Wells-Gardner Electronics Corporation
2700 N. Kildare Avenue
Chicago, Illinois 60639
March 22, 1996
To Our Shareholders:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of Wells-Gardner Electronics Corporation which will be held at the General
Offices of the company, 2701 North Kildare Avenue, Chicago, Illinois, April 23,
1996, at 2:00 P.M. Central Daylight Savings Time. All holders of common shares
of the company as of the close of business on March 15, 1996, are entitled to
vote at the Annual Meeting.
Time will be set aside for discussion of each item of business described in
the accompanying Notice of Annual Meeting and Proxy Statement. A current report
on the business operations of the company will be presented at the meeting and
shareholders will have an opportunity to ask questions. We plan to adjourn the
meeting at approximately 3:15 P.M., but members of senior management will remain
to answer any additional questions you may have.
We hope you will be able to attend the Annual Meeting. Whether or not you
expect to attend, you are urged to complete, sign, date and return the proxy
card in the enclosed envelope in order to make certain that your shares will be
represented at the Annual Meeting.
Sincerely,
ANTHONY SPIER
Anthony Spier
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - APRIL 23, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Wells-Gardner
Electronics Corporation will be held on Tuesday, April 23, 1996, at 2:00 P.M.,
Central Daylight Savings Time, at the General Offices of the company, 2701 North
Kildare Avenue, Chicago, Illinois, for the following purposes:
1. To elect eight directors;
2. To consider and vote upon a proposal to approve the company's 1996
Nonemployee Director Stock Plan;
3. To consider and vote upon a proposal to amend the company's Articles of
Incorporation, as amended, to authorize up to 500,000 shares of Preferred Stock;
and
4. To act upon any other business which may properly be brought before the
meeting.
The close of business on March 15, 1996, has been fixed as the record date for
determining the shareholders entitled to notice of and to vote at the Annual
Meeting.
By Order of the Board of Directors,
RICHARD L. CONQUEST
Secretary
March 22, 1996
<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 23, 1996
This Proxy Statement is being sent on or about March 22, 1996, to all
holders of common shares, $1.00 par value ("Common Stock"), the only class of
stock outstanding, of Wells-Gardner Electronics Corporation, 2701 North Kildare
Avenue, Chicago, IL 60639 (the "company"), entitled to vote at the Annual
Meeting of Shareholders on April 23, 1996 (the "Meeting"), in order to furnish
information relating to the business to be transacted.
VOTING PROCEDURES
Shareholders of record at the close of business on March 15, 1996, are
entitled to vote at the Meeting. As of that date, there were 4,052,676 shares
of Common Stock outstanding. Shareholders are entitled to one vote per share
owned on the record date, and with respect to the election of directors,
shareholders have cumulative voting rights. Under cumulative voting, each
shareholder is entitled to a number of votes equal to the number of directors to
be elected multiplied by the number of shares owned by such shareholder, and
such shareholder may cast such votes for one nominee or distribute them in any
manner among any number of nominees.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE, which is postage-paid if mailed in the United States.
You may revoke your proxy at any time before it is actually voted at the
Meeting by delivering written notice of revocation to the Secretary of the
company, by submitting a subsequently dated proxy, or by attending the Meeting
and withdrawing the proxy. You may also be represented by another person
present at the Meeting by executing a proxy designating such person to act on
your behalf. Each unrevoked proxy card properly executed and received prior to
the close of the Meeting will be voted as indicated.
Unless otherwise indicated on the proxy card, votes represented by all
properly executed proxies will be distributed equally among the nominees for
director named herein, except that if additional persons are nominated, the
proxies will have discretionary authority to cumulate votes among the nominees
named herein. The withholding of authority to vote for any individual nominee
or nominees will permit the proxies to distribute the withheld votes in their
discretion among the remaining nominees. In addition, where specific
instructions are not indicated, the proxy will be voted FOR the approval of the
company's 1996 Nonemployee Director Stock Plan and FOR the amendment to the
company's Articles of Incorporation, as amended, to authorize up to 500,000
shares of Preferred Stock.
<PAGE>
Assuming the presence at the Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock, thereby constituting a
quorum, the affirmative vote of the holders of a plurality of the shares
represented at the Meeting and entitled to vote is required for the election of
directors, the affirmative vote of the holders of a majority of the shares
represented at the Meeting and entitled to vote is required for the approval of
the company's 1996 Nonemployee Director Stock Plan and the affirmative vote of
the holders of two-thirds of the outstanding shares of Common Stock is required
for the amendment to the company's Articles of Incorporation, as amended, to
authorize up to 500,000 shares of Preferred Stock. Abstentions are included in
the determination of the number of shares present for purposes of determining if
a quorum is present. Shares represented by proxies which are marked "abstain"
or to deny discretionary authority on any matter will be treated as shares
present and entitled to vote, which will have the same effect as a vote against
any such matters. Broker "non-votes" will have the effect of a negative vote
with respect to the amendment to the company's Article of Incorporation,
amended, to authorize up to 500,000 shares of Preferred Stock. Except with
respect to such amendment, broker "non-votes" will be treated as not represented
at the Meeting as to matters for which a non-vote is indicated on the broker's
proxy and will not affect the determination of the outcome of the vote on any
proposal to be decided at the Meeting. A broker "non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner.
The expense of preparing, printing and mailing this Proxy Statement will be
paid by the company. In addition to the use of the mail, proxies may be
solicited personally or by telephone by regular employees of the company without
additional compensation. The company will reimburse banks, brokers and other
custodians, nominees and fiduciaries for their costs in sending the proxy
materials to the beneficial owners of the Common Stock.
A copy of the 1995 Annual Report to Shareholders, which includes the
consolidated financial statements of the company for 1995, was mailed to the
shareholders on or about March 22, 1996.
ELECTION OF DIRECTORS
The bylaws of the company provide that the number of directors of the
company shall be from five to nine, as fixed from time to time by the Board of
Directors. The size of the Board is currently set at eight members.
Shareholders are entitled to cumulative voting in the election of directors. See
"Voting Procedures" herein. Directors will hold office until the next Annual
Meeting and until their successors are duly elected and qualified, or until
their earlier death or resignation. The Board of Directors has inquired of each
nominee and has ascertained that each will serve if elected. In the event that
any of these nominees should become unavailable for election, the Board of
Directors may designate substitute nominees, in which event the shares
represented by the proxy cards returned will be voted for such substitute
nominees unless an instruction to the contrary is indicated on the proxy card.
Albert S. Wells, Jr., who is a member of the Executive and Stock Option
Committees, has advised the company that he is retiring as director of the
company as of the date of the Meeting.
<PAGE>
INFORMATION CONCERNING NOMINEES
ANTHONY SPIER Director since April 1990
Anthony Spier, age 52, has been Chairman of the Board, President and Chief
Executive Officer since April 1994. Before joining the company, Mr. Spier was
President of OCE Bruning, a manufacturer of drafting equipment and supplies,
from 1990 to 1994. Prior thereto, he was Vice President of A.M. International,
and President of Bruning Corporation, a division of A.M. International. He is a
member of the Executive Committee.
