<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
[X] Definitive proxy statement Only (as permitted by Rule 14a-6(e)(2)
[ ] 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 the 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:
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<PAGE> 2
April 27, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of Sun Hydraulics Corporation. The meeting will be held Saturday,
May 13, 2000, at 10:00 a.m., Eastern Daylight Savings Time, at the Company's
manufacturing facility located at 701 Tallevast Road, Sarasota, Florida 34243.
A tour of the 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 bank, brokerage or other
nominee, it will supply you with a proxy to be returned to it. It is important
that you return the form to the nominee as quickly as possible so that the
nominee 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 nominee
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,
/s/ Robert E. Koski
--------------------------------------------
ROBERT E. KOSKI
Chairman of the Board
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SATURDAY, MAY 13, 2000
Notice hereby is given that the Annual Meeting of Shareholders of Sun
Hydraulics Corporation, a Florida corporation, will be held on Saturday, May
13, 2000, 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 three Directors to serve until the Annual Meeting in
2003 and one Director to serve until the Annual Meeting in 2002, and
until their successors are elected and qualified or until their
earlier resignation, removal from office or death;
2. To ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent certified public accountants for the year
2000; 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 1999 Annual Report of the Company is enclosed. Shareholders of
record at the close of business on March 31, 2000, 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
April 27, 2000
<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 2000 Annual Meeting of
Shareholders, which will be held on Saturday, May 13, 2000, 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 April 27, 2000.
The close of business on March 31, 2000, 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 March 31, 2000, 6,384,948 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 March 31, 2000, on all matters that come before the Meeting.
Directors shall be elected by a plurality of the shares represented, in person
or by proxy, and voting at the Meeting. For all other matters, 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.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven
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.
The term of office of three of the Company's current seven Directors,
Messrs. Robert E. Koski, John S. Kahler and James G. March, will expire at the
2000 Annual Meeting. The Board of Directors unanimously recommends that you
vote "FOR" the reelection of Robert E. Koski and John S. Kahler to serve until
the Company's annual meeting in 2003, and until their respective successors
shall be duly elected and qualified
<PAGE> 5
or until their earlier resignation, removal from office or death. Dr. March has
informed the Board that he does not wish to be nominated for another term. To
replace Dr. March, the Board of Directors unanimously recommends that you vote
"FOR" the election of Allen J. Carlson to serve until the Company's annual
meeting in 2003, and until his successor shall be duly elected and qualified or
until his earlier resignation, removal from office or death.
The Board of Directors has also determined that the number of seats on
the Board of Directors shall be increased to eight and unanimously recommends
that you vote "FOR" the election of Christine L. Koski to fill the
newly-created Board seat and serve until the Company's annual meeting in 2002,
and until her successor shall be duly elected and qualified or until her
earlier resignation, removal from office or death. See "Management-Directors
and Executive Officers" and "Certain Transactions" for further information on
Mr. Carlson and Ms. Koski.
Shareholders may vote for up to four 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. 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 Taco van Tijn 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, nominees for Director, and executive officers and the positions they
hold with the Company. Executive officers serve at the pleasure of the Board of
Directors. See "Anticipated Changes in Executive Management" below for a
discussion of certain changes in the Company's executive management that are
expected to occur prior to the Meeting.
NAME AGE POSITION
Robert E. Koski 71 Chairman of the Board of Directors (term
expiring in 2000), Nominee for Director (term
expiring in 2003) and a member of the
Compensation Committee
Allen J. Carlson 49 Vice President, Nominee for Director (term
expiring in 2003)
Jeffrey Cooper 59 Engineering Manager
Richard J. Dobbyn 56 Chief Financial Officer
Peter G. Robson 55 General Manager, Sun Hydraulics Limited
John S. Kahler 60 Director (term expiring in 2000), Nominee for
Director (term expiring in 2003) and a member
of the Audit Committee
Christine L. Koski 42 Nominee for Director (term expiring in 2002)
Ferdinand E. Megerlin 61 Director (term expiring in 2001) and a member
of the Compensation Committee
- 2 -
<PAGE> 6
NAME AGE POSITION
Clyde G. Nixon 64 President, Chief Executive Officer and
Director (term expiring in 2001)
Taco van Tijn 76 Director (term expiring in 2002) and a member
of the Audit Committee
David N. Wormley 60 Director (term expiring in 2002) and a member
of the Compensation Committee
ROBERT E. 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 38 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.
