SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
THE BETHLEHEM CORPORATION
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(Name of Registrant as Specified in Charter)
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(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was
<PAGE>
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THE BETHLEHEM CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 10, 1997
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To the Shareholders of The Bethlehem Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of THE BETHLEHEM CORPORATION, a Pennsylvania corporation (the
"Company"), will be held on Thursday, April 10, 1997 at 3:00 p.m. local time at
the Holiday Inn, Route 512, Bethlehem, Pennsylvania, for the following purposes:
1. To elect five directors, each to serve for a term of one
year and until the next annual meeting of Shareholders and until their
successors are duly elected and qualify;
2. To approve the Company's 1997 Stock Option Plan;
3. To approve the grant of stock options to each of Universal
Process Equipment, Inc. ("UPE"), James L. Leuthe and Salvatore J.
Zizza;
4. To approve the issuance of 350,000 shares of the Company's
common stock, no par value, to UPE;
5. To ratify the appointment of BDO Seidman LLP as independent
auditors of the Company for the fiscal year ending May 31, 1997; and
6. To transact such other business as may properly come before
the Meeting and any adjournment thereof according to the proxies
discretion.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Board of Directors has fixed the close
of business on March 3, 1997 as the record date (the "Record Date") for the
Meeting. Only shareholders of record of the Company's common stock, no par
value, on the Company's stock transfer books on the close of business on the
Record Date are entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
HAROLD BOGATZ
SECRETARY
March 10, 1997
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WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO FILL
IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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<PAGE>
THE BETHLEHEM CORPORATION
25TH AND LENNOX STREETS
EASTON, PENNSYLVANIA 18045
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 10, 1997
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INTRODUCTION
This Proxy Statement is being furnished to shareholders by the Board of
Directors of The Bethlehem Corporation, a Pennsylvania corporation (the
"Company"), in connection with the solicitation of the accompanying proxy (each
a "Proxy" and collectively, the "Proxies") for use at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held Thursday, April 10, 1997
at 3:00 p.m. local time at the Holiday Inn, Route 512, Bethlehem, Pennsylvania
or at any adjournment thereof.
The principal executive offices of the Company are located at 25th and
Lennox Streets, Easton, Pennsylvania 18045. The approximate date on which this
Proxy Statement and the accompanying Proxy will first be sent or given to
shareholders is March 10, 1997.
RECORD DATE AND VOTING SECURITIES
As of the close of business on March 3, 1997, the record date for the
Meeting (the "Record Date"), there were 1,938,520 outstanding shares of the
Company's common stock, no par value (the "Common Stock"). Except as indicated
below, holders of Common Stock have one vote per share on each matter to be
acted upon. Only holders of Common Stock (the "Shareholders") of record at the
close of business on the Record Date will be entitled to vote at the Meeting and
at any adjournment thereof. The presence, in person or by proxy, of Shareholders
entitled to cast at least a majority of the votes that all Shareholders are
entitled to cast on a particular matter to be acted upon at the meeting shall
constitute a quorum for purposes of consideration and action on such matter.
In the election of directors, each Shareholder shall have the right to
multiply the number of votes to which he may be entitled by the total number of
directors to be elected in the election of directors and he may cast the whole
number of his votes for one candidate or he may distribute them among any two or
more candidates. All other matters expected to be brought before the Meeting
require the affirmative vote of the holders of a majority of the Company's
Common Stock represented and voting at the Meeting for approval.
VOTING OF PROXIES
Shares of Common Stock represented by Proxies, which are properly
executed, duly returned and not revoked, will be voted in accordance with the
instructions contained therein. If no specification is indicated on the Proxy,
the shares of Common Stock represented thereby will be voted: (i) for the
election as Directors of the five persons who have been nominated by the Board
of Directors; (ii) to approve the Company's 1997 Stock Option Plan (the "1997
Stock Option Plan"); (iii) to approve the grant of stock options to each of
Universal Process Equipment, Inc. ("UPE"), James L. Leuthe and Salvatore J.
Zizza; (iv) to approve the issuance of 350,000 shares of Common
<PAGE>
Stock to UPE; (v) to ratify the appointment of BDO Seidman LLP as independent
auditors of the Company for the year ending May 31, 1997 (the "1997 Fiscal
Year"); and (vi) on any other matter that may properly be brought before the
Meeting in accordance with the judgment of the person or persons voting the
Proxies.
The execution of a Proxy will in no way affect a Shareholder's right to
attend the Meeting and to vote in person. Any Proxy executed and returned by a
Shareholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy that is presented
before the Meeting, or if the Shareholder attends the Meeting and votes by
ballot, except as to any matter or matters upon which a vote shall have been
cast pursuant to the authority conferred by such Proxy prior to such revocation.
For purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (I.E., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are present but that have not been voted.
The cost of solicitation of the Proxies being solicited on behalf of
the Board of Directors will be borne by the Company. In addition to the use of
the mail, proxy solicitation may be made by telephone, telegraph and personal
interview by officers, directors and employees of the Company. The Company will,
upon request, reimburse brokerage houses and persons holding Common Stock in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 3, 1997, information
regarding all persons who are known to the Company to be the beneficial owner of
more than 5% of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
Percentage of
Name and Address of Beneficial Owner Shares Owned Beneficially(1) Outstanding Shares
- ------------------------------------- --------------------------------- ------------------------
<S> <C> <C>
James L. Leuthe 348,958(2) 16.8%
25th & Lennox Streets
Easton, PA 18045
Universal Process 2,181,600(3)(4) 58.4
Equipment, Inc.
P.O. Box 338
Roosevelt, NJ 08555
Robert F. Bacigalupo 150,901(5) 7.7
2433 S. Oakley Avenue
Chicago, IL 60608
Alan H. Silverstein 260,000(6) 11.8
25th & Lennox Streets
Easton, PA 18045
Salvatore J. Zizza 184,667(7) 8.7
25th & Lennox Streets
Easton, PA 18045
</TABLE>
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<PAGE>
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(1) All persons identified below as holding options are deemed to be beneficial
owners of shares of Common Stock subject to such options by reason of their
right to acquire such shares within 60 days after March 3, 1997.
(2) Of this total, 52,281 shares are owned by Nikki, Inc., a corporation of
which Mr. Leuthe is an officer and director and the sole stockholder, 161,343
shares are owned by Mr. Leuthe and 135,334 shares are subject to options. This
total does not include 640 shares owned by Mr. Leuthe's children, as to which he
disclaims beneficial ownership.
(3) Includes 1,800,000 shares subject to options. See "Certain Relationships and
Transactions."
(4) Does not include shares owned by Ronald H. Gale and Jan P. Gale.
(5) Of this total, 140,901 shares are owned by Mr. Bacigalupo and 10,000 shares
are subject to options. This total does not include 2,331 shares owned by Mr.
Bacigalupo's wife and 6,000 shares held in trust for the benefit of family
members as to which Mr. Bacigalupo acts as trustee. Mr. Bacigalupo disclaims
beneficial ownership of these 8,331 shares.
(6) Consists of 260,000 shares subject to options.
(7) Consists of 184,667 shares subject to options.
