<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential. For Use
of the Commission Only (as
[X] Definitive proxy statement permitted by Rule 14a-6(e)(2)
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration no.:
(3) Filing party:
(4) Dated filed:
Notes:
<PAGE>
April 29, 1997
To Our Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Performance Technologies, Incorporated at Monroe Golf Club, 155
Golf Avenue, Pittsford, New York, on Tuesday, June 10, 1997 at 10:00 a.m.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement. The Company's 1996 Annual Report, which is contained in this package,
sets forth important financial information concerning the Company.
A brief report will be made at this meeting of the highlights for the
year 1996 and there will be an opportunity for questions of general interest to
the stockholders.
I sincerely hope that you are able to attend this year's Annual
Meeting.
Please sign and return your proxy promptly, whether or not you plan to
attend. Your vote is very important to the Company. On behalf of the officers
and directors, I wish to thank you for your interest in the Company and your
confidence in its future.
Very truly yours,
Charles E. Maginness
Chairman and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
Please sign, date and return your proxy card promptly
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED
315 Science Parkway
Rochester, New York 14620
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 10, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of PERFORMANCE TECHNOLOGIES, INCORPORATED (the "Company") will be
held at Monroe Golf Club, 155 Golf Avenue, Pittsford, New York, on Tuesday, June
10, 1997 at 10:00 a.m., local time, for the following purposes more fully
described in the accompanying Proxy Statement:
1. To elect two directors of the Company.
2. To consider and act upon a proposal to ratify the appointment of Price
Waterhouse LLP as the Company's independent public accountants for the fiscal
year ending December 31, 1997.
3. To consider and act upon a proposal to amend the Company's Stock Option
Plan to increase by 500,000 shares the number of shares that may be issued
pursuant to the Stock Option Plan.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on April 25, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting.
A Proxy Statement and Proxy are enclosed.
WE HOPE THAT YOU WILL ATTEND THIS MEETING IN PERSON, BUT IF YOU CANNOT,
PLEASE SIGN AND DATE THE ENCLOSED PROXY. RETURN THE PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth R. Donaldson, Secretary
Dated at Rochester, New York
April 29, 1997
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED
315 Science Parkway
Rochester, New York 14620
April 29, 1997
PROXY STATEMENT
GENERAL
This proxy statement is furnished to stockholders in connection with
the solicitation of proxies by the Board of Directors of PERFORMANCE
TECHNOLOGIES, INCORPORATED (the "Company") to be used at the Annual Meeting of
Stockholders of the Company which will be held on Tuesday, June 10, 1997 (the
"Meeting"), and at any adjournments thereof. This proxy statement and
accompanying form of proxy are first being mailed to stockholders on or about
April 29, 1997. The proxy, when properly executed and received by the Secretary
of the Company prior to the Meeting, will be voted as therein specified unless
revoked by filing with the Secretary prior to the Meeting a written revocation
or a duly executed proxy bearing a later date. A stockholder may also revoke his
or her proxy in person at the Meeting. Unless authority to vote for one or more
of the director nominees is specifically withheld, a signed proxy will be voted
FOR the election of the director nominees named herein and, unless otherwise
indicated FOR the selection of Price Waterhouse LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1997 and FOR the
approval of an amendment to the Performance Technologies, Incorporated Stock
Option Plan to increase by 500,000 shares the number of shares that may be
issued pursuant to the Stock Option Plan.
The cost of soliciting proxies will be borne by the Company. In
addition to the solicitation by use of the mails, directors, officers or regular
employees of the Company, without extra compensation, may solicit proxies
personally, by telephone, telegraph or facsimile transmission. The Company has
requested persons holding stock for others in their names or in the names of
nominees to forward soliciting material to the beneficial owners of such shares
and will, if requested, reimburse such persons for their reasonable expenses in
so doing.
VOTES REQUIRED
The total outstanding capital stock of the Company as of April 25,
1997, the record date for the Meeting (the "Record Date"), consisted of
4,810,191 shares of Common Stock, par value $.01 per share (the "Common Stock").
Only holders of Common Stock of record on the books of the Company at the close
of business on April 25, 1997, are entitled to notice of and to vote at the
Meeting and at any adjournments thereof. Each holder of Common Stock is entitled
to one vote for each share of Common Stock registered in his or her name. A
majority of the outstanding Common Stock, represented in person or by proxy at
the Meeting, will constitute a quorum for the transaction of all business.
Pursuant to the provisions of the Delaware General Corporation Law, directors
shall be elected by a plurality of the votes cast by the holders of shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote at the Meeting. Because directors are elected by a plurality of
the votes cast, withholding authority to vote with respect to one or more
nominees will have no effect on the outcome of the election, although such
shares would be counted as present for purposes of determining the existence of
a quorum. Similarly, any broker non-votes (which occur when shares held by
brokers or nominees for beneficial owners are voted on some matters but not on
others in the absence of instructions from the beneficial owner) are not
considered to be votes cast and therefore would have no effect on the outcome of
the election of directors, although they would be counted for quorum purposes.
The affirmative vote of a majority of the votes cast is required to
ratify the selection of Price Waterhouse LLP as independent public accountants
for the Company for the fiscal year ending December 31, 1997. Abstentions and
any broker non-votes are not considered to be votes cast and therefore would
have no effect on the outcome of this proposal. The affirmative vote of the
holders of a majority of the shares of Common Stock represented at the Meeting
and entitled to vote on the proposal to amend the Performance Technologies,
Incorporated Stock Option Plan is required for approval of that proposal.
Accordingly, abstentions and any broker non-votes, since they are considered to
be represented at the Meeting, would have the same effect as votes cast against
that proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, with notes thereto, sets forth as of April 25,
1997 certain information regarding the Common Stock held by (i) the persons
known to the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) each director of the Company, (iii) each "Named Executive" (see
"EXECUTIVE COMPENSATION"), and (iv) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name Amount and Nature
of Beneficial Ownership Percent of Class (2)
<S> <C> <C>
Charles E. Maginness(1) 424,221 (3) 8.8%
John M. Slusser(1) 392,310 (4) 8.1%
Bernard Kozel(1) 364,750 (5) 7.6%
Donald L. Turrell 60,672 (6) 1.3%
William E. Mahuson 79,000 (7) 1.6%
Dorrance W. Lamb 11,200 (8) *
John E. Mooney 42,750 (9) *
Paul L. Smith 13,000(10) *
Putnam Investment Management Group(11) 437,500 9.1%
One Post Office Square, Boston MA 02109
FMR Corp.(12) 278,000 5.8%
82 Devonshire Street, Boston MA 02109
Chancellor LGT Asset Management Group(13) 250,000 5.2%
1166 Avenue of the Americas, New York NY 10036
All Directors and Officers as a Group 1,387,903(14) 28.2%
- -------------------------
<FN>
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner of 5% or
more of the Company's Common Stock is in care of the Company at 315 Science
Parkway, Rochester, New York 14620.
(2) Percentage based upon 4,810,191 shares of Common Stock outstanding as of
April 25, 1997.
(3) Includes (a) 25,000 shares of Common Stock issuable upon exercise of a
warrant that is currently exercisable; (b) 13,000 shares of Common Stock
issuable upon the exercise of options that are currently exercisable; and
(c) 46,332 shares of Common Stock owned of record by Mr. Maginness' wife.
