<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
SUN HYDRAULICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of filing fee (Check the appropriate box):
[x] No filing fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1)
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 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:
_______________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________
(3) Filing Party:
_______________________________________________________________________
(4) Date Filed:
_______________________________________________________________________
<PAGE> 2
May 23, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Sun Hydraulics Corporation. The meeting will be held Saturday,
June 21, 1997, at 10:00 a.m., Eastern Daylight Savings Time, at the Company's
new manufacturing facility located at 701 Tallevast Road, Sarasota, Florida
34243. A tour of our new plant and refreshments will follow the meeting.
The Notice of the meeting and the Proxy Statement on the following
pages cover the formal business of the meeting, which includes the election of
Directors and a proposal to ratify the appointment of the Company's independent
certified public accountants. We also will report on the progress of the
Company and comment on matters of current interest.
It is important that your shares be represented at the meeting. We
ask that you promptly sign, date and return the enclosed proxy card in the
envelope provided, even if you plan to attend the meeting. Returning your
proxy card to us will not prevent you from voting in person at the meeting if
you are present and choose to do so.
If your shares are held in street name by a brokerage, your broker
will supply you with a proxy to be returned to the brokerage. It is important
that you return the form to the brokerage as quickly as possible so that the
brokerage may vote your shares. You may not vote your shares in person at the
Meeting unless you obtain a power of attorney or legal proxy from your broker
authorizing you to vote the shares, and you present this power of attorney or
proxy at the Meeting.
The Board of Directors and management look forward to greeting you
personally at the meeting.
Sincerely,
ROBERT E. KOSKI
Chairman of the Board
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SATURDAY, JUNE 21, 1997
Notice hereby is given that the Annual Meeting of Shareholders of Sun
Hydraulics Corporation, a Florida corporation, will be held on Saturday, June
21, 1997, at 10:00 a.m., Eastern Daylight Savings Time, at the Company's
manufacturing facility, located at 701 Tallevast Road, Sarasota, Florida,
34243, for the following purposes:
1. To elect one Director to serve until the Annual
Meeting in 1998, and two Directors to serve until the Annual Meeting
in 2000, and until their successors are elected and qualified or until
their earlier resignation, removal from office or death;
2. To ratify the appointment of Price Waterhouse LLP as
the Company's independent certified public accountants for the year
1997; and
3. To transact such other business as properly may come
before the Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this
Notice for a more complete description of the matters to be acted upon at the
Meeting. The 1996 Annual Report of the Company is enclosed. Shareholders of
record at the close of business on May 1, 1997, are entitled to receive notice
of and to vote at the Meeting and any adjournment thereof.
All shareholders are cordially invited to attend the Meeting. Whether
or not you expect to attend, please sign and return the enclosed Proxy promptly
in the envelope provided to assure the presence of a quorum. You may revoke
your Proxy and vote in person at the Meeting if you desire. If your shares are
held in street name by a brokerage, your broker will supply you with a proxy to
be returned to the brokerage. It is important that you return the form to the
brokerage as quickly as possible so that the brokerage may vote your shares.
You may not vote your shares in person at the Meeting unless you obtain a power
of attorney or legal proxy from your broker authorizing you to vote the shares,
and you present this power of attorney or proxy at the Meeting.
By order of the Board of Directors,
/s/ Gregory C. Yadley
----------------------------------
GREGORY C. YADLEY
Secretary
Sarasota, Florida
May 23, 1997
<PAGE> 4
SUN HYDRAULICS CORPORATION
1500 WEST UNIVERSITY PARKWAY
SARASOTA, FLORIDA 34243
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors and
Management of Sun Hydraulics Corporation (the "Company") in connection with the
solicitation of proxies to be voted at the Company's 1997 Annual Meeting of
Shareholders, which will be held on Saturday, June 21, 1997, at 10:00 a.m.,
Eastern Daylight Savings Time, at the Company's manufacturing facility, located
at 701 Tallevast Road, Sarasota, Florida 34243 (the "Meeting").
Any proxy delivered pursuant to this solicitation may be revoked, at
the option of the person executing the proxy, at any time before it is
exercised by delivering a signed revocation to the Company, by submitting a
later-dated proxy, or by attending the Meeting in person and casting a ballot.
If proxies are signed and returned without voting instructions, the shares
represented by the proxies will be voted as recommended by the Board of
Directors.
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by regular employees of the Company. The Company does not expect to
pay any compensation for the solicitation of proxies, but may reimburse brokers
and other persons holding stock in their names, or in the names of nominees,
for their expense in sending proxy materials to their principals and obtaining
their proxies. The approximate date on which this Proxy Statement and enclosed
form of proxy first has been mailed to shareholders is May 23, 1997.
