SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PRAEGITZER INDUSTRIES, INC.
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(Name of Registrant as Specified in its Charter)
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(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)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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.
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5) Total fee paid:
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[ ] Fee paid previously 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:
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<PAGE>
PRAEGITZER INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 5, 1999
TO THE SHAREHOLDERS OF PRAEGITZER INDUSTRIES, INC.:
The Annual Meeting of the Shareholders of Praegitzer Industries, Inc., an
Oregon corporation, will be held at 2:00 p.m., Pacific Time, on November 5,
1999, at The Governor Hotel, 611 S.W. Tenth at Alder, Portland, Oregon 97205,
for the following purposes:
1. Electing directors to serve for the following year and until their
successors are elected; and
2. Transacting any other business that properly comes before the meeting.
Only shareholders of record at the close of business on September 20, 1999
will be entitled to vote at the annual meeting.
YOU ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. You may attend the meeting
in person even if you send in your proxy; retention of the proxy is not
necessary for admission to or identification at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Robert L. Praegitzer
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
Tualatin, Oregon
October 25, 1999
<PAGE>
PRAEGITZER INDUSTRIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
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The mailing address of the principal executive offices of the Company is
19801 SW 72nd Avenue, Tualatin, Oregon 97062. The approximate date this proxy
statement and the accompanying proxy form are first being sent to shareholders
is October 25, 1999.
UPON WRITTEN REQUEST TO GINA O'NEILL, INVESTOR RELATIONS, ANY PERSON WHOSE
PROXY IS SOLICITED BY THIS PROXY STATEMENT WILL BE PROVIDED, WITHOUT CHARGE, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of
Praegitzer Industries, Inc., an Oregon corporation, for use at the Annual
Meeting of Shareholders to be held on November 5, 1999 and at any adjournment
thereof. The Company will bear the cost of preparing and mailing the proxy,
proxy statement, and any other material furnished to shareholders by the Company
in connection with the Annual Meeting. Proxies will be solicited by use of the
mails, and officers and employees of the Company may also solicit proxies by
telephone or personal contact. Copies of solicitation materials will be
furnished to fiduciaries, custodians, and brokerage houses for forwarding to
beneficial owners of the stock held in their names.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with the Secretary of the Company, an instrument of revocation or a
duly executed proxy bearing a later date. The proxy may also be revoked by
voting in person at the meeting. A shareholder who attends the meeting, however,
is not required to revoke the proxy and vote in person. All valid, unrevoked
proxies will be voted at the annual meeting in accordance with the instructions
given.
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only outstanding authorized voting security of the
Company. The record date for determining holders of Common Stock entitled to
vote at the annual meeting is September 20, 1999. On that date there were
13,129,751 shares of Common Stock outstanding, entitled to one vote per share.
The Common Stock does not have cumulative voting rights.
The following table sets forth certain information regarding the beneficial
ownership as of September 20, 1999 of the Common Stock by (i) each person known
by the Company to own beneficially more than 5 percent of the Common Stock, (ii)
each director and each director nominee of the Company, (iii) each executive
officer of the Company named in the Summary Compensation Table, and (iv) all
executive officers and directors as a group. Except as otherwise noted, the
persons listed below have sole investment and voting power with respect to the
Common Stock owned by them.
<TABLE>
<CAPTION>
Beneficial Owner Number of Shares Percentage of
Beneficially Owned (1) Shares
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert L. Praegitzer......................................... 8,213,125(2) 62.55%
19801 SW 72nd Avenue
Tualatin, Oregon 97062
Mellon Bank Corporation (3).................................. 1,007,650(4) 7.67%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Boston Group Holdings, Inc. (3).............................. 716,550(5) 5.46%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
The Boston Company, Inc (3).................................. 716,550(6) 5.46%
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Matthew J. Bergeron.......................................... 177,849(7) 1.35%
Robert J. Versiackas......................................... 195,692(8) 1.49%
Gregory L. Lucas............................................. 31,250(9) *
James M. Buchanan............................................ 34,369(10) *
Daniel J. Barnett............................................ 110,703(11) *
Merrill A. McPeak............................................ 16,999(12) *
Theodore L. Stebbins......................................... 21,666(13) *
Gordon B. Kuenster........................................... 4,999(14) *
All directors and executive officers as a group (11 persons). 8,844,210(15) 67.36%
- --------------
* Less than 1%
2
<PAGE>
(1) Shares that the person has the right to acquire within 60 days after
September 20, 1999 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.