ALLEN J. CARLSON joined the Company in March 1996, and was named Vice
President in January 2000. From October 1977 to March 1996, Mr. Carlson held
various engineering, marketing and management positions for Vickers
Incorporated, a wholly-owned subsidiary of Trinova Corporation. He is a
graduate of the Milwaukee School of Engineering and the Advanced Management
Program at the Harvard Business School. Mr. Carlson has over 29 years
experience in the fluid power industry.
JEFFREY 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 31 years experience
in the fluid power industry.
RICHARD J. 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.
JOHN S. KAHLER is the President, CEO, and a Director of Cincinnati
Incorporated. Mr. Kahler has served in various management positions with
Cincinnati Incorporated since 1989. He is a graduate of Carnegie-Mellon
University and the Harvard Business School.
CHRISTINE L. KOSKI since 1980 held various positions in sales, product
management, purchasing, sales management and international marketing with
Celanese Ltd. or its former affiliates, including Hoechst AG and Hoechst
Celanese Chemical Group Ltd. From April 1996 through March 2000, Ms. Koski was
Global Marketing Manager - Acrylates of Celanese Ltd.; from April 1995 through
April 1996, she was Marketing Manager - Acetaldehyde & NPG of Hoechst AG. Ms.
Koski currently is pursuing an MBA degree from Southern Methodist University.
FERDINAND E. MEGERLIN is Chairman and Joint Managing Director of Linde
Lift Truck Corporation's Industrial Trucks and Hydraulics Division in
Aschaffenburg, Germany. He is also
- 3 -
<PAGE> 7
Chairman of Linde's U.S. subsidiaries Linde Hydraulics Corp., Canfield, Ohio,
and Linde Lift Truck Corp., Sommerville, South Carolina. Within VDMA, Germany's
association for mechanical and plant engineering, Dr. Megerlin serves as Vice
Chairman of the German Fluid Power Association. He is a mechanical engineer and
received his Dr.-Ing. degree from the Technical University of Karlsruhe,
Germany, and his PhD from TH Aachen, Germany. Dr. Megerlin has over 28 years of
experience in the fluid power industry.
CLYDE G. 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
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 past Chairman of the Board of the National Fluid Power
Association. Mr. Nixon has over 32 years experience in the fluid power
industry.
PETER G. 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
33 years experience in the fluid power industry.
TACO VAN TIJN is an attorney (solicitor), who has practiced law in
London, England, since May 1977. Since June 1998, he has been a consultant with
Rooks Rider. Mr. van Tijn has been a Director of the Company since February
1989, and the principal statutory officer of Sun Hydraulik Holdings Limited
since January 1991.
DAVID N. 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 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
and executive officers, except that Mr. Koski and Dr. March, who is retiring
from the Board following the Meeting, are step-brothers. Further, Ms. Koski, a
nominee for Director, is the daughter of Robert E. Koski.
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 Audit Committee was appointed in February 1997 and held two
meetings in 1999. 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.
- 4 -
<PAGE> 8
A Compensation Committee was formed in December 1996 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. The full Board of Directors carried out the
responsibilities of the Compensation Committee directly during 1999.
The Board of Directors held four meetings during 1999. Each Director
attended all of the meetings of the Board and of each committee of which he was
a member in 1999. 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.