The close of business on May 1, 1997, has been designated as the
record date for the determination of shareholders entitled to receive notice of
and to vote at the Meeting. As of May 1, 1997, 6,300,002 shares of the
Company's Common Stock, par value $.001 per share, were issued and outstanding.
Each shareholder will be entitled to one vote for each share of Common Stock
registered in his or her name on the books of the Company on the close of
business on May 1, 1997, on all matters that come before the Meeting.
The affirmative vote of the holders of a majority of the shares
represented, in person or by proxy, and voting at the Meeting will be required
to take action at the Meeting. Abstentions will be counted toward the number
of shares represented at the meeting. Broker non-votes will be disregarded.
<PAGE> 5
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six
members. The Board is divided into three classes of Directors serving
staggered three-year terms. Directors hold their positions until the annual
meeting of shareholders in the year in which their term expires, and until
their respective successors are elected and qualified or until their earlier
resignation, removal from office or death. Executive officers serve at the
pleasure of the Board of Directors.
The term of office of three of the Company's current six Directors
will expire at the 1997 Annual Meeting. The Board of Directors recommends that
these three Directors be reelected at the Meeting to hold office for an
additional term and until their respective successors shall be duly elected and
qualified or until their earlier resignation, removal from office or death.
The Board of Directors unanimously recommends that you vote "FOR" the
reelection of Arthur B. Bodley to serve until the Company's annual meeting in
1998, and the reelection of Robert E. Koski and James G. March to serve until
the Company's annual meeting in 2000. See "Management-Directors and Executive
Officers" and "Certain Transactions" for further information on such nominees.
Shareholders may vote for up to three nominees. The affirmative vote of a
majority of the shares represented at the Meeting and entitled to vote thereon
will be required for the election of Directors. Shareholders may not vote
cumulatively in the election of Directors. Abstentions will be counted toward
the number of shares represented at the Meeting. Broker non-votes will be
disregarded. In the event any of the nominees should be unable to serve, which
is not anticipated, the proxy committee, which consists of Robert E. Koski and
Clyde G. Nixon, will vote for such other person or persons for the office of
Director as the Board of Directors may recommend.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Company's
Directors and executive officers and the positions they hold with the Company.
Executive officers serve at the pleasure of the Board of Directors.
-2-
<PAGE> 6
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert E. Koski 68 Chairman of the Board of Directors (term expiring in 1997) and a member of the
Compensation Committee
Clyde G. Nixon 61 President, Chief Executive Officer, and Director (term expiring in 1998)
Robert J. Devereaux 65 Vice President
Jeffrey Cooper 56 Engineering Manager
Russell G. Copeman 58 Manufacturing Manager
Richard J. Dobbyn 53 Chief Financial Officer
Peter G. Robson 52 General Manager, Sun Hydraulics Limited
Arthur B. Bodley 78 Director (term expiring in 1997) and a member of the Audit Committee
James G. March 69 Director (term expiring in 1997) and a member of the Compensation Committee
Taco van Tijn 73 Director (term expiring in 1999) and a member of the Audit Committee
David N. Wormley 57 Director (term expiring in 1999) and a member of the Compensation
Committee
</TABLE>
MR. KOSKI is a co-founder of the Company and has served as its
Chairman of the Board since it began operations in 1970. He was also its
President and Chief Executive Officer from that time until November 1988. He
is a graduate of Dartmouth College and past Chairman of the Board of the
National Fluid Power Association. Mr. Koski has over 35 years experience in
the fluid power industry, and has served as Chairman of the Fluid Power Systems
and Technology Division of the American Society of Mechanical Engineers, and as
a member of the Board of Directors of the National Association of
Manufacturers.
MR. NIXON joined the Company in January 1988, and was named its
President and Chief Executive Officer in November 1988. From September 1985,
to January 1988, he served as Vice President of Cross & Trecker Corporation and
was President of Warner & Swasey Company, its wholly-owned subsidiary. From
1964 to 1985, he served in various management capacities with Brown & Sharpe
Manufacturing Corporation, most recently as Vice President of its fluid power
-3-
<PAGE> 7
division and President of Double A Products Company, its wholly-owned
subsidiary. Mr. Nixon is a graduate of Cornell University and the Harvard
Business School, and is Chairman of the Board of the National Fluid Power
Association. Mr. Nixon has over 29 years experience in the fluid power
industry.
MR. DEVEREAUX joined the Company as head of manufacturing operations
and processes in June 1979. He was named Vice President in January 1991. From
1957 to 1979, he served in various management capacities with Continental Group
and its subsidiaries Continental Can Corporation and Bondware/Crest. Mr.