(2) Includes options to purchase 93,750 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 31,250 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(3) The Company has relied upon the information contained in the Schedule 13G
jointly filed by Mellon Bank Corporation, Boston Group Holdings, Inc. and
The Boston Company, Inc. with the Securities and Exchange Commission on
February 4, 1999.
(4) Mellon Bank Corporation has sole voting power over 998,350 shares and sole
dispositive power over 1,007,650 shares. Mellon Bank Corporation is the
beneficial owner of these shares due to its direct or indirect ownership of
certain entities, including without limitation Boston Group Holdings, Inc.
and The Boston Company, Inc., which are the beneficial and record owners,
respectively, of shares of the Company's common stock.
(5) Boston Group Holdings, Inc. has sole voting power over 707,250 shares and
sole dispositive power over 716,550 shares. Boston Group Holdings, Inc. is
the beneficial owner of these shares due to its ownership of The Boston
Company, Inc., the record owner of the shares. These shares are also
included in the shares beneficially owned by Mellon Bank Corporation.
(6) The Boston Company, Inc. has sole voting power over 707,250 shares and sole
dispositive power over 716,550 shares. The shares are also included in the
shares beneficially owned by Mellon Bank Corporation and Boston Group
Holdings, Inc.
(7) Includes options to purchase 68,749 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 31,251 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(8) Includes options to purchase 35,260 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 54,740 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(9) Includes options to purchase 31,250 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 93,750 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
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<PAGE>
(10) Includes options to purchase 31,250 shares of Common Stock that are
exercisable within 60 days after September 20, 1999 and excludes options to
purchase 153,750 shares of Common Stock not exercisable within 60 days
after September 20, 1999.
(11) Includes options to purchase 3,333 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 6,667 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(12) Includes options to purchase 14,999 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 10,001 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(13) Includes options to purchase 21,666 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 3,334 shares of Common Stock not exercisable within 60 days after
September 20, 1999.
(14) Includes options to purchase 4,999 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 10,0001 shares of Common Stock not exercisable within 60 days
after September 20, 1999.
(15) Includes options to purchase 332,756 shares of Common Stock that are
exercisable within 60 days after September 20, 1999. Excludes options to
purchase 464,744 shares of Common Stock not exercisable within 60 days
after September 20, 1999.
</TABLE>
PROPOSAL 1: ELECTION OF DIRECTORS
The directors of the Company are elected at the Annual Meeting to serve
until their successors are elected and qualified. Each nominee is now serving as
a director of the Company. If a quorum of shareholders is present at the Annual
Meeting, the six nominees for election as directors who receive the greatest
number of votes cast at the meeting will be elected directors. Abstentions and
broker non-votes will have no effect on the results of the vote. Unless
otherwise instructed, proxy holders will vote the proxies they receive for the
nominees named below. If any of the nominees for director at the Annual Meeting
becomes unavailable for election for any reason, the proxy holders will have
discretionary authority to vote pursuant to the proxy for a substitute or
substitutes. The following table briefly describes the Company's nominees for
directors.
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<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS AGE SINCE
- --------------------------------------------------- --- --------
<S> <C> <C>
ROBERT L. PRAEGITZER founded the Company in 1981 68 1981
and has been its Chief Executive Officer and Chairman
of the Board since that time, and was the President
from the founding until January 1998. He was also
the founder and President of Praegitzer Design
Incorporated, which merged into the Company in 1995,
and Praegitzer Property Group, the assets of which
were acquired by the Company in 1996.
MATTHEW J. BERGERON joined the Company in 1990 as 36 1995
Chief Financial Officer. He became Senior Vice
President in 1993, a director in November 1995,
Executive Vice President and Chief Operating
Officer in April 1997 and President and Chief
Operating Officer in January 1998. Prior to joining
the Company, Mr. Bergeron was an accountant at
Johnson & Shute P.S., a public accounting firm.