ALLAN GARDNER Director since April 1963
Allan Gardner, age 74, retired from the company in 1988. Before retiring, Mr.
Gardner had served the company in various positions, including President and
Chief Operating Officer. Mr. Gardner had been employed by the company since
1948. He is a member of the Investment Committee.
JAMES J. ROBERTS, JR. Director since April 1982
James J. Roberts, Jr., age 51, has been Chairman of the Board and Chief
Executive Officer of James Industries, Inc. since its incorporation in 1977.
James Industries, a sales representative organization serving the electronics
and computer industries, has served the company as a sales representative since
1979. He is Chairman of the Executive Committee and a member of the Stock
Option Committee.
JOHN R. BLOUIN Director since April 1989
John R. Blouin, age 49, has been President of James Industries, Inc. since 1982.
Prior to joining James Industries in 1980, Mr. Blouin served in a variety of
sales management and marketing positions with General Electric Corporation. He
is Chairman of the Investment Committee.
WILLIAM L. DE NICOLO Director since April 1995
William L. De Nicolo, age 50, is the founder and, since its formation in 1986,
Chairman, of Telular Corporation ("Telular"), a corporation specializing in the
design, development, manufacture and marketing of patented cellular
telecommunication technology and products. Mr. De Nicolo served as President
and Chief Executive officer of Telular from 1986 to 1993 and was reelected to
these positions in November 1995. Mr. De Nicolo has also been President and
Chairman of DNIC Brokerage Company, a holding company for the stock of Telular
and Telular Canada, since 1986. He is a member of the Audit and Investment
Committees.
<PAGE>
WAYNE HARRIS Director since April 1995
Wayne Harris, age 61, is the President of Wayne Harris Company, a Dallas-based
appliance wholesaler, a position he has held since 1988. Prior thereto, Mr.
Harris was Corporate Vice President of Roper Corporation, a manufacturer of home
appliances and outdoor power equipment, from 1981 to 1988. He is a member of
the Audit Committee.
ERNEST R. WISH Director since August 1995
Ernest R. Wish, age 64, has been the Director of Revenue since 1995, and was
City Clerk from 1993 to 1995, for the City of Chicago. Prior thereto, Mr. Wish
was Managing Partner of the Chicago and Midwest Regional offices of Coopers &
Lybrand LLP, a public accounting firm. He is Chairman of the Audit Committee.
RANDALL S. WELLS New Director Nominee
Randall S. Wells, age 44, has been Executive Vice President and General Manager
of the company since 1987. Mr. Wells has been employed by the company since
1971 in various positions. Randall S. Wells is the son of Albert S. Wells, Jr.
The shares represented by the proxy cards returned will be voted FOR the
election of these nominees, as specified under "Voting Procedures" herein,
unless specified otherwise.
VOTING RIGHTS AGREEMENT
The company, Albert S. Wells, Jr., Randall S. Wells, Anthony Spier, Allan
Gardner, John R. Blouin, James Industries, Inc. and James J. Roberts, Jr. are
parties to a voting rights agreement (the "Voting Rights Agreement") dated
February 29, 1996, governing the voting of Common Stock for directors of the
company. The Voting Rights Agreement supersedes a prior voting rights agreement
entered into in April 1994. Pursuant to the Voting Rights Agreement, the
parties have agreed to vote their shares of Common Stock at each election of
directors for such slate of nominees as the Executive Committee of the Board
designates, provided that such slate shall always include James J. Roberts, Jr.,
John R. Blouin, Randall S. Wells, Allan Gardner and Anthony Spier or any of them
as are willing and able to serve as directors (collectively, the "Designated
Directors"). In any election of directors of the company in which the number of
nominees exceeds the number of directors to be elected, the agreement provides
that the parties will vote in a manner to assure the election of the greatest
number of Designated Directors or their successors. The Voting Rights Agreement
terminates on the earlier of the termination of the Sales Representative
Agreement between the company, James Industries, Inc. and James J. Roberts, Jr.
(see "Compensation Committee Interlocks and Insider Participation" herein) and
December 31, 2000.
<PAGE>
BOARD COMPENSATION
Employee directors do not receive additional compensation for serving on
the Board of Directors. In 1995, nonemployee directors received $750 for each
Board and committee meeting attended and a quarterly retainer of $750, plus
expenses of attendance. The Board proposes to modify the compensation paid
nonemployee directors if the 1996 Nonemployee Director Stock Plan is approved.
The 1996 Nonemployee Director Stock Plan provides for awards to each nonemployee
director of 800 shares of Common Stock each year, an attendance fee of 200
shares of Common Stock for each Board and committee meeting attended, and a cash
payment in an amount sufficient to offset tax liability incurred in connection
with such stock awards, as well as stock options for a number of shares of
Common Stock equal to one percent of the number of shares of Common Stock
outstanding on the date of grant divided by the number of eligible directors, to
be granted to nonemployee directors in office upon adjournment of an annual
meeting of shareholders. See "Proposal to Approve the 1996 Nonemployee Director
Stock Plan" for a description of the plan. The company also pays the premiums
for directors' and officers' liability insurance policies. The Board of
Directors met six times in 1995, including once by telephone conference, and the
non-employee directors were paid for the five meetings at which they appeared in
person, waiving payment for the telephone conference meeting. All directors
attended at least 75 percent of the aggregate number of Board meetings and of
meetings of committees on which they served in 1995.
COMMITTEES OF THE BOARD
The Board of Directors has a standing Audit Committee, Executive Committee,
Stock Option Committee and Investment Committee. The Board has no nominating
committee or compensation committee, although the Executive Committee deals with
matters relating to compensation and nominations to the Board.
AUDIT COMMITTEE
The Audit Committee consists of Ernest R. Wish (since August 1995), Wayne
Harris and William L. De Nicolo. The Audit Committee met four times during
1995. It also meets separately with representatives of the company's
independent auditors and with representatives of senior management. The Audit
Committee reviews and makes recommendations to the Board regarding a number of
operating matters including: (i) the general scope of audit coverage; (ii) the
fees charged by the independent auditors; and (iii) matters relating to the
company's internal control systems.
EXECUTIVE COMMITTEE
The Executive Committee consists of Anthony Spier, Albert S. Wells, Jr. and
James J. Roberts, Jr. The Executive Committee, which met three times during
1995, has the authority to take all actions that could be taken by the Board of
Directors, except as provided by statute. It may meet between regularly
scheduled Board meetings to take such action as is necessary for the efficient
operation of the company.
<PAGE>
The Executive Committee also deals with matters relating to compensation
and nominations to the Board of Directors. The Executive Committee's duties
relating to nominations to the Board include proposing a slate of directors for
election by the shareholders at each Annual Meeting and proposing candidates to
fill vacancies on the Board. It conducts research to identify suitable
candidates for Board membership, and seeks individuals who will make a
substantial contribution to the company. It will consider candidates proposed
by shareholders. Generally, candidates must be highly qualified and
affirmatively desirous of serving on the Board. They should represent the
interests of all shareholders and not those of a special interest group. Any
shareholder wishing to propose a candidate for consideration should forward the
candidate's name and a detailed background of the candidate's qualifications to
the Secretary of the company.