Devereaux is an engineering graduate of Rensselaer Polytechnical Institute.
Mr. Devereaux has over 17 years experience in the fluid power industry.
MR. COOPER joined the Company in December 1990, as an engineer and has
been Engineering Manager since September 1991. From August 1987, to December
1990, he was Engineering Manager, Mobile Valves, of Vickers, Incorporated, a
wholly-owned subsidiary of Trinova Corporation, and from September 1979 to
August 1986, he served as Vice President of Engineering for Double A Products
Company. Mr. Cooper is an engineering graduate of Willesden College of
Technology, London, England. Mr. Cooper has over 28 years experience in the
fluid power industry.
MR. COPEMAN joined the Company in July 1996, as Manufacturing Manager,
in charge of manufacturing operations and processes. From January 1996, to
July 1996, Mr. Copeman was the principal of Copeman Consulting, and performed
consulting services for the Company from March 1996 to July 1996. From January
1994, to October 1995, Mr. Copeman was a partner with Coopers & Lybrand,
Australia; from July 1989, to December 1993, he was a Director of Coopers &
Lybrand's International Manufacturing Practice. From January 1985, to July
1989, he served in various management positions with Vickers, Incorporated,
most recently as Vice President. From August 1967, to January 1985, he served
in various management positions with Double A Products Company, most recently
as Vice President. Mr. Copeman is a Certified Manufacturing Engineer and a
graduate of Georgia Institute of Technology and the Krannert Business School of
Purdue University. Mr. Copeman has over 22 years experience in the fluid power
industry.
MR. DOBBYN joined the Company in October 1995, and was named Chief
Financial Officer in July 1996. From June 1995 to October 1995, Mr. Dobbyn
served as the Controller of Protek Electronics. From July 1994 to June 1995,
he served as the Fiscal Director of a non-profit child care agency. From
September 1984 to July 1994, Mr. Dobbyn was Senior Vice President-Finance and
Administration for Loral Data Systems, formerly Fairchild Weston Systems, a
Schlumberger company. Mr. Dobbyn is a Certified Public Accountant and a
graduate of Boston College.
MR. ROBSON has served as a Director of Sun Hydraulics Limited,
Coventry, England, since May 1993, and has been employed by the Company as the
General Manager of its United Kingdom operations since 1982. Mr. Robson is a
Chartered Engineer and a graduate of Coventry University. Mr. Robson has over
30 years experience in the fluid power industry.
-4-
<PAGE> 8
MR. BODLEY has served as President and Chief Executive Officer of
Atlas Fluid Components Company, Inc., a fluid power distributorship in Akron,
Ohio, since January 1966. Mr. Bodley has over 30 years experience in the fluid
power industry. He has served as a Director of the Company since January 1973.
DR. MARCH is a Professor Emeritus at Stanford University, Palo Alto,
California. He was a senior member of the faculty at Stanford University and
the Stanford Business School from September 1970, to August 1995, and is the
author of numerous books and articles on organizational behavior and decision
making. From September 1964, to August 1970, Dr. March was a Professor of
Psychology and Sociology at the University of California, Irvine, where he was
Dean of the School of Social Sciences from 1964 to 1969. Dr. March served as a
Director of the Company from 1989 to 1992, and rejoined the Company's Board of
Directors in November 1995. He also is a member of the Board of Directors of
Wally Industries and Chair of the Citicorp Behavioral Sciences Research
Council. Dr. March is a graduate of the University of Wisconsin and received
his Ph.D. from Yale University.
MR. VAN TIJN is an attorney (solicitor), practicing law in London,
England, since May 1971. He has been a Director of the Company since February
1989, and the principal statutory officer of Sun Hydraulik Holdings Limited
since January 1991.
DR. WORMLEY is the Dean of the Engineering School at Pennsylvania
State University, where he has taught since 1992. He previously was a member
of the engineering faculty at the Massachusetts Institute of Technology. Dr.
Wormley is Vice-Chair of the National Science Foundation Engineering
Directorate Advisory Committee. Dr. Wormley has served as a Director of the
Company since December 1992. He is an engineer and earned his Ph.D. from the
Massachusetts Institute of Technology.
No family relationships exist between any of the Company's Directors,
nominees and executive officers, except that Mr. Koski and Dr. March are
step-brothers. There are no arrangements or understandings between any
Director or nominee and any other person concerning service or nomination as a
Director.
The Board of Directors has Audit and Compensation Committees. The
Company does not have a Nominating Committee; instead, the entire Board of
Directors functions as a Nominating Committee.