BENEFICIAL OWNERSHIP BY MANAGEMENT AND DIRECTORS
The following table sets forth, as of March 3, 1997, information
regarding the ownership of the outstanding Common Stock of the Company by each
director and Named Executive Officer (as hereinafter defined) and all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Owned Percent of Outstanding
Name of Beneficial Owner Beneficially(1) Shares
- --------------------------------------------------- --------------------------- ---------------------------
<S> <C> <C>
James L. Leuthe 348,958(2) 16.8%
Alan H. Silverstein 260,000(2) 11.8
O. Karl Dieckmann 43,020(3) 2.2
Ronald H. Gale 2,263,934(2)(3) 60.4
(4)
Jan Gale 2,261,934(2)(3) 60.3
(4)
B. Ord Houston 20,199(3) 1.0
Salvatore J. Zizza 184,667(2) 8.7
Harold Bogatz 6,667(5) (6)
Clarence T. Lind 5,667(7) (6)
All directors and executive officers as a group (12 3,222,381(1)(2) 73.7%
persons) (4)(8)
</TABLE>
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<PAGE>
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(1) All persons identified below as holding options are deemed to be beneficial
owners of shares of Common Stock subject to such options by reason of their
right to acquire such shares within 60 days after March 3, 1997.
(2) Reference is made to "Security Ownership of Certain Beneficial Owners and
Management - Certain Beneficial Owners."
(3) Includes 10,334 shares subject to options.
(4) Includes 2,181,600 shares beneficially owned by UPE, of which the individual
is an officer, director and principal stockholder. See "Security Ownership of
Certain Beneficial Owners and Management-Certain Beneficial Owners."
(5) Consists of 6,667 shares subject to options.
(6) Less than 1.0%.
(7) Includes 1,667 shares subject to options.
(8) Includes 2,438,006 shares subject to options.
PROPOSAL I--ELECTION OF DIRECTORS
NOMINEES
Prior to the 1995 Annual Meeting of Shareholders (the "1995 Meeting"),
the Company's By-Laws provided for the organization of the Board of Directors
into four classes with directors in each class serving for four year terms. The
Board of Directors approved and at the 1995 Meeting the Shareholders ratified an
amendment to the ByLaws that created a Board of Directors whose entire
membership is to be elected annually. The By-Law amendment did not affect the
terms of then incumbent directors who were elected in prior years and whose
terms did not expire at the 1995 Meeting. Such directors will continue to serve
as directors until the expiration of their respective terms and until their
successors are elected and qualified, after which they will be elected annually.
It is proposed that five nominee directors, Harold Bogatz, Ronald H.
Gale, Jan P. Gale, B. Ord Houston and Salvatore J. Zizza (the "Nominees"), be
elected to serve until the next Annual Meeting of Shareholders and until their
respective successors are elected and qualified. Unless otherwise specified, all
Proxies received will be voted in favor of the election of the Nominees as
directors of the Company. All Nominees are currently directors of the Company.
Each Nominee has consented to serve if elected. In the event that any
of the Nominees should be unable to serve, the Proxies will vote for such
substitute nominee or nominees as they, in their discretion, shall determine.
The Board of Directors has no reason to believe that any of the Nominees named
herein will be unable to serve. Any vacancy occurring on the Board of Directors
for any reason may be filled by a majority vote of the directors then in office,
and each person so elected shall serve until the next Annual Meeting of
Shareholders and until his successor is elected and qualified.
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<PAGE>
The following table sets forth information regarding the current ages,
terms of office and business experience of the current directors and the
Nominees including their positions with the Company:
<TABLE>
<CAPTION>
Year First
Became a Year Term
Director Will Expire
NAME AGE PRINCIPAL OCCUPATION --------------- ---------------
- ---- --- --------------------
<S> <C> <C> <C>
Salvatore J. Zizza(1) 51 Chairman of the Board of 1995 1997
Directors since 1995; since
1991, Chairman of The
Lehigh Group, a public
company listed on the New
York Stock Exchange that
has a subsidiary in the
distribution of electrical
products
Alan H. Silverstein 48 President and Chief 1994 1997
Executive Officer of the
Company since December
1995; President and Chief
Operating Officer of the
Company from February
1994 to November 1995;
from 1991 to present,
President of Earth
Environmental Services,
Inc., a solid waste
remediation firm and
developer of solid waste
co-generation projects; from
July 1992 to February 1994,
President of Universal
Envirogenics, Inc., a
rebuilder of industrial gas
plants
James L. Leuthe 55 Chairman of the Board of 1976 1997
First Lehigh Corporation, a
bank holding company, since
1982; from 1977 until 1995
held various positions with
the Company including
President and Chief
Executive Officer
Jan P. Gale(1)(2) 42 Vice President since 1978 of 1991 1997
UPE, an international
supplier of complete process
plants and equipment and
manufacturer of new
equipment in the United
States and Europe
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Year First
Became a Year Term
Director Will Expire
NAME AGE PRINCIPAL OCCUPATION --------------- ---------------
- ---- --- --------------------
<S> <C> <C> <C>
Ronald H. Gale(1)(2) 45 President and Chief 1990 1997
Executive Officer of UPE
since 1978
Harold Bogatz(1) 58 Vice President and General 1995 1997
Counsel of UPE since 1987;
Secretary of the Company
since 1996
O. Karl Dieckmann 83 Investment manager and 1960 1997
consultant, retired for at least
the past five years
B. Ord Houston(1) 84 Secretary of the Company 1976 1997
from June 1983 to December
1995, otherwise retired for at
least the last five years; held
various positions with the
Company since 1966, most
recently as Executive Vice
President
</TABLE>
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(1) Nominee
(2) Ronald H. Gale and Jan P. Gale, both Nominees and incumbent directors,
are brothers.
REQUIRED VOTE
In voting for directors, each Shareholder is entitled to five votes for
each share of Common Stock held, one for each of five directors to be elected. A
Shareholder may cast his votes evenly for all Nominees or may cumulate his votes
and cast them for one Nominee or distribute his votes among two or more
Nominees. The five persons receiving the highest number of votes cast in person
or by proxy shall be elected to the Board of Directors. Brokers that do not
receive instructions are entitled to vote on the election of directors.
Abstentions from voting on the election of directors will have no effect since
they will not represent votes cast at the Meeting for the purpose of electing
directors.
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<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES.
BOARD MEETINGS -- COMMITTEES OF THE BOARD
The Board of Directors met three times during the 1996 Fiscal Year. The
Board of Directors presently maintains an Audit Committee, a Compensation
Committee and a Nominating Committee. None of the directors of the Company
attended fewer than 75% of the aggregate of the total number of meetings of the
Board of Directors held plus the total number of meetings held by all committees
of the Board on which he served during the 1996 Fiscal Year, with the exception
of Mr. Dieckmann, whose health prevented him from attending all such meetings
during the 1996 Fiscal Year.
The Audit Committee currently consists of Messrs. Dieckmann, Houston
and Leuthe and is appointed annually by the Board of Directors to recommend the
selection of independent auditors, to review the scope and results of the audit,
to review the adequacy of the Company's accounting, financial and operating
controls and to supervise special investigations. The Audit Committee did not
meet during the 1996 Fiscal Year.
The Compensation Committee currently consists of Messrs. Zizza, Houston
and R. Gale and is appointed annually by the Board of Directors to recommend to
the Board of Directors remuneration arrangements for senior management and
directors, the adoption of compensation plans in which officers and directors
are eligible to participate and the granting of options or other benefits under
such plans. The Compensation Committee met once during the 1996 Fiscal Year.