The Executive Committee makes recommendations to the Board with respect to
the compensation paid to the Chief Executive Officer and other executive
officers. See "Report of Board of Directors on Compensation" herein.
Stock Option Committee
The Stock Option Committee consists of Albert S. Wells, Jr. and James J.
Roberts, Jr. The Stock Option Committee met once during 1995. The Stock Option
Committee administers the company's Amended and Restated Incentive Stock Plan.
See "Report of the Stock Option Committee on Compensation" herein.
INVESTMENT COMMITTEE
The Investment Committee consists of John R. Blouin, Allan Gardner and
William L. De Nicolo. The Investment Committee met four times during 1995. The
Investment Committee identifies and makes recommendations to the Board regarding
possible acquisitions and other investment opportunities of the company.
<PAGE>
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
Set forth in the following table are the beneficial holdings on March 15,
1996, of each person known by the company to own beneficially more than five
percent of its outstanding Common Stock, directors and nominees, the Chief
Executive Officer and all executive officers and directors as a group.
<TABLE>
Number of
Shares
Beneficially
Owned
(a) (b) (c) % of Class
<S> <C> <C>
James J. Roberts, Jr. ................ 551,836(d) 13.6%
Individually and as Trustee of
the James J. Roberts Trust dated
December 23, 1991
1619 Colonial Parkway
Inverness, Illinois 60067
Dimensional Fund Advisors Inc. ....... 231,800(e) 5.7%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
Albert S. Wells, Jr. ................. 154,998(f) 3.8%
Allan Gardner ........................ 111,795(g) 2.8%
Anthony Spier ........................ 120,183 3.0%
John R. Blouin ....................... 1,000 *
William L. DeNicolo .................. 5,000 *
Wayne Harris ......................... 1,000 *
Ernest R. Wish ....................... 2,000 *
Randall S. Wells ..................... 47,082 1.2%
Executive Officers & Directors as a
group (15 persons) 1,145,200 27.6%
*Represents holdings of less than one percent.
</TABLE>
<PAGE>
(a) The amounts shown include the following shares that may be acquired within
60 days pursuant to outstanding stock options: Mr. Spier, 11,675 shares; Mr.
Randall Wells, 11,950 shares; and all executive officers and directors as a
group, 90,761 shares.
(b) Excludes shares owned by spouses as follows: Mr. Spier, 13,708 shares; Mr.
Albert Wells, 24,072 shares; Mr. Gardner, 6,300 shares; and executive officers
and directors as a group, 44,080 shares. In each case, beneficial ownership of
such shares is disclaimed.
(c) The amounts shown include performance-based restricted stock awards that
could vest in accordance with their terms as follows: Mr. Spier, 39,000 shares;
Mr. Randall Wells, 9,000 shares; and all executive officers and directors as a
group, 102,000 shares. These performance-based restricted stock awards were
amended in February 1996. See "Report of the Stock Option Committee on
Compensation" for a description of the amendment.
(d) According to Schedule 13D filed with the Securities and Exchange Commission
by Mr. Roberts and other information furnished by him, Mr. Roberts has sole
voting power over all shares beneficially owned by him. According to such
information, all of these shares are owned by Mr. Roberts as trustee of a
trust of which he is sole beneficiary.
(e) According to Schedule 13G filed with the Securities and Exchange Commission,
Dimensional Fund Advisors Inc. has sole voting power with respect to 132,300
shares and sole dispositive power with respect to 231,800 shares.
(f) Includes 82,400 shares held by the Lorraine D. Wells Family Trust, of which
Mr. Wells is the trustee.
(g) All of these shares are held by the Allan Gardner Revocable Living Trust
dated 1/9/90, of which Mr. Gardner is the trustee.
REPORT OF BOARD OF DIRECTORS ON COMPENSATION
This report of the Board of Directors shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and shall not otherwise be deemed filed under
such acts.
<PAGE>
OVERVIEW OF EXECUTIVE COMPENSATION POLICIES
The Board of Directors' policy with respect to compensation of the
company's executive officers includes the following objectives:
* Maintain a level of compensation that will attract and retain highly qualified
individuals.
* Match the compensation goals of the executive officers with the short-term and
long-term operational goals of the company.
* Align the interests of the executive officers and shareholders.
* Reward significant performance by individual executive officers, which
performance contributes to the success of the company.
To achieve these objectives, the overall compensation of the company's
executive officers was comprised in 1995 of salaries and stock options granted
under the company's Amended and Restated Incentive Stock Plan ("ISP"). The
Board of Directors determines the annual salary of each executive officer, based
upon recommendations of the Executive Committee. The ISP is administered by the
Stock Option Committee. See "Report of the Stock Option Committee on
Compensation" herein.
Certain executive officers are parties to employment contracts which
specify minimum salaries. Any compensation exceeding such minimum levels is set
relative to executive compensation at comparable companies in the electronics
industries and companies of comparable size.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Spier is employed under a contract originally entered into in
connection with his joining the company and being elected as Chairman of the
Board, President and Chief Executive Officer of the company in April 1994 (the
"1994 contract"). The 1994 contract provided for minimum compensation of
$150,000 for 1995. In February 1996, the 1994 contract was amended (the
"Amended Contract"). The Amended Contract, which expires December 31, 2000, but
can be extended for additional one-year terms thereafter, provides for minimum
annual compensation of $200,000 until December 31, 1996, and $225,000
thereafter. Mr. Spier may terminate the Amended Contract in the event of a
"change in control" of the company. If, upon a "change of control" of the
company, Mr. Spier terminates the Amended Contract and does not, within five
days of termination, enter into a new contract with a term of at least two years
with the company or the company's successor, the Amended Contract provides that
Mr. Spier is entitled to a lump sum payment in an amount equal to the greater of
the compensation Mr. Spier would have been entitled to but for such termination
during the remaining term of the agreement and twice his total compensation from
the company for the twelve calendar months preceding termination. In addition,
in case of a "change of control," the Amended Contract provides for payment of
the value of any unvested stock options or stock awards, and a payment to offset
any excise tax liability (pursuant to section 4999 of the Internal Revenue Code)
incurred. In addition, Mr. Spier is to be reimbursed for legal fees and
expenses incurred by Mr. Spier as a result of such termination. Mr. Spier also
received stock options in 1995. See "Report of the Stock Option Committee on
Compensation" and "Summary Compensation Table" herein.
<PAGE>
BOARD OF DIRECTORS
Anthony Spier Albert S. Wells, Jr. James J. Roberts, Jr.
Allan Gardner John R. Blouin William L. De Nicolo
Wayne Harris Ernest R. Wish
REPORT OF THE STOCK OPTION COMMITTEE ON COMPENSATION
The company believes that significant stock ownership by executive officers
is a major incentive in building shareholder value and aligning the interests of
executives and shareholders. Under the company's ISP, which is administered by
the Stock Option Committee, nonqualified stock options, incentive stock options,
stock appreciation rights and stock awards may be granted to officers and other
key employees of the company.