The Board of Directors held four meetings during 1996. Directors who
are not officers of the Company are paid $2,500 for attendance at each meeting
of the Board of Directors, as well as each meeting of each Board committee on
which they serve when the committee meeting is not held within one day of a
meeting of the Board of Directors. Directors also are reimbursed for their
expenses incurred in connection with their attendance at such meetings.
In September, 1996, the Company granted non-statutory options to
Directors Bodley and van Tijn to purchase 3,920 shares of the Company's common
stock, and to Director Wormley
-5-
<PAGE> 9
to purchase 2,940 shares of the Company's Common Stock. All of the foregoing
options were exercisable upon grant, at an exercise price of $3.00 per share,
and they expire in January, 2007.
The Audit Committee was appointed in February 1997. The functions of
the Audit Committee are to recommend annually to the Board of Directors the
appointment of the independent public accountants of the Company, to discuss
and review the scope of and the fees for the prospective annual audit with the
independent public accountants, to review the results thereof with the
independent public accountants, to review and approve non-audit services of the
independent public accountants, to review compliance with existing major
accounting and financial policies of the Company, to review the adequacy of the
financial organization of the Company, to review management's procedures and
policies relative to the adequacy of the Company's internal accounting
controls, to review compliance with federal and state laws relating to
accounting practices and to review and approve (with the concurrence of a
majority of the disinterested Directors of the Company) transactions, if any,
with affiliated parties.
The Compensation Committee was appointed in December 1996, but did not
meet during 1996. The functions of the Compensation Committee are to review
and approve annual salaries and bonuses for all executive officers, to review,
approve and recommend to the Board of Directors the terms and conditions of all
employee benefit plans or changes thereto, to administer the Company's stock
option plans and carry out the responsibilities required by the rules of the
Securities and Exchange Commission.
In 1996, each incumbent Director attended all of the meetings of the
Board and of each committee of which he was a member held during the period.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 1, 1997, information as to
the beneficial ownership of the Company's Common Stock by (i) each person or
entity known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each Director, (iii) each named
executive officer of the Company, as defined in Item 402(a)(3) of Regulation
S-K under the Securities Exchange Act of 1934 ("Named Executive Officer"), and
(iv) all Directors and executive officers of the Company as a group. Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares of Common Stock owned by them, except to the
extent such power may be shared with a spouse.
-6-
<PAGE> 10
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP CLASS (2)
---------------------------------------- -------------------- ---------
<S> <C> <C>
Koski Family Limited Partnership . . . . . . . . . . 2,258,543 35.8
5619 Preston Oaks Road
Dallas, Texas 75240
Christine L. Koski(3) . . . . . . . . . . . . . . . . 2,322,838 36.9
5619 Preston Oaks Road
Dallas, Texas 75240
Robert C. Koski(3) . . . . . . . . . . . . . . . . . 2,258,543 35.8
315 Sycamore Street
Decatur, Georgia 30030
Thomas L. Koski(3) . . . . . . . . . . . . . . . . . 2,258,543 35.8
Six New Street
East Norwalk, Connecticut 06855
Robert E. Koski(3)(4) . . . . . . . . . . . . . . . . 2,544,921 40.4
Beverly Koski(3)(4) . . . . . . . . . . . . . . . . . 2,544,921 40.4
Robert S. and Ann R. Ferrell(5) . . . . . . . . . . . 421,037 6.7
5924 Cranbrook Way, #101
Naples, Florida 34112
Robert J. Devereaux(6) . . . . . . . . . . . . . . . 251,203 4.0
Clyde G. Nixon(7) . . . . . . . . . . . . . . . . . . 202,740 3.2
Peter G. Robson(8) . . . . . . . . . . . . . . . . . 76,308 1.2
James G. March(9) . . . . . . . . . . . . . . . . . . 53,572 *
Jeffrey Cooper(8) . . . . . . . . . . . . . . . . . . 49,109 *
Arthur B. Bodley(10) . . . . . . . . . . . . . . . . 13,860 *
Russell G. Copeman(8) . . . . . . . . . . . . . . . . 10,526 *
Taco van Tijn(10) . . . . . . . . . . . . . . . . . . 8,920 *
Richard J. Dobbyn(11) . . . . . . . . . . . . . . . . 8,500 *
David N. Wormley(12) . . . . . . . . . . . . . . . . 3,940 *
All Directors and Executive Officers as a Group
(11 persons) . . . . . . . . . . . . . . . . . . . 3,223,599 48.7
- --------------
</TABLE>
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the persons listed
who own more than 5% of the Company's Common Stock is 1500 West
University Parkway, Sarasota, Florida 34243.