The Nominating Committee currently comprises Messrs. J. Gale, Zizza,
Silverstein and Bogatz, and is appointed annually by the Board of Directors to
recommend to the Board of Directors nominees for election as directors. The
Nominating Committee did not meet during the 1996 Fiscal Year.
EXECUTIVE COMPENSATION TABLE
The following table summarizes compensation information for the
Company's President and Chief Executive Officer, the Company's Former Chairman
and Chief Executive Officer and Clarence T. Lind, the only executive officer of
the Company whose compensation exceeded $100,000 for the fiscal year ended May
31, 1996. The table presents compensation information for such individuals for
compensation paid or accrued by the Company for services rendered during the
year ended December 31, 1993, during the five-month transition period ended May
31, 1994 and during the fiscal years ended May 31, 1995 and May 31, 1996.
Messrs. Leuthe, Silverstein and Lind are collectively referred to herein as the
"Named Executive Officers."
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------------- --------------------------------
Name and Other Annual Stock Option All Other
Principal Position Year Salary Bonus Compensation(s) Awards Compensation (1)
- --------------------- -------- -------- --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
James L. Leuthe 1996 -- -- -- 125,000 $672
Former Chairman and 1995 -- -- -- -- 672
Chief Executive 1994(3) -- -- -- -- 280
Officer(2) 1993 -- -- -- -- 672
Alan H. Silverstein 1996 $118,655 $46,850 $7,295(4) -- 11,925
President and Chief 1995 110,000 30,698 5,472(4) -- 11,925
Executive Officer(5) 1994(3) 36,667 -- 1,824(4) 260,000 224
Clarence T. Lind 1996 90,000 26,350 4,369(4) 20,000 672
Vice President of
Sales, Marketing and
Technology(6)
</TABLE>
- ---------------------
(1) Represents life insurance premiums paid by the Company.
(2) Mr. Leuthe did not receive cash compensation for his services during
the Company's fiscal year ended December 31, 1993, the transition period ended
May 31, 1994, the Company's fiscal year ended May 31, 1995 or the Company's
fiscal year ended May 31, 1996. Mr. Leuthe resigned as Chairman of the Board and
Chief Executive Officer on December 12, 1995. For a further description of the
stock options granted to Mr. Leuthe, see "Proposal III--Approval of Grant of
Stock Options."
(3) Includes compensation received only during the transition period
January 1, 1994 to May 31, 1994.
(4) Includes lease and insurance payments made by the Company with respect
to use of an automobile.
(5) Mr. Silverstein was elected President and Chief Operating Officer of
the Company in February 1994. Prior to that time, Mr. Silverstein served as a
consultant to the Company. Mr. Silverstein was appointed Chief Executive Officer
of the Company on December 12, 1995.
(6) Mr. Lind was elected Vice President of Sales, Marketing and Technology
of the Company on December 12, 1995.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted
during the fiscal year ended May 31, 1996 under the Company's stock option plans
or pursuant to grants to the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options Granted to Per Share
Underlying Employees in Exercise
Name Options Granted Fiscal Year Price Expiration Date
- ----------------------------- ----------------- -------------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Clarence T. Lind 5,000 3.3% $2.50 December 21, 2005
15,000 10.0% $2.00 March 27, 2006
James L. Leuthe 125,000 (1) $1.8125 March 25, 2006
</TABLE>
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(1) Mr. Leuthe is not an employee of the Company.
AGGREGATED FISCAL YEAR-END OPTIONS
The following table sets forth certain information regarding
unexercised stock options held by each of the Named Executive Officers as of May
31, 1996. No stock options were exercised by any such officer during the 1996
Fiscal Year.
AGGREGATED FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Unexercised Options in-the-Money Options
at May 31, 1996 at May 31, 1996 ($)(1)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- --------------------- -------------------- ------------------------
Alan H. Silverstein 260,000/0 406,250/0
Clarence T. Lind 0/20,000 0/8,750
James L. Leuthe 10,334/125,000 0/93,750
- -------------------
(1) On May 31, 1996, the last reported sale price of the Company's Common
Stock, as reported by the American Stock Exchange, was $2.5625 per
share.
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<PAGE>
COMPENSATION OF DIRECTORS
Directors are not compensated for their services as a director but are
entitled to reimbursement of expenses incurred in connection with their
attendance at all meetings. In the past the Company has granted options to
certain directors.
EMPLOYMENT AGREEMENTS
Alan H. Silverstein, President and Chief Executive Officer, is employed
by the Company pursuant to an agreement (the "Employment Agreement") dated
February 1, 1994. The Employment Agreement provides for a five year term, with
automatic renewal for successive terms of two years, subject to a mutual right,
exercisable within 120 days prior to the expiration of any term, not to renew
the Employment Agreement. The salary paid to Mr. Silverstein for the first year
under the Employment Agreement is $110,000 increasing to $165,000 in the fifth
year. Mr. Silverstein is entitled to a quarterly bonus based on the earnings of
the Company, with a minimum guaranteed bonus for the first 18 months of $30,000.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors. and persons who own more than 10% of a registered class
of the Company's equity securities to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of equity securities of the Company. Executive officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms which they file.
The Form 3 Initial Statement of Beneficial Ownership of Securities for
each of Anthony Chiarella and Antoinette L. Martin was filed late. Both Mr.
Chiarella and Ms. Martin became Reporting Persons on September 29, 1994 and the
Form 3 for each of them was filed on January 10, 1996.
One Form 4 Statement of Change in Beneficial Ownership of Securities
for Alan H. Silverstein relating to the grant of options to purchase 10,000
shares to Mr. Silverstein pursuant to the Company's Directors' Stock Option Plan
was filed late. Mr. Silverstein was granted the options on April 12, 1994 and
the Form 4 was filed on January 10, 1996.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Ronald H. Gale and Jan Gale are directors and Shareholders of the
Company and are officers, directors and principal stockholders of UPE, a
principal Shareholder of the Company. UPE and/or Ronald H. Gale and/or Jan Gale
are also majority shareholders or otherwise affiliated with other companies that
engage in transactions with the Company. UPE and related entities have purchased
process equipment manufactured by the Company and have utilized the Company's
remanufacturing services. The approximate total revenues derived from sales to
UPE and related parties were $1.1 million for the fiscal year ended May 31, 1996
and $2.4 million for the fiscal year ended May 31, 1995. The Board of Directors
believes that the terms of such sales were at least as favorable to the Company
as could have been obtained from unaffiliated third parties.
On March 26, 1996, the Company granted an option to purchase 350,000
shares of Common Stock to UPE at an exercise price of $1.8125 per share. Such
option was issued in consideration for guarantees by UPE of borrowings by the
Company from the CIT Group and Sterling Commercial Capital in July 1995. The
financing from the CIT Group consists of a three year $5 million maximum line of
credit and term loan facility, secured by a third
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<PAGE>
lien position on Company owned real estate and a first lien on substantially all
other owned assets of the Company. This credit facility includes: (a) an
$800,000 term loan requiring $13,333 monthly principal payments plus interest at
prime rate (Chase Bank, New York) plus 3% and (b) advances against a percentage
of eligible inventory not to exceed $4,000,000 in the aggregate. Initial
proceeds of this credit facility were used to fund working capital. The
financing from Sterling Commercial Capital consists of a $1.5 million five year
first mortgage loan. The loan is collateralized by a first mortgage lien on real
estate owned by the Company and a second lien on all other Company owned assets.