In accordance with the company's policy of aligning the interests of its
executive officers with those of its shareholders, grants of performance-based
restricted stock awards were made to all executive officers in 1994. The
performance goal set for these awards was not reached for 1995. In February
1996, the Stock Option Committee amended the performance-based restricted stock
awards by changing the performance-goal years and the vesting dates from 1995,
1996 and 1997 to 1996, 1997 and 1998, respectively. Vesting of the amended
restricted stock awards is dependent upon the company achieving certain profit
goals during the years 1996, 1997 and 1998 and shares will now vest in each of
1996, 1997 and 1998, respectively, if the company's earnings from continuing
operations before interest and tax (EBIT) for that fiscal year equal or exceed
the target amount for that year. Shares for any year which do not vest because
of failure to attain that year's performance goal may vest on the basis of the
attainment of cumulative performance goals during the three-year period. Any
awards that have not vested as specified above will be forfeited. In addition
in 1995, 128,800 stock options were granted to eight executive officers.
CHIEF EXECUTIVE OFFICER AWARDS
In 1994, in connection with Mr. Spier joining the company and being elected
Chairman of the Board, President and Chief Executive Officer, and as a part of
his overall compensation, Mr. Spier received a performance-based restricted
stock award of 30,000 shares and received an additional restricted stock award
of 9,000 shares in connection with the grant of performance-based restricted
stock awards to all executive officers described in the preceding paragraph (the
terms of which are set forth in footnote (e) to the "Summary Compensation Table"
herein). As set forth above, the performance goals were not reached in 1995,
and, in February 1996, the Stock Option Committee amended the restricted stock
awards. In 1995, Mr. Spier was also granted an option to purchase 26,700 shares
of Common Stock at an exercise price of $2.75, the fair market value on the date
of the grant. See "Option Grants in 1995" for further information with respect
to the specific terms of such grant. The Stock Option Committee believes the
stock awards make a significant portion of Mr. Spier's overall compensation
dependent on company performance and the option grant helps to align Mr. Spier's
long term compensation directly with shareholder value since the potential value
of the grant is tied directly to increases in the fair market value of the
company's Common Stock during the term of the option.
<PAGE>
STOCK OPTION COMMITTEE
James J. Roberts, Jr. Albert S. Wells, Jr.
<TABLE>
SUMMARY COMPENSATION TABLE
Set forth on the following table are, for the years indicated, each
component of compensation paid to the Chief Executive Officer.
Annual Compensation Long-Term Compensation
Other Securities
Name and Annual Restricted Underlying All Other
Principal Fiscal Salary Comp. Stock Options Compensation
Position Year (b) (c) Awards (#) (d)
<S> <C> <C> <C> <C> <C> <C>
Anthony 1995 $148,125 $16,435 --- 26,700 $6,460
Spier (a)
Chairman of 1994 $ 67,375 $11,532 $112,500 20,000 $1,344
the Board,
President and
Chief Executive Officer
</TABLE>
____________________
(a) Mr. Spier joined the company as Chairman of the Board, President and Chief
Executive Officer in April 1994.
(b) Includes all pre-tax employee contributions to the Employee Retirement
401(k) Plan.
(c) Includes benefits associated with the personal use of a company automobile
for 1995 and 1994 of $16,435 and $3,925, respectively, and company-paid taxes
in 1994 of $7,607.
(d) Includes premiums paid on life insurance for the benefit of Mr. Spier for
1995 and 1994 of $2,016 and $1,344, respectively and, for the company's
contributions to the Employee Retirement 401(k) Plan in 1995 of $4,444.
(e) In 1994, Mr. Spier received performance-based restricted stock awards
aggregating 39,000 shares, which awards were amended in February 1996, and, as
amended, are subject to vesting or forfeiture as follows: 12,000, 13,000 and
14,000 of Mr. Spier's shares will vest in each of 1996, 1997 and 1998,
respectively, if the company's earnings from continuing operations before
interest and tax (EBIT) for that year equal or exceed the target amount for that
year. Shares for any year which do not vest because of failure to attain that
year's performance goal may vest on the basis of the attainment of cumulative
performance goals during the three-year period. Any awards that have not vested
as specified above will be forfeited. These restricted shares will be forfeited
in case of the termination of Mr. Spier's employment with the company, except if
Mr. Spier is terminated by the company without cause. Any dividends declared
on the Common Stock will be paid on the restricted shares. As of December 31,
1995, Mr. Spier owned a total of 39,000 shares of restricted stock with a fair
market value of $124,313.
<PAGE>
<TABLE>
OPTION GRANTS IN 1995
Set forth is certain information concerning grants of options to the Chief
Executive Officer during 1995:
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
Number of Percentage of
Securities Total Options
Underlying Granted to Exercise
Options Employees Price per Expiration
Name Granted in 1995 share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Anthony 26,700 12% $2.75 1/06/2005 $46,127 $117,020
Spier (a)
</TABLE>
____________________
(a) The options become exercisable in 25% installments in June 1995, January
1996, January 1997 and January 1998.
<TABLE>
AGGREGATED OPTION EXERCISES IN 1995 AND
OPTION VALUES AT DECEMBER 31, 1995
Set forth on the following table is information relating to the number of
shares of Common Stock subject to options held at December 31, 1995, by the
Chief Executive Officer. Unexercised options for 20,025 shares of Common Stock
were in-the-money at December 31, 1995.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Fiscal Options at
Year-end (#) Fiscal Year-End
Shares
Acquired on Value Exercis- Unexercis- Exercis- Unexercis-
Name Exercise (#) Realized able able able able
<S> <C> <C> <C> <C> <C> <C>
Anthony 16,675 $47,320 0 30,025 0 $8,761(a)
Spier
(a) Based on a per share value, at December 31, 1995, of $3.1875.
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Albert S. Wells, Jr., James J. Roberts, Jr. and Anthony Spier serve on the
Executive Committee, which deals with certain matters related to compensation of
executive officers. Mr. Wells is a former President and Chief Executive Officer
of the company. Mr. Spier does not participate in any decisions relating to his
compensation. The Stock Option Committee, which administers the company's ISP,
consists of James J. Roberts, Jr. and Albert S. Wells, Jr. Messrs. Roberts and
Blouin, who are both directors of the company, are the sole shareholders of
James Industries, Inc., and Mr. Roberts is the Chairman of the Board and Chief
Executive Officer, and Mr. Blouin is President, of James Industries, Inc.
James Industries, Inc., a sales representative organization, acts as a sales
representative for, and as a distributor of, the company's products. James
Industries, Inc. has been an independent sales representative for the company
since 1979 and is compensated therefor on a commission basis pursuant to a Sales
Representation Agreement dated January 1, 1991 (the "1991 Representation
Agreement"). Commissions paid pursuant to the 1991 Representation Agreement to
James Industries, Inc. in 1995, totaled approximately $868,000. On February 29,
1996, the company, James Industries, Inc. and James J. Roberts, Jr. entered into
a new Sales Representative Agreement, effective as of January 1, 1996, which
supersedes the 1991 Representation Agreement. The new agreement expires
December 31, 2000, but can be extended for additional one-year terms thereafter.
James Industries, Inc. also acts as a distributor, purchasing the company's
products for sale to third parties. For 1995, the company's sales to James
Industries, Inc. totaled approximately $425,000. In addition, James Industries,
Inc. is also an independent sales representative for certain of the company's
suppliers. In 1995, the company purchased approximately $1,351,000 of products
from third party vendors represented by James Industries, Inc. on a commission
basis.
