 8, 2015 as Vice President – Finance and Chief Financial Officer. Mr. Marchiando was not eligible to receive any payments under a severance agreement nor acceleration of the vesting of any stock options or stock awards upon termination of his employment. Type of Payment Benefit Prior to Change in Control Following Change in Control Retirement, Voluntary Termination by NEO or For Cause Termination by Company No Termination of Employment Voluntary Termination by NEO, Without Good Reason, or For Cause Termination by Company Cash Payment $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $124,390 $124,390 $124,390 Benefits $ - $ - $ - $ - $ - Total $ - $ - $124,390 $124,390 $124,390 David L. Watza Cash Payment $ - $130,000 $ - $ - $338,000 $ - $- $ - $ - $ - $ - $- $ - $ - $48,750 Benefits $ - $18,210 $ - $ - $36,420 Total $ - $148,210 $ - $ - $423,170 Cash Payment $ - $367,500 $ - $ - $ - Stock Options $ - $ - $ - $ - $ - Stock Awards $ - $ - $ - $ - $ - Benefits $ - $17,213 $ - $ - $ - Total $ - $384,713 $ - $ - $ - Cash Payment $ - $ - $ - $ - $ - Stock Options $ - $ - $ - $ - $ - Stock Awards $ - $ - $ - $ - $ - Benefits $ - $ - $ - $ - $ - Total $ - $ - $ - $ - $ - 20152016 and 20142015 were approved by the Audit Committee pursuant to its pre-approval policies and procedures prior to the service being provided. None of the audit-related fees or tax fees described below arising in fiscal 20152016 and 20142015 were approved by the Audit Committee after the initiation of such services pursuant to an exemption from the SEC’s requirements relating to approval of these types of services by the Audit Committee prior to the provision of the service under Section 2.01(c)(7)(i)(C) of SEC Regulation S-X.2015 and $414,623 in fiscal 2014.20152016 or fiscal 2014. The aggregate fees and expenses billed by BDO for preparation of a transfer pricing tax study were $15,266 in fiscal 2014.4620152016 or fiscal 2014.20162017 annual meeting which are eligible for inclusion in our proxy statement for that meeting under Rule 14a-8 promulgated under the Exchange Act, must be received by the Secretary of the Company at 47827 Halyard Drive, Plymouth, MI 48170,48170-2461, no later than June 1, 20162017 in order to be considered for inclusion in our proxy statement relating to that meeting. In order to curtail controversy as to the date on which a proposal was received by us, it is suggested that proposals be submitted by certified mail, return receipt requested.If Proposal 3 is not approved by the shareholders, shareholder proposals intended to be presented at the 2016 annual meeting which are not eligible for inclusion in our proxy statement for that meeting under Rule 14a-8 are considered untimely under Rule 14a-5 promulgated under the Exchange Act unless received by the Secretary of the Company at the Company’s offices no later than August 15, 2016.However, if Proposal 3 is approved by the shareholders, Article I, Section 10 of our will provide that, in order for shareholder proposals to be properly brought before the 20162017 annual meeting, written notice of such proposal, along with the information required by Article I, Section 10 of our Bylaws, must be received by the Secretary of the Company at our principal executive offices no earlier than the close of business on August 12, 20162017 and no later than September 11, 2016.2017. If the annual meeting is advanced by more than 30 days or delayed by more than 70 days from the anniversary date of the 20152016 annual meeting, the notice must be delivered not earlier than the close of business on the 90th day prior to the 20162017 annual meeting and not later than the close of business on the 60th day prior to the 20162017 annual meeting or, if later, the 10th day following the day on which a public announcement of the date of the 20162017 annual meeting is first made by the Company.20162017 annual meeting to use their discretionary voting authority, to the extent permitted by law, with respect to any proposal considered untimely at the 20162017 annual meeting.20162017 annual meeting should submit such recommendations in writing to the Nominating and Corporate Governance Committee, c/o Assistant Secretary, Perceptron, Inc., 47827 Halyard Drive, Plymouth, MI 4817048170-2461 no later than May 2, 2016.2017. The recommendation should be accompanied by the following: (i) the name, address, e-mail address (if any), and telephone number of the shareholder, the number of shares of the Common Stock beneficially owned by the shareholder and proof of the shareholder’s beneficial ownership of the Common Stock by one of the means set forth in Rule 14a-8(b)(2) promulgated under the Exchange Act; (ii) the name, address, e-mail address (if any) and telephone number of the proposed nominee and the number of shares of the Common Stock beneficially owned by the nominee; (iii) a detailed description of the proposed nominee’s business, professional, public, academic, scientific or technological experience and other qualifications for Board membership, including the name and address of other businesses for which the proposed nominee has provided services, or for which he or she has served as a director, in the last five years, a description of the proposed nominee’s specific experience in such position and the proposed nominee’s academic achievements; (iv) a description of any potential conflicts between the interests of the Company and its shareholders and the proposed nominee; (v) a written agreement by the proposed nominee to serve as a member of the Company’s Board if nominated and elected; and (vi) a written representation by the shareholder and the proposed nominee that the