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 Com-
[X] Definitive proxy statement mission Only (as permitted by
[ ] Definitive additional materials Rule 14a-6(e) (2))
[ ] 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 26, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Performance Technologies, Incorporated at The Lodge at Woodcliff, 199
Woodcliff Drive, Fairport, New York, on Tuesday, June 8, 1999 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 1998 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
1998 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 8, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of PERFORMANCE TECHNOLOGIES, INCORPORATED (the "Company") will be
held at The Lodge at Woodcliff, 199 Woodcliff Drive, Fairport, New York, on
Tuesday, June 8, 1999 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
PricewaterhouseCoopers LLP as the Company's independent public accountants for
the fiscal year ending December 31, 1999.
3. 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 16, 1999 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 26, 1999
<PAGE>
PERFORMANCE TECHNOLOGIES, INCORPORATED
315 Science Parkway
Rochester, New York 14620
April 26, 1999
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 8, 1999 (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 26, 1999. 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 a written
revocation or a duly executed proxy bearing a later date with the Secretary
prior to the Meeting. 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 PricewaterhouseCoopers LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1999.
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 16, 1999,
the record date for the Meeting (the "Record Date"), consisted of 7,246,543
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 16, 1999, 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 PricewaterhouseCoopers LLP as independent public accountants
for the Company for the fiscal year ending December 31, 1999. 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.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, with notes thereto, sets forth as of April 16, 1999
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
Amount and Nature Percent
of Beneficial of
Name Ownership Class(2)
<S> <C> <C>
Charles E. Maginness(1) 617,631 (3) 8.1%
John M. Slusser(1) 502,408 (4) 6.6%
Bernard Kozel(1) 413,282 (5) 5.4%
Donald L. Turrell 154,550 (6) 2.0%
William E. Mahuson 151,550 (7) 2.0%
Dorrance W. Lamb 57,350 (8) *
John E. Mooney 56,435 (9) *
Paul L. Smith 10,500 (10) *
Putnam Investment Management Group(11) 546,650 7.2%
One Post Office Square, Boston MA 02109
FMR Corp.(12) 730,300 9.6%
82 Devonshire Street, Boston MA 02109
All Directors and Officers as a Group 1,963,706 (13) 25.9%
- -------------------------
<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 7,587,964 shares consisting of 7,246,543 shares of
Common Stock outstanding as of April 16, 1999 and 341,421 shares of Common
Stock issuable upon exercise of stock options and warrants currently
exercisable.
(3) Includes (a) 37,500 shares of Common Stock issuable upon exercise of a
warrant currently exercisable; (b) 72,000 shares of Common Stock issuable
upon the exercise of options 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
19,500 shares of Common Stock issuable upon exercise of options not yet
vested.
(4) Includes (a) 37,500 shares of Common Stock issuable upon exercise of a
warrant currently exercisable; (b) 6,387 shares of Common Stock issuable
upon exercise of options currently exercisable; (c) 8,166 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. Excludes 1,500 shares of
Common Stock issuable upon exercise of options not yet vested.
(5) Includes (a) 6,000 shares of Common Stock issuable upon exercise of options
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.
Excludes 1,500 shares of Common Stock issuable upon exercise of options not
yet vested.
2
<PAGE>
(6) Includes (a) 86,034 shares of Common Stock issuable upon exercise of
options currently exercisable; (b) 62,266 shares owned jointly by Mr.
Turrell and his wife; (c) 4,750 shares of Common Stock owned of record by
Mr. Turrell's wife as custodian for their child; and (d) 1,500 shares of
Common Stock owned of record by Mr. Turrell's child living in his
household. Mr. Turrell disclaims beneficial ownership of the shares owned
by his wife as custodian for their child and owned by his child living in
his household. Excludes 51,750 shares of Common Stock issuable upon
exercise of options not yet vested.
(7) Includes 40,550 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 13,450 shares of Common Stock issuable upon
exercise of options not yet vested.
(8) Includes (a) 49,450 shares of Common Stock issuable upon exercise of
options currently exercisable; and (b) 2,350 shares of Common Stock owned
of record by Mr. Lamb's wife as custodian for their child living in their
household. Excludes 32,500 shares of Common Stock issuable upon exercise of
options not yet vested.
(9) Includes (a) 4,500 shares of Common Stock issuable upon exercise of options
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. Excludes 1,500 shares of Common Stock
issuable upon exercise of options not yet vested.
(10) Includes 1,500 shares of Common Stock issuable upon exercise of options
currently exercisable. Excludes 1,500 shares of Common Stock issuable upon
exercise of options not yet vested.
