SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 27, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Performance Technologies, Incorporated at Monroe Golf Club, 155
Golf Avenue, Pittsford, New York, on Wednesday, June 3, 1998 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 1997 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 1997 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 of the Board
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 3, 1998
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 Wednesday,
June 3, 1998 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 amend the Company's Stock Option
Plan as to the timing and vesting of options granted to Outside Participating
Directors.
3. 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, 1998.
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 17, 1998 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 27, 1998
1
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED
315 Science Parkway
Rochester, New York 14620
April 27, 1998
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 Wednesday, June 3, 1998 (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 27, 1998. 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 approval of an amendment to the Performance Technologies,
Incorporated Stock Option Plan as to the timing and vesting of options granted
to Outside Participating Directors and FOR the selection of Price Waterhouse LLP
as the Company's independent public accountants for the fiscal year ending
December 31, 1998.
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 17,
1998, the record date for the Meeting (the "Record Date"), consisted of
7,294,450 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 17, 1998, 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 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. 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, 1998. 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.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, with notes thereto, sets forth as of April 17,
1998 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 Percent
of Beneficial of
Ownership Class (2)
<S> <C> <C>
Charles E. Maginness(1) 611,631 (3) 8.0%
John M. Slusser(1) 515,408 (4) 6.8%
Bernard Kozel(1) 418,782 (5) 5.5%
Donald L. Turrell 144,800 (6) 1.9%
William E. Mahuson 150,750 (7) 2.0%
Dorrance W. Lamb 52,850 (8) *
John E. Mooney 54,935 (9) *
Paul L. Smith 13,000 (10) *
Putnam Investment Management Group(11) 540,750 7.0%
One Post Office Square, Boston MA 02109
FMR Corp.(12) 581,500 7.6%
82 Devonshire Street, Boston MA 02109
All Directors and Officers as a Group 1,962,156 (13) 25.7%
- -------------------------
<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 7,627,571 shares consisting of 7,294,450 shares of
Common Stock outstanding as of April 17, 1998 and 333,121 shares of Common
Stock issuable upon exercise of stock options and warrants that are
currently exercisable.
(3) Includes (a) 37,500 shares of Common Stock issuable upon exercise of a
warrant that is currently exercisable; (b) 73,500 shares of Common Stock
issuable upon the exercise of options that are currently exercisable; and
(c) 69,498 shares of Common Stock owned of record by Mr. Maginness' wife.
Mr. Maginness disclaims beneficial ownership of such shares owned by his
wife. Excludes 25,500 shares of Common Stock issuable upon exercise of
options that have not yet vested.
(4) Includes (a) 37,500 shares of Common Stock issuable upon exercise of a
warrant that is currently exercisable; (b) 4,887 shares of Common Stock
issuable upon exercise of options that are currently exercisable; (c)
15,166 shares owned jointly by Mr. Slusser and his wife; (d) 18,000 shares
of Common Stock owned of record by Mr. Slusser as custodian for his minor
children living in his household; (e) 9,000 shares of Common Stock owned of
record by Mr. Slusser's wife's son who shares Mr. Slusser's residence; and
(f) 42,000 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 shares owned by Mr. Slusser's wife's son.
(5) Includes (a) 6,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable; (b) 58,500 shares of Common Stock owned of
record by The Jayme E. Fund Trust U/A, Benjamin J. Fund Trust U/A and Ariel
D. Fund Trust U/A over which Mr. Kozel has voting and investment powers;
and (c) 19,500 shares of Common Stock owned of record by Mr. Kozel's wife.
Mr. Kozel disclaims beneficial ownership of such shares owned by his wife.
3
<PAGE>
(6) Includes (a) 80,034 shares of Common Stock issuable upon exercise of
options that are currently exercisable; (b) 61,516 shares that are owned
jointly by Mr. Turrell and his wife; (c) 3,250 shares of Common Stock owned
of record by Mr. Turrell's wife as custodian for their child. Mr. Turrell
disclaims beneficial ownership of the shares owned by his wife as custodian
for their child. Excludes 39,000 shares of Common Stock issuable upon
exercise of options that have not yet vested.
(7) Includes 42,750 shares of Common Stock issuable upon exercise of options
that are currently exercisable. Excludes 9,250 shares of Common Stock
issuable upon exercise of options that have not yet vested.