The loan bears interest at 14.25% per annum. The outstanding principal and
interest is payable in 59 consecutive equal monthly payments calculated to fully
amortize over a 15 year period with a final payment of all then outstanding
principal and interest. See "Proposal III--Approval of Grant of Stock Options."
The Board of Directors has authorized the issuance to UPE of 350,000
shares of Common Stock in consideration for a 50% ownership interest in certain
resale inventory, which consists primarily of heat transfer equipment owned by
UPE. The inventory has a retail sales value in excess of $1,500,000. The
issuance of such shares is subject to Shareholder approval. UPE and the Company
have entered into a joint marketing and sales agreement with respect to the
resale of the inventory. See "Proposal IV--Approval of Issuance of Stock to
UPE."
On November 28, 1995, the Company purchased a variety of used process
equipment and machinery at a cost of $2,500,000 from International Dismantling
and Machinery Corp. ("IDM"). Simultaneously with the acquisition of the IDM
equipment, the Company entered into an exclusive sales and marketing agreement
with UPE whereby UPE has the responsibility for marketing and selling this
inventory for the Company. As consideration for its services, UPE will receive
from the Company 50% of the net selling price (defined as the sales price less
the cost of the equipment) plus one-half of the sales commission earned by each
UPE salesperson for selling a piece of IDM equipment. Also, as set forth in the
sales and marketing agreement, UPE is responsible for any interest due for the
financing of the purchase price of this equipment.
From time to time in the ordinary course of business, UPE advances
funds to the Company to enable the Company to meet certain temporary cash
requirements. The interest rate on the advances is 8.75% per annum. During May
1996 the Company received a $310,000 advance from UPE, which advance was repaid
in June 1996 and August 1996. In August 1996, UPE advanced $250,000 to the
Company. UPE advanced an additional $250,000 to the Company in October 1996. As
of March 3, 1997, the August 1996 and October 1996 advances were outstanding.
On February 28, 1997, the Company purchased a complete two stage
environmental thermal process treatment plant in Alberta, Canada. In order to
effect the acquisition of the equipment, the Company borrowed $225,000 from UPE
at an interest rate of prime rate (Chase Bank, New York) plus 2.5%. This loan
will be repaid from the proceeds of the sale of the specific equipment
purchased.
As of June 1, 1996, the Company began a three year profit sharing
arrangement with UPE. This arrangement was agreed upon as consideration for
UPE's role in introducing the Company to Third Millenium Products, Inc.
("Millenium"), negotiating the acquisition of the assets of the American Furnace
Division of Millenium by Bethlehem Advanced Materials Corporation ("BAM"), a
wholly-owned subsidiary of the Company and UPE's role in originating,
negotiating, developing and assisting in the marketing of the Tower Filter
Process product line. Under this arrangement which expires in May 1999, UPE is
entitled to receive 25% of the net pre-tax profits of BAM and the Tower Filter
Press product line.
The Company and Salvatore J. Zizza, Chairman of the Board of the
Company, are parties to an agreement under which Mr. Zizza renders certain
financial advisory services, including those relating to proposed mergers and
acquisitions and equity and debt financing, and relations with the financial
community and investors. Mr. Zizza receives compensation in the amount of
$60,000 per annum.
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PROPOSAL II--APPROVAL OF THE 1997 STOCK OPTION PLAN
The Board of Directors has unanimously approved for submission to a
vote of Shareholders a proposal to approve the 1997 Stock Option Plan (the "1997
Plan") set forth in Appendix A to this proxy statement. The following discussion
of the 1997 Stock Option Plan is qualified in its entirety by reference to
Appendix A.
The purpose of the 1997 Plan is to provide additional incentive to the
officers, directors and employees of the Company who are primarily responsible
for the management and growth of the Company, and to consultants and advisors to
the Company who otherwise materially contribute to the conduct and direction of
its business, operations and affairs, in order to strengthen their desire to
remain in the employ or retention of the Company and to stimulate their efforts
on behalf of the Company, and to retain and attract to the employ of the Company
persons of competence. The 1997 Plan provides for the grant of both "incentive
stock options" and "nonqualified stock options." Any employee shall be eligible
to receive incentive stock options or nonqualified stock options. Consultants
and advisors to the Company and directors of the Company who are not employees
shall be eligible to receive nonqualified stock options.
ADMINISTRATION
The Stock Option Committee (the "Committee"), composed of two or more
non-management directors that are "non-employee directors" within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act") and "outside directors" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), administers the granting of stock
options to officers, directors and employees of the Company under the 1997 Plan.
COMMON STOCK SUBJECT TO THE 1997 PLAN
The 1997 Plan currently authorizes the issuance of a maximum of 200,000
shares of Common Stock. The maximum number of shares that may be subject to
options granted under the 1997 Plan to any individual in any calendar year may
not exceed 50,000 and the method of counting such shares shall conform to any
requirements applicable to "performance-based" compensation under Section 162(m)
of the Code. It is intended that compensation realized upon the exercise of an
option granted under the 1997 Plan will therefore be regarded as
"performance-based" under Section 162(m) of the Code and that such compensation
may be deductible without regard to the limits of Section 162(m) of the Code.
See "-- Performance Based Compensation." If any option under the 1997 Plan shall
expire or terminate for any reason, without having been exercised in full, the
unpurchased shares subject thereto shall again be available for the purposes of
the 1997 Plan.
EXERCISE PRICE AND TERM
The option price per share applicable to options granted under the 1997
Plan shall be determined by the Committee, but (i) as to an incentive stock
option shall not be less than 100% of the fair market value per share of Common
Stock on the date such option is granted (ii) as to an incentive stock option
granted to an Employee owning, or who is considered as owning by applying the
rules of ownership set forth in Section 424(d) of the Code, over 10% of the
total combined voting power of all classes of stock of the Company or any
Subsidiary, the option price of such incentive stock option shall equal or
exceed 110% of the fair market value of a share on the date the incentive stock
option is granted and such incentive stock option shall expire not more than
five years after the date of grand and (iii) as to a nonqualified stock option,
shall not be less than 80% of the fair market value on the date such option is
granted. If an option granted to the Company's Chief Executive Officer or to any
of the Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
the exercise price of such option shall not be less than 100% of the fair market
value on the date such option is granted. The Committee shall fix the term of
each option, provided that the maximum length of the term of each option granted
under the 1997 Plan shall be 10 years.
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PERFORMANCE-BASED COMPENSATION
Section 162(m) of the Code, in general, disallows the Company a federal
income tax deduction for total remuneration in excess of $1 million paid to the
Company's Chief Executive Officer or to any of the Company's four most highly
compensated officers other than the Chief Executive Officer in any one year.