(11) The following information is derived from a Schedule 13G dated February 18,
1999 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
255,900 of such shares. Putnam Investments, Inc., Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. have shared
dispositive power with respect to all 546,650 shares.
(12) The following information is derived from a Schedule 13G dated December 10,
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 730,300 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 341,421 shares of Common Stock issuable upon exercise of stock
options and warrants currently exercisable; excludes 123,200 shares of
Common Stock issuable upon exercise of stock options 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.
3
<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 1999 ANNUAL MEETING
Director
Name and Background Since
Charles E. Maginness, age 66, has served as Chairman of the Board
since 1986 and served as Chief Executive Officer of the Company 1983
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.
Bernard Kozel, age 77, has served as a director of the Company
since 1983. He is the former Chairman of the Board of J. Kozel & 1983
Son, a Rochester, New York-based structural steel company. He is
President of K.G. Capital Corporation.
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 1999 ANNUAL MEETING
Director
Name and Background Since
Donald L. Turrell, age 51, has served as Chief Executive Officer
of the Company since June 1997, and President and Chief Operating 1995
Officer since 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.
John M. Slusser, age 46, a founder of the Company, has served as
a director since its inception in 1981. From 1981 through 1995, 1981
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.
John E. Mooney, age 53, has served as a director of the Company
since 1984. He is President and Chief Executive Officer of Essex 1984
Partners, Inc., Rochester, New York. Mr. Mooney also serves on
the Board of Directors of Veramark Technologies, Inc., a publicly
held telecommunications company.
Paul L. Smith, age 63, has served as a director of the Company
since 1993. He is an independent business and financial 1993
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.
4
<PAGE>
Committees of the Board of Directors
The Board has a Compensation Committee to evaluate executive compensation.
Messrs. Smith, Mooney and Kozel 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. Slusser, 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. Mooney, Kozel 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, Audit Committee, and
Nominating Committee met two, one, one, and one time(s), respectively, in 1998.
The Company's Board of Directors held six meetings in 1998. Each director
attended at least 75 percent 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 $750 for each meeting attended. Each Board member also receives $6,000
per year if he attends at least 75 percent 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. At the
1998 Stockholders Meeting, an amendment to the Company's Stock Option Plan (the
"Plan") was approved to provide 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
option for 1,500 shares of Common Stock. The exercise price for these options
will be the fair market value of the Company's Common Stock on the date of the
option grant. Options vest on the first anniversary of the grant date and expire
five years from the date of grant. From time to time, the Company may grant
additional options to directors. Under the previous Plan, options awarded to
Outside Directors vested immediately. As a result of the amendment approved at
the 1998 Stockholders Meeting, Messrs. Kozel, Mooney, Slusser and Smith each
received two non-qualified options for an aggregate 3,000 shares at an exercise
price of $13.88, one for 1,500 shares which vested immediately and one for 1,500
shares which will vest in June 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons, who own more than 10% of a registered class of the
Company's equity securities, to file certain reports regarding ownership of, and
transactions in, the Company's securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors, and 10% shareholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on its review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% shareholders were complied with, except that Bernard
Kozel filed a Form 4 statement of changes of beneficial ownership with respect
to an acquisition of Common Stock in March 1998 in connection with exercising
2,250 stock options subsequent to the required filing date.
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 Paul L.
Smith, Chairman, John E. Mooney and Bernard Kozel.
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.
5
<PAGE>
The three key components of the Company's executive compensation for 1998
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. The Company did not achieve the internal growth goals and objectives
established in the Company's 1998 annual incentive plan. As a result, no cash
incentive compensation was paid to executive officers in 1998.
At the request of the Compensation Committee, the Company retained the
services of Watson Wyatt & Company during 1998 to perform a comparative analysis
of the compensation of its executive officers. Watson Wyatt & Company compared
the compensation of the Company's executives to a peer group of similarly sized
companies in the technology industry. The comparison indicated to the
Compensation Committee that the total compensation levels for executive officers
was appropriate. However, it did indicate that the annual salary compensation
levels could use some upward movement to become more comparable and such action
has been taken by the Company.
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. In 1998, the Compensation Committee
recommended to the Stock Option Committee that qualified and non-qualified stock
options awarded to executive officers vest over a three year period. Refer to
the Named Executive in the Option Grants in Last Fiscal Year Table for stock
options awarded in 1998.
Compensation of Chief Executive Officer
Mr. Turrell was Chief Executive Officer for 1998 and also held the position
of President. Mr. Turrell's salary is reviewed by the Compensation Committee in
the context of Company's current performance trends and prospects. For 1998, Mr.
Turrell did not receive any cash incentive compensation for the year.