Mr. Maginness disclaims beneficial ownership of such shares owned by his
wife. Excludes 32,000 shares of Common Stock issuable upon exercise of an
option that has not yet vested.
(4) Includes (a) 25,000 shares of Common Stock issuable upon exercise of a
warrant that is currently exercisable; (b) 9,629 shares of Common Stock
issuable upon exercise of options that are currently exercisable; (c)
56,444 shares owned jointly by Mr. Slusser and his wife; (d) 7,000 shares
of Common Stock owned of record by Mr. Slusser's wife as custodian for her
child living in their household; (e) 12,000 shares of Common Stock owned of
record by Mr. Slusser as custodian for his minor children living in his
household; and (f) 28,000 shares of Common Stock owned of record by Mr.
Slusser's wife. Mr. Slusser disclaims beneficial ownership of the shares
owned by his wife individually and as custodian. Excludes 629 shares of
Common Stock issuable upon exercise of options that have not yet vested.
(5) Includes (a) 6,500 shares of Common Stock issuable upon exercise of options
that are currently exercisable; (b) 59,000 shares of Common Stock owned of
record by The Kozel Family Trust over which Mr. Kozel has voting and
investment powers; and (c) 13,000 shares of Common Stock owned of record by
Mr. Kozel's wife. Mr. Kozel disclaims beneficial ownership of such shares
owned by his wife.
(6) Includes (a) 13,928 shares of Common Stock issuable upon exercise of
options that are currently exercisable; (b) 44,044 shares that are owned
jointly by Mr. Turrell and his wife; and (c) 2,700 shares of Common Stock
owned of record by Mr. Turrell's child living in his household. Mr. Turrell
disclaims beneficial ownership of these shares. Excludes 35,428 shares of
Common Stock issuable upon exercise of options that have not yet vested.
(7) Includes 7,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable. Excludes 20,000 shares of Common Stock
issuable upon exercise of an option that has not yet vested.
(8) Includes (a) 6,000 shares of Common Stock issuable upon exercise of an
option that is currently exercisable; and (b) 1,300 shares of Common Stock
owned of record by Mr. Lamb's wife as custodian for their child living in
their household. Excludes 600 shares of Common Stock owned of record by an
adult member of Mr. Lamb's family who resides outside of his household and
excludes 24,000 shares of Common Stock issuable upon exercise of an option
that has not yet vested.
(9) Includes (a) 1,000 shares of Common Stock issuable upon exercise of an
option that is currently exercisable; (b) 8,400 shares of Common Stock
owned of record by Mr. Mooney's wife; (c) 9,500 shares owned of record by
John E. Mooney as trustee for John E. Mooney Profit Sharing Plan; and (d)
8,050 shares of Common Stock owned of record by First Rochester Capital
Corp. of which Mr. Mooney serves as President. Mr. Mooney disclaims
beneficial ownership of the shares owned by his wife.
(10) Includes 3,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable.
(11) The following information is derived from a Schedule 13G dated January 27,
1997 filed by Putnam Investments, Inc. on behalf of itself, Marsh &
McLennan Companies, Inc. (its parent holding company), Putnam Investment
Management, Inc. (a wholly-owned subsidiary of Putnam Investments, Inc. and
investment adviser to the Putnam family of mutual funds) and The Putnam
Advisory Company, Inc. (a wholly-owned subsidiary of Putnam Investments,
Inc. and investment adviser to Putnam's institutional clients). Both Putnam
Investment Management, Inc. and The Putnam Advisory Company, Inc. have
dispository power over the shares as investment managers. However, each of
the mutual fund's trustees has voting power over the shares held by each
fund, and The Putnam Advisory Company, Inc. has shared voting power over
the shares held by institutional clients. Putnam Investments, Inc. and The
Putnam Advisory Company, Inc. have shared voting power with respect to
229,800 of such shares. Putnam Investments, Inc., Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. have shared
dispositive power with respect to all 437,500 shares.
(12) The following information is derived from a Schedule 13G dated February 14,
1997 filed by FMR Corp. Fidelity Management & Research Company, Inc.
("Fidelity"), an investment adviser and wholly-owned subsidiary of FMR
Corp., is the beneficial owner of all 278,000 shares. Each of Edward C.
Johnson 3d, Chairman of FMR Corp. and Abigail Johnson, Director of FMR
Corp., together with other family members who are part of a controlling
group of FMR Corp., through FMR Corp.'s control of Fidelity and the
Fidelity Funds, has the sole power to dispose of all such shares owned by
the Fidelity Funds. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of
FMR Corp. has the sole power to vote or direct the voting of the shares
owned directly by Fidelity Funds, which power rests in the Funds' Board of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Funds' Boards of Trustees.
(13) The following information is derived from a Schedule 13G dated February 7,
1997 filed by Chancellor LGT Asset Management, Inc. and Chancellor LGT
Trust Company (its wholly-owned subsidiary), and LGT Asset Management,
Inc., as the holding company for Chancellor LGT Asset Management, Inc.
Chancellor LGT Asset Management, Inc. and Chancellor LGT Trust Company, as
investment advisers for various fiduciary accounts, have sole power to vote
or direct the vote and sole power to dispose or direct the disposition of
all such shares.
(14) Includes 110,057 shares of Common Stock issuable upon exercise of stock
options and warrants that are currently exercisable, and excludes 112,057
shares of Common Stock issuable upon exercise of stock options that have
not yet vested.
</FN>
</TABLE>
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The Company
currently has six directors, two in each class. Terms are staggered so that one
class is elected each year. Only one class of directors is elected at each
Annual Meeting of Stockholders. Each director so elected serves for a three-year
term and until his or her successor is elected and qualified, subject to such
director's earlier death, resignation or removal.
The Board of Directors recommends the election of the two nominees
named below, each of whom is currently a director of the Company. Unless
authority to vote for one or more of the nominees is specifically withheld
according to the instructions, proxies in the enclosed form will be voted FOR
the election of each of the two nominees named below. The Board of Directors
does not contemplate that either of the nominees will not be able to serve as a
director, but if that contingency should occur prior to the voting of the
proxies, the persons named in the enclosed proxy reserve the right to vote for
such substitute nominee or nominees as they, in their discretion, shall
determine.
<PAGE>
Information about the Directors
The following table sets forth certain information with respect to each
director of the Company who is being proposed for re-election at the Meeting.
PROPOSED FOR ELECTION AS DIRECTORS
AT THE 1997 ANNUAL MEETING
<TABLE>
<CAPTION>
<S> <C>
Director
Name and Background Since
Donald L. Turrell, age 49, has served as President and Chief Operating Officer and director since 1995
April 1995. From 1985 to 1990, he held the position of Vice President of Sales and Marketing and from
1990 to 1993, he held the position of Vice President and General Manager of the Workstation Products
business unit. From 1993 to 1995, he held the position of President of the Company's Performance
Computer business unit. From 1977 to 1984, Mr. Turrell held various positions with Rochester
Instrument Systems, including Sales Manager, Product Marketing Manager, Vice President of Sales and
Vice President of Marketing.