PROPOSAL TO APPROVE THE
1996 NONEMPLOYEE DIRECTOR STOCK PLAN
BACKGROUND
The Board of Directors approved the Wells-Gardner Electronics Corporation
1996 Nonemployee Director Stock Plan (the "NDSP") on February 29, 1996, subject
to approval by the shareholders of the company. The purpose of the NDSP is to
enable the company to attract and retain outstanding individuals to serve as
members of the Board of Directors by providing such persons awards of Common
Stock as well as opportunities to acquire shares of Common Stock, thereby
strengthening the mutuality of interests between such persons and the company's
shareholders. Reference is made to Annex A for a complete statement of the
provisions of the NDSP. The following summary is qualified in its entirety by
reference to the specific terms of the NDSP.
<PAGE>
DESCRIPTION OF PLAN
The NDSP reserves 250,000 shares of Common Stock for automatic grants of
nonqualified stock awards and stock options to members of the Board of Directors
who are not officers or employees of the company or its subsidiaries (a
"Nonemployee Director"). The Board of Directors is responsible for the NDSP's
implementation but may not exercise any discretion concerning its
administration.
OPTION GRANTS
The NDSP provides that each Nonemployee Director in office on adjournment
of each annual meeting of the shareholders of the company (an "Annual Meeting"),
will automatically receive on May 1 following such Annual Meeting, commencing
May 1, 1996, a nonqualified stock option to purchase a number of shares of
Common Stock equal to one percent (1%) of the total number of shares of Common
Stock outstanding on the date of grant divided by the number of Nonemployee
Directors eligible to receive such stock options on the date of grant.
Each option will be granted for a term of ten years and will vest in
quarterly installments every six months following the grant date. The option
price, which will be the fair market value of the Common Stock on the date of
the grant, will be paid in cash or by delivery of Common Stock owned by the
Nonemployee Director for at least six months valued at fair market value on the
date of exercise.
No option granted under the NDSP shall be transferable by a Nonemployee
Director, otherwise than by will or, if the Nonemployee Director dies intestate,
by the laws of descent and distribution. All options shall be exercisable
during the Nonemployee Director's lifetime only by the Nonemployee Director or
his or her legal representative. Notwithstanding the foregoing, an option will
automatically become transferable to the Nonemployee Director's immediate family
or trusts or family partnerships for the benefit of such persons if and to the
extent the Securities and Exchange Commission removes the transferability
restrictions from its rules. Such options terminate within ninety days after
the Nonemployee Director leaves such position; provided, however, that in case
of death of a Nonemployee Director while in such position or within ninety days
after termination, or in the case of retirement of a Nonemployee Director, such
options become automatically exercisable within one year after such person's
death or retirement.
<PAGE>
STOCK AWARDS
Each Nonemployee Director in office on adjournment of each Annual Meeting
will receive on May 1 following such Annual Meeting, commencing May 1, 1996, a
stock award of 800 shares of Common Stock. In addition, each Nonemployee
Director who has attended a meeting of the Board of Directors or of a committee
of the Board of Directors, will receive a stock award of 200 shares for each
such meeting attended by the Nonemployee Director (an "Attendance Award"). On
May 1, commencing May 1, 1996, the company will pay in advance to each
Nonemployee Director in office on adjournment of the preceding Annual Meeting,
an award of 800 shares of Common Stock (the "Annual Attendance Payment") for
attending four Board of Director meetings. If a Nonemployee Director attends
less than four Board of Director meetings between two Annual Meetings, such
Nonemployee Director will remit to the Company the excess of the Annual
Attendance Payment over Attendance Awards due. If a Nonemployee Director
attends more than four Board of Director meetings between two Annual Meetings,
the company will pay such Nonemployee Director, in addition to the Annual
Attendance Payment, on the date of the Annual Meeting following such Nonemployee
Director's election as such, Attendance Awards for the additional meetings as
due. In addition, each Nonemployee Director who has attended a meeting of a
committee of the Board of Directors, will receive a stock award of 200 shares to
be paid on May 1, September 1, December 1, and March 1 (each a "Payment Date"),
for each committee meeting attended in the time preceding such Payment Date but
following the prior Payment Date.
FEDERAL TAX TREATMENT
The options granted under the NDSP will not qualify for the special tax
treatment accorded to "incentive stock options" under Section 422 of the
Internal Revenue Code. Although a Nonemployee Director will not recognize
income at the time of the grant of the option, he or she will recognize ordinary
income upon the exercise of an option in an amount equal to the excess of the
fair market value of the stock on the date of exercise of the option over the
amount paid for the stock.
The value of the shares awarded as stock awards under the NDSP will be
taxable as income to the Nonemployee Director for federal tax purposes in the
calendar year when awarded. The amount taxable will be the value of the Common
Stock at the time of distribution.
As a result of the Nonemployee Director's exercise of an option or grant of
a stock award, the company will be entitled to deduct as compensation an amount
equal to the amount included in the Nonemployee Director's gross income. The
company's deduction will be taken in the company's taxable year in which the
option is exercised or in which the Nonemployee Director is taxable on the
award.
<PAGE>
OTHER INFORMATION
For all purposes, fair market value is defined as the closing price of the
Common Stock as reported on the American Stock Exchange (or such other
consolidated transaction reporting system on which such Common Stock may be
traded) for such day, or if the Common Stock was not traded on such day, then
the next preceding day on which the stock was traded, all as reported by such
source as the Board of Directors may select.
The Board of Directors of the company may suspend or terminate the NDSP at
any time. No grants can be made under the NDSP after February 29, 2006. The
Board of Directors may also amend the NDSP from time to time in such respects as
the Board of Directors may deem advisable. No such amendment shall be made,
however, that would disqualify the NDSP, or any other plan of the company
intended to be so qualified, from the exemption provided by Rule 16b-3 under the
Securities Exchange Act of 1934.
The NDSP contains provisions for automatic adjustment of awards in the
event of a merger, consolidation, or reorganization, or issuance of shares by
the company without new consideration.
NEW PLAN BENEFITS
Set forth on the following table are the benefits to be granted under the
NDSP in 1996, to the named executive officers, to the company's executive
officers as a group, to the company's directors who are not executive officers
and to all employees, including all current officers who are not executive
officers, as a group, assuming (i) that all six director nominees qualifying as
Nonemployee Directors herein are elected at the Meeting, (ii) that on May 1,
1996, there will be 4,052,676 shares of Common Stock outstanding, (iii) that in
1996, each Nonemployee Director will attend four Board of Director meetings, and
(iv) that in 1996, each Nonemployee Director will attend four committee meetings
and (v) that the price of a share of Common Stock on the date of each award made
in 1995 pursuant to the NDSP is $3.875, the closing price of a share of Common
Stock on March 15, 1996, as reported on the American Stock Exchange.