(2) This column set forth shares of the Company's Common Stock which are
deemed to be "beneficially owned" by the persons named in the table
under Rule 13d-3 of the Securities and Exchange Commission. All of
the persons named in the table have sole voting and investment power
with respect to all shares beneficially owned by them except as
otherwise described in the following footnotes.
-7-
<PAGE> 11
(3) Includes 2,258,543 shares owned by the Koski Family Limited
Partnership, over which Christine L. Koski, Robert C. Koski, Thomas L.
Koski, Robert E. Koski and Beverly Koski share dispositive power.
Each of the foregoing individuals has the sole right to vote 451,709
shares of Common Stock held by the Koski Family Limited Partnership.
Christine L. Koski, Robert C. Koski and Thomas L. Koski are the adult
children of Robert E. Koski and Beverly Koski.
(4) Includes 151,216 shares owned by Beverly Koski and 135,162 shares
owned by Robert E. Koski. Beverly Koski is the spouse of Robert E.
Koski.
(5) According to information supplied to the Company by the Ferrells in
connection with the initial public stock offering of the Company on
January 9, 1997. Includes 240,125 shares owned by the Robert S.
Ferrell Trust, of which Robert S. Ferrell is the sole trustee, and
180,312 shares owned by the Ann R. Ferrell Trust, of which Ann R.
Ferrell is the sole trustee. Robert S. Ferrell is the spouse of Ann
R. Ferrell. Includes 600 shares owned individually by Ann R. Ferrell.
(6) Includes 139,871 shares owned by the Robert J. Devereaux Trust, of
which Robert J. Devereaux is the sole trustee, and 52,500 shares owned
by the Christine C. Devereaux Trust, of which Christine C. Devereaux
is the sole trustee. Robert J. Devereaux is the spouse of Christine
C. Devereaux. Also includes 58,832 shares subject to currently
exercisable options.
(7) Includes 97,449 shares which are owned jointly by Mr. Nixon and his
spouse. Also includes 105,291 shares subject to currently exercisable
options.
(8) Represents shares subject to currently exercisable options.
(9) Shares are owned jointly by Dr. March and his spouse.
(10) Includes 3,920 shares subject to currently exercisable options.
(11) Includes 7,000 shares subject to currently exercisable options.
(12) Includes 2,940 shares subject to currently exercisable options.
DIRECTOR AND EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table is a summary of the compensation paid or accrued
by the Company for the last three fiscal years for services in all capacities
to the Company's Chief Executive Officer and its other three Executive Officers
who earned more than $100,000 from the Company in 1996 (the "Named Executive
Officers").
-8-
<PAGE> 12
- -------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM
------------------- COMPENSATION
AWARDS-
SECURITIES
NAME AND UNDERLYING OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY OPTIONS/SARS (#) COMPENSATION (3)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert E. Koski, 1996 $106,000 --- $18,798 (4)
Chairman of the 1995 106,000 --- 28,033 (4)
Board of Directors 1994 106,000 --- 18,837
Clyde G. Nixon, 1996 180,000 94,765 (1) 12,239
President and 1995 165,000 110,739 (2) 21,807
Chief Executive Officer 1994 150,000 --- 30,827 (5)
Robert J. Devereaux 1996 129,000 48,306 (1) 11,160
Vice President 1995 123,500 --- 19,771
1994 118,500 --- 19,171
Jeffrey Cooper 1996 116,000 43,689 (1) 9,314
Engineering Manager 1995 110,500 --- 10,280
1994 105,000 --- 9,840
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents nonqualified stock options granted in conjunction with the
termination of the executive's phantom stock compensation agreement.
(2) Represents phantom stock compensation award.
(3) Except as otherwise noted, reflects primarily contributions made by
the Company on behalf of the employee to the Company's 401(k) plan and
excess life insurance premiums.
(4) Includes payment by the Company of certain professional fees on behalf
of Mr. Koski in 1996 and 1995 in the amounts of $11,478 and $7,250,
respectively.
(5) Includes payment by the Company of certain club dues on behalf of Mr.
Nixon in the amount of $12,000.