Paul L. Smith, age 61, has served as a director of the Company since 1993. He is an independent 1993
business and financial consultant. From 1983 to 1993, he served as Senior Vice President and Chief
Financial Officer of Eastman Kodak Company. He also serves on the Board of Directors of Home
Properties of New York, Inc.
</TABLE>
The following table sets forth certain information with respect to each
director of the Company whose term in office does not expire at the Meeting.
DIRECTORS WHOSE TERMS DO NOT EXPIRE
AT THE 1997 ANNUAL MEETING
<TABLE>
<CAPTION>
<S> <C>
Director
Name and Background Since
Charles E. Maginness, age 64, has served as Chief Executive Officer of the Company since April 1995, 1983
and as Chairman since 1986. From 1984 through 1986, he held the position of President and from 1984
through April 1995 was also Chief Financial Officer. From 1970 to 1983, Mr. Maginness was employed by
Kayex Corporation where he held several positions, including President and Chief Executive Officer,
and President of its Hamco Division. Mr. Maginness is also a director of Performance Telecom
Corporation.
John E. Mooney, age 51, has served as a director of the Company since 1984. He is President and Chief 1984
Executive Officer of Essex Investment Group, Inc., Rochester, New York. Mr. Mooney also serves on the
Board of Directors of Moscom Corporation, a publicly held telecommunications company.
John M. Slusser, age 44, a founder of the Company, has served as a director since its inception in 1981
1981. From 1981 through 1995, he held various positions, including President and Chief Executive
Officer. In April 1995, in connection with the spin-off of certain of the Company's business units
and operating subsidiaries into Performance Telecom Corporation, he became President, Chief Executive
Officer and a director of Performance Telecom Corporation. Prior to 1981, Mr. Slusser held an
engineering management position with Computer Consoles, Incorporated.
Bernard Kozel, age 75, has served as a director of the Company since 1983. He is the former Chairman 1983
of the Board of J. Kozel & Son, a Rochester, New York-based structural steel company. He is President
of KG Capital Corporation. Mr. Kozel also serves on the Board of Directors of Magnetic Technologies
Inc.
</TABLE>
<PAGE>
Committees of the Board of Directors
The Board has a Compensation Committee to evaluate executive
compensation. Messrs. Kozel, Mooney and Smith comprise the Compensation
Committee. Additionally, the Board has a Stock Option Committee to determine
option grants pursuant to the Company's Stock Option Plan. For purposes of
complying with Securities Exchange Act Rule 16b-3, the Company has at least two
disinterested directors administer the Stock Option Plan. Messrs. Kozel and
Smith currently comprise the Stock Option Committee. The Board also has an Audit
Committee for the purposes of reviewing the Company's financial reporting
procedures. Messrs. Kozel, Mooney and Smith comprise the Audit Committee. The
Board also has a nominating committee to identify potential new directors and to
designate officers of the Company. The Board also has a Succession Committee to
assess and evaluate the transition of certain management responsibilities.
Messrs. Slusser, Mooney and Kozel comprise the Succession Committee.
The Compensation Committee, Stock Option Committee, Audit Committee,
Nominating Committee and Succession Committee met two, three, two, one and three
times, respectively, during the year ended December 31, 1996. The Company's
Board of Directors held five meetings during the year ended December 31, 1996.
Each director attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by all
committees of the Board on which that director served.
Compensation of Directors
Members of the Board of Directors who are not employees of the Company
received $300 for each meeting attended. Each Board member also receives $2000
per year if they attend at least 75% of the scheduled meetings. In addition,
each committee member receives $250 for each meeting attended if the meeting is
not scheduled on the same day as a Board of Directors meeting. The Company's
Stock Option Plan provides that each director who is not an employee of the
Company or any of its subsidiaries and who has served as a director since the
last Annual Meeting of Stockholders shall automatically be granted a
non-statutory option to purchase 1,000 shares of the Company's Common Stock on
the date of each Annual Meeting of Stockholders. The exercise price of such
options is the fair market value of the Company's Common Stock on the date of
the option grant. From time to time, the Company may grant additional options to
directors. In June 1996, pursuant to the Company's Stock Option Plan, Messrs.
Kozel, Mooney, Slusser and Smith each received an option to purchase 1,000
shares of Common Stock at exercise price of $14.75 per share.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 1996 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed.
Report of the Compensation Committee with Respect to Executive Compensation
General
The Compensation Committee of the Board of Directors is comprised of
three independent non-employee directors who administer the Company's executive
compensation program. The members of the Compensation Committee are Bernard
Kozel, Paul L.
Smith and John E. Mooney.
The Company's executive pay program is designed to attract and retain
executives who will contribute to the Company's long-term success, to reward
executives for achieving short and long-term strategic Company goals, to link
executive and stockholder interests through equity-based plans and to provide a
compensation package that recognizes individual contributions and Company
performance.
The three key components of the Company's executive compensation for
1996 were base salary, short-term incentives, represented by the Company's
annual bonus program, and long-term incentives, represented by the Company's
stock option program. The short-term incentive component of each executive's
total compensation is intended to be variable and is directly related to the
Company's pre-tax profitability.
In the first quarter of each fiscal year, the Compensation Committee
reviews with the Chief Executive Officer and approves, with any modifications it
deems appropriate, an annual salary plan for all of the Company's executives,
none of whom has a written employment agreement with the Company. The salary
plan is developed under the ultimate direction of the Chief Executive Officer
based on performance judgments as to the past and expected future contributions
of each executive. The parameters of the short-term incentive bonus program for
the Company's employees, including management, are established at the beginning
of each year. Amounts contributed to this program are based upon the Company
achieving certain pre-tax profitability levels and the amount contributed
increases as a percentage of profits after the targeted profit level is
realized. After the end of each fiscal year, the Chief Executive Officer
evaluates each executive's performance and makes recommendations to the
Compensation Committee for salary, bonuses and stock options.
Executive Officer Compensation
The Company's total compensation program for executive officers
consists of both cash and equity-based compensation. The components of the
annual cash compensation program consist of a base salary and an annual cash
incentive bonus program which is designed to provide short-term incentive to the
Company's employees, including management. Executive officer salaries are
reviewed and established near the beginning of the calendar year. The Company's
short-term bonus program for its employees described above is also applicable to
management. For 1996, the targeted amount contributed to the program was
allocated to three pools: the Chief Executive Officer and President; upper
management; and all other employees. The actual allocation of the bonus pool for
the Chief Executive Officer and the President was determined by the Compensation
Committee after the end of the calendar year and is presented in the Summary
Compensation Table. The allocation of the bonus pool for executives and
employees other than the Chief Executive Officer and President was based on
recommendations of the Company's Chairman and President.
Long-term incentives are intended to be provided through the grant of
stock options under the Performance Technologies, Incorporated Stock Option
Plan. The Compensation Committee believes that stock options are a means of
aligning the long-range interests of all employees, including executives, with
those of the Company's stockholders by providing them with the opportunity to
acquire an equity stake in the Company. The size of the stock option award is
based primarily on the individual's responsibilities and position with the
Company, as well as on the individual's performance. Stock options are granted
with an exercise price equal to the fair market value of the Company's Common
Stock on the date of grant, and options generally vest in three years. This
approach is designed to encourage the creation of stockholder value over the
long term since no benefit is realized from a stock option grant unless the
price of the Company's Common Stock rises. The Compensation Committee
recommended to the Stock Option Committee that qualified stock options awarded
to executive officers vest over a five year period. Stock options granted in
1996 to executive officers carried a five year vesting period but become fully
vested at such time as the Company's Common Stock trades at $22 per share. Refer
to the Named Executive in the Option Grants in Last Fiscal Year Table for stock
options awarded in 1996.