<PAGE>
<TABLE>
1996 Nonemployee Director Stock Plan
Number of Dollar Value of
Stock Options Stock Awards to
Name and Position to be Granted be Granted
<S> <C> <C>
Anthony Spier 0 $0
Chairman of the Board,
President and Chief
Executive Officer
Executive Group 0 $0
Non-Executive
Director Group 40,526 $55,800
Non-Executive
Officer Employee
Group 0 $0
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1996
NONEMPLOYEE DIRECTOR STOCK PLAN.
PROPOSAL TO AMEND THE ARTICLES
OF INCORPORATION TO AUTHORIZE UP TO 500,000
SHARES OF PREFERRED STOCK
The Board of Directors has unanimously adopted and submitted to the
shareholders for approval an amendment to the Articles of Incorporation of the
company, as amended, (the "Preferred Stock Amendment") to authorize the
issuance, from time to time, by the company of up to 500,000 shares of preferred
stock (the "Preferred Stock") in one or more series and having provisions to be
determined by the Board of Directors at the time of issuance. The text of the
Preferred Stock Amendment is attached hereto as Annex B and is incorporated
herein by reference.
<PAGE>
The Board of Directors believes that the authorization of the Preferred
Stock is in the best interests of the company and its shareholders and believes
that it is advisable to authorize such shares and have them available in
connection with possible future transactions, such as financing, strategic
alliances, corporate mergers, acquisitions, possible funding of new product
programs or businesses and other uses not presently determinable and as may be
deemed to be feasible and in the best interests of the company. In addition,
the Board of Directors believes that it is desirable that the company have the
flexibility to issue shares of Preferred Stock without further shareholder
action, except as otherwise provided by law.
The Preferred Stock of any series will have such designations, preferences,
conversion rights, cumulative, relative, participating, optional or other
rights, including voting rights, qualifications, limitations or restrictions
thereof as are determined by the Board of Directors. Thus, if the Preferred
Stock Amendment is approved, the Board of Directors would be entitled to
authorize the creation and issuance of up to 500,000 shares of Preferred Stock
in one or more series with such limitations and restrictions as may be
determined in the Board's sole discretion, without further authorization by the
company's shareholders. Shareholders will not have preemptive rights to
subscribe for shares of Preferred Stock.
It is not possible to determine the actual effect of the Preferred Stock on
the rights of the shareholders of the company until the Board of Directors
determines the rights of the holders of a series of the Preferred Stock.
However, such effects might include (i) restrictions on the payment of dividends
to holders of the Common Stock; (ii) dilution of voting power to the extent that
the holders of shares of Preferred Stock are given voting rights; (iii) dilution
of the equity interests and voting power if the Preferred Stock is convertible
into Common Stock; and (iv) restrictions upon any distribution of assets to the
holders of the Common Stock upon liquidation or dissolution and until the
satisfaction of any liquidation preference granted to the holders of Preferred
Stock.
<PAGE>
The Board of Directors is required by Illinois law to make any
determination to issue shares of Preferred Stock based upon its judgment as to
the best interests of the shareholders and the company. Although the Board of
Directors has no present intention of doing so, it could issue shares of
Preferred Stock (within the limits imposed by applicable law) that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of the company by means of a merger, tender offer,
proxy contest or other means. When in the judgment of the Board of Directors
such action would be in the best interests of the shareholders and the company,
the issuance of shares of Preferred Stock could be used to create voting or
other impediments or to discourage persons seeking to gain control of the
company, for example, by the sale of Preferred Stock to purchasers favorable to
the Board of Directors. In addition, the Board of Directors could authorize
holders of a series of Preferred Stock to vote either separately as a class or
with the holders of Common Stock, on any merger, sale or exchange of assets by
the company or any other extraordinary corporate transaction. The existence of
the additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares could also be used to
dilute the stock ownership of a person or entity seeking to obtain control of
the company should the Board of Directors consider the action of such entity or
person not to be in the best interests of the shareholders and the company. Such
issuance of Preferred Stock could also have the effect of diluting the earnings
per share and book value per share of the Common Stock held by the holders of
Common Stock.
While the company may consider effecting an equity offering of Preferred
Stock in the future for the purposes of raising additional working capital or
otherwise, the company, as of the date hereof, has no agreements or
understandings with any third party to effect any such offering and no
assurances are given that any offering will in fact be effected.
<PAGE>
Because capital markets and the company's own circumstances can change in
the future, the Board of Directors would consider it very unwise to attempt to
limit the types of Preferred Stock that the company might issue. However, as in
all matters relating to the conduct of the company's affairs, the company's
directors will use their best judgment in determining what features are
appropriate at any given time, after giving full consideration to the best
interests of the company's shareholders.
DISSENTERS' RIGHTS
Pursuant to the Illinois Business Corporation Act, the company's
shareholders are not entitled to dissenters' rights of appraisal with respect to
the Preferred Stock Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
ARTICLES OF INCORPORATION TO AUTHORIZE UP TO 500,000 SHARES OF PREFERRED STOCK.
COMMON STOCK PRICE PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative
total shareholder return of the company's Common Stock with the cumulative total
return of the S&P Midcap 400 Index and the S&P Electronics-Instrumentation Index
during the years 1991 through 1995, assuming the investment of $100 on December
31, 1990, and the reinvestment of dividends.
<TABLE>
INDEXED RETURNED YEAR ENDING
Company/Index Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C>
Wells-Gardner
Electronics Corp. 100.00 76.19 252.38 152.38 102.36 121.41
S&P Midcap
400 Index 100.00 150.10 167.98 191.41 184.55 241.66
Electronics
(Instrument) 100.00 173.31 212.87 243.89 303.11 469.12
</TABLE>
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the company's directors,
its executive (and certain other) officers, and any person holding more than ten
percent of the company's Common Stock are required to report their ownership of
Common Stock and any changes in that ownership to the Securities and Exchange
Commission and any exchange or quotation system on which the Common Stock is
listed or quoted. Specific due dates for these reports have been established
and the company is required to report in this proxy statement any failure to
file by these dates. All of these filing requirements were satisfied by its
directors and officers and ten percent holders, except Mr. De Nicolo and Mr.
Harris who respectively made their initial filing on Form 3 after the due date.
In making these statements, the company has relied on the representations of
its directors and officers and its ten percent holders and copies of the reports
that they have filed with the Securities and Exchange Commission.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the company has appointed the firm of KPMG Peat
Marwick to serve as independent public accountants of the company for 1996. A
representative of KPMG Peat Marwick will be present at the Meeting and will have
the opportunity to make a statement. The representative will also be available
to respond to appropriate questions from the shareholders.
PROPOSALS OF SECURITY HOLDERS
Any shareholder proposal intended to be presented at the 1997 Annual
Meeting of Shareholders must be received at the company's executive offices,
2701 North Kildare Avenue, Chicago, Illinois 60639, by no later than
November 21, 1996, in order to be considered for inclusion in the company's
proxy statement materials relating to such meeting.
OTHER BUSINESS
The company is not aware of any business to be acted upon at the Meeting
other than that which is described in this Proxy Statement. In the event that
other business calling for a vote of the shareholders is properly presented at
the Meeting, the holders of the proxies will vote your shares in accordance with
their best judgment.