ANTICIPATED CHANGES IN EXECUTIVE MANAGEMENT
The next meeting of the Board of Directors will be held on May 12,
2000, the day prior to the Meeting. At that time, it is anticipated that Robert
E. Koski, co-founder of the Company, will resign as Chairman and become
Chairman Emeritus of the Company, with no executive responsibilities. Further,
it is contemplated that the Board of Directors will elect Clyde G. Nixon, the
Company's current President and Chief Executive Officer, as Chairman, and that
Mr. Nixon will step down as President and Chief Executive Officer. Finally, it
is anticipated that Allen J. Carlson, the Company's Vice President, will be
elected by the Board of Directors as President and Chief Executive Officer. The
Board of Directors previously has discussed these changes and the Directors
informally have agreed to take action at the May 12 meeting to implement the
executive management transition.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2000, 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, and (iv) all Directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) CLASS
- ---------------------------------------- ------------------------ -----
<S> <C> <C>
Robert E. Koski(3)(4)(5)................................. 2,618,920 41.0
Beverly Koski(3)(4)(5)................................... 2,618,920 41.0
Christine L. Koski(3).................................... 2,397,838 37.6
3525 Turtle Creek Boulevard #19B
Dallas, Texas 75219
Robert C. Koski(3)(5).................................... 2,375,543 37.2
315 Sycamore Street
Decatur, Georgia 30030
Thomas L. Koski(3)....................................... 2,333,543 36.5
Six New Street
East Norwalk, Connecticut 06855
Koski Family Limited Partnership......................... 2,333,543 36.5
3525 Turtle Creek Boulevard #19B
Dallas, Texas 75219
</TABLE>
- 5 -
<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) CLASS
- ---------------------------------------- ------------------------ -----
<S> <C> <C>
Royce & Associates, Inc.(6).............................. 590,200 9.2
Royce Management Company
Charles M. Royce
1414 Avenue of the Americas
New York, NY 10019
Bradley S. Ferrell(7).................................... 459,642 7.2
5924 Cranbrook Way, #101
Naples, Florida 34112
Robert S. and Ann R. Ferrell(8).......................... 322,537 5.1
5924 Cranbrook Way, #101
Naples, Florida 34112
Clyde G. Nixon(9)........................................ 228,618 3.5
Peter G. Robson(10)...................................... 89,574 1.4
Jeffrey Cooper(10)....................................... 73,369 1.1
Richard J. Dobbyn(11).................................... 33,500 *
Allen J. Carlson(12)..................................... 18,500 *
Taco van Tijn(13)........................................ 8,920 *
David N. Wormley(14)..................................... 3,940 *
John S. Kahler(15)....................................... 3,200 *
Ferdinand E. Megerlin.................................... 0 -
All Directors and Executive Officers
as a Group (10 persons)................................ 3,078,541 48.2
</TABLE>
- --------------
(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 sets 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. Except as otherwise
indicated, the persons listed 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.
(3) Includes 2,333,543 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 voting and investment power as the general
partners in the Partnership. Christine L. Koski, Robert C. Koski and
Thomas L. Koski are the adult children of Robert E. Koski and Beverly
Koski.
(4) Includes 141,215 shares owned by Beverly Koski and 117,162 shares owned by
Robert E. Koski. Beverly Koski is the spouse of Robert E. Koski.
(5) Includes 27,000 shares owned by the Koski Family Foundation, Inc., over
which Robert E. Koski, Beverly Koski and Robert C. Koski share voting and
investment power.
(6) According to Amendment No. 1 to the Schedule 13G, filed February 9, 2000,
by Royce & Associates, Inc. ("Royce") and Royce Management Company
("RMC"), registered investment advisors, and Charles M. Royce, Royce has
sole voting and investment power with respect to 578,400 shares, and RMC
has sole voting and investment power with respect to 11,800 shares.
According to the Schedule 13G, Charles M. Royce may be deemed to be a
controlling person of Royce and RMC, and as such may be deemed to
beneficially own the shares beneficially owned by Royce and RMC. According
to the Schedule 13G, Mr. Royce does not own any shares outside of Royce
and RMC, and disclaims beneficial ownership of the shares held by Royce
and RMC.
- 6 -
<PAGE> 10
(7) Includes 38,205 shares owned by Mr. Ferrell, over which Mr. Ferrell has
sole voting and investment power, and 421,437 shares beneficially owned by
Mr. Ferrell in his capacity as trustee of various trusts, over which Mr.
Ferrell has shared voting and investment power.
(8) Includes 4,500 shares owned by the Robert S. Ferrell Trust, of which
Robert S. Ferrell is the sole trustee, 186,125 shares owned by Bradley S.