Compensation of Chief Executive Officer
Mr. Maginness was Chief Executive Officer for 1996 and also held the
position of Chairman of the Board. Mr. Maginness' salary is reviewed by the
Compensation Committee in the context of Company's current performance trends
and prospects.
For 1996, the Compensation Committee approved a short-term incentive
compensation program for all employees based upon the Company achieving certain
pre-tax profitability levels. After the end of the calendar year, the
Compensation Committee approved the actual bonus allocation to Mr. Maginness
based upon his strategic contributions and the financial performance of the
Company in 1996.
Compensation Committee
Bernard Kozel
Paul L. Smith
John E. Mooney
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Chief Executive Officer of the Company consults with the
Compensation Committee and makes recommendations to it. He participates in
discussions with the Compensation Committee but does not vote or otherwise
participate in the Compensation Committee's determinations.
As a result of the completion of the Company's initial public offering
in January 1996, an Insider Trading Policy was established for all officers,
directors and employees.
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term
compensation, for services rendered to the Company in all capacities for the
fiscal years ended December 31, 1996, 1995 and 1994, paid by the Company to
those persons who were, during the fiscal year ended December 31, 1996, (i) the
chief executive officer of the Company and (ii) each other executive officer of
the Company who earned over $100,000 during the fiscal year ended December 31,
1996 (the "Named Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
Long Term
Annual Compensation Compensation
------------------- ------------
Name and All Other
Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($) (1)
- ------------------ ---- ---------- --------- ----------- --------------------
Charles E. Maginness, 1996 $143,958 $161,330 40,000 $17,063
Chief Executive Officer 1995 $137,280 $112,000 $ 8,435
1994 $131,040 $ 6,496 $ 9,992
Donald L. Turrell, 1996 $117,846 $161,330 40,000 $12,778
President 1995 $107,370 $ 92,400 $ 6,583
1994 $ 97,812 $ 5,250 6,856 $ 6,804
Dorrance W. Lamb, 1996 $ 99,628 $113,880 30,000 $ 7,237
Vice President - Finance 1995 $ 94,830 $ 61,600 $ 4,073
Chief Financial Officer 1994 $ 90,870 $ 4,250 $ 2,854
William E. Mahuson, 1996 $ 96,212 $ 75,920 25,000 $ 6,837
Vice President 1995 $ 92,934 $ 50,400 $ 4,007
1994 $ 89,622 $ 2,000 $ 2,842
- ------------------
<FN>
(1) Includes payments for life insurance, car allowances and car expenses, and 401(k) allowance.
</FN>
</TABLE>
Employment Agreements
The Company does not have employment agreements with any of its
executive officers.
<PAGE>
Stock Option Grants And Exercises
The following sets forth information with respect to stock options
granted to the Named Executives during the fiscal year ended December 31, 1996
pursuant to the Performance Technologies, Incorporated Stock Option Plan.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
<S> <C> <C> <C> <C> <C> <C>
Individual Grants
Number of % of Total Potential Realizable Value at
Securities Options Granted Exercise Assumed Annual Rates of Stock Price
Underlying Options to Employees in Price Expiration Appreciation for Option Term (2)
Name Granted (1) Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- ----------- ----------- --------- ---- ------- -------
Charles E. Maginness 40,000 17% $11.38 4/3/2006 $286,275 $725,452
Donald L. Turrell 40,000 17% $11.38 4/3/2006 $286,275 $725,452
Dorrance W. Lamb 30,000 13% $11.38 4/3/2006 $214,706 $544,089
William E. Mahuson 25,000 11% $11.38 4/3/2006 $178,922 $453,408
<FN>
(1) These options become vested in five installments, twenty percent per year
commencing on the first anniversary of the grant date, and become fully vested
at such time as the Company's Common Stock trades at $22 per share.
(2) Amounts represent potential gains that could be achieved for the options
granted in 1996 based on assumed annual growth rates of 5% and 10% in the price
of the Company's Common Stock over the ten-year life of the option (which would
equal a total increase in stock price of 63% and 159%, respectively). Actual
gains, if any, will depend upon market conditions and the Company's future
performance and prospects.
</FN>
</TABLE>
The following table sets forth information with respect to the exercise
of stock options by the Named Executives during the year ended December 31, 1996
and also information with respect to status of unexercised stock options as of
December 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<S> <C> <C> <C> <C> <C> <C>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End (#) FY-End ($) (2)
---------------------------- ----------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------------- ----------------- ----------- ------------- ----------- -------------
Charles E. Maginness 5,000 40,000 $35,731
Donald L. Turrell 4,000 $41,700 5,928 43,428 $42,151 $23,716
Dorrance W. Lamb 3,500 30,000 $27,409
William E. Mahuson 4,000 $41,700 2,000 25,000 $14,749
- ------------------
<FN>
(1) Represents the difference between the fair market value of the Common Stock
underlying the options as of the exercise date and the exercise price of
the option.
(2) Represents the difference between the fair market value of the Common Stock
as of December 31, 1996 and the exercise price of the option. Options that
are not In-the-Money have been excluded from the computation.
</FN>
</TABLE>
Stock Performance Graph
The following graph compares the cumulative total return on the
Company's Common Stock at the end of each calendar quarter since January 24,
1996, the date on which the Company's Common Stock began trading on the NASDAQ
National Market, to the NASDAQ Stock Market (U.S.) Index, and the NASDAQ
Computer Manufacturer Index. The stock performance shown in the graph below is
not intended to forecast or necessarily be indicative of future performance.
[The following descriptive data is supplied in accordance with Rule 304(d)
of Rugulation S-T]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1/25/96 3/31/96 6/30/96 9/30/96 12/31/96
------- ------- ------- ------- -------
Performance Technologies, Incorporated 100 145 183 152 121
NASDAQ Stock Market 100 107 115 119 125
NASDAQ Computer Manufacture 100 106 119 132 138
</TABLE>
CERTAIN TRANSACTIONS
The Company leases its facility at 315 Science Parkway from C & J
Enterprises (the "Partnership"), a New York general partnership of which Mr.
Maginness and Mr. Slusser, a director of the Company, are equal partners. The
Partnership acquired the property and constructed the facility with the proceeds
of an industrial development revenue bond with the County of Monroe Industrial
Development Agency ("COMIDA") in September 1990. As part of that bond financing,
the Company has guaranteed the obligations of the Partnership to The Chase
Manhattan Bank, N.A. under the Letter of Credit and Reimbursement Agreement and
Mortgage and Security Agreement up to an aggregate amount of $1,291,630.