DANIEL J. BARNETT joined the Company as Senior Vice 48 1996
President and a director in August 1996 in
connection with the merger of Trend Circuits, Inc.
("Trend")into the Company. On May 29, 1998,
Mr. Barnett terminated his employment with
the Company. Prior to the merger, Mr. Barnett was
the president of Trend. Mr. Barnett served as the
president of Trend from 1992 until August 1996.
Theodore L. STEBBINS is the Managing Director of 58 1996
Adams, Harkness & Hill, Inc. ("Adams Harkness"),
an investment banking firm, and was appointed
to the Board of Directors of the Company in May 1996.
The Company has retained Adams Harkness to
provide financial advisory services related
to strategic alternatives. Under this
arrangement, Adams Harkness is entitled to
receive a fee based on the value of the transaction
(as defined). The fee is not payable until a
transaction is consummated. As of the date
of this proxy statement, the Company has no
understandings, commitments or agreements for
any transaction that would require a payment
under this arrangement.
MERRILL A. MCPEAK joined the Company as a director 63 1997
in April 1997. He is a retired general of the United
States Air Force. He served as Chief of Staff of
the Air Force from October 1990 to October 1994.
He is Chairman of the Board and a Director of ECC
International, and serves on the boards of four
other publicly traded companies: Tektronix Inc.,
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<PAGE>
Thrustmaster Inc., Trans World Airlines, and
Western Power and Equipment.
Gordon B. Kuenster joined the Company as a director 66 1997
in November 1997. He is founder and Chief Executive
Officer of Seattle Sight Systems, Inc.,
a manufacturer of application-specific high
resolution computer displays. He founded Seattle
Sight Systems, Inc. in 1996 and is presently
serving as Chief Executive Officer. Mr. Kuenster
was founder and Chief Executive Officer of Virtual
Vision, Inc. from 1991 to 1994 and Virtual
Image Displays, Inc. from 1994 to 1996.
</TABLE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors met four times in the fiscal year ended June 30,
1999 ("fiscal 1999"). No director attended fewer than 75 percent of the
aggregate of all meetings of the Board of Directors and the committees of which
the director was a member during fiscal 1999. The standing committees of the
Board of Directors are the Audit Committee and the Compensation Committee. The
Company does not have a Nominating Committee.
The Audit Committee makes recommendations concerning the engagement of the
independent public accountants, reviews with the independent public accountants
the plans and results of audits, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and nonaudit fees, and reviews
the adequacy of the Company's internal accounting controls. The Audit Committee
consists of General McPeak, Mr. Stebbins and Mr. Kuenster and met four times in
fiscal 1999. The Compensation Committee determines compensation for the
Company's executive officers, and administers the Company's 1995 Stock Incentive
Plan and the Company's Employee Stock Purchase Plan. The Compensation Committee
consists of Mr. Kuenster, General McPeak and Mr. Stebbins and met four times in
fiscal 1999.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company are reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings. They also receive, in
cash, an annual retainer fee of $10,000 in quarterly installments along with
$1,000 for each board meeting attended. In addition, each individual who becomes
a nonemployee director of the Company receives a non-statutory option to
purchase 10,000 shares of Common Stock when the individual becomes a director,
and each nonemployee director of the Company is automatically granted an annual
non-discretionary, non-statutory option to purchase 5,000 shares of Common Stock
upon re-election. Members of the Audit and Compensation Committees are each
entitled to $500 per committee meeting they attend and the chairman of both
committees is entitled to an annual cash payment of $1,000.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid by the Company with
respect to the last three fiscal years to the Chief Executive Officer and the
four other most highly compensated executive officers whose annual compensation
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------- ---------------------------
Fiscal Options All Other
Name and Principal Position Year Salary Bonus Granted Compensation (1)
- ------------------------------------------------------ ------- --------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Robert L. Praegitzer 1997 $ 274,999 0 125,000 9,640
Chief Executive Officer 1998 $ 300,000 0 0 9,640
1999 $ 300,000 0 0 9,640
Matthew J. Bergeron 1997 $ 149,999 0 25,000 4,983
President and Chief Operating Officer 1998 $ 199,423 0 25,000 4,983
1999 $ 200,000 0 0 4,983
Robert J. Versiackas 1997 $ 141,731 0 16,043 0
Senior Vice President of Operations 1998 $ 199,892 0 58,957 0
1999 $ 185,000 0 15,000 0
James M. Buchanan(2) 1997 -- -- -- --
Senior Vice President of Sales 1998 $ 35,577 0 125,000 $ 1,615
and Marketing 1999 $ 185,000 0 20,000 $ 8,400
Gregory L. Lucas(3) 1997 $ 7,115 0 50,000 0
Senior Vice President of Technology 1998 $ 181,442 0 25,000 0
1999 $ 185,000 0 20,000 0
- --------------
(1) Consists of car allowances
(2) Mr. Buchanan commenced employment with the Company on April 13, 1998.