proposed nominee is not an affiliate or affiliated party with respect to the shareholder. The Assistant Secretary will forward any recommendations to the Nominating and Corporate Governance Committee. The nominating shareholder and proposed nominee may be requested to provide additional information regarding the shareholder or the proposed nominee and to attend one or more interviews, in each case, as requested by the Board or Nominating and Corporate Governance Committee.47If Proposal 3 is approved by the shareholders, shareholders20162017 annual meeting of shareholders must provide written notice of such intention, along with the other information required by Article 1, Section 10 of our Bylaws, to the Secretary of the Company at our principal executive offices no earlier than the close of business on August 12, 20162017 and no later than September 11, 2016.2017. If the annual meeting is advanced by more than 30 days or delayed by more than 70 days from the anniversary date of the 20152016 annual meeting, the notice must be delivered not earlier than the close of business on the 90th day prior to the 20162017 annual meeting and not later than the close of business on the 60th day prior to the 20162017 annual meeting or, if later, the 10th day following the day on which a public announcement of the date of the 20162017 annual meeting is first made by the Company. Notwithstanding the foregoing, if the number of directors to be elected is increased and there is no public disclosure regarding such increase or naming all of the nominees for director at least 70 days prior to the first anniversary of the prior year’s annual meeting, then shareholder notice with regard to nomination of directors shall be considered timely if received by the Secretary of the Company no later than the 10th day following public disclosure of the increase in the number of directors to be elected. A proponent must also update the information provided in or with the notice at the times specified by our Bylaws. Nomination notices which do not contain the information required by our Bylaws or which are not delivered in compliance with the procedure set forth in our Bylaws will not be considered at the shareholder meeting.48AMENDMENT TO ARTICLE 1, SECTION 10 OF BYLAWSREGARDING ADVANCE NOTICE PROVISIONSSection 10.ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER BUSINESS AND NOMINATIONS.(a)Director Nominations.(1) Only persons who are nominated in accordance with the procedures set forth in this Section 10 shall be eligible to serve as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at an annual or special meeting of shareholders (i) by or at the direction of the board of directors or any duly authorized committee thereof (including, without limitation, by making reference to the nominees in the proxy statement delivered to shareholders on behalf of the board of directors), or (ii) by any shareholder of the Corporation who was a shareholder of record both at the time of giving of notice provided for in this Section 10 and at the time of the shareholders meeting, who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section 10, who attends, or whose duly qualified representative attends, the meeting and makes such nomination(s) and, in the case of nominations for election at a special meeting, only if the board of directors or a court has first determined that directors are to be elected at such meeting. Unless otherwise provided in the Corporation’s articles of incorporation, Section 10(1)(ii) shall be the exclusive means for a shareholder to propose or make any nomination of a person or persons for election to the board to be considered by the shareholders at an annual meeting or special meeting.(2) Except as may be otherwise required by law, for nominations to be made by a shareholder at an annual meeting or, if the board of directors has first determined that directors are to be elected at a special meeting, at a special meeting, the shareholder must (i) provide Timely Notice thereof in writing and in proper form (as provided in Section 10 (a)(3)) to the secretary of the Corporation at the Corporation’s principal office and (ii) provide any updates or supplements to such notice at the times and in the form required by Section 10(c).(3) To be in proper form for purposes of this Section 10(a), a shareholder’s notice must set forth the following information:(i) as to each person whom the shareholder proposes to nominate for election or reelection as a director (A) all information relating to such proposed nominee that would be required to be set forth in a shareholder’s notice pursuant to this Section 10 if such proposed nominee were a Proposing Person, (B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 under the Exchange Act and the rules and regulations thereunder (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, arrangements or understandings between or among any Proposing Person and each proposed nominee, and his or her respective affiliates and associates, and (D) an undertaking from each such person to be nominated that, if elected to the board of directors, they will comply with all corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines and other policies of the Corporation that are generally applicable from time to time to directors who are not employees of the Corporation;(ii) as to each Proposing Person, (A) the name and address of such Proposing Person and, as to the shareholder providing the notice, such name and address as they appear on the Corporation’s books, (B) a statement describing and quantifying in reasonable detail any Material Ownership Interests, (C) the amount of any equity securities beneficially owned (as defined in Rule 13d-3 (or any successor thereof) under the Exchange Act) in any direct competitor of the Corporation or its operating subsidiaries if such nominee(s) and the Proposing Persons, in the aggregate, beneficially own 5% or more of any class of equity securities of such direct competitor, and (D) whether the Proposing Person intends to solicit proxies from shareholders in support of such nominee(s); and(iii) a representation that the shareholder providing the notice intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice.(4) The shareholder providing the notice shall furnish such other information as may reasonably be requested by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence or lack of independence of such nominee.A-1(5) Notwithstanding anything in the Timely Notice requirement in Section 10(a)(2) to the contrary, in the event that the number of directors to be elected to the board of directors is increased and there is no Public Announcement by the Corporation naming all of the nominees for director or, in the alternative, specifying the size of the increased board of directors at least 70 days prior to the first anniversary of the preceding year’s annual meeting of shareholders, a shareholder’s notice required by this Section 10 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to or mailed and received by the secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such Public Announcement is first made by the Corporation.(b)Other Business.(1) At any annual or special meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a shareholders meeting, business (except as provided in the next sentence), must be (A) specified in the notice of meeting given by or at the direction of the board of directors (or any duly authorized committee thereof), (B) brought before the meeting by or at the direction of the board of directors, the chairperson or the president, or (C) otherwise properly brought by any shareholder of the Corporation who was a shareholder of record both at the time of giving of notice provided for in this Section and at the time of the meeting of shareholders, who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section 10(b) and who attends, or whose duly qualified representative attends, the meeting and presents such business to the meeting. Except (i) for proposals made in accordance with the procedures and conditions set forth in Rule 14a-8 (or any successor thereof) under the Exchange Act and included in the notice of meeting and proxy statement given by or at the direction of the board of directors (or any duly authorized committee thereof), (ii) for director nominations (which shall be governed by Section 10(a)) and (iii) as otherwise required by applicable law, this Section 10(b) shall be the exclusive means for a shareholder to propose business to be brought before any meeting of shareholders.(2) Except as may be otherwise required by law, for business to be properly brought before an annual or special meeting by a shareholder or shareholders pursuant to this Section 10(b), (i) the business must otherwise be a proper matter for shareholder action under applicable law and (ii) the shareholder must (A) provide Timely Notice thereof in writing and in proper form to the secretary of the Corporation at the Corporation’s principal office and (B) provide any updates or supplements to such notice at the times and in the form required by Section 10(c).(3) To be in proper form for purposes of this Section 10(b), a shareholder’s notice shall set forth the following information:(i) a brief description of the business desired to be brought before the meeting (including the text of any resolutions or bylaw amendments proposed for consideration) and the reasons for conducting such business at the meeting;(ii) all information relating to such proposed business that is required to be included in a proxy statement or other filings required to be made in connection with solicitations of proxies pursuant to Section 14 under the Exchange Act and the rules and regulations thereunder in connection with the meeting at which such proposed business is to be acted upon;(iii) a brief description of any material interest in such business of each Proposing Person and a brief description of all agreements, arrangements and understandings between such Proposing Person and any other person or persons (including their names) in connection with the proposal of such business;(iv) as to each Proposing Person, (A) the name and address of such Proposing Person and, as to the shareholder providing the notice, such name and address as they appear on the Corporation’s books, (B) a statement describing and quantifying in reasonable detail any Material Ownership Interests, and (C) whether the Proposing Person intends to solicit proxies from shareholders in support of such business; and(v) a representation that the shareholder providing the notice intends to appear in person or by proxy at the meeting to propose the business identified in the shareholder’s notice.(c)Requirement to Update Information. A shareholder providing any notice as provided in Section 10 (a) or (b) shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to Section 10 or 10(b), as applicable, shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting date or any adjournment or postponement thereof, and such update and supplement shall be delivered to or otherwise received by the secretary at the principal executive offices of the Corporation not later than two (2) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date) and not later than eight (8) business days prior to the date for the meeting or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).A-2