Pursuant to the terms of the facility lease, the Company is obligated to pay
annual rental of $270,000 plus annual increases based on the Consumer Price
Index, together with real property taxes and assessments, expenses and other
charges associated with the facility. For as long as the Partnership leases the
property and the facility from COMIDA, the Company has a right of first refusal
to acquire an assignment of the Partnership's interest in the property if the
Partnership receives a bona fide offer from any third party to acquire that
interest. The right of first refusal must be exercised within 21 days of the
Company's receipt of notice from the Partnership of the Partnership's intention
to accept the third party offer. The purchase price to be paid by the Company is
80% of the purchase price stated in the bona fide third party offer. In the
event the Partnership acquires ownership of the property and the facility from
COMIDA, the Company has a right of first refusal similar to that described above
except that the purchase price to be paid by the Company shall be the purchase
price stated in the bona fide third party offer reduced by an amount equal to
20% of the excess of (1) the sale price over (2) the partnership's cost and
selling expenses for the property and the facility.
In connection with the spin-off of certain of the Company's business
units and operating subsidiaries into Performance Telecom Corporation ("PTC")
and the assignment to PTC of its obligations under a loan from the City of
Rochester, New York, in the amount of $500,000, the Company has guaranteed this
obligation of PTC subject to the requirement that the Company, acting as agent
for the City, first liquidate the assets of PTC that serve as collateral for the
loan and pay the proceeds of such liquidation to the City which shall apply
those proceeds to the repayment of the loan. At December 31, 1996, PTC had a
$450,000 loan balance outstanding but had placed $250,000 in escrow specifically
to pay down outstanding principal on that obligation at the end of the loan
term, reducing the Company's exposure on this guarantee to $200,000. To the
extent the liquidation proceeds received within 60 days of PTC's default are not
sufficient to discharge the loan, the Company has guaranteed payment of that
loan.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Price Waterhouse LLP served as the independent public
accountants of the Company for the fiscal year ended December 31, 1996 and the
Board of Directors has again selected Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1997.
This selection will be presented to the stockholders for their approval at the
Meeting. The Board of Directors recommends a vote in favor of the proposal to
approve and ratify this selection and (unless otherwise directed therein) it is
intended that the shares represented by the enclosed properly executed proxy
will be voted FOR such proposal. If the stockholders do not ratify this
selection, the Board of Directors may reconsider its choice.
A representative of Price Waterhouse LLP is expected to be present at
the Meeting. The representative will be given an opportunity to make a statement
if he so desires and will be available to respond to appropriate questions
concerning the audit of the Company's financial statements.
Effective November 14, 1995, the Company replaced its independent
accountants Rotenberg & Company, LLP, a firm based in Rochester, New York, with
Price Waterhouse LLP. Rotenberg & Company, LLP's reports on financial statements
have not contained an adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.
The decision to change accountants was approved by the Company's Board of
Directors. There were no disagreements with the former accountants on any matter
of accounting principles or practices, or auditing scope or procedure. The
former accountants did not advise the Company that the internal controls
necessary to develop reliable financial statements did not exist, or as to the
existence of any information that would lead such accountants to no longer be
able to rely on management's representations or that would have made it
unwilling to be associated with management's financial statements. In addition,
the former accountants did not advise management of the need to expand the scope
of their audit or of any information that, if further investigated, may
materially impact the fairness or reliability of either a previously issued
audit report or the financial statements issued or to be issued with respect to
subsequent periods, or cause such accountants to be unwilling to rely on
management's representations or be associated with the Company's financial
statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
PROPOSAL 3
ADMENDMENT TO THE PERFORMANCE TECHNOLOGIES, INCORPORATED
STOCK OPTION PLAN
The Board of Directors is proposing an amendment to the Performance
Technologies, Incorporated Stock Option Plan ("Option Plan") to increase the
number of shares of the Company's Common Stock reserved for issuance under the
Option Plan by 500,000 shares, to 1,200,000 shares.
The Board of Directors believes that stock options are invaluable tools
for the recruitment, retention and motivation of qualified employees, including
officers and other persons who can contribute materially to the Company's
success. The Company has used stock options for such purposes since 1986. See
"Report of the Compensation Committee with Respect to Executive Compensation."
The Option Plan had only 164,575 shares available for future issuance pursuant
to new option grants as of December 31, 1996. The Board of Directors believes
that it is important to have additional shares available to provide adequate
flexibility to meet future needs. The Board of Directors recommends a vote in
favor of the proposal to amend the Option Plan to increase the number of shares
of Common Stock available for issuance to 1,200,000 shares, and (unless
otherwise directed therein) it is intended that the shares represented by the
enclosed properly executed proxy will be voted FOR such proposal.
Summary of Stock Option Plan
The Option Plan is intended to encourage stock ownership by the
Company's executive officers, key employees and outside directors to provide an
incentive for such persons to expand and improve the Company's profits and to
assist the Company in attracting and retaining key employees and directors. The
Option Plan provides that options granted under the Option Plan will be
designated as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended, or as non-statutory stock options by the Stock Option
Committee of the Board of Directors (the "Committee"), which also will have
discretion as to the persons to be granted options, the number of shares subject
to the options and the terms of the option agreements. Only employees will be
entitled to receive incentive stock options, while outside directors will only
be entitled to receive non-statutory stock options. Of the 700,000 shares of
Common Stock reserved for issuance under the Option Plan at December 31, 1996,
options for 332,129 shares were outstanding and 203,296 shares have been issued
pursuant to the exercise of options previously granted.
The Option Plan provides that (i) all options granted thereunder shall
be exercisable during a period of no more than ten years from the date of grant
(five years for options granted to holders of 10% or more of the outstanding
shares of Common Stock), and (ii) the option exercise price for incentive stock
options shall be at least equal to 100% of the fair market value of the
Company's Common Stock on the date of grant (110% for options granted to holders
of 10% or more of the outstanding shares of Common Stock). The aggregate fair
market value, as determined on the date of grant, of shares of Common Stock for
which incentive stock options are first exercisable under the terms of the
Option Plan by an option holder during any calendar year cannot exceed $100,000.
Except with respect to options granted to Outside Participating Directors as
described below, the exercise price of a non-statutory stock option is
determined by the Committee, although the Board of Directors has resolved not to
grant, under any circumstances, non-statutory stock options with an exercise
price of less than 85% of the fair market value of the Company's Common Stock on
the date of grant.
All options (except those options granted to Outside Participating
Directors) generally may be exercised only if the option holder remains
continuously associated with the Company from the date of grant to the date of
exercise. Options may, however, be exercised within certain specified time
periods upon termination of association or upon the death or disability of an
option holder.
In 1996, the Company amended the Option Plan to provide for formula
grants of non-statutory stock options to outside directors. Participation is
limited to members of the Board of Directors who are not current employees of
the Company or any of its subsidiaries or who are otherwise not eligible for
discretionary grants under the Option Plan ("Outside Participating Directors").
As of April 29, 1997, there are four Outside Participating Directors.
The Option Plan provides that beginning with the 1996 Annual Meeting
until 2001, on the day of the Company's Annual Meeting of Stockholders, each
individual elected, reelected or continuing as an Outside Participating Director
will automatically receive a non-statutory stock option for 1,000 shares of
Common Stock. Additionally, any Outside Participating Director who has served
for the entire year preceding such Annual Meeting who is not standing for
reelection to the Board is eligible to receive such an award. Under the Option
Plan's formula, the exercise price for these non-statutory stock options will be
the last sale price of Common Stock on the NASDAQ/NNM on the date of the grant.