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table details individual grants of stock options made in
fiscal year 1996 to each of the Named Executive Officers of the Company. All
options were granted pursuant to the Company's 1996 Stock Option Plan and are
exercisable currently. No stock appreciation rights (SAR) were granted during
the period. The table also indicates the potential realizable value of each
grant of options assuming that the market price of the underlying security
appreciates in value from the date of the grant to the end of the option term
at the following annualized rates:
-9-
<PAGE> 13
<TABLE>
<CAPTION> POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (1)
- --------------------------------------------------------------------------------------------------------------------------
NUMBER PERCENT
OF OF TOTAL
SECURITIES OPTIONS
UNDER- GRANTED EXERCISE
LYING TO OR
OPTIONS EMPLOYEES BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($) 0% ($)
(a) (b) (c) (d) (e) (f) (g) (h)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert E. Koski 0 -- -- -- -- -- --
Clyde G. Nixon 94,765 31% $4.95 1/09/07 $997,354 $1,865,975 $431,181
Robert J. Devereaux 48,306 16% 3.47 1/09/07 579,889 1,022,665 291,285
Jeffrey Cooper 43,689 14% 3.43 1/09/07 526,212 926,668 265,192
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes a market price at date of grant of $9.50, which was the
initial public offering price for the shares of common stock on
January 9, 1997. The 5% and 10% assumed annual rates of stock price
appreciation are provided in compliance with Regulation S-K under the
Securities Exchange Act of 1934. The Company does not necessarily
believe that these appreciation calculations are indicative of actual
future stock option values or that the price of Common Stock will
appreciate at such rates.
STOCK OPTION EXERCISES AND YEAR END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during 1996 and
unexercised options held on December 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FISCAL AT FISCAL
YEAR-END (#) YEAR-END ($)
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE (1)
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert E. Koski 0 -- 0/0 0/0
Clyde G. Nixon 21,006 $164,257 94,765/0 $431,181/0
Robert J. Devereaux 0 -- 48,306/0 291,285/0
Jeffrey Cooper 0 -- 43,689/0 265,192/0
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value is based upon the difference between the initial public offering
price of $9.50 per share on January 9, 1997, and the exercise price of
the options.
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<PAGE> 14
As the Company's initial public offering of its Common Stock did not
occur until 1997, no Performance Graph is required or included in this Proxy
Statement.
The information contained in the following section "Report of Board of
Directors Acting as Compensation Committee" is not deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission or
subject to Regulations 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934.
REPORT OF BOARD OF DIRECTORS ACTING AS COMPENSATION COMMITTEE
The following report was prepared by the Board of Directors, acting as
the Company's Compensation Committee:
The goals of the Company's compensation program are to attract,
retain, motivate and reward highly qualified management personnel and to
provide them with long-term career opportunities. The Company's compensation
philosophy is to provide its executives with a competitive total compensation
package which motivates superior job performance, the achievement of the
Company's business objectives, and the enhancement of shareholder value.
Compensation of the Company's Named Executive Officers will be reviewed
annually by the Compensation Committee. Changes proposed for these employees
will be evaluated and approved by the Compensation Committee on an individual
basis.
The Company's general approach to compensating Named Executive
Officers is to pay cash salaries which generally are competitive within ranges
of salaries paid to executives of other manufacturing companies, although the
Company does not attempt to meet salary levels of such companies. Instead, the
Committee sets overall compensation at a level it believes to be fair, based
upon a subjective analysis of the individual executive's experience and past
and potential contributions to the Company. The Company, historically, has not
paid performance-based bonuses. To assist in determining appropriate overall
compensation, the Company intends in the future to review information regarding
revenues, income, and executive compensation for other public manufacturing
companies.
Stock option grants to Named Executive Officers and other key
employees of the Company, including the Chief Executive Officer, will be made
at the discretion of the Compensation Committee pursuant to the Company's 1996
Stock Option Plan (the "Stock Option Plan"). Factors and criteria to be used
by the Compensation Committee in the award of stock options will include
individual responsibilities, individual performance and direct and indirect
contributions to the profitability of the Company. The benefits derived from
each stock option granted under the Stock Option Plan are directly attributable
to a future increase in the value of the Company's Common Stock. The Chief
Executive Officer and two other current Named Executive Officers received stock
option grants in 1996. However, these grants were made in connection with the
termination of certain phantom stock agreements. See "Executive Compensation
Agreements."
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<PAGE> 15
Section 162(m) of the Internal Revenue Code limits the tax deduction
to $1 million for compensation paid to a corporation's key executive officers
unless certain requirements are met. One of the requirements imposed under
regulations promulgated by the Internal Revenue Service is that the
corporation's compensation committee be comprised solely of "disinterested
directors." Not all of the Directors serving on the Company's Compensation
Committee are disinterested under those regulations. However, given the
Company's compensation program and historic compensation levels, the Company
does not believe the limitation on deductibility will have a material effect on
the Company. The Company intends to monitor the effect of the Section 162(m)
regulations and take steps in the future as might be appropriate.
Robert E. Koski and Clyde G. Nixon abstain from all determinations by
the Board of Directors acting as the Compensation Committee as they relate to
their respective compensation as Chairman of the Board and as Chief Executive
Officer and President, respectively.