Ferrell, Trustee of Robert S. Ferrell Flint Trust, dated 06/16/98, 6000
shares owned by the Ann R. Ferrell Trust, of which Ann R. Ferrell is the
sole trustee, 125,312 shares owned by Bradley S. Ferrell, Trustee of Ann
R. Ferrell Flint Trust dated 06/16/98, and 600 shares owned individually
by Ann R. Ferrell. Robert S. Ferrell is the spouse of Ann R. Ferrell.
(9) Includes 136,869 shares subject to currently exercisable options and
49,522 shares in the Joan Nixon Trust.
(10) Represents shares subject to currently exercisable options.
(11) Includes 32,000 shares subject to currently exercisable options.
(12) Includes 18,000 shares subject to currently exercisable options.
(13) Includes 3,920 shares subject to currently exercisable options.
(14) Includes 2,940 shares subject to currently exercisable options.
(15) Includes 2,200 shares owned in trust, of which Mr. Kahler's spouse is the
trustee and beneficiary.
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 the four most highly compensated
executive officers who earned more than $100,000 from the Company in 1999 under
the rules of the Securities and Exchange Commission (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION OTHER
AWARDS--SECURITIES ANNUAL
NAME AND UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY OPTIONS/SARs (#) (2)
------------------ ---- ------ ---------------- ------------
<S> <C> <C> <C> <C>
Robert E. Koski, 1999 $106,000 --- $ 7,860(3)
Chairman of the 1998 106,000 --- 14,045
Board of Directors 1997 106,000 --- 20,175
---- -------- ------ -------
Clyde G. Nixon, 1999 205,200 $11,703(4)
President and 1998 191,300 17,084
Chief Executive Officer 1997 180,000 58,781(1) 22,927
---- -------- ------ -------
Jeffrey Cooper 1999 133,100 $ 7,246
Engineering Manager 1998 126,525 11,683
1997 121,000 27,100(1) 13,567
---- -------- ------ -------
Allen J. Carlson 1999 122,000 --- $ 2,850
Vice President 1998 110,350 --- 2,466
1997 112,203 --- 7,911
---- -------- ------ -------
Richard J. Dobbyn 1999 118,000 $ 4,228
Chief Financial Officer 1998 107,575 5,773
1997 97,000 35,000(1) 7,054
---- -------- ------ -------
</TABLE>
- --------------
1 Represents incentive stock options granted on January 9, 1997, the date of
the Company's initial public offering, at an exercise price equal to the
public offering price.
- 7 -
<PAGE> 11
(2) 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.
(3) Includes dues of $1,500.
(4) Includes dues of $750.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options or stock appreciation
rights to any named executive officer during fiscal 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTIONS/SARs
FISCAL AT FISCAL
YEAR-END(#) YEAR-END ($)
NAME SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- -------------------------- --------------- ------------ -------------------- ----------------
(A) (B) (C) (D) (E)
- -------------------------- --------------- ------------ -------------------- ----------------
<S> <C> <C> <C> <C>
Robert E. Koski --- -- 0/0 0/0
Clyde G. Nixon --- -- 126,343/27,203 $ 469,087/0
Jeffrey Cooper --- -- 64,749/26,840 $ 149,853/0
Allen J. Carlson --- -- 16,000/8,000 0/0
Richard J. Dobbyn --- -- 25,000/22,000 0/0
</TABLE>
- ---------------
(1) Based upon the December 31, 1999, closing stock price of $6.50 per share,
as reported on the Nasdaq National Market.
The information contained in the following sections "Report of Board
of Directors Acting as Compensation Committee" and "Performance Graph" are 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 Board of Directors and the Compensation Committee. Changes
proposed for these employees will be evaluated and approved by the Compensation
Committee on an individual basis.
- 8 -
<PAGE> 12
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.
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
John S. Kahler Robert E. Koski James G. March
Ferdinand E. Megerlin Clyde G. Nixon Taco Van Tijn
David N. Wormley
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Board of Directors determined the compensation, including salary
and bonus, of the Executive Officers of the Company for the fiscal year ended
January 1, 2000, and the initial compensation for the current fiscal year
through the date hereof. In the future, the Compensation Committee of the Board
of Directors, comprised of Robert E. Koski, Ferdinand E. Megerlin, and David N.