(3) Mr. Lucas commenced employment with the Company on June 16, 1997.
</TABLE>
7
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted in
fiscal 1999 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percentage Annual Rates of
Number of of Options Stock Price
Shares Granted to Appreciation for
Underlying Employees Exercise Option Term (1)
Options in Fiscal Price per Expiration -----------------------------
Name Granted Year Share Date 5% 10%
- --------------------------------- ---------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Praegitzer 0 -- -- -- -- --
Matthew J. Bergeron 0 -- -- -- -- --
Robert J. Versiackas 15,000(2) 3.45% $ 5.344 4/16/09 $ 50,412 $ 127,754
James M. Buchanan 20,000(2) 4.60% $ 5.344 4/16/09 $ 67,216 $ 170,339
Gregory L. Lucas 20,000(2) 4.60% $ 5.344 4/16/09 $ 67,216 $ 170,339
- --------------
(1) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "option spreads" that would exist for
the respective options based on assumed compounded rates of annual stock
price appreciation of 5 percent and 10 percent from the date the options
were granted over the option term.
(2) These options become exercisable April 16, 2000.
</TABLE>
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table indicates for all executive officers named in the
Summary Compensation Table (i) stock options exercised during fiscal 1999,
including the value realized on the date of exercise, (ii) the number of shares
subject to exercisable (vested) and unexercisable (unvested) stock options as of
June 30, 1999, and (iii) the value of "in-the-money" options, which represents
the positive spread between the exercise price of existing stock options and the
year-end price of the Common Stock.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Subject to Unexercised In-the-Money Options
Number of Options at Fiscal Year-End at Fiscal Year-End (1)
Shares Acquired Value ----------------------------- -----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Praegitzer -- -- 62,500 62,500 $ 0 $ 0
Matthew J. Bergeron -- -- 56,250 43,750 $ 0 $ 0
Robert J. Versiackas -- -- 22,760 67,240 $ 0 $ 8,910
James M. Buchanan -- -- 31,250 113,750 $ 0 $ 11,880
Gregory L. Lucas -- -- 31,250 63,750 $ 0 $ 11,880
- --------------
(1) Based on last sale price of $5.938 per share on June 30, 1999.
</TABLE>
8
<PAGE>
EMPLOYMENT ARRANGEMENTS
In November 1995 the Company entered into an employment agreement with
Robert L. Praegitzer, providing an annual base salary of $250,000 with increases
over time, and eligibility for bonuses and other Company benefits. Mr.
Praegitzer's employment agreement is of an indefinite duration.
In August 1996, the Company entered into employment agreement with Robert
J. Versiackas providing for annual base salary of $130,000 with eligibility for
bonuses and other Company benefits. If at the end of each quarter during the
first two years of this Agreement the total salary and bonus paid to Mr.
Versiackas is less than an annualized rate of $165,000, the Company shall pay
Mr. Versiackas an amount equal to the difference. Additionally, Mr. Versiackas
received options to acquire 16,043 shares of Common Stock at a price of $13.125
per share. Upon termination, Mr. Versiackas is entitled to all payments
customary under Company policies. The agreement with Mr. Versiackas may be
terminated by either party with or without cause upon thirty (30) days written
notice (or, in the case of termination by the Company, with payment of sixty
(60) days of base compensation in lieu of thirty (30) days notice).