Options vest immediately, become exercisable six months from the date of grant
and expire five years from the date of grant. The exercise price may be paid in
cash or in the delivery of shares of the Company's Common Stock.
Upon an Outside Participating Director's death, his/her legal
representatives or heirs will have one year to exercise those options that were
exercisable by the Outside Participating Director at the time of death. Should
an individual cease to serve as an Outside Participating Director for any reason
other than death, the term of any then outstanding option will extend for the
length of the remaining term of the option.
The above summary of the Option Plan is qualified in its entirety by
reference to the full text of the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's
proxy statement to be issued in connection with the 1998 Annual Meeting of
Stockholders, such proposal must be delivered to the Company no later than
December 30, 1997.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter other than those specifically referred to in this Proxy
Statement. If any other matters properly come before the Meeting, it is intended
that the holders of the proxies will act in respect thereto in accordance with
their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth R. Donaldson, Secretary
Dated at Rochester, New York
April 29, 1997
<PAGE>
PROXY
PERFORMANCE TECHNOLOGIES, INCORPORATED The undersigned hereby appoints CHARLES
E. MAGINNESS and DORRANCE W. LAMB, and each of them, proxies for the undersigned
with full power of substitution, to vote all shares of the Common Stock of
PERFORMANCE TECHNOLOGIES, INCORPORATED (the "Company") owned by the undersigned
at the Annual Meeting of Stockholders to be held at Monroe Golf Club, 155 Golf
Avenue, Pittsford, New York, on Tuesday, June 10, 1997 at 10:00 a.m. local time,
and at any adjournment or adjournments thereof:
1. Election of Directors.
[ ] FOR all nominees listed below
(except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote
for all nominees listed below.
Instruction: To withhold authority to vote for any individ-
ual nominee, strike a line through the nominee's name list-
ed below.
Donald L. Turrell Paul L. Smith
2. Proposal to ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the Company's Stock Option Plan to increase by 500,000
shares the number of shares that may be issued pursuant to the Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting. (Continued and to be signed,
on reverse side)
(continued from other side)
This Proxy is solicited on behalf of the Board of Directors of the Company. This
Proxy will be voted as specified by the undersigned. This proxy revokes any
prior proxy given by the undersigned. Unless authority to vote for one or more
of the nominees is specifically withheld according to the instruc- tions, a
signed Proxy will be voted FOR the election of the named nominees for directors
and, unless otherwise specified, FOR the other proposals listed herein and
described in the accompanying Proxy Statement. The undersigned acknowledges
receipt with this Proxy of a copy of the Notice of Annual Meeting and Proxy
Statement dated April 29, 1997, describing more fully the proposals set forth
herein.
Dated: ___________________________________, 1997
- -------------------------------------------------
- -------------------------------------------------
Signature(s) of stockholder(s)
Please date and sign name exactly as it appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing. If the
stockholder is a corporation, the full corporate name should be inserted and the
proxy signed by an officer of the corporation, indicating his title.
<PAGE>
APPENDIX A
PERFORMANCE TECHNOLOGIES, INCORPORATED
AMENDED AND RESTATED STOCK OPTION PLAN
WHEREAS, Performance Technologies, Incorporated (the "Company") adopted
the PERFORMANCE TECHNOLOGIES, INCORPORATED STOCK OPTION PLAN (the "Plan") on May
1, 1986, amended and restated the Plan effective January 1, 1987 and amended the
Plan on May 3, 1990, amended and restated the Plan on April 18, 1994 and amended
the Plan again on November 14, 1995; amended and restated the Plan again on June
5, 1996; and
NOW, THEREFORE, the Plan is hereby amended and restated in its
entirety, effective June 10, 1997, as follows:
1. Purpose. The PERFORMANCE TECHNOLOGIES, INCORPORATED STOCK OPTION
PLAN (the "Plan") is designed to attract the best available personnel for
positions of substantial responsibility and to furnish additional incentive to
key employees and directors of the Company, upon whose efforts the successful
conduct of the business of the Company largely depends, by encouraging such
individuals to acquire a proprietary interest in the Company or to increase the
same. This purpose will be effected through the granting of options to purchase
shares of Common Stock, $.01 par value per share, of the Company (the "Shares")
which will be identified by the Compensation Committee of the Board of Directors
of the Company (the "Committee") either as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended to date
(the "Code") or as non-statutory stock options.
2. Eligibility. The persons eligible to receive options under this Plan
shall be non-employee directors as more fully described in Section 17 hereof
("Outside Participating Directors") and such key employees of the Company as the
Committee shall select from time to time (the "Participants"). Participants and
Outside Participating Directors under the Plan shall be eligible to receive
stock options provided that no member of the Committee shall have received
options under this Plan (other than options granted pursuant to Sections 17
through 21 of this Plan) during the one year prior to serving on the Committee
or during the time served on the Committee. Outside Participating Directors of
the Company shall be eligible to receive non-statutory stock options pursuant to
Sections 17 through 21 of this Plan. All references in this Plan to employees or
directors of the Company shall include employees or directors of any parent or
subsidiary of the Company, as those terms are defined in Section 424 of the
Code.
3. Stock Subject to Options. Subject to the provisions of Section 9
hereof, options may be granted under the Plan to purchase, in the aggregate, not
more than 1,200,000 Shares. The Shares may, in the discretion of the Board of
Directors of the Company, consist either in whole or in part of authorized but
unissued Shares or Shares held in the treasury of the Company, and the Shares
may, in the discretion of the Committee, become subject to incentive stock
options or non-statutory stock options. Any Shares subject to an option which
for any reason expires or is terminated unexercised as to such Shares shall
continue to be available for options under the Plan.
4. Annual Limitation. The aggregate fair market value (determined as of
the time the option is granted) of the Shares with respect to which incentive
stock options are exercisable for the first time by a Participant during any
calendar year (under all incentive stock option plans of the Company, any parent
and any subsidiaries) shall not exceed $100,000.
5. Terms and Conditions of Options. Each option granted by the
Committee or granted pursuant to Sections 17 through 21 of this Plan shall be
evidenced by a stock option agreement in such form or forms as the Committee may
from time to time prescribe (which agreements need not be identical) containing
provisions consistent with the Plan, including a provision prohibiting
disposition of any option granted under this Plan or the Shares issued on
exercise of such option within six months of the date of grant and, in the
discretion of the Committee, any other waiting period following the grant of the
option during which all or any part may not be exercised. The right of the
Company to terminate the employment of the Participant at any time, with or
without cause, shall in no way be restricted by the existence of this Plan, any
option granted hereunder, or any stock option agreement relating thereto.
Options shall in all cases further be subject to the following terms and
conditions:
(a) Type of Option and Price. Each option shall state the
number of Shares subject to the option, whether the option is intended to be an
incentive stock option or a non- statutory stock option and the option price.
The option price of any incentive stock option shall equal or exceed the fair
market value of the Shares with respect to which the incentive stock option is
granted at the time of the granting of the option. However, if an incentive
stock option is granted to any person who would, after the grant of such option,
be deemed to own stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any parent or subsidiary (a "Ten
Percent Stockholder"), the option price shall not be less than 110% of the fair
market value of the Shares with respect to which the option is granted at the
time of the granting of the option to the Ten Percent Stockholder.