Chicago, Illinois
March 22, 1996
<PAGE>
Annex A
WELLS-GARDNER ELECTRONICS CORPORATION
1996 NONEMPLOYEE DIRECTOR STOCK PLAN
ARTICLE I
GENERAL
1.1 Purpose. Wells-Gardner Electronics Corporation, an Illinois
corporation (the "Company"), hereby adopts the 1996 Nonemployee Director Stock
Plan (the "Plan"). The purpose of the Plan is to attract and retain outstanding
individuals to serve as members of the Board of Directors of the Company by
awarding such persons shares of Common Stock of the Company (the "Common Stock")
as well as providing such persons opportunities to acquire shares of Common
Stock thereby strengthening the mutuality of interest between such persons and
the Company's shareholders.
1.2 Shares Reserved under the Plan. There is hereby reserved for issuance
under the Plan an aggregate of 250,000 shares of Common Stock, which may be
authorized but unissued or treasury shares. If there is a lapse, expiration,
termination or cancellation of any award or option granted under this Plan, all
shares subject to or reserved for such award or option may again be used for new
awards or options granted under this Plan.
1.3 Participation. Participation in this Plan is limited to members of the
Board of Directors who are not salaried officers or employees of the Company or
any of its direct or indirect subsidiaries (a "Nonemployee Director" or
"Participant").
ARTICLE II
STOCK OPTIONS
2.1 Options to be Granted under the Plan. Effective on May 1 each year,
commencing on May 1, 1996, each Nonemployee Director in office on adjournment of
the annual meeting of the shareholders of the Company ("Annual Meeting")
immediately preceding such May 1, will automatically be awarded a nonqualified
stock option (the "option") to purchase such number of shares of Common Stock
equal to one percent (1%) of the total number of shares of Common Stock
outstanding on the grant date divided by the number of Nonemployee Directors
eligible to receive such options on the grant date.
2.2 Option Exercise Price. Each option granted under this Plan shall be
exercisable at an option price equal to the Fair Market Value of the Common
Stock on the date of the grant.
<PAGE>
2.3 Limitations on Exercise. Any option granted under this Plan may be
exercised in whole or in part, from time to time after the date granted, subject
to the following limitations:
(a) No option granted hereunder may be exercised during the first six
months following the date such option was granted. Thereafter, up to one
quarter (1/4) of the shares covered by the option may be exercised every six
months following the date of grant.
(b) All options granted hereunder will terminate not later than ninety
days after termination of service as Nonemployee Director subject to the
provisions of (c) below.
(c) In case of the death of a Nonemployee Director (I) while in such
position or (ii) within ninety days after termination, or in case of retirement,
such person's options granted hereunder become automatically fully exercisable
for a period one year after such person's death or retirement. For purposes of
this section, "retirement" means a Nonemployee Director's termination of service
as a member of the Company's Board of Directors after age 70 or at any time with
the consent of the Company's Board of Directors.
(d) No option granted hereunder may be exercised more than ten years from
the date the option is granted.
2.4 Method and Time of Exercise; Delivery of Certificates. Any option
granted under this Plan shall be deemed exercised on the date written notice of
exercise is received by the Chief Financial Officer of the Company at the
Company's corporate headquarters. Such notice shall be accompanied by: (i) a
check payable to the Company for the purchase price of the shares to be
purchased; or (ii) delivery (or certification of ownership) of shares of Common
Stock owned for at least six months whose Fair Market Value on the date of
exercise equals the purchase price of the shares to be purchased; or (iii) any
combination of the foregoing. A Participant may also use cashless exercise as
permitted under Federal Reserve Board's Regulation T.
2.5 Nontransferability. Any option granted under this Plan shall not be
transferable other than by will or the laws of descent and distribution, and
shall be exercisable, during the Participant's lifetime, only by the Participant
or the Participant's guardian or legal representative. If a Nonemployee
Director dies during the option period, any option granted to such Participant
may be exercised by his estate or the person to whom the option passes by will
or the laws of descent and distribution, but only in accordance with Section 2.3
above. Notwithstanding the foregoing, an option will automatically become
transferable to the Participant's immediate family or trusts or family
partnerships for the benefit of such persons if and to the extent the Securities
and Exchange Commission specifically removes the transferability restrictions
from Securities and Exchange Commission Rule 16b-3 ("Rule 16b-3").
<PAGE>
ARTICLE III
STOCK AWARDS
3.1 Annual Stock Awards. Effective on May 1 each year commencing on May 1,
1996, each Nonemployee Director in office on adjournment of the Annual Meeting
immediately preceding such May 1, and on the date of the grant, will
automatically be awarded 800 shares of Common Stock.
3.2 Attendance Stock Awards.
(a) Each Nonemployee Director who has attended a meeting of the Company's
Board of Directors or of a committee of the Company's Board of Directors (a
"Meeting") shall automatically be awarded 200 shares of Common Stock per Meeting
attended (an "Attendance Award").
(b) On May 1, commencing May 1, 1996, the company will pay to each
Nonemployee Director in office on adjournment of the preceding Annual Meeting,
an award of 800 shares of Common Stock (the "Annual Attendance Payment") as
Attendance Awards for four meetings of the Company's Board of Directors (a
"Board Meeting"). If a Nonemployee Director attends less than four Board
Meetings between two Annual Meetings, such Nonemployee Director will remit to
the Company the excess of the Annual Attendance Payment over the Attendance
Awards due for Board Meetings. If a Nonemployee Director attends more than four
Board Meetings between two Annual Meetings, the company will pay such
Nonemployee Director, in addition to the Annual Attendance Payment, on the date
of the Annual Meeting following such Nonemployee Director's election as such,
such Attendance Awards as due for Board Meetings.
(c) Attendance Awards for meetings of a committee of the Company's Board
of Directors will be paid on May 1, September 1, December 1, and March 1 (each,
a "Payment Date") for attendance at all such meetings in the period preceding
such Payment Date but following the prior Payment Date.
ARTICLE IV
MISCELLANEOUS
4.1 Other Provisions; Securities Registration. The grant of any option or
award under the Plan may also be subject to other provisions as counsel to the
Company deems appropriate, including, without limitation, such provisions as may
be appropriate to comply with federal or state securities laws and stock listing
requirements.
4.2 Definition of Fair Market Value. The term "Fair Market Value" shall
mean, as of any date, the closing price of the Common Stock as reported on the
American Stock Exchange (or such other consolidated transaction reporting system
on which the Common Stock is primarily traded) for such day, or if such Common
Stock was not traded on such day, then the next preceding day on which the stock
was traded, all as reported by such source as the Board of Directors may select.
<PAGE>
4.3 Adjustment Provisions. If the Company shall at any time change the
number of issued shares of Common Stock without new consideration to the Company
(such as by stock dividend or stock split), the total number of shares reserved
for issuance under this Plan and the number of shares covered by each
outstanding option or award shall be automatically adjusted so that the
aggregate consideration payable to the Company and the value of each option or
award shall not be changed. If, during the term of this Plan or during the term
of any option granted under this Plan, the Common Stock of the Company shall be
changed into another kind of stock, securities, cash or other property whether
as a result of reorganization, sale, merger, consolidation, or other similar
transaction, the Board of Directors shall cause adequate provision to be made
whereby the Participants shall thereafter be entitled to receive, upon the due
exercise of any outstanding options or upon the grant of awards, the stock,
securities, cash or other property the Participants would have been entitled to
receive immediately prior to the effective date of any such transaction for
shares of Common Stock which could have been acquired through the exercise of
such options or as awards.