(8) Includes (a) 44,950 shares of Common Stock issuable upon exercise of
options that are currently exercisable; and (b) 700 shares of Common Stock
owned of record by Mr. Lamb's wife as custodian for their child living in
their household. Excludes 19,500 shares of Common Stock issuable upon
exercise of options that have not yet vested.
(9) Includes (a) 3,000 shares of Common Stock issuable upon exercise of options
that are currently exercisable; (b) 10,080 shares of Common Stock owned of
record by Mr. Mooney's wife; (c) 10,500 shares owned of record by John E.
Mooney as trustee for John E. Mooney Profit Sharing Plan; and (d) 10,175
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 26,
1998 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
dispositive 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
304,900 of such shares. Putnam Investments, Inc., Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. have shared
dispositive power with respect to all 540,750 shares.
(12) The following information is derived from a Schedule 13G dated February 11,
1998 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 581,500 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) Includes 333,121 shares of Common Stock issuable upon exercise of stock
options and warrants that are currently exercisable; excludes 93,250 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.
4
<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 1998 ANNUAL MEETING
Director
Name and Background Since
John E. Mooney, age 52, has served as a director of the Company 1984
since 1984. He is President and Chief 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 45, a founder of the Company, has served 1981
as a director since its inception in 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, he became President, Chief Executive Officer and a
director of Performance Telecom Corporation, now known as
InformationView Solutions Corporation. Prior to 1981,
Mr. Slusser held an engineering management position with
Computer Consoles, Incorporated.
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 1998 ANNUAL MEETING
Director
Name and Background Since
Charles E. Maginness, age 65, has served as Chairman of the 1983
Board since 1986 and served as Chief Executive Officer of the
Company from April 1995 to June 1997. 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.
Donald L. Turrell, age 50, has served as President and Chief 1995
Operating Officer since April 1995. In June 1997, Mr. Turrell
became Chief Executive Officer of the Company. 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.
Bernard Kozel, age 76, has served as a director of the Company 1983
since 1983. He is the former Chairman of the Board of
J. Kozel & Son, a Rochester, New York-based structural steel
company. He is President of KG Capital Corporation.
Paul L. Smith, age 62, has served as a director of the Company 1993
since 1993. He is an independent 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 Canandaigua Brands, Inc. and
Home Properties of New York, Inc.
5
<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, Slusser
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. Messrs. Maginness, Turrell and Slusser
comprise the Nominating Committee.
The Compensation Committee, Stock Option Committee and Audit Committee
met three, three and one time(s), respectively, during the year ended December
31, 1997. The Nominating Committee did not meet during the year ended December
31, 1997. The Company's Board of Directors held five meetings during the year
ended December 31, 1997. 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 $500 for each meeting attended. Each Board member also receives $4,000
per year if he attends 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 currently 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. See Proposal 2. From time to time, the Company may grant
additional options to directors. In June 1997, 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 an exercise price of $12.50 per share.
Such shares were adjusted to 1,500 shares of Common Stock at an exercise price
of $8.33 as a result of the three-for-two stock split effected in September
1997.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 1997 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
1997 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.
6
<PAGE>
In the first quarter of each fiscal year, the Compensation Committee
reviews with the Chairman and the President 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 Chairman and Chief Executive
Officer and the President evaluate each executive's performance and make
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 1997, the targeted amount contributed to the program was
allocated to three pools: the Chief Executive Officer, President and Chief
Financial Officer; upper management; and all other employees. The actual
allocation of the bonus pool for the Chief Executive Officer, the President and
the Chief Financial Officer 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, the President and the Chief Financial Officer was based
on recommendations of the Company's Chairman and the 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 to five 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 and non-qualified stock
options awarded to executive officers vest over a five year period. Stock
options granted in 1997 to executive officers carried a five year vesting
period. Refer to the Named Executive in the Option Grants in Last Fiscal Year
Table for stock options awarded in 1997.
Compensation of Chief Executive Officer
Mr. Maginness was Chief Executive Officer until June 1997, at
which time he resigned his position as Chief Executive Officer but retained his
position as Chairman of the Board. Mr. Turrell assumed the responsibilities of
Chief Executive Officer effective June 10, 1997. For 1997, the salaries for Mr.
Maginness and Mr. Turrell were reviewed by the Compensation Committee in the
context of Company's current performance trends and prospects.
For 1997, 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 and
Mr. Turrell based upon their strategic contributions and the financial
performance of the Company in 1997.