However, Section 162(m) exempts "performance-based" compensation, such as stock
option based compensation, if it is awarded under a shareholder-approved plan
that meets certain requirements. In accordance with Treasury regulations issued
under Section 162(m), compensation attributable to stock options will qualify as
"performance-based" compensation, provided that (i) the option plan contains a
per-employee limitation on the number of shares for which options may be granted
during a specified period, (ii) the per-employee limitation is approved by the
shareholders, (iii) the option is granted by a compensation committee comprised
solely of "outside directors," and (iv) the exercise price of the option is no
less than the fair market value of the stock on the date of grant. Accordingly,
the 1997 Plan provides that the maximum number of shares that may be subject to
options thereunder to any individual in any calendar year shall not exceed
50,000. It is intended that compensation realized upon the exercise of an option
granted under the 1997 Plan to the Company's Chief Executive Officer or to any
of the Company's other four most highly compensated officers will therefore be
regarded as "performance-based" under Section 162(m) of the Code and that such
compensation may be deductible without regard to the limits of Section 162(m) of
the Code. There will be no grants to the Company's Chief Executive Officer or to
any of the Company's other four most highly compensated officers under the 1997
Plan unless such plan is approved by the Shareholders.
CHANGE IN CONTROL
In the event of a change in control of the Company, new option rights
may be substituted for the option rights granted under the 1997 Plan, or the
Company's duties as to options outstanding under the 1997 Plan may be assumed,
by the successor to the Company. In the event that new option rights are not
substituted, or are not substantially equivalent to, the option rights granted
under the 1997 Plan, or are not assumed, the option rights granted under the
1997 Plan shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, in which the Company will not be a surviving entity or (iii) upon a
transfer of all or substantially all of the assets of the Company or more than
80% of the outstanding shares of Common Stock; PROVIDED, HOWEVER, that each
option holder shall have the right immediately prior to or concurrently with
such dissolution, liquidation, merger, consolidation, acquisition, sale of all
or substantially all assets, separation, reorganization or similar occurrence,
to exercise any unexpired option rights granted thereunder whether or not then
exercisable.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. Incentive stock options granted under the 1997
Plan are intended to be "incentive stock options" within the meaning of Section
422 of the Code. Under present law, the grantee of an incentive stock option
will not realize taxable income upon the grant or the exercise of the incentive
stock option and the Company will not receive an income tax deduction at either
such time. If the optionee does not sell the Common Stock acquired upon exercise
of an incentive stock option within either (i) two years after the grant of the
incentive stock option or (ii) one year after the date of exercise of the
incentive stock option, the gain upon a subsequent sale of the Common Stock will
be taxed as long-term capital gain. If the optionee, within either of the above
periods, disposes of the Common Stock acquired upon exercise of the incentive
stock option, the optionee will recognize as ordinary income an amount equal to
the lesser of (i) the gain realized by the optionee upon such disposition or
(ii) the difference between the exercise price and the fair market value of the
shares on the date of exercise. In such event, the Company would be entitled to
a corresponding income tax deduction equal to the amount recognized as ordinary
income by the optionee. The gain in excess of such amount recognized by the
optionee as ordinary income would be taxed as long-term capital gain or
short-term capital gain (subject to the holding period requirements for
long-term or short-term capital gain treatment).
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The exercise of an incentive stock option will generally result in the
excess of the Common Stock's fair market value on the date of exercise over the
exercise price being included in the optionee's alternative minimum taxable
income ("AMTI"). If the Common Stock is subject to a risk of forfeiture and is
nontransferable, the excess described above will be included in AMTI when the
risk of forfeiture lapses or the shares become transferable, whichever occurs
sooner. Liability for the alternative minimum tax is a complex determination and
depends upon an individual's overall tax situation. Before exercising an
incentive stock option, an optionee should discuss the possible application of
the alternative minimum tax with his tax advisor.
NON-QUALIFIED STOCK OPTIONS. Upon exercise of a non-qualified stock
option granted under the 1997 Plan, the optionee will recognize ordinary income
in an amount equal to the excess of the fair market value of the Common Stock
received over the exercise price of such Common Stock. That amount will increase
the optionee's basis in the Common Stock acquired pursuant to the exercise of
the option. Upon a subsequent sale of the Common Stock, the optionee will
recognize short term or long term gain or loss depending upon his holding period
for the Common Stock and upon the subsequent appreciation or depreciation in the
market value of the Common Stock. The Company will be allowed a federal income
tax deduction for the amount recognized as ordinary income by the optionee upon
the optionee's exercise of the option.
REQUIRED VOTE
The approval of the 1997 Stock Option Plan requires the affirmative
vote of a majority of the votes cast by all Shareholders represented and
entitled to vote thereon. An abstention, withholding of authority to vote or
broker non-vote, therefore, will not have the same legal effect as an "against"
vote and will not be counted in determining whether the proposal has received
the requisite Shareholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE 1997 STOCK OPTION PLAN.
PROPOSAL III--APPROVAL OF GRANT OF STOCK OPTIONS
PROPOSAL
The Board of Directors recommends that the Shareholders vote to approve
the grant of stock options, described below, to UPE, a principal Shareholder of
the Company, James L. Leuthe, a director and former Chairman and Chief Executive
Officer of the Company and Salvatore J. Zizza, Chairman of the Board of
Directors of the Company.
GRANT OF OPTIONS
Subject to the approval of the Company's Shareholders, the Board of
Directors has granted to UPE and Messrs. Leuthe and Zizza stock options (the
"Options") to purchase an aggregate of 350,000, 125,000, 178,000 and 5,000
shares of Common Stock, respectively. Such Options were granted at an exercise
price of $1.8125 per share, being not less than 100% of the fair market value of
the Common Stock on the date of grant. Upon approval by the Shareholders of the
Company, the Options will become exercisable as to all of the shares covered
thereby. On May 31, 1996, the last reported sale price of the Company's Common
Stock, as reported by the American Stock Exchange, was $2.5625 per share.
The Options granted to each of UPE and Messrs. Leuthe and Zizza expire
on March 25, 2006, or, with respect to Messrs. Leuthe and Zizza, within three
months after a optionee's death or permanent incapacitation.
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The Options are not transferable except, with respect to Messrs. Leuthe
and Zizza, by will or by the laws of descent and distribution.
The exercise price of the Options and the number of shares issuable
upon the exercise of the Options will be subject to adjustment to protect
against dilution in the event of stock dividends, stock splits, consolidations,
mergers, or liquidation of the Company.
Additional terms of each Option have been set by the Board of Directors
and are embodied in option agreements executed by each of UPE and Messrs. Leuthe
and Zizza.
PURPOSE OF OPTIONS
The Options granted to UPE were in consideration for guarantees by UPE
of borrowings by the Company from the CIT Group and Sterling Commercial Capital
in July 1995. The financing from the CIT Group consists of a three year $5
million maximum line of credit and term loan facility, secured by a third lien
position on Company owned real estate and a first lien on substantially all
other owned assets of the Company. This credit facility includes: (a) an
$800,000 term loan requiring $13,333 monthly principal payments plus interest at
prime rate (Chase Bank, New York) plus 3% and (b) advances against a percentage
of eligible inventory not to exceed $4,000,000 in the aggregate. Initial
proceeds of this credit facility were used to fund working capital. The
financing from Sterling Commercial Capital consists of a $1.5 million five year
first mortgage loan. The loan is collateralized by a first mortgage lien on real
estate owned by the Company and a second lien on all other Company owned assets.