BOARD OF DIRECTORS
Arthur B. Bodley Robert E. Koski
James G. March Clyde G. Nixon
Taco Van Tijn David N. Wormley
EXECUTIVE COMPENSATION AGREEMENTS
In September 1996, in connection with the termination of certain
individual phantom stock compensation agreements, the Company issued to eight
employees of the Company and Sun Hydraulics Holdings Limited, including Messrs.
Cooper, Devereaux, Nixon and Robson, who are Executive Officers of the Company,
options to purchase 305,260 shares of Common Stock. The exercise prices for
such options ranged from $3.00 to $5.05, with a weighted average of $3.95.
Such options are exercisable and have a term of 10 years. As part of the same
agreements, following its initial public offering in January 1997, the Company
also issued to such employees incentive stock options to purchase 189,348
shares of Common Stock at the initial public offering price of the Common Stock
of $9.50 per share. Such incentive stock options vest over varying periods of
up to seven years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Board of Directors of the Company determined the compensation,
including salary and bonus, of the Executive Officers of the Company for the
fiscal year ended December 31, 1996, and the initial compensation for the
current fiscal year through the date hereof. In the future, the Compensation
Committee of the Board of Directors will determine the compensation of the
Company's Executive Officers.
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<PAGE> 16
CERTAIN TRANSACTIONS
The information set forth herein briefly describes transactions during
the past fiscal year between the Company and its Directors, officers and 5%
shareholders. Management of the Company believes that such transactions have
been on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties. These transactions have been approved by a
majority of the Company's disinterested Directors. Future transactions, if
any, with affiliated parties will be approved by a majority of the Company's
disinterested Directors and the Audit Committee and will be on terms no less
favorable to the Company than those that could be obtained from unaffiliated
parties.
REORGANIZATION WITH SUN HYDRAULIK HOLDINGS LIMITED
Immediately prior to the Company's initial public offering of Common
Stock in January, 1997, the Company effected a 9.90373 for 1 stock split of its
capital stock. The Company at the same time acquired all of the outstanding
shares of capital stock of Sun Hydraulik Holdings Limited, a private limited
company organized under the Laws of England and Wales ("SHHL"), pursuant to an
exchange offer made by the Company to all of the shareholders of SHHL (the
"Reorganization"). Pursuant to the terms of the exchange offer, the Company
issued 1.17013 shares of Common Stock (for a total of 374,810 shares of Common
Stock) and $0.16 in cash for each share of stock of SHHL acquired by it. No
registration rights were granted to the SHHL shareholders, and the shares of
the Company's Common Stock issued to them in the Reorganization are "restricted
securities" under the Securities Act of 1933.
Prior to the Reorganization, the Company and SHHL were controlled by
the same group of shareholders and were operated as a common enterprise, with
all of the Company's European operations carried out through subsidiaries of
SHHL operating in England and Germany. The relative values of the Company and
SHHL for purposes of the Reorganization were established by appraisals
conducted for this purpose. These appraisals also were used to establish the
relative values of the Company and Suninco, Inc. for the June 1996 merger of
those two corporations. See "Suninco Merger" below.
SUNOPTECH, LTD.
In October 1995, the Company contributed certain intangible assets to
SunOpTech, Ltd. ("SunOpTech"), a limited partnership formed to further the
development of manufacturing software. In January 1996, the Company
distributed to its shareholders the 65% limited partnership interest in
SunOpTech which it received in exchange for the contributed intangible assets.
Robert E. Koski owns 51% of the common stock of the general partner of
SunOpTech, and Messrs. Koski and Clyde G. Nixon are members of the board of
directors of the general partner. The Company currently has no ownership
interest in SunOpTech.
The Company entered into a contract with SunOpTech for a 35-month term
beginning November 1995, for the development of computer software and computer
support to the
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<PAGE> 17
Company. The Company will pay approximately $955,000 over the contract term,
provide office space and equipment and reimburse SunOpTech for reasonable
expenses related to the software development. During 1996, the Company paid
fees of $555,000 and expenses of $203,000 under the agreement, and provided
certain administrative support to SunOpTech at no charge. The software is
still in the development stage but is being utilized in the Company's plants in
Sarasota and Germany. Under its agreement with SunOpTech, the Company has a
perpetual, nonexclusive license to use the software, as well as any future
enhancements, without charge other than the development and support fees to be
provided during the 35-month term of the agreement.
