WELLS-GARDNER
Electronics Corporation
2701 North Kildare Avenue
Chicago, Illinois 60639
March 21, 1997
To Our Shareholders:
You are cordially invited to attend the 1997 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 22, 1997, 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 14, 1997, 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 3:00
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 22, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Wells-Gardner Electronics Corporation will be held on Tuesday, April 22,
1997, 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 nine directors;
2. To consider and vote upon a proposal to ratify the appointment of
KPMG Peat Marwick LLP, as independent public accountants of the
Company for the current fiscal year;
3. To act upon any other business which may properly be brought
before the meeting.
The close of business on March 14, 1997, 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,
GENE AHNER
Secretary
March 21, 1997
<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 22, 1997
This Proxy Statement is being sent on or about March 21, 1997, 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 22, 1997 (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 14, 1997, are
entitled to vote at the Meeting. As of that date, there were 4,070,026
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 to ratify the appointment of
KPMG Peat Marwick LLP, as independent public accountants of the Company
for the current fiscal year.
<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 majority
of the shares represented at the Meeting and entitled to vote is
required for the approval to ratify the appointment of KPMG Peat Marwick
LLP, as independent public accountants of the Company for the current
fiscal year. 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 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 1996 Annual Report to Shareholders, which includes the
consolidated financial statements of the Company for 1996, was mailed to
the shareholders on or about March 21, 1997.
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 nine
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.
<PAGE>
INFORMATION CONCERNING NOMINEES
ANTHONY SPIER Director since April, 1990
Anthony Spier, age 53, has been Chairman of the Board, President and
Chief Executive Officer since April 1994. Before joining the Company,
Mr. Spier was President of Bruning Corporation, a manufacturer of
drafting equipment and supplies, from 1989 to 1994. Prior thereto, he
was Vice President of AM International, and President of the
International Division of AM International. He is chairman of the
Executive Committee and a member of the Acquisition Committee.
JOHN R. BLOUIN Director since April, 1989
John R. Blouin, age 50, has been President of James Industries, Inc.
since 1982. James Industries, a sales representative organization
serving the electronics and computer industries, has served the Company
as a sales representative since 1979. See ``Compensation Committee
Interlocks and Insider Participation'' for additional disclosure
regarding James Industries, Inc. Prior to joining James Industries in
1980, Mr. Blouin served in a variety of sales management and marketing
positions with General Electric Corporation. In May of 1988 he received
the American Amusement Machine Association Joseph Robbins Coin-Op
Recognition Award. Mr. Blouin also serves as a director of American
Manufacturing and Technologies Inc. He is chairman of the Acquisition
Committee.
WILLIAM L. DE NICOLO Director since April, 1995
William L. DeNicolo, age 51, is the founder and, since its formation in
1986, Chairman, of Telular Corporation (NASDAQ: WRLS), a corporation
specializing in the design, development, manufacture and marketing of
patented cellular telecommunication technology and products. Mr.
DeNicolo served as President and Chief Executive Officer of Telular
Corporation from 1986 to 1993 and from November, 1995 to April, 1996.
He is a member of the Audit Committee.
ALLAN GARDNER Director since April, 1963
Allan Gardner, age 75, 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 Acquisition
Committee.
<PAGE>
H. WAYNE HARRIS Director since April, 1995
H. Wayne Harris, age 62, 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 Compensation
Committee.
IRA J. KAUFMAN Director since February, 1997
Ira J. Kaufman, age 68, is Senior Managing Director of Mesirow Financial
since 1995. Prior thereto, Mr. Kaufman was Chairman of the Board and
Chief Executive Officer of Rodman & Renshaw Inc. Mr. Kaufman was also
Chairman of the Board and Chief Executive Officer of Exchange National
Bank of Chicago. He is member of the New York Stock Exchange, American
Stock Exchange, Chicago Board of Trade, Chicago Board Options Exchange
and National Association of Securities Dealers. Mr. Kaufman also serves
as a director of Anicom, Inc. and First Eagle National Bank.
JAMES J. ROBERTS, JR. Director since April, 1982
James J. Roberts, Jr., age 52, 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. See ``Compensation Committee Interlocks and
Insider Participation'' for additional disclosure regarding James
Industries, Inc. He is chairman of the Compensation Committee and a
member of the Executive Committee.
RANDALL S. WELLS Director since April, 1996
Randall S. Wells, age 45, 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.
ERNEST R. WISH Director since August, 1995
Ernest R. Wish, age 65, is Chairman of the Board of WRM, Inc. a
residential real estate management firm. Mr. Wish also held the position
as the Director of Revenue from 1995 to 1996, 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 and a member of the Compensation and Acquisition Committees.
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.