The loan bears interest at 14.25% per annum. The outstanding principal and
interest is payable in 59 consecutive equal monthly payments calculated to fully
amortize over a 15 year period with a final payment of all then outstanding
principal and interest.
The Options granted to Mr. Leuthe were in consideration of his services
to the Company as Chairman of the Board and Chief Executive Officer and as an
inducement for continued service as a director of the Company. The Options
granted to Mr. Zizza were in consideration of his serving as a director of the
Company.
The Options are expressly conditioned upon approval of the grant of the
Options by the Company's Shareholders. If approval of the Company's Shareholders
is not received, the Options will be cancelled and deemed never to have been
granted.
FEDERAL INCOME TAX CONSEQUENCES
All of the Options are non-qualified stock options.
NON-QUALIFIED STOCK OPTIONS. Upon exercise of a non-qualified stock
option the optionee will recognize ordinary income in an amount equal to the
excess of the fair market value of the Common Stock received over the exercise
price of such Common Stock. That amount will increase the optionee's basis in
the Common Stock acquired pursuant to the exercise of the option. Upon a
subsequent sale of the Common Stock, the optionee will recognize short term or
long term gain or loss depending upon his holding period for the Common Stock
and upon the subsequent appreciation or depreciation in the market value of the
Common Stock. The Company will be allowed a federal income tax deduction for the
amount recognized as ordinary income by the optionee upon the optionee's
exercise of the option.
SUMMARY OF TAX CONSEQUENCES. The foregoing outline is no more than a
summary of the federal income tax provisions relating to the grant and exercise
of the Options and the sale of Common Stock acquired upon exercise. Individual
circumstances and amendments to the federal income tax laws or regulations may
vary these results.
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REGISTRATION OF SHARES
The Company intends to file a registration statement under the
Securities Act of 1933, as amended, with respect to the Common Stock issuable
upon exercise of the Options subsequent to approval of the Options by the
Company's Shareholders.
REQUIRED VOTE
Approval of the grant of options requires the affirmative vote of a
majority of the votes cast by all Shareholders represented and entitled to vote
thereon. An abstention, withholding of authority to vote or broker non- vote,
therefore, will not have the same legal effect as an "against" vote and will not
be counted in determining whether the proposal has received the requisite
Shareholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE GRANT OF THE STOCK OPTIONS.
PROPOSAL IV--APPROVAL OF ISSUANCE OF STOCK TO UPE
PROPOSAL
The Board of Directors recommends that the Shareholders vote to approve
the issuance of stock, described below, to UPE, a principal Shareholder of the
Company.
GRANT OF STOCK
The Board of Directors has authorized the issuance to UPE of 350,000
shares of Common Stock in consideration for a 50% ownership interest in certain
resale inventory, which consists primarily of heat transfer equipment owned by
UPE. The inventory has a retail sales value in excess of $1,500,000. The
issuance of such shares is subject to Shareholder approval. UPE and the Company
have entered into a joint marketing and sales agreement with respect to the
resale of the inventory.
REQUIRED VOTE
Approval of the grant of stock to UPE requires the affirmative vote of
a majority of the votes cast by all Shareholders represented and entitled to
vote thereon. An abstention, withholding of authority to vote or broker non-
vote, therefore, will not have the same legal effect as an "against" vote and
will not be counted in determining whether the proposal has received the
requisite Shareholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE GRANT OF THE STOCK.
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PROPOSAL V--RATIFICATION OF SELECTION OF AUDITORS
On March 6, 1997, the Board of Directors of the Company terminated the
engagement of Sobel & Co., LLC, Certified Public Accountants ("Sobel") as the
independent auditors of the Company and appointed BDO Seidman LLP as the
independent auditors of the Company for the fiscal year ending May 31, 1997.
Sobel's report on the financial statements of the Company for the fiscal years
ended May 31, 1995 and May 31, 1996 did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles. There were no other reportable events or
disagreements with Sobel to report in response to Item 304(a) of Regulation S-B.
Although the selection of auditors does not require ratification, the
Board of Directors has directed that the appointment of BDO Seidman LLP for the
1997 Fiscal Year be submitted to Shareholders for ratification due to the
significance of their appointment to the Company. If Shareholders do not ratify
the appointment of BDO Seidman LLP, the Board of Directors will consider the
appointment of other certified public accountants. A representative of BDO
Seidman LLP is expected to be available at the Meeting to make a statement if
such representative desires to do so and to respond to appropriate questions.
REQUIRED VOTE
Ratification of the appointment of BDO Seidman LLP requires the
affirmative vote of a majority of the votes cast by all Shareholders represented
and entitled to vote thereon. An abstention, withholding of authority to vote or
broker non-vote, therefore, will not have the same legal effect as an "against"
vote and will not be counted in determining whether the proposal has received
the requisite Shareholder vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE 1997 FISCAL YEAR.
ANNUAL REPORT
All Shareholders of record as of the Record Date are concurrently
herewith being sent a copy of the Company's Annual Report for the 1996 Fiscal
Year.
ANY SHAREHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB, AS AMENDED, FOR THE 1996 FISCAL YEAR
(WITHOUT EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITING TO SHAREHOLDER INFORMATION, THE BETHLEHEM CORPORATION, 25TH AND LENNOX
STREETS, EASTON, PENNSYLVANIA 18045.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next Annual Meeting of Shareholders of the
Company, Shareholder proposals for such meeting must be submitted to the Company
no later than August 12, 1997.
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OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters
other than those set forth herein which will be presented for consideration at
the Meeting. If any other matter or matters are properly brought before the
Meeting or any adjournment thereof, the persons named in the accompanying Proxy
will have discretionary authority to vote, or otherwise act, with respect to
such matters in accordance with their judgment.
By Order of the Board of Directors,
HAROLD BOGATZ
SECRETARY
March 10, 1997
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ANNEX A
TO
PROXY STATEMENT
THE BETHLEHEM CORPORATION
1997 STOCK OPTION PLAN
1. Purpose of the Plan
The purpose of the Plan is to provide additional incentive to
the officers, directors and employees of the Company who are primarily
responsible for the management and growth of the Company, and to consultants and
advisors to the Company who otherwise materially contribute to the conduct and
direction of its business, operations and affairs, in order to strengthen their
desire to remain in the employ or retention of the Company and to stimulate
their efforts on behalf of the Company, and to retain and attract to the employ
of the Company persons of competence. Each option granted pursuant to the Plan
shall be designated at the time of grant as either an "incentive stock option"
or as a "nonqualified stock option." The terms and conditions of the Plan shall
be set forth or incorporated by reference in the option agreements evidencing
the options.
The Company intends that the Plan meet the requirements of
Rule 16b-3 and that transactions of the type specified in subparagraphs (c) to
(f) inclusive of Rule 16b-3 by officers and directors of the Company pursuant to
the Plan be exempt from the operation of Section 16(b) of the Exchange Act.
Further, the Plan is intended to satisfy the performance-based compensation
exception to the limitation on the Company's tax deductions imposed by Section
162(m) of the Code. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
2. Definitions
For the purposes of the Plan, unless the context otherwise
requires, the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Company's
Board of Directors.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the Stock Option Committee composed
of two or more directors who are Non-Employee Directors and Outside Directors
and who shall be elected by, and who shall serve at the pleasure of, the Board
of Directors, and who shall be responsible for administering the Plan.