SUNINCO MERGER
On June 28, 1996, Suninco, Inc. ("Suninco") was merged into the
Company. Prior to the merger, the Company and Suninco were controlled by the
same group of shareholders and were operated as a common enterprise, with
Suninco as the owner and lessor of the Company's Sarasota, Florida,
manufacturing plant and certain equipment utilized by the Company at that
location. The relative values of the Company and Suninco in the merger were
established by appraisals conducted for this purpose. In structuring the
merger, the Company concluded that, based upon such appraisals, the issuance of
178,426 shares of Common Stock to the former Suninco shareholders represented
fair value for the acquired assets of Suninco.
ATLAS FLUID COMPONENTS COMPANY, INC.
Arthur B. Bodley, a Director of the Company, is the President, Chief
Executive Officer and controlling shareholder of Atlas Fluid Components
Company, Inc. ("Atlas"), a fluid power distributorship in Akron, Ohio, that
purchases and sells the Company's products pursuant to one of the Company's
standard distributor agreements. Atlas purchased approximately $1.1 million,
$1.3 million and $1.2 million of products from the Company in fiscal 1996, 1995
and 1994, respectively.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors, officers and holders of more than 10% of the Company's
Common Stock to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
any other equity securities of the Company. As the Company's initial public
offering of its Common Stock did not occur until 1997, no Section 16(a) reports
were required in 1996.
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<PAGE> 18
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has engaged the firm of Price Waterhouse LLP, independent
certified public accountants, to report upon the financial statements included
in the Annual Report submitted herewith. A representative from said firm will
be in attendance at the Meeting, will have the opportunity to make a statement
if desired, and will be available to respond to any questions from those in
attendance. The Company has appointed Price Waterhouse LLP to report upon its
1997 financial statements, subject to ratification of such appointment by the
shareholders at the Meeting. Shareholder ratification of the Company's
independent certified public accountants is not required by the Company's Bylaws
or otherwise. The Board of Directors has elected to seek such ratification as a
matter of good corporate practice and unanimously recommends that you vote "FOR"
such ratification. Abstentions will be counted toward the number of shares
represented at the Meeting. Broker non-votes will be disregarded. If the
shareholders do not ratify this appointment, other certified public accountants
will be considered by the Board of Directors upon recommendation of the Audit
Committee.
OTHER BUSINESS
Management of the Company does not know of any other business that may
be presented at the Meeting. If any matter not described herein should be
presented for shareholder action at the Meeting, the persons named in the
enclosed Proxy will vote the shares represented thereby in accordance with
their best judgment.
SHAREHOLDER PROPOSALS FOR
PRESENTATION AT THE 1998 ANNUAL MEETING
The Board of Directors requests that any shareholder proposals
intended for presentation at the 1998 Annual Meeting be submitted to Gregory C.
Yadley, Secretary, in writing no later than December 1, 1997, for consideration
for inclusion in the Company's proxy materials for such meeting.
By Order of the Board of Directors,
/s/ GREGORY C. YADLEY
---------------------------------------
Gregory C. Yadley,
Secretary
Dated: May 23, 1997
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<PAGE> 19
APPENDIX
SUN HYDRAULICS CORPORATION
1500 WEST UNIVERSITY PARKWAY
SARASOTA, FL 34243
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 21, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, having received notice of the Annual Meeting of
Shareholders of Sun Hydraulics Corporation to be held at 10:00 a.m., Eastern
Daylight Savings Time, on Saturday, June 21, 1997, hereby designates and
appoints Robert E. Koski and Clyde G. Nixon, and each of them with authority to
act without the others, as attorneys and proxies for the undersigned, with full
power of substitution, to vote all shares of Common Stock, par value $.001 per
share, of Sun Hydraulics Corporation that the undersigned is entitled to vote at
such Meeting or at any adjournment thereof, with all the powers the undersigned
would possess if personally present, such proxies being directed to vote as
specified below and in their discretion on any other business that may properly
come before the Meeting.
1. Election of Directors: Arthur B. Bodley, Rober E. Koski and James G. March
2. Appointment of Price Waterhouse LLP as independent certified public
accountants of the Company
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for Proposals 1 and 2.
1. Election of Directors
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
2. Appointment of Price Waterhouse LLP as Independent Certified Public
Accountants of the Corporation
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(see reverse side)
3. In their discretion the proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned reserves the right to revoke this Proxy at any time prior to
the Proxy being voted at the Meeting. The Proxy may be revoked by delivering a
signed revocation to the Company at any time prior to the Meeting, by submitting
a later-dated Proxy, or by attending the Meeting in person and casting a ballot.
The undersigned hereby revokes any proxy previously given to vote such shares at
the Meeting.
----------------------------------
Signature(s)
Date
----------------------------------
----------------------------------
Signature(s)
Date
----------------------------------
NOTE: Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing as
attorney, executor, administrator,
trustee, guardian or corporate
officer, please give full title as
such.