<PAGE>
VOTING RIGHTS AGREEMENT
The Company, Anthony Spier, John R. Blouin, Allan Gardner, James J.
Roberts, Jr., Randall S. Wells and James Industries, Inc. 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 Anthony Spier, John R. Blouin, Allan Gardner, James
J. Roberts, Jr., Randall S. Wells and 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.
BOARD COMPENSATION
Employee directors do not receive additional compensation for serving on
the Board of Directors. At the 1996 Annual Meeting, shareholders
approved the Nonemployee Director Stock Plan. The 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 and expenses of attendance, 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 final adjournment of an annual
meeting of shareholders. The Company also pays the premiums for
directors' and officers' liability insurance policies. The Board of
Directors met six times in 1996 and the non-employee directors were paid
for the six meetings. All directors attended at least 97 percent of the
aggregate number of Board meetings and of meetings of committees on
which they served in 1996.
COMMITTEES OF THE BOARD
The Board of Directors has a standing Audit Committee, Executive
Committee, Compensation Committee and Acquisition Committee. Although
the Board has no nominating committee, the Executive Committee deals
with matters relating to nominations to the Board.
AUDIT COMMITTEE
The Audit Committee consists of Ernest R. Wish and William L. DeNicolo.
The Audit Committee met four times during 1996. 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.
<PAGE>
EXECUTIVE COMMITTEE
The Executive Committee consists of Anthony Spier and James J. Roberts,
Jr. The Executive Committee, which met two times during 1996, 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.
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.
COMPENSATION COMMITTEE
The Compensation Committee consists of James J. Roberts, Jr., H. Wayne
Harris and Ernest R. Wish. The Compensation Committee met two times
during 1996. The Compensation Committee administers the Company's
Amended and Restated Incentive Stock Plan. See ``Report of the
Compensation Committee'' herein. The Compensation Committee also 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.
ACQUISITION COMMITTEE
The Acquisition Committee consists of John R. Blouin, Anthony Spier,
Allan Gardner and Ernest R. Wish. The Acquisition Committee met two
times during 1996. The Acquisition Committee identifies and makes
recommendations to the Board regarding possible acquisitions and other
investment opportunities of the Company.
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
Set forth in the following table are the beneficial holdings on February
28, 1997, 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, the Executive Vice President and
General Manager and all executive officers and directors as a group.
<PAGE>
<TABLE>
Number of
Shares
Beneficially
Owned (a)(b)(c) % of Class
<S> <C> <C>
Voting Rights Agreement........... 860,951(g) 21.1%
James J. Roberts, Jr.............. 555,726(d) 13.7%
Individual and as Trustee of
the James J. Roberts Trust
dated January 23, 1991
1619 Colonial Parkway
Inverness, Illinois 60067
Dimensional Fund Advisors, Inc.... 207,700(e) 5.1%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
Anthony Spier..................... 129,150 3.2%
Allan Gardner..................... 116,485(f) 2.9%
Randall S. Wells.................. 46,900 1.2%
Ernest R. Wish.................... 16,890 *
John R. Blouin.................... 12,690 *
William L. DeNicolo............... 8,690 *
Ira J. Kaufman.................... 5,000 *
H. Wayne Harris................... 4,890 *
Officers & Directors as a
group (15 persons).............. 1,061,675 26.1%
* Represent 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,
33,350 shares; Mr. Wells, 23,900 shares; and all executive officers
and directors as a group, 120,076 shares.
(b) Excludes shares owned in joint tenancy as follows: Mr. Spier,
14,708 shares; Mr. Wells, 21,132 shares; Mr. Blouin, 3,000; Mr.
Gardner, 5,750 shares; and executive officers and directors as a
group, 44,590 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. Wells, 9,000 shares; and all
executive officers and directors as a group, 45,000 shares. These
performance-based restricted stock awards were amended in
February 1996. See "Report of the Compensation Committee" 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. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial
ownership of 207,700 shares of Wells-Gardner Electronics stock as
of December 31, 1996, all of which shares are held in portfolios of
DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified
benefit plans, all of which Dimensional Fund Advisors Inc. serves
as investment manager. Dimensional disclaims beneficial ownership
of all such shares.
(f) Of these shares, 111,795 shares are held by the Allan Gardner
Revocable Living Trust dated January 9, 1990, of which Mr. Gardner
is the trustee.
(g) According to the Voting Rights Agreement dated February 29, 1996,
Mr. Spier, Mr. Blouin, Mr. Gardner, Mr. Roberts and Mr. Wells have
agreed to vote 860,951 shares as a block on certain matters. See
``Voting Rights Agreement'' for additional disclosure.