Mr. Versiackas has also entered into an agreement with the Company
restricting his ability to compete with the Company until two years after
termination of his employment and prohibiting disclosure of confidential
information and solicitation of the Company's customers or employees.
In addition, in April 1999 Mr. Versiackas entered into an agreement with
the Company which provides that, upon a change of control of the Company, if Mr.
Versiackas' employment is terminated within one year after the change of
control, Mr. Versiackas' stock options will become fully exercisable, unless the
change in control transaction would otherwise be accounted for under the pooling
of interest method. In addition, if Mr. Versiackas' employment is terminated
other than for cause within 12 months of a change of control, he will be
entitled to receive an amount equal to 6 months of his base salary within 30
days of termination.
In March 1998 the Company entered into an agreement with James M. Buchanan,
the Company's Senior Vice President of Sales and Marketing, providing for an
annual base salary of $185,000 with eligibility for bonuses and other Company
benefits.
9
<PAGE>
Mr. Buchanan has also entered into an agreement with the Company in the
event of a change of control. The agreement provides that, upon a change of
control of the Company, if Mr. Buchanan's employment is terminated within one
year after the change of control, Mr. Buchanan's stock options will become fully
exercisable, unless the change in control transaction would otherwise be
accounted for under the pooling of interest method. In addition, if Mr.
Buchanan's employment is terminated other than for cause within 12 months of a
change of control, he will be entitled to receive an amount equal to 18 months
of his base salary within 30 days of termination, insurance coverage and car
allowance for 18 months following termination.
In December 1998 the Company entered into a Stock Purchase Agreement with
Matthew J. Bergeron, the Company's President and Chief Operating Officer,
pursuant to which the Company sold Mr. Bergeron 100,000 unregistered shares of
its common stock at fair market value. Due to the restrictions on transfer of
the shares, the agreement provided that the fair market value of the shares
would be 75% of the public market price of the Company's common stock as quoted
on the Nasdaq National Market System. On December 22, 1998, the date on which
the purchase price for the shares was established, the closing market price for
the Company's common stock was $6.9375 per share. Accordingly, the purchase
price for the shares was $520,350. Under the terms of the agreement, Mr.
Bergeron must pay the Company the entire purchase price, without interest, on or
before January 1, 2006. The Company agreed to indemnify Mr. Bergeron for any
state or federal income tax liability for which he may become liable on account
of interest imputed on the deferred payment of the purchase price. Mr. Bergeron
has the option to require the Company to repurchase the shares from him during
January 2006 for $420,312.50. This transaction closed February 18, 1999.
Mr. Bergeron has also entered into an agreement with the Company in the
event of a change of control. The agreement provides that, upon a change of
control of the Company, if Mr. Bergeron's employment is terminated within one
year after the change of control, Mr. Bergeron's stock options will become fully
exercisable, unless the change in control transaction would otherwise be
accounted for under the pooling of interest method. In addition, if Mr.
Bergeron's employment is terminated other than for cause within 12 months of a
change of control, he will be entitled to receive an amount equal to 6 months of
his base salary within 30 days of termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has leased its Dallas warehouse facility from Robert L.
Praegitzer, with the lease payments totaling $160,800 for the year end June 30,
1999. The lease rates for the warehouse facility were determined by Mr.
Praegitzer, who was the sole shareholder of the Company at the time of
determination. The Board of Directors of the Company unanimously concluded that
these rates were comparable to rates that could have been obtained from an
independent party.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation committee consists of three directors and, pursuant to
authority delegated by the Board of Directors, determines and administers the
compensation of the Company's executive officers. In setting the compensation
for the executive officers other than the Chief Executive Officer, the
Compensation Committee works closely with the Chief Executive Officer, who makes
specific recommendations to the committee concerning compensation for each of
the other executive officers. Although the Board of Directors has granted the
Compensation Committee full authority to set executive compensation, in practice
the decisions of the Compensation Committee are usually reported as
recommendations to the full Board of Directors, which has in the past generally
approved the recommendations.