(b) Term. The term of each option granted to a Participant
shall be determined by the Committee, but in no event shall an option be
exercisable either in whole or in part after the expiration of ten years from
the date on which it is granted. Notwithstanding the foregoing, an incentive
stock option granted to a Ten Percent Stockholder shall not be exercisable
either in whole or in part after the expiration of five years from the date on
which it is granted. The Committee and a Participant or Outside Participating
Director may at any time by mutual agreement terminate any option granted to
such Participant or Outside Participating Director under the Plan.
(c) Exercise. Each option, or any installment thereof, shall
be exercised, whether in whole or in part, by giving written notice to the
Company at its principal office, specifying the number of Shares purchased and
the purchase price being paid, and accompanied by the payment of the purchase
price. A Participant or Outside Participating Director may pay for the Shares
subject to the option with cash, a certified check or a bank cashier's check
payable to the order of the Company. Alternatively, at the Company's sole option
he may be permitted to pay for the Shares, in whole or in part, by the delivery
of Shares already owned by him, which will be accepted in exchange at their fair
market value on the date of exercise. Certificates representing the Shares
purchased by the Participant or Outside Participating Director shall be issued
as soon as reasonably practicable after the Participant or Outside Participating
Director has complied with the provisions hereof. Pursuant to applicable federal
and state laws, the Company may be required to collect withholding taxes upon
the exercise of a non-statutory option. The Company may require, as a condition
to the exercise of a non-statutory stock option, that the Participant or Outside
Participating Director exercising that option concurrently pay to the Company
the entire amount or a portion of any taxes which the Company is required to
withhold by reason of such exercise, in such amount as the Committee or the
Company in its discretion may determine.
(d) Disposition of Shares. If the option is an incentive stock
option, the Participant cannot transfer Shares acquired upon the exercise of
that option within two years from the date of the grant of the option or within
one year from the date the option is exercised.
6. Non-Assignment. During the lifetime of the Participant or Outside
Participating Director, options granted hereunder shall be exercisable only by
him and shall not be assignable or transferable by him, whether voluntarily or
by operation of law or otherwise, and no other person shall acquire any rights
therein.
7. Death of Participant or Outside Participating Director. In the event
that a Participant or Outside Participating Director shall die while he is an
employee or director of the Company (or within 30 days after the termination of
such directorship or employment) and prior to the complete exercise of options
granted to him under the Plan, any such remaining options may be exercised in
whole or in part within one year after the date of the Participant's or outside
Participating Director's death and then only: (i) by the Participant's or
Outside Participating Director's estate or by or on behalf of such person or
persons to whom the Participant's or Outside Participating Director's rights
pass under his Will or the laws of descent and distribution, (ii) to the extent
that the Participant or Outside Participating Director was entitled to exercise
the option at the date of his death, and subject to all of the conditions on
exercise imposed hereby, and (iii) prior to the expiration of the term of the
option.
8. Termination of Employment of a Participant.
(a) Any stock option shall be exercisable, during the life
time of the Participant, only while he is an employee of the Company and has
been an employee continuously since the grant of the option, or within 30 days
after the date on which he ceases to be such an employee.
(b) Any option shall be exercisable under this Section 8 only
to the extent that the Participant would have been entitled to exercise the
option at the time of the termination of the employment relationship; and
further, no option shall be exercisable after the expiration of the term
thereof. In the case of a Participant who is permanently and totally disabled
(within the meaning of Section 105(d)(4) of the Code), the 30-day period
described in this Section 8 shall be one year.
(c) For purposes of this Section 8, an employment relationship
will be treated as continuing during the period when a Participant is on
military duty, sick leave or other bona fide leave of absence if the period of
such leave does not exceed 90 days, or, if longer, so long as a statute or
contract guarantees the Participant's right to re-employment with the Company.
When the period of leave exceeds 90 days and the individual's right to
re-employment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
9. Anti-Dilution Provisions. The aggregate number and kind of Shares
available for options under the Plan, the number and kind of Shares subject to
any outstanding option, and the option price of each outstanding option, shall
be proportionately adjusted by the Committee for any increase, decrease or
change in the total outstanding Shares of the Company resulting from a stock
dividend, recapitalization, merger, consolidation, split-up, combination,
exchange of Shares or similar transaction (but not by reason of the issuance,
sale or purchase of Shares by the Company in consideration for money, services
or property).
10. Rights as a Stockholder. The Participant or Outside Participating
Director shall have no rights as a stockholder with respect to the Shares
purchased by him pursuant to the exercise of an option until the date of the
issuance to him of a certificate of stock representing such Shares. No
adjustment shall be made for dividends or for distributions of any other kind
with respect to Shares for which the record date is prior to the date of the
issuance to the Participant or Outside Participating Director of a certificate
for the Shares.
11. Investment Purpose. Until such time as the Plan is registered with
the Securities and Exchange Commission pursuant to applicable provisions of the
Securities Act of 1933, as amended (the "Act"), each written notice by which a
Participant or Outside Participating Director exercises an option shall contain
representations on behalf of the Participant or Outside Participating Director
that he acknowledges that the Company is selling or distributing Shares to him
under a claim of exemption from registration under the Act, as a transaction not
involving any public offering; that he is acquiring such Shares with a view to
investment and not with a view to distribution or resale; and that he agrees not
to make any sale or other distribution or disposition of such Shares unless (i)
a registration statement with respect to such Shares shall be effective under
the Act, and the Company shall have received proof satisfactory to it that there
has been compliance with applicable state law, or (ii) the Company shall have
received an opinion of counsel satisfactory to it that no violation of the Act
or applicable state law will be involved in such transfer. The Company shall
include on each certificate for Shares issued under the Plan a legend to the
foregoing effect and such other legends restricting the transfer thereof as it
may deem appropriate to comply with any requirement established by law or by the
rules of any stock exchange.
12. Stockholders Agreement. In the event that at the time of any
exercise of an option the Company is a party to any stockholders' agreement or
stock repurchase agreement which by its terms requires any person to become a
party thereto as a precondition to the issuance of any Shares to him, then any
Shares issued hereunder shall be delivered only upon the execution and delivery
by the Participant or Outside Participating Director of such agreement.
13. Adoption, Approval, and Term of Plan. The Plan was adopted and took
effect on May 1, 1986. The Plan shall terminate on December 31, 2001 provided
that all incentive stock options with respect to the 17,070 Shares remaining
under the Plan as of April 16, 1994 must be granted on or before April 30, 1996.
No termination of the Plan, whether under the provisions of this Section 13 or
otherwise, shall terminate or otherwise affect options held by Participants or
Outside Participating Directors on the effective date of the termination of the
Plan.
14. Amendment and Termination of Plan. The Board of Directors of the
Company, without further approval of the stockholders of the Company, may at any
time suspend or terminate the Plan or may amend it from time to time in any
manner; provided, however, that no amendment shall be effective without prior
approval of the stockholders of the Company, which would (i) except as provided
in Section 9 hereof, increase the maximum number of Shares which may be issued
with respect to options under the Plan, (ii) change the eligibility requirements
for individuals entitled to receive options under the Plan, (iii) extend the
period for granting incentive stock options, or (iv) materially increase
benefits accruing to Participants or Outside Participating Directors hereunder.