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 1996 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 Compensation Committee. See
``Report of the Compensation Committee'' 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''). In February 1996, Mr. Spier's 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 1996. See ``Report of the
Compensation Committee'' and ``Summary Compensation Table'' herein.
<PAGE>
BOARD OF DIRECTORS
Anthony Spier Ira J. Kaufman
John R. Blouin James J. Roberts, Jr.
William L. De Nicolo Randall S. Wells
Allan Gardner Ernest R. Wish
H. Wayne Harris
REPORT OF THE COMPENSATION COMMITTEE
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 Compensation 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. In February 1996, the Compensation 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. The performance goal
set for these awards was not reached for 1996. In addition in 1996,
105,000 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 (d) to the " Summary Compensation Table" herein).
In February 1996, the Compensation Committee amended the restricted
stock awards. In 1996, Mr. Spier was also granted an option to purchase
30,000 shares of Common Stock at an exercise price of $3.125, the fair
market value on the date of the grant. See "Option Grants in 1996"
for further information with respect to the specific terms of such
grant. The Compensation Committee believes the stock awards make a
significant portion of Mr. Spier's overall compensation dependent on
Company performance and the option grant helps to align Mr. Spier's long
term compensation directly with shareholder value since the potential
value of the grant is tied directly to increases in the fair market
value of the Company's Common Stock during the term of the option.
<PAGE>
COMPENSATION COMMITTEE
James J. Roberts, Jr.
H. Wayne Harris
Ernest R. Wish
<TABLE>
SUMMARY COMPENSATION TABLE
Set forth on the following table are, for the years indicated, each
component of compensation paid to the Chief Executive Officer and the
Vice President and General Manager of Business Services.
Annual Compensation Long-Term Compensation
Securities
Name and Other Annual Restricted Underlying All Other
Principal Fiscal Salary Compensation Stock Awards Options Compensation
Position Year (b)($) (c)($) (d)($) (#) (e)($)
<S> <C> <C> <C> <C> <C> <C>
Anthony Spier 1996 190,550 13,800 --- 30,000 6,766
Chairman of the 1995 148,125 16,435 --- 26,700 6,460
Board, President 1994(a) 67,375 11,535 112,500 20,000 1,344
and Chief Executive
Officer
Mark Komorowski 1996 100,462 5,508 --- 10,000 2,751
Vice President &1995 79,469 --- --- 13,300 2,527
General Manager 1994 49,979 --- 31,500 --- 1,512
of Business Services
</TABLE>
(a) Mr. Spier joined the Company as Chairman of the Board, President
and Chief Executive Officer in April 1994. Mr. Komorowski was
promoted to Vice President and General Manager of Business Services
in April 1996.
(b) Includes all pre-tax employee contributions to the Employee
Retirement 401(k) Plan.
(c) Includes Mr. Spier's benefits associated with the personal use of a
Company automobile for 1996, 1995 and 1994 of $13,800, $16,435 and
$3,928, respectively and company-paid taxes in 1994 of $7,607.
Includes Mr. Komorowski's benefits associated with the personal use
of a Company automobile for 1996 of $5,508.
<PAGE>
(d) 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. The performance goal set for these awards was
not reached for 1996. 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, 1996, Mr. Spier owned a
total of 39,000 shares of restricted stock with a fair market value
of $170,625.
In 1994, Mr. Komorowski received performance-based restricted stock
awards aggregating 9,000 shares, which awards were amended in
February 1996, and, as amended, are subject to vesting or
forfeiture as follows: 2,000, 3,000 and 4,000 of Mr. Komorowski'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. The performance goal set for these awards was
not reached for 1996. Any awards that have not vested as specified
above will be forfeited.
(e) Includes premiums paid on life insurance for the benefit of Mr.
Spier for 1996, 1995 and 1994 of $2,016, $2,016 and $1,344,
respectively and, for the Company's contributions to the Employee
Retirement 401(k) Plan in 1996 and 1995 of $4,750 and $4,444,
respectively. Includes premiums paid on life insurance for the
benefit of Mr. Komorowski for 1996 and 1995 of $115, and $86,
respectively and, for the Company's contributions to the Employee
Retirement 401(k) Plan in 1996, 1995 and 1994 of $2,636, $2,441 and
$1,512, respectively.
<PAGE>
<TABLE>
OPTION GRANTS IN 1996
Set forth is certain information concerning grants of options to the
Chief Executive Officer and the Vice President and General Manager of
Business Services during 1996:
Individual Grants Potential Realized
Value at Assumed
Number of Percentage of Annual Rates of
Securities Total Options Stock Price
Underlying Granted to Appreciation for
Options Employee in Exercise of Option Term
Granted 1996 Base Price Expiration 5% 10%
Name (#) (%) ($/share) Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Anthony
Spier 30,000 11.40 3.125 3/1/2006 51,687 127,308
Mark
Komorowski 10,000 3.80 3.125 3/1/2006 17,229 42,436
</TABLE>
(a) The options become exercisable in 25% installments in August 1996,
February 1997, February 1998 and February 1999.