(d) "Company" means The Bethlehem Corporation, a
Pennsylvania corporation.
(e) "Employee" means an employee of the Company or of a
Subsidiary (including a director or officer of the Company or a Subsidiary who
is also an employee).
(f) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(g) "Fair Market Value" of the Shares means the closing
price of publicly traded Shares on the national securities exchange on which the
Shares are listed (if the shares are so listed) or on the NASDAQ National Market
or Small Cap Market (if the Shares are regularly quoted on the NASDAQ National
Market or Small Cap Market), or, if not so listed or regularly quoted, the mean
between the closing bid and asked prices of publicly
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<PAGE>
traded Shares in the over-the-counter market, or, if such bid and asked prices
shall not be available, as reported by any nationally recognized quotation
service selected by the Company, or as determined by the Committee in a manner
consistent with the provisions of the Code.
(h) "ISO" means an option intended to qualify as an
incentive stock option under Section 422 of the Code.
(i) "Non-Employee Director" means a non-employee director
as defined in Rule 16b-3.
(j) "NQO" means an option that does not qualify as an
ISO.
(k) "Outside Director" means an outside director as
defined in Section 162(m) of the Code.
(l) "Plan" means the 1997 Stock Option Plan of the
Company.
(m) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act.
(n) "Securities Act" means the Securities Act of 1933, as
amended.
(o) "Shares" means shares of the Company's Common Stock,
no par value, including authorized but unissued shares and shares that have been
previously issued and reacquired by the Company.
(p) "Subsidiary" of the Company means and includes a
"Subsidiary Corporation," as that term is defined in Section 424(f) of the Code.
3. Administration
Subject to the express provisions of the Plan, the Committee
shall have authority to interpret and construe the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
conditions of the respective option agreements (which need not be identical) and
to make all other determinations necessary or advisable for the administration
of the Plan. Subject to the express provisions of the Plan, the Committee, in
its sole discretion, shall from time to time determine the persons from among
those eligible under the Plan to whom, and the time or times at which, options
shall be granted, the number of Shares to be subject to each option, whether an
option shall be designated an ISO or an NQO and the manner in and price at which
such option may be exercised. In making such determination, the Committee may
take into account the nature and period of service rendered by the respective
optionees, their level of compensation, their past, present and potential
contributions to the Company and such other factors as the Committee shall in
its discretion deem relevant. The determination of the Committee with respect to
any matter referred to in this Section 3 shall be conclusive.
In the event that for any reason the Committee is unable to
act or if the Committee at the time of any grant, award or other acquisition
under the Plan of an ISO or NQO or Share does not consist of two or more
Non-Employee Directors, then any such grant, award or other acquisition may be
approved or ratified in any other manner contemplated by subparagraph (d) of
Rule 16b-3.
4. Eligibility for Participation
Any Employee shall be eligible to receive ISOs or NQOs granted
under the Plan. Consultants and advisors to the Company and directors of the
Company who are not Employees shall be eligible to receive NQOs.
5. Limitation on Shares Subject to the Plan
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Subject to adjustment as hereinafter provided, no more than
200,000 Shares may be issued pursuant to the exercise of options granted under
the Plan. If any option shall expire or terminate for any reason, without having
been exercised in full, the unpurchased Shares subject thereto shall again be
available for the purposes of the Plan. The maximum number of Shares that may be
subject to options granted under the Plan to any individual in any calendar year
shall not exceed 50,000, and the method of counting such Shares shall conform to
any requirements applicable to performance-based compensation under Section
162(m) of the Code.
6. Terms and Conditions of Options
Each option granted under the Plan shall be subject to the
following terms and conditions:
(a) Except as provided in Subsections 6(j) and (k), the option
price per Share shall be determined by the Committee, but (i) as to an ISO shall
not be less than 100% of the Fair Market Value of a Share on the date such ISO
is granted; and (ii) as to an NQO, shall not be less than 80% of the Fair Market
Value of a Share on the date such NQO is granted.
(b) The Committee shall, in its discretion, fix the term of
each option, provided that the maximum length of the term of each option granted
hereunder shall be 10 years and provided further that the provisions of
Subsection 6(j) hereof shall be applicable to the grant of ISOs to Employees
therein identified.
(c) If a holder of an option dies while he is employed by the
Company or a Subsidiary or, if the Committee so determines in its discretion at
the time such option is granted or at any time thereafter, within three months
after the termination of such employment by reason of retirement with the
written consent of the Company or a Subsidiary, such option may, to the extent
that the holder of the option was entitled to exercise such option on the date
of his death, be exercised during a period after his death fixed by the
Committee in its discretion at the time such option is granted or at any time
thereafter, but in no event to exceed one year, by his personal representative
or representatives or by the person or persons to whom the holder's rights under
the option shall pass by will or by the applicable laws of descent and
distribution; provided, however no option granted under the Plan may be
exercised to any extent by anyone after its stated expiration date.
(d) In the event that a holder of an option shall voluntarily
retire or quit his employment without the written consent of the Company or a
Subsidiary or if the Company shall terminate the employment of a holder of an
option for cause, the options held by such holder shall forthwith terminate. If
a holder of an option shall voluntarily retire or quit his employment with the
written consent of the Company or a Subsidiary or if the employment of such
holder shall have been terminated by the Company or a Subsidiary for reasons
other than cause, such holder may unless his option shall have previously
expired pursuant to the provisions hereof, exercise his option at any time prior
to the first to occur of the expiration of the original option period or the
expiration of a period after termination of employment fixed by the Committee in
its discretion at the time the option is granted or at any time thereafter, but
in no event to exceed three months, to the extent of the number of Shares
subject to such option that were purchasable by him on the date of termination
of his employment. Options granted under the Plan shall not be affected by any
change of employment so long as the holder thereof continues to be an Employee.
(e) Anything to the contrary contained herein or in any option
agreement executed and delivered hereunder, no option shall be exercisable
unless and until the Plan shall have been approved by shareholders of the
Company in accordance with Section 13 hereof.
(f) Each option shall be nonassignable and nontransferable by
the option holder otherwise than by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the option holder
solely by him; provided, however, that options may be transferred pursuant to a
qualified domestic relations order (as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules promulgated thereunder).
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(g) An option holder desiring to exercise an option shall
exercise such option by delivering to the Company written notice of such
exercise, specifying the number of Shares to be purchased, together with payment
of the purchase price therefor; provided, however that no option may be
exercised in part with respect to fewer than 100 Shares, except to purchase the
remaining Shares purchasable under such option. Payment shall be made as
follows: (i) in United States dollars by cash or by check, certified check, bank
draft or money order payable to the order of the Company; (ii) at the discretion
of the Committee, by delivering to the Company Shares already owned by the
option holder and having a Fair Market Value on the date of exercise equal to
the exercise price or a combination of such Shares and cash; or (iii) by any
other proper method specifically approved by the Committee.
(h) In order to assist an option holder with the acquisition
of Shares pursuant to the exercise of an option granted under the Plan, the
Committee may, in its discretion and subject to the requirements of applicable
statutes, rules and regulations, whenever, in its judgment, such assistance may
reasonably be expected to benefit the Company, authorize, either at the time of
the grant of the option or thereafter (i) the extension of a loan to the option
holder by the Company, (ii) the payment by the option holder of the purchase
price of the Shares in installments, or (iii) the guaranty by the Company of a
loan obtained by the option holder from a third party. The Committee shall
determine the terms of any such loan, installment payment arrangement or
guaranty, including the interest rate and other terms of repayment thereof.