4.4 Amendment or Discontinuation of Plan. The Board of Directors may amend
the Plan at any time or suspend or discontinue the Plan at any time, but no such
action shall adversely affect any outstanding option; provided that this Plan
may not be materially amended more frequently than once every six months and no
amendment shall be adopted which would result in any Nonemployee Director losing
his or her status as a "disinterested" administrator under Rule 16b-3 with
respect to any employee benefit plan of the Company or result in the Plan losing
its status as a protected plan under Rule 16b-3.
4.5 Shareholder Approval. The Plan was adopted by the Board of Directors
on February 29, 1996, subject to shareholder approval. The Plan and any
benefits granted thereunder shall be null and void if shareholder approval is
not obtained at the next annual meeting of shareholders. No grants shall be
made hereunder after February 29, 2006.
<PAGE>
Annex B
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
WELLS-GARDNER ELECTRONICS CORPORATION
The Articles of Incorporation of the corporation, as amended, shall be further
amended as follows:
The total number of shares which the corporation is authorized to issue is:
twenty-five million five hundred thousand (25,500,000), divided into twenty-five
million (25,000,000) shares of common stock (the "Common Stock"), one dollar
($1.00) par value per share, and five hundred thousand (500,000) shares of
preferred stock (the "Preferred Stock"), one dollar ($1.00) par value per share.
The designation, relative rights, preferences and limitations of the shares
of each class are as follows:
The shares of Preferred Stock may be issued from time to time in one or
more series of any number of shares, provided that the aggregate number of
shares issued and not canceled of any and all such series shall not exceed the
total number of shares of Preferred Stock hereinabove authorized, and with
distinctive serial designations, all as shall hereafter be stated and expressed
in the resolution or resolutions providing for the issue of such shares of
Preferred Stock from time to time adopted by the Board of Directors pursuant to
authority so to do which is hereby vested in the Board of Directors. Each
series of shares of Preferred Stock (a) may have such voting powers, full or
limited, or may be without voting powers; (b) may be subject to redemption at
such time or times and at such prices; (c) may be entitled to receive dividends
(which may be cumulative or non-cumulative) at such rate or rates, on such
conditions and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or series of stock; (d)
may have such rights upon the involuntary liquidation or voluntary liquidation
of the corporation; (e) may be made convertible into or exchangeable for, shares
of any other class or classes or of any other series of the same or any other
class or classes of shares of the corporation at such price or prices or at such
rates of exchange and with such adjustments; (f) may be entitled to the benefit
of a sinking fund to be applied to the purchase or redemption of shares of such
series in such amount or amounts; (g) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness of the corporation
or any subsidiary, upon the issue of any additional shares (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on, and the purchase, redemption or other
acquisition by the corporation or any subsidiary of, any outstanding shares of
the corporation and (h) may have such other relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof; all
as shall be stated in said resolution or resolutions providing for the issue of
such shares of Preferred Stock. Shares of Preferred Stock of any series that
have been redeemed (whether through the operation of a sinking fund or
otherwise) or that if convertible or exchangeable, have been converted into or
exchanged for shares of any other class or classes shall have the status of
authorized and unissued shares of Preferred Stock of the same series and may be
reissued as part of the series of which they were originally a part or may be
reclassified and reissued as a part of a new series of shares of Preferred Stock
to be created by resolution or resolutions of the Board of Directors or as part
of any other series of shares of Preferred Stock, all subject to the conditions
or restrictions on issuance set forth in the resolution or resolutions adopted
by the Board of Directors providing for the issue of any series of shares of
Preferred Stock.
<PAGE>
Subject to the provisions of any applicable law, or of the bylaws of the
corporation as from time to time amended, with respect to the closing of the
transfer books or the fixing of a record date for the determination of
shareholders entitled to vote and except as otherwise provided by law or by the
resolution or resolutions providing for the issue of any series of shares of
Preferred Stock, the holders of outstanding shares of Common Stock shall
exclusively possess voting power for the election of directors and for all other
purposes, each holder of record of shares of Common Stock being entitled to one
vote for each share of Common Stock standing in his or her name on the books of
the corporation. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of shares of Preferred Stock, the holders
of shares of Common Stock shall be entitled, to the exclusion of the holders of
shares of Preferred Stock of any and all series, to receive such dividends as
from time to time may be declared by the Board of Directors. In the event of
any liquidation, dissolution or winding up of the corporation, whether voluntary
or involuntary, after payment shall have been made to the holders of shares of
Preferred Stock of the full amount to which they shall be entitled pursuant to
the resolution or resolutions providing for the issue of any series of shares of
Preferred Stock, the holders of shares of Common Stock shall be entitled, to the
exclusion of the holders of shares of Preferred Stock of any and all series, to
share, ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the corporation available for distribution to its
shareholders.
Subject to the provisions of these Articles of Incorporation, as amended,
and except as otherwise provided by law, the stock of the corporation,
regardless of class, may be issued for such consideration and for such corporate
purposes as the Board of Directors may from time to time determine.
* * *
All provisions contained in the Articles of Incorporation, as amended, of
this corporation which are inconsistent with the foregoing amendment be and the
same hereby are deleted from the Articles of Incorporation, as amended.
<PAGE>
PROXY Wells-Gardner Electronics Corporation
2701 North Kildare Avenue
Chicago, Illinois 60639
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony Spier, James J. Roberts, Jr.
and Allan Gardner, and each of them, as Proxies, each with power of
substitution, and hereby authorizes them to vote, as designated below,
all Common Shares of Wells-Gardner Electronics Corporation held of record
by the undersigned on March 15, 1996, at the annual meeting of shareholders
to be held on April 23, 1996, and any adjournment thereof. A majority of
the Proxies present at the meeting, and if only one is present, then that
one, may exercise the power of all the Proxies hereunder.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
Anthony Spier, Allan Gardner, James J. Roberts, Jr., John Blouin,
William DeNicolo, Wayne L. Harris, Ernest R. Wish, Randall S. Wells
If additional persons are nominated, the named Proxies may cumulate the votes
represented by this proxy in their discretion among the above-named nominees.
The withholding of authority to vote for any individual nominee or
nominees will permit the Proxies to distribute the withheld votes among the
remaining nominees.
(INSTRUCTION: to withhold authority to vote for any individual nominee, write
that nominee's name in the space below).
_____________________________________________________________________________
2. APPROVAL OF NONEMPLOYEE DIRECTOR STOCK PLAN. To consider and vote upon
a proposal to approve the company's 1996 Nonemployee Director Stock Plan,
FOR AGAINST ABSTAIN
3. APPROVAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION. To consider
and vote upon a proposal to amend the company's Articles of Incorporation,
as amended, to authorize up to 500,000 shares of Preferred Stock.
FOR AGAINST ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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, 2 AND 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
DATED_______________________________________________, 1996
Signature_________________________________________________
Signature if held jointly_________________________________
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
<PAGE>