<TABLE>
AGGREGATED OPTION EXERCISES IN 1996 AND
OPTION VALUES AT DECEMBER 31, 1996
Set forth on the following table is information relating to the number
of shares of Common Stock subject to options held at December 31, 1996,
by the Chief Executive Officer and the Vice President and General
Manager of Business Services. Unexercised options for 80,000 shares of
Common Stock were in-the-money at December 31, 1996.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Option at Fiscal at Fiscal
Acquired on Value Year-End (#) Year-End (a)($)
Name Exercise (#) Realized($) Exercis- Unexercis- Exercis- Unexercis-
able able able able
<S> <C> <C> <C> <C> <C> <C>
Anthony
Spier 16,675 55,856 19,175 40,850 23,347 52,944
Mark
Komorowski 3,325 9,144 10,650 10,825 13,931 14,778
(a) Based on a per share value, at December 31, 1996, of $4.375.
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Anthony Spier and James J. Roberts, Jr. serve on the Executive
Committee, which deals with certain matters related to compensation of
executive officers. Mr. Spier does not participate in any decisions
relating to his compensation. The Compensation Committee, which
administers the Company's ISP, consists of James J. Roberts, Jr., H.
Wayne Harris and Ernest R. Wish. Mr. Roberts is Chairman of the Board
and Chief Executive Officer 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 February 29, 1996
(the "1996 Representation Agreement"). Commissions paid pursuant to
the 1991 Representation Agreement to James Industries, Inc. in 1996,
totaled approximately $1,175,000. The 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 1996, the Company's
sales to James Industries, Inc. totaled approximately $543,000. In
addition, James Industries, Inc. is also an independent sales
representative for certain of the Company's suppliers. In 1996, the
Company purchased approximately $2,935,000 of products from third party
vendors represented by James Industries, Inc. on a commission basis.
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 1992 through 1996,
assuming the investment of $100 on December 31, 1991, and the
reinvestment of dividends.
<TABLE>
Base
Period Indexed Returns Years Ending
Company / Index Dec. Dec. Dec. Dec. Dec. Dec.
91 92 93 94 95 96
<S> <C> <C> <C> <C> <C> <C>
Wells-Gardner 100.00 331.25 200.00 134.35 159.35 218.75
Electronics
Electronics 100.00 130.29 165.57 184.44 248.40 268.69
(Instrument)
S&P Midcap 400 Index 100.00 111.91 127.53 122.96 161.00 191.91
</TABLE>
<PAGE>
PROPOSAL FOR RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of KPMG
Peat Marwick LLP to serve as independent public accountants of the
Company for the fiscal year ending December 31, 1997. Although
shareholder ratification is not required, the Board of Directors
believes that the shareholders should be afforded the opportunity to
ratify the appointment and has directed that such appointment be
submitted to the shareholders of the Company for ratification at the
Annual Meeting. KPMG Peat Marwick LLP has served as independent public
accountants of the Company with respect to the Company's financial
statements for fiscal years 1994, 1995 and 1996, and is considered by
the Board of Directors of the Company to be well qualified. If the
shareholders do not ratify the appointment of KPMG Peat Marwick LLP, the
Board of Directors may reconsider the appointment. During fiscal 1996,
KPMG Peat Marwick LLP provided the Company with audit and tax services
totaling approximately $71,000.
A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting and may have the opportunity to make a statement. The
representative will also be available to respond to appropriate
questions from the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
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. 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.
<PAGE>
PROPOSALS OF SECURITY HOLDERS
Any shareholder proposal intended to be presented at the 1998 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 20, 1997, 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 21, 1997
<PAGE>
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 14, 1997, at the annual meeting of
shareholders to be held on April 22, 1997, 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, John R. Blouin, William L. DeNicolo, Allan Gardner,
H. Wayne Harris, Ira J. Kaufman, James J. Roberts, Jr.,
Randall S. Wells, Ernest R. Wish
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. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To
consider and vote upon a proposal to ratify the appointment of KPMG Peat
Marwick LLP, as independent public accountants of the Company for the
current fiscal year. FOR AGAINST ABSTAIN
3. 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 THE ELECTION OF ALL LISTED DIRECTORS AND FOR
PROPOSAL 2.
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_____________________________________________________, 1997
SIGNATURE _____________________________________________________
SIGNATURE IF HELD JOINTLY ____________________________________
Please mark, sign, date and return the proxy card promptly using the
enclosed envelope.
<PAGE>