15. Effect of Acquisition, Reorganization or Liquidation.
Notwithstanding any provision to the contrary in this Plan or in any agreement
evidencing options granted hereunder, all options with exercise periods then
currently outstanding shall become immediately exercisable in full and remain
exercisable until their expiration in accordance with their respective terms
upon the occurrence of either of the following events:
(i) the first purchase of the Shares pursuant to a
tender or exchange offer which is intended to effect the acquisition of more
than 50% of the voting power of the Company (other than a tender or exchange
offer made by the Company); or
(ii) approval by the Company's stockholders of
(A) a merger or consolidation of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any reclassification or reorganization
of the Shares), (B) a sale or disposition of all or substantially all of the
Company's assets, or (C) a plan of complete liquidation or dissolution of the
Company.
16. Administration. The Plan shall be administered by the Committee as
it may be constituted from time to time. The Committee shall consist of at least
two members of the Board selected by the Board, all of whom shall be
Disinterested Persons. A Disinterested Person for purposes of the Plan is one
who is not, during the one year prior to service on the Committee, or during
such period of service, granted or awarded equity securities pursuant to the
Plan or any other plan of the Company that would entitle him to acquire stock or
stock options of the Company, except for options issued pursuant to Sections 17
through 21 of this Plan. Decisions of the Committee concerning the
interpretation and construction of any provisions of the Plan or of any option
granted pursuant to the Plan shall be final. The Company shall effect the grant
of options under the Plan in accordance with the decisions of the Committee,
which may, from time to time, adopt rules and regulations for carrying out the
Plan. For purposes of the Plan, an option shall be deemed to be granted when the
written agreement for the same is signed on behalf of the Company by its duly
authorized officer or representative. Subject to the express provisions of the
Plan, the Committee shall have the authority, in its discretion and without
limitation, to determine the individuals to receive options, whether an option
is intended to be an incentive stock option or a non- statutory stock option,
the times when such individuals shall receive such options, the number of Shares
to be subject to each option, the term of each option, the date when each option
shall become exercisable, whether an option shall be exercisable in whole or in
part in installments, the number of Shares to be subject to each installment,
the date each installment shall become exercisable, the terms of each
installment and the option price of each option, to accelerate the date of
exercise of any option or installment thereof, and to make all other
determinations necessary or advisable for administering the Plan.
17. Outside Participating Directors. As of each Grant Date as defined
in Section 18, each member of the Board of Directors (including any member who
is not standing for reelection to the Board of Directors) who (a) is not an
employee of the Company or any of its subsidiaries, and (b) served as a member
of the Board of Directors since the last Annual Meeting of Stockholders is
deemed an Outside Participating Director and is eligible to receive options in
accordance with Section 18 below.
18. Grants of Options to Outside Participating Directors.
(a) Grant Dates. On the date of each Annual Meeting
of Stockholders, each Outside Participating Director shall automatically be
granted a non-statutory option to purchase 1,000 Shares (the "Grant Date").
(b) Election to Decline Option. Any Outside Participating
Director may, by written notice received by the Company prior to the Grant Date
of such Option, elect to decline an Option, in which case such Option shall not
be granted to him; provided, however, that at no time shall the Company pay or
provide to such Outside Participating Director anything of value in lieu of the
declined Option. In addition, any Outside Participating Director may, by written
notice received by the Company prior to the Grant Date of such Option, revoke a
previous election to decline an Option.
19. Exercise Price of Options Granted to Outside Participating
Directors. The price at which each option granted pursuant to Section 18 shall
be exercisable shall be the fair market value per share (the "Market Value") of
the Shares on the Grant Date of such option. For purposes of this Plan, the
Market Value of the Shares shall be the closing price of the Shares in the
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq"), if the closing price of the
Shares is then reported by Nasdaq. If the closing price of the Shares is not
then reported by Nasdaq, the Market Value of the Shares on any date shall be
deemed to be the mean between the representative closing bid and asked prices of
the Shares in the over-the-counter market as reported by Nasdaq. If the Shares
are reported on a national securities exchange, Market Value of the Shares shall
mean the Market Value on the principal national securities exchange on which the
Shares are then listed or admitted to trading (if the Shares are then listed or
admitted to trading on any national securities exchange), and the closing price
shall be the last reported sale price regular way or, in case no such sale takes
place on such date, the average of the closing bid and asked prices regular way,
as reported by such exchange. If the Shares are not then so listed on a national
securities exchange, the Market Value of the Shares on any date shall be the
closing price (the last reported sale price regular way). If the Shares are not
then reported by Nasdaq or are not reported on a national securities exchange,
the Market Value of the Shares on any date shall be as furnished by any member
of the National Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose. If no member of the National Association
of Securities Dealers, Inc. furnishes quotes with respect to the Shares, Market
Value shall be determined by such other reasonable method as is adopted by
resolution of the Board of Directors.
20. Vesting and Expiration of Outside Participating Director Stock
Options. Each option granted to an Outside Participating Director shall
immediately vest on the Grant Date and shall become exercisable within six
months of the Grant Date in accordance with Section 5(c) of this Plan. Each
option shall expire on the fifth anniversary of the Grant Date, and to the
extent any option remains unexercised on such fifth anniversary, it shall be
forfeited.
21. Cessation of Service of an Outside Participating Director.
(a) Cessation of Service. An Outside Participating Director's
cessation of service as a member of the Board of Directors for any reason shall
not have any effect on options that (i) have been granted prior to the date of
cessation of service or (ii) the Grant Date of which coincides with the Outside
Participating Director's last day in office as a result of not standing for
reelection to the Company's Board of Directors. Notwithstanding the foregoing,
upon the death of an Outside Participating Director or former Outside
Participating Director, all options held by the decedent must be exercised by
his legal representative within one year after the date of death (but in no
event after the expiration of the option) or they shall be forfeited.
(b) Loss of Eligibility. If an Outside Participating Director
becomes an employee of the Company or otherwise no longer satisfies the
requirements for eligibility set forth in Section 17 hereof, then all options
already granted to him hereunder shall continue in full force and effect, in
accordance with their original terms, for so long as he remains a member of the
Board of Directors, but he shall be entitled to no further formula grants of
Options pursuant to Section 17 through Section 21 hereof.
22. Reservation of Shares. The Company shall be under no obligation to
reserve Shares to fill options. The grant of options to individuals hereunder
shall not be construed to constitute the establishment of a trust of such Shares
and non particular Shares shall be identified as optioned and reserved for
individuals hereunder. The Company shall be deemed to have complied with the
terms of the Plan if, at the time of issuance and delivery pursuant to the
exercise of an option, it has a sufficient number of Shares authorized and
unissued or in its treasury which may then be appropriated and issued for
purposes of the Plan, irrespective of the date when such Shares were authorized.
All Participants' rights hereunder are limited to the right to receive Shares of
the Company as provided in this Plan.
23. Application of Proceeds. The proceeds of the sale of Shares
by the Company under the Plan will constitute general funds of the Company and
may be used by the Company for any purpose.
24. Gender. As used in this Plan, masculine pronouns shall be
deemed to include the feminine, and vice versa.
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Stock Option Plan to be executed this _____day of June, 1997.
Performance Technologies, Incorporated
By:_____________________________
Charles E. Maginness
Chief Executive Officer