Internal Revenue Code Section 162(m), limits to $1,000,000 per person the
annual amount that the Company may deduct for compensation paid to any of its
most highly compensated officers. Generally the levels of salary and bonus paid
by the Company do not exceed this limit. However, upon the exercise of
nonstatutory stock options, the excess of the current market price over the
option price (option spread) is treated as compensation and, therefore, it may
be possible for option exercises by an officer in any year to cause the
officer's total compensation to exceed $1,000,000. Under certain regulations,
option spread compensation from options that meet certain requirements will not
be subject to the $1,000,000 cap on deductibility, and it is the Company's
current policy generally to grant options that meet those requirements.
COMPENSATION PRINCIPLES
Executive compensation is based on several general principles, which are
summarized below:
- Provide competitive total compensation that enables the Company to
attract and retain key executives.
- Link corporate and individual performance to compensation.
- Encourage long-term success and align shareholder interests with
management interests by giving executives the opportunity to acquire
stock in the Company.
- Reward initiative.
11
<PAGE>
COMPENSATION COMPONENTS
The primary components of the Company's executive officer compensation
program are base salary, annual incentive arrangements and long-term incentive
compensation in the form of stock options.
BASE SALARY. Executive officer base salaries for fiscal 1999 were
established by the Compensation Committee, to provide salary levels appropriate
for the responsibilities of the executive officers of the Company. In
determining salaries, the Compensation Committee took into account individual
experience, job responsibility and individual performance. No specific weight
was attached to these factors in establishing base salaries. For fiscal 2000 and
future years, the Company will continue to establish base salary levels for the
Company's executive officers that are competitive with those established by
companies of similar size in the electronics industry. When determining
salaries, the Compensation Committee will also take into account individual
experience levels, job responsibility and individual performance. Each executive
officer's salary will be reviewed annually, and increases to base salary will be
made to reflect competitive market increases and the individual factors
described above.
STOCK OPTIONS. The Company's 1995 Stock Incentive Plan (the "Plan") is
intended as a long-term incentive plan for executive officers, managers and
other key employees of the Company. The objectives of the Plan are to align
employee and shareholder long-term interests by creating a direct link between
compensation and shareholder value. The Compensation Committee administers the
Plan and recommends to the full Board of Directors awards of stock options to
executive officers and other employees of the Company. Options granted under the
Plan generally have been granted at an exercise price equal to the fair market
value of the Common Stock on the date of grant. Fair market value is established
by the Board of Directors, upon recommendation of the Compensation Committee, as
the closing price as reported on the Nasdaq National Market on the date of
grant. Options generally become exercisable over a four-year period with 25% of
the options exercisable at the end of each year from date of grant. Stock
options generally have a ten-year term, but terminate earlier if employment is
terminated. Initial option grants to executive officers depend upon the level of
responsibility and position, and subsequent grants are made based on the
Compensation Committee's subjective assessment of performance, among other
factors. In fiscal 1999 the Board of Directors, upon recommendation of the
Compensation Committee, made the following option grants of Company Common Stock
under the Plan to executive officers of the Company: Robert J. Versiackas -
15,000 shares; Gregory L. Lucas - 20,000 shares; James M. Buchanan - 20,000;
Robert G. Schmelzer - 15,000 shares; William J. Thale - 15,000 shares; and Scott
D. Gilbert - 7,500 shares . The Compensation Committee expects that in the
future, if additional grants are made, consideration will be given to the number
of options granted in the past and the exercise price of such grants.
12
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee and the Board of Directors set Mr. Praegitzer's
compensation for fiscal 1999. They employed the same criteria that the
Compensation Committee used to set compensation for the other executive
officers. The Compensation Committee and the Board of Directors reviewed the
data within the electronics industry and similar size firms. They based Mr.
Praegitzer's salary on their findings of other executives with his level of
experience, and recognized Mr. Praegitzer's individual performance and important
contributions to the Company's increased revenue and earnings growth.
COMPENSATION COMMITTEE MEMBERS
Gordon B. Kuenster
Theodore L. Stebbins
Merrill A. McPeak
13
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph that compares the cumulative total stockholder
return on the Company's Common Stock with the cumulative total return on the
Nasdaq Composite U.S. Index and a peer group of companies in the Company's
industry (SIC 3672) over the period indicated (assuming the investment of $100
in the Company's Common Stock on April 4, 1996, the date of the Company's
initial public offering, and reinvestment of any dividends). In accordance with
guidelines of the SEC, the stockholder return for each entity in the peer group
index have been weighted on the basis of market capitalization as of each
monthly measurement date set forth on the graph.
COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG PRAEGITZER INDUSTRIES, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
[Graphic line chart omitted.]
Cumulative Total Returns
--------------------------------------
04/04/1996 6/96 6/97 6/98 6/99
---------- ---- ---- ---- ----
Praegitzer Industries, Inc. 100 113 117 61 63
Peer Group 100 89 176 166 406
Nasdaq Stock Market (U.S.) 100 106 129 170 244
* $100 INVESTED ON 4/4/96 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDEING JUNE 30.
14
<PAGE>
INDEPENDENT ACCOUNTANTS
Representatives of Deloitte & Touche LLP will be at the Annual Meeting and
will be available to respond to appropriate questions. They do not plan to make
any statement but will have the opportunity to make a statement if they wish.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than 10 percent of the
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors, and
beneficial owners of more than 10 percent of the Common Stock are required by
the SEC regulation to furnish the Company with copies of all section
16(a)reports they file. Based solely on a review of such reports received by the
Company and on written representations from certain reporting persons that they
have complied with the relevant filing requirements, the Company believes that
all section 16(a) filing requirements applicable to its executive officers and
directors have been complied with except a Form 3 was not timely filed by Robert
G. Schmelzer.
DISCRETIONARY AUTHORITY
For this year's Annual Meeting of Shareholders, if notice of a shareholder
proposal to be raised at the Annual Meeting of Shareholders was received at the
principal executive offices of the Company after August 23, 1999, proxy voting
on that proposal when and if raised at the Annual Meeting will be subject to the
discretionary voting authority of the designated proxy holders. For the 2000
Annual Meeting of Shareholders, if notice of a shareholder proposal to be raised
at the Meeting is received at the principal executive offices of the Company
after September 10, 2000, proxy voting on that proposal when and if raised at
the Annual Meeting will be subject to the discretionary voting authority of the
designated proxy holders.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy material
for the Company's 2000 annual meeting must be received at the principal
executive office of the Company no later than June 27, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
Robert L. Praegitzer
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
Tualatin, Oregon
October 25, 1999
15
<PAGE>
PRAEGITZER INDUSTRIES, INC.
Annual Meeting, November 5, 1999
-----------
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints Robert L. Praegitzer and Matthew J.
Bergeron, and each of them, proxies with power of substitution to vote on behalf
of the undersigned all shares that the undersigned may be entitled to vote at
the annual meeting of shareholders of Praegitzer Industries, Inc. (the
"Company") on November 5, 1999 and any adjournments thereof, with all powers
that the undersigned would possess if personally present, with respect to the
following:
1. Election of FOR all nominees WITHHOLD AUTHORITY to vote
Directors: except as marked to the for all nominees listed
contrary below. [ ] below. [ ]
(Instructions: To withhold authority to vote for any individual, strike a line
through the nominee's name below.)
Robert L. Praegitzer, Matthew J. Bergeron, Daniel J. Barnett
Theodore L. Stebbins, Merrill A. McPeak, Gordon B. Kuenster
2. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the meeting
may exercise all the powers granted hereby.
(Continued and to be signed on the other side.)
<PAGE>
The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be voted for
the election of directors. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER
MATTERS THAT MAY COME BEFORE THIS MEETING.
Shares:
Date:___________________, 1999
______________________________
Signature or Signatures
Please date and sign as name
is imprinted hereon, including
designation as executor,
trustee, etc., if applicable.
A corporation must sign its
name by the president or other
authorized officer.
The Annual Meeting of
Shareholders of Praegitzer
Industries, Inc. will be held
on November 5, 1999 at 2:00
p.m., Pacific Time, at The
Governor Hotel, 611 S.W. Tenth
at Alder, Portland, Oregon.
Please Note: Any shares of stock of the Company held in the name of fiduciaries,
custodians or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian or brokerage house itself; the beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of the
Company are held in "street name" by a brokerage house, only the brokerage
house, at the instructions of its client, may vote or appoint a proxy to vote
the shares.