(d)Determination of Improperly Brought Nomination or Business. The chairperson of the meeting shall, if the facts so warrant, determine and declare to the meeting that one or more nominations or other business was not properly brought before the meeting in accordance with the provisions of this Section 10 and, if the chairperson should so determine, the chairperson shall so declare to the meeting and any such defective nomination shall be disregarded and any such improperly brought business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.(e)Definitions. As used in this Section 10, the following terms have the meanings ascribed to them below.(1) “Exchange Act” means the Securities Exchange Act of 1934, as amended.(2) “Material Ownership Interests” means (i) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially (as defined in Rule 13d-3 (or any successor thereof) under the Exchange Act) and of record by such Proposing Person, (ii) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation (a “Derivative Instrument”) directly or indirectly owned beneficially by such Proposing Person, (iii) any proxy, contract, arrangement, understanding, or relationship pursuant to which such Proposing Person has a right to vote any shares of any security of the Corporation, (iv) any short interest beneficially owned or held by such Proposing Person in any security of the Corporation, (v) any rights to dividends on the shares of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (vi) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a (A) limited liability company in which the Proposing Person is a member or, directly or indirectly, beneficially owns an interest in a member, or (B) general or limited partnership in which such Proposing Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, and (vii) any performance related fees (other than an asset-based fee) to which such Proposing Person is entitled based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice.(3) “Proposing Person” means (i) the shareholder providing the notice of the nomination or business proposed to be made or presented at the meeting, (ii) the beneficial owner, if different, on whose behalf the nomination or business proposed to be made or presented at the meeting is made, (iii) any affiliate or associate of such beneficial owner (as such terms are defined in Rule 12b-2 (or any successor thereof) under the Exchange Act), and (iv) any other person with whom such shareholder or such beneficial owner (or any of their respective affiliates or associates) is acting in concert,(4) “Public Announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press, Prime Newswire, Marketwire, PR Newswire or comparable news service or in a document furnished to or filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and publicly available.(5) “Timely Notice.”(i) With respect to an annual meeting, a notice is a Timely Notice if it (A) is delivered to the secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day and not later than the close of business on the 60th day prior to the one-year anniversary of the preceding year’s annual meeting, and (B) contains all of the information required to be contained therein by the applicable provisions of this Section 10; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 70 days from such anniversary date or if the Corporation did not hold an annual meeting in the preceding fiscal year, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the 60th day prior to such annual meeting or, if later, the 10th day following the day on which a Public Announcement of the date of such meeting is first made by the Corporation.A-3(ii) With respect to a special meeting, a notice is a Timely Notice if it (A) (I) is delivered to the secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or, if later, the 10th day following the day on which a Public Announcement is first made of the date of the special meeting, or (II) is delivered at the time a request for a special meeting is submitted in proper form to the secretary, by Proposing Persons, if the special meeting is called at the request of shareholders and (B) contains all of the information required to be contained therein by the applicable provisions of Section 10.(iii) In no event shall the public announcement of a postponement or adjournment of an annual or special meeting to a later date or time commence a new time period for the giving of a shareholder’s notice as described above.(f)Compliance With Applicable Law. Notwithstanding the foregoing provisions of this Section 10, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section. Nothing in this Section shall be deemed to affect any rights of (i) shareholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor thereof) under the Exchange Act, or (ii) the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the articles of incorporation.A-4AMENDMENT TO ARTICLE X OF BYLAWS REGARDINGAUTHORITY OF BOARD TO AMEND BYLAWSARTICLE XAMENDMENT OF BYLAWSShareholders or the Board of Directors of the Corporation shall have the power at any regular or special meeting of shareholders or Board to alter, amend, add to, rescind or repeal the Bylaws of the Corporation by the affirmative vote of a majority of the outstanding shares of stock of the Corporation entitled to vote at such meeting, or by a majority of the Directors in office, including any vacancies, at the time of the meeting of the Board at which such change is sought to be adopted, provided that notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such meeting.B-1