Wormley, will determine the compensation of the Company's Executive Officers.
Mr. Koski is Chairman of the Company's Board of Directors.
- 9 -
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares cumulative total return among Sun
Hydraulics Corporation, the Nasdaq Stock Market Index (U.S.) and a peer group
from January 9, 1997, to December 31, 1999, assuming $100 invested in each on
January 9, 1997, the date of the initial public offering of the Company's
Common Stock. Total return assumes reinvestment of any dividends for all
companies considered within the comparison. The stock price performance shown
on the graph above is not necessarily indicative of future price performance.
Companies in the peer group are Commercial Intertech Corp., Denison
International plc, Moog Inc., The Oilgear Company and Sauer, Inc. Sauer, Inc.
began reporting as a publicly-held company in 1998.
{PERFORMANCE GRAPH}
<TABLE>
<CAPTION>
1/9/97 6/30/97 12/31/97 6/30/98 12/31/98 6/30/99 12/31/99
------ ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sun Hydraulics Corporation $100 $123 $128 $171 $ 90 $ 98 $ 72
Peer Group $100 $116 $147 $149 $108 $123 $ 99
Nasdaq Stock Market (U.S.) $100 $109 $119 $143 $168 $206 $303
</TABLE>
Note: The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
- 10 -
<PAGE> 14
CERTAIN TRANSACTIONS
During fiscal 1999, neither the Company nor either of its subsidiaries
entered into or proposed to enter into any transactions with a value in excess
of $60,000 with any director, or executive officer, or security holder known to
own of record or beneficially more than 5% of the Company's common stock.
Further, no director or executive officer had a business relationship with or
was indebted to the Company or either of its subsidiaries reportable under the
rules of the Securities and Exchange Commission during fiscal 1999. 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.
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. To the Company's knowledge, based
solely upon a review of the forms, reports and certificates filed with the
Company by such persons, all of them complied with the Section 16(a) filing
requirements in 1999 except Robert E. Koski, who filed two late reports
covering five purchases; James G. March, who filed one late report covering
three purchases, and Allen J. Carlson whose Form 3 report was filed late.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has engaged the firm of PricewaterhouseCoopers 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
PricewaterhouseCoopers LLP to report upon its 2000 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.
- 11 -
<PAGE> 15
SHAREHOLDER PROPOSALS FOR THE 2001 PROXY STATEMENT
AND PRESENTATION AT THE 2001 ANNUAL MEETING
Under SEC Rule 14a-8, in order for a shareholder proposal to be
included in the Company's Proxy Statement for the 2001 Annual Meeting, and
under the Company's Bylaws, for a matter to be considered at such meeting
(other than the election of Directors), the shareholder proposal, together with
certain other information specified in the Bylaws, must be submitted no later
than December 22, 2000. To be timely, shareholder nominations for Directors
must be received, together with certain other information specified in the
Bylaws, at least 60 days, but not more than 90 days, prior to the meeting. The
2001 Annual Meeting is scheduled for May 19, 2001. Shareholder proposals and
Director nominations should be submitted in writing to Gregory C. Yadley,
Secretary, at 1500 West University Parkway, Sarasota, Florida 34243. A copy of
the Company's Bylaws will be provided upon request in writing to the Secretary.
By Order of the Board of Directors,
/s/ Gregory C. Yadley
-------------------------------------
GREGORY C. YADLEY
Secretary
Dated: April 27, 2000
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<PAGE> 16
SUN HYDRAULICS CORPORATION
1500 WEST UNIVERSITY PARKWAY
SARASOTA, FL 34243
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 13, 2000.
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, May 13, 2000, hereby designates and appoints
Robert E. Koski and Clyde G. Nixon, and each of them with authority to act
without the other, 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: Allen J. Carlson, John S. Kahler, Christine L. Koski
and Robert E. Koski
2. Ratification of Appointment of PricewaterhouseCoopers 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
<TABLE>
<S> <C> <C> <C>
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY TO VOTE
(except as marked to the contrary below) FOR ALL NOMINEES LISTED ABOVE
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
----------------------------------------------------------------------------
2. Ratification of Appointment of PricewaterhouseCoopers 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.