Compensation Committee
Paul L. Smith, Chairman
John E. Mooney
Bernard Kozel
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Chief Executive Officer of the Company consults with the Compensation
Committee and makes recommendations. He participates in discussions with the
Compensation Committee but does 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, 1998, 1997 and 1996, paid by the Company to
those persons who were, during the fiscal year ended December 31, 1998 (i) the
chief executive officer of the Company and (ii) the other executive officers of
the Company who earned over $100,000 during the fiscal year ended December 31,
1998 (the "Named Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
All Other
Name and Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($) (1)
- ------------------ ---- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Charles E. Maginness, 1998 $151,696 1,500 $20,298
Chairman of the Board; 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)
Donald L. Turrell, 1998 $147,692 15,000 $11,574
Chief Executive Officer 1997 $127,308 $168,700 30,000 $10,722
(from June 10, 1997) 1996 $117,846 $161,330 60,000 $12,778
and President
Dorrance W. Lamb, 1998 $114,423 7,500 $ 9,490
Vice President - Finance 1997 $109,192 $117,580 15,000 $ 9,073
Chief Financial Officer 1996 $ 99,628 $113,880 45,000 $ 7,237
William E. Mahuson, 1998 $104,508 4,000 $ 7,119
Vice President 1997 $101,347 $ 66,460 7,500 $ 7,289
1996 $ 96,212 $ 75,920 37,500 $ 6,837
- ------------------
<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.
7
<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, 1998 pursuant
to the Performance Technologies, Incorporated Stock Option Plan.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
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 1,500 1% $14.63 1/22/2003 $ 6,061 $ 13,392
Donald L. Turrell 15,000 11% $14.63 1/22/2003 $ 60,613 $133,928
Dorrance W. Lamb 7,500 5% $14.63 1/22/2003 $ 30,306 $ 66,964
William E. Mahuson 4,000 3% $14.63 1/22/2003 $ 16,163 $ 35,714
<FN>
(1) These options vest in three annual installments of twenty percent, fifty
percent and one-hundred percent commencing on the first anniversary of the grant
date. Option shares awarded during 1998 were qualified stock options.
(2) Amounts represent potential gains that could be achieved for the options
granted in 1998 based on assumed annual growth rates of 5% and 10% in the price
of the Company's Common Stock over the five-year life of the option (which would
equal a total increase in stock price of 28% and 61%, 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, 1998 and also information with respect to status of unexercised stock
options as of December 31, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options In-the-Money Options at FY-End
at FY-End(#) ($) (1)
------------ -------
Shares Acquired Value
Name on Exercise (#) Realized ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Maginness 7,500 $81,203 103,500 25,500 $791,093 $141,000
Donald L. Turrell 3,750 $30,859 76,284 39,000 $483,739 $141,000
Dorrance W. Lamb 3,050 $35,572 44,950 19,500 $249,944 $ 70,500
William E. Mahuson 3,000 $25,812 37,500 11,500 $207,675 $ 41,535
- ------------------
<FN>
(1) Represents the difference between the fair market value of the Common Stock
as of December 31, 1998 and the exercise price of the option. Options that
are not In-the-Money have been excluded from the computation.
(2) 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>
8
<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
Regulation S-T]
<TABLE>
<CAPTION>
Performance NASDAQ NASDAQ
Technologies, Stock Computer
Incorporated Market Manufacturer
------------ ------ ------------
<S> <C> <C> <C> <C>
1/25/96 100 100 100
3/31/96 145 106 106
6/30/96 183 115 119
9/30/96 152 119 131
12/31/96 121 125 138
3/31/97 138 118 116
6/30/97 191 140 150
9/30/97 363 164 188
12/31/97 272 153 167
3/31/98 277 179 205
6/30/98 211 185 243
9/30/98 173 167 267
12/31/98 246 216 363
</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, 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. 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.
The Company has the option to renew the lease for two successive periods of five
years each at an annual rental in accordance with the provision of the lease
agreement.
9
<PAGE>
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as the independent public
accountants of the Company for the fiscal year ended December 31, 1998 and the
Board of Directors has again selected PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1999. 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 PricewaterhouseCoopers 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 2
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's
proxy statement to be issued in connection with the 2000 Annual Meeting of
Stockholders, such proposal must be delivered to the Company no later than
December 27, 1999.
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 26, 1999
10
<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 The Lodge at Woodcliff, 199
Woodcliff Drive, Fairport, New York, on Tuesday, June 8, 1999 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.
Charles E. Maginness Bernard Kozel
2. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed, on reverse side)
(continued from other side)
3. 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 26, 1999, describing more fully the proposals set forth herein.
Dated: ___________________________________, 1999
- -------------------------------------------------
- -------------------------------------------------
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.