Compensation Committee
Bernard Kozel
Paul L. Smith
John E. Mooney
7
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Chairman of the Board and the President of the Company consult with
the Compensation Committee and make recommendations to it. They participate in
discussions with the Compensation Committee but do not vote or otherwise
participate in the Compensation Committee's determinations. An Insider Trading
Policy exists 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, 1997, 1996 and 1995, paid by the Company to
those persons who were, during the fiscal year ended December 31, 1997 (i) the
chief executive officer of the Company and (ii) the other executive officers of
the Company who earned over $100,000 during the fiscal year ended December 31,
1997 (the "Named Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
All Other
Name and Compensation
Principal Position Year Salary($) Bonus ($) Options(#)(2) ($) (1)
- ------------------ ---- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Charles E. Maginness, 1997 $151,112 $168,700 30,000 $18,342
Chief Executive Officer 1996 $143,958 $161,330 60,000 $17,063
(through June 10, 1997) 1995 $137,280 $112,000 $ 8,435
Donald L. Turrell, 1997 $127,308 $168,700 30,000 $10,722
Chief Executive Officer 1996 $117,846 $161,330 60,000 $12,778
(from June 10, 1997) 1995 $107,370 $ 92,400 $ 6,583
and President
Dorrance W. Lamb, 1997 $109,192 $117,580 15,000 $ 9,073
Vice President - Finance 1996 $ 99,628 $113,880 45,000 $ 7,237
Chief Financial Officer 1995 $ 94,830 $ 61,600 $ 4,073
William E. Mahuson, 1997 $101,347 $ 66,460 7,500 $ 7,289
Vice President 1996 $ 96,212 $ 75,920 37,500 $ 6,837
1995 $ 92,934 $ 50,400 $ 4,007
- ------------------
<FN>
(1) Includes payments for life insurance, car allowances and car expenses, and
401(k) allowance.
(2) All option shares have been adjusted for the Company's three-for-two stock
split effected in September 1997.
</FN>
</TABLE>
Employment Agreements
The Company does not have employment agreements with any of its
executive officers.
8
<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, 1997
pursuant to the Performance Technologies, Incorporated Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
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% ($)
---- ----------- ----------- --------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Maginness 30,000 22% $7.25 4/27/2007 $136,786 $346,630
Donald L. Turrell 30,000 22% $7.25 4/27/2007 $136,786 $346,630
Dorrance W. Lamb 15,000 11% $7.25 4/27/2007 $ 68,393 $173,315
William E. Mahuson 7,500 5% $8.92 5/15/2007 $ 42,059 $106,583
<FN>
(1) These options become vested in five installments, twenty percent per year
commencing on the first anniversary of the grant date. All option shares and the
exercise prices for options have been adjusted for the Company's three-for-two
stock split effected in September 1997. Option shares awarded to Mr. Maginness
and Mr. Turrell during 1997 were non-qualified stock options and option shares
awarded to Mr. Lamb and Mr. Mahuson were qualified stock options.
(2) Amounts represent potential gains that could be achieved for the options
granted in 1997 based on assumed annual growth rates of 5% and 10% in the price
of the Company's Common Stock over the ten-year life of the option (which would
equal a total increase in stock price of 63% and 159%, respectively). Actual
gains, if any, will depend upon market conditions and the Company's future
performance and prospects.
</FN>
</TABLE>
The following table sets forth information with respect to the exercise
of stock options by the Named Executives, if any, during the year ended December
31, 1997 and also information with respect to status of unexercised stock
options as of December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Options In-the-Money Options at FY-End
at FY-End (#) (2) ($) (1) (2)
----------------- -----------
Shares Acquired Value
Name on Exercise (#) Realized($)(3) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Maginness 105,000 30,000 $986,108 $217,500
Donald L. Turrell 74,034 30,000 $593,801 $217,500
Dorrance W. Lamb 3,500 $34,738 45,000 15,000 $311,085 $108,750
William E. Mahuson 40,500 7,500 $298,175 $ 41,873
- ------------------
<FN>
(1) Represents the difference between the fair market value of the Common
Stock as of December 31, 1997 and the exercise price of the option.
Options that are not In-the-Money have been excluded from the
computation.
(2) All option shares and value of In-the-Money options have been adjusted
for the Company's three-for-two stock split effected in September 1997.
(3) 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.
</FN>
</TABLE>
9
<PAGE>
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, Inc. 100 145 183 152 121
NASDAQ Stock Market 100 107 115 119 125
NASDAQ Computer Manufacturer Index 100 106 119 132 138
3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- -------
Performance Technologies, Inc. 138 191 363 272
NASDAQ Stock Market 118 140 164 154
NASDAQ Computer Manufacturer Index 116 150 188 167
</TABLE>
10
<PAGE>
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, directors 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.
PROPOSAL 2
AMENDMENT 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 provide that
formula options to Outside Participating Directors shall be granted on the date
of the Annual Meeting and shall vest on the one year anniversary of the grant
date, provided the director still serves as a member of the Board of Directors
on the vesting date. As a result of this amendment, in 1998 only, each director
will receive two non-qualified options for an aggregate 3000 shares, one for
1500 shares which will vest immediately pursuant to the provisions of the Option
Plan in effect prior to adoption, if adopted, of the proposed amendment and one
for 1500 shares which will vest in one year.
The Board of Directors recommends a vote in favor of the proposal to amend the
Stock Option Plan to provide that formula options to Outside Participating
Directors shall be granted on the date of the Annual Meeting and shall vest on
the one year anniversary of the grant date, provided the director still serves
as a member of the Board of Directors on the vesting date.
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 1,800,000 shares of
Common Stock reserved for issuance under the Option Plan at December 31, 1997,
options for 573,501 shares were outstanding and 855,937 shares were available
for future grant.
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
11
<PAGE>
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 27, 1998, there are four Outside Participating Directors.
The proposed amendment to the Option Plan provides that 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 1,500 shares of Common
Stock. 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 on the first anniversary of
the grant date 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.
Under the current version of the Option Plan, options vest immediately for
Outside Participating Directors who had served as a director since the last
Annual Meeting of Stockholders.
Upon an Outside Participating Director's death, his/her legal
representatives or heirs will have one year to exercise those options that were
vested and 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 2
PROPOSAL 3
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, 1997 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, 1998.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
12
<PAGE>
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's
proxy statement to be issued in connection with the 1999 Annual Meeting of
Stockholders, such proposal must be delivered to the Company no later than
December 28, 1998.
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 27, 1998
13
<PAGE>
EXHIBIT I
PERFORMANCE TECHNOLOGIES, INCORPORATED
AMENDMENT TO 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, amended the
Plan on May 3, 1990, amended and restated the Plan on April 18, 1994, amended
the Plan on November 14, 1995, amended and restated the Plan on June 5, 1996 and
amended the Plan again on June 10, 1997; and
WHEREAS, the Company desires to amend Section 17 of the Plan to provide
that the grant of options to Outside Participating Directors shall be
prospective as an incentive to service rather than as a reward for past service,
to amend Section 20 of the plan to amend the vesting provisions of such options
and to amend Section 21 of the Plan to make it consistent with the provisions of
amended Section 20.
NOW, THEREFORE, Sections 17, 20 and 21 of the Plan are hereby amended to
read in their entirety effective June 3, 1998, subject to approval of the
Company's stockholders, as follows:
17. Outside Participating Directors. As of each Grant Date as
defined in Section 18, each member of the Board of Directors
who (a) is not an employee of the Company or any of its
subsidiaries and (b) will serve as a member of the Board of
Directors subsequent to the Grant Date is deemed an Outside
Participating Director and is eligible to receive options in
accordance with Section 18 below.
20. Vesting and Expiration of Outside Participating Director
Stock Options. Each option granted to an Outside Participating
Director shall vest and shall become exercisable on the first
anniversary of the Grant Date in accordance with Section 5 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 have been granted and vested prior to the date of
cessation of service. Upon the death of an Outside
Participating Director or former Outside Participating
Director, all vested 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.
All other terms and conditions of the Plan shall remain in full force
and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to Stock
Option Plan to be executed this _____ day of June, 1998.
PERFORMANCE TECHNOLOGIES, INC.
By:_______________________
Donald L. Turrell
Chief Executive Officer
14
<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 3, 1998 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 individual nominee, strike a
line through the nominee's name listed below.
John E. Mooney John M. Slusser
2. Proposal to amend the Company's Stock Option Plan to provide that formula
options to Outside Participating Directors shall be granted on the date of the
Annual Meeting and shall vest on the one year anniversary of the grant date,
provided the director still serves as a member of the Board of Directors on the
vesting date.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed, on reverse side)
(continued from other side)
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
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 instructions, 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 27, 1998, describing more fully the proposals set forth herein.
Dated: ___________________________________, 1998
- -------------------------------------------------
- -------------------------------------------------
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.