Loans, installment payment arrangements and guaranties may be authorized with or
without security and the maximum amount thereof shall be the option price for
the Shares being acquired plus related interest payments.
(i) The aggregate Fair Market Value (determined at the time an
ISO is granted) of the Shares as to which an Employee may first exercise ISOs in
any one calendar year under all incentive stock option plans of the Company and
its Subsidiaries may not exceed $100,000.
(j) An ISO may be granted to an Employee owning, or who is
considered as owning by applying the rules of ownership set forth in Section
424(d) of the Code, over 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary if the option price of such ISO equals
or exceeds 110% of the Fair Market Value of a Share on the date the ISO is
granted and such ISO expires not more than five years after the date of grant.
(k) If an option granted to the Company's Chief Executive
Officer or to any of the Company's other four most highly compensated offers is
intended to qualify as "performance-based" compensation under Section 162(m) of
the Code, the exercise price of such option shall not be less than 100% of the
Fair Market Value of a Share on the date such option is granted.
7. Adjustments Upon Changes in Capitalization
(a) Subject to any required regulatory approval, new option
rights may be substituted for the option rights granted under the Plan, or the
Company's duties as to options outstanding under the Plan may be assumed, by a
corporation other than the Company, or by a parent or subsidiary of the Company
or such corporation, in connection with any merger, consolidation, acquisition,
sale of all or substantially all assets, separation, reorganization, liquidation
or like occurrence in which the Company is involved. Notwithstanding the
foregoing or the provisions of Subsection 7(b) hereof, in the event that such
corporation, or parent or subsidiary of the Company or such corporation, does
not substitute new option rights for, and substantially equivalent to, the
option rights granted hereunder, or assume the option rights granted hereunder,
the option rights granted hereunder shall terminate and thereupon become null
and void (i) upon dissolution or liquidation of the Company, or similar
occurrence, (ii) upon any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, in which the Company will not be a
surviving entity or (iii) upon a transfer of all or substantially all of the
assets of the Company or more than 80% of the outstanding Shares; provided,
however, that each option holder shall have the right immediately prior to or
concurrently with such dissolution, liquidation, merger, consolidation,
acquisition, sale of all or substantially all assets, separation, reorganization
or similar occurrence, to exercise any unexpired option rights
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granted hereunder whether or not then exercisable. If the exercise of the
foregoing right by the holder of an ISO would be deemed to result in a violation
of the provisions of Subsection 6(i) of the Plan, then, without further act on
the part of the Committee or the option holder, such ISO shall be deemed an NQO
to the extent necessary to avoid any such violation.
(b) The existence of outstanding options shall not affect in
any way the right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issuance of Shares or subscription rights
thereto, or any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Shares or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise;
provided, however, that if the outstanding Shares shall at any time be changed
or exchanged by declaration of a stock dividend, stock split, combination of
shares or recapitalization, the number and kind of Shares subject to the Plan or
subject to any options theretofore granted, and the option prices, shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of Shares without changing the aggregate option price.
(c) Adjustments under this Section 7 shall be made by the
Committee whose determination as to what adjustments, if any, shall be made, and
the extent thereof, shall be final.
8. Privileges of Stock Ownership
No option holder shall be entitled to the privileges of stock
ownership as to any Shares not actually issued and delivered to him.
9. Securities Regulation
(a) Each option shall be subject to the requirement that if at
any time the Board of Directors or Committee shall in its discretion determine
that the listing, registration or qualification of the Shares subject to such
option upon any securities exchange or under any Federal or state law, or the
approval or consent of any governmental regulatory body, is necessary or
desirable in connection with the issuance or purchase of Shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, approval or consent shall have been effected or
obtained free from any conditions not reasonably acceptable to the Board of
Directors or Committee.
(b) Unless at the time of the exercise of an option and the
issuance of the Shares thereby purchased by any option holder hereunder there
shall be in effect as to such Shares a Registration Statement under the
Securities Act and the rules and regulations of the Securities and Exchange
Commission, or there shall be available an exemption from the registration
requirements of the Securities Act, the option holder exercising such option
shall deliver to the Company at the time of exercise a certificate (i)
acknowledging that the Shares so acquired may be "restricted securities" within
the meaning of Rule 144 promulgated under the Securities Act, (ii) certifying
that he is acquiring the Shares issuable to him upon such exercise for the
purpose of investment and not with a view to their sale or distribution; and
(iii) containing such option holder's agreement that such Shares may not be sold
or otherwise disposed of except in accordance with applicable provisions of the
Securities Act. The Company shall not be required to issue or deliver
certificates for Shares until there shall have been compliance with all
applicable laws, rules and regulations, including the rules and regulations of
the Securities and Exchange Commission.
10. Employment or Retention of Option Holders
Nothing contained in the Plan or in any option agreement
executed and delivered thereunder shall confer upon any option holder any right
to continue in the employ or retention of the Company or any Subsidiary
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or to interfere with the right of the Company or any Subsidiary to terminate
such employment or retention at any time.
11. Withholding; Disqualifying Disposition
(a) The Company shall deduct and withhold from any salary or
other compensation for employment services of an option holder all amounts
required to satisfy withholding tax liabilities arising from the grant or
exercise of an option under the Plan or the acquisition or disposition of Shares
acquired upon exercise of any such option.
(b) In the case of disposition by an option holder of Shares
acquired upon exercise of an ISO within (i) two years after the date of grant of
such ISO, or (ii) one year after the transfer of such Shares to such option
holder, such option holder shall give written notice to the Company of such
disposition not later than 30 days after the occurrence thereof, which notice
shall include all such information as may be required by the Company to comply
with applicable provisions of the Code and shall be in such form as the Company
shall from time to time determine.
(c) In the discretion of the Committee and in lieu of the
deduction and withholding provided for in subsection (a) above, the Company
shall deduct and withhold Shares otherwise issuable to the option holder having
a Fair Market Value on the date income is recognized pursuant to the exercise of
an option equal to the amount required to be withheld.
12. Amendment, Suspension and Termination of the Plan
Subject to any required regulatory approval, the Board of
Directors or Committee may at any time amend, suspend or terminate the Plan,
provided that, except as set forth in Section 7 above, no amendment may be
adopted without the approval of shareholders that would:
(a) increase the number of Shares that may be issued
pursuant to the exercise of options granted under the Plan;
(b) permit the grant of an ISO under the Plan with an
option price less than 100% of the Fair Market Value of the Shares at the time
such option is granted;
(c) change the provisions of Section 4;
(d) extend the term of an option or the period during
which an option may be granted under the Plan; or
(e) decrease an option exercise price (provided that the
foregoing does not preclude the cancellation of an option and a new grant at a
lower exercise price without shareholder approval).
Unless the Plan shall theretofore have been terminated by the Board of Directors
or Committee, the Plan shall terminate on March 8, 2007. No option may be
granted during the term of any suspension of the Plan or after termination of
the Plan. The amendment or termination of the Plan shall not, without the
written consent of the option holder to be affected, alter or impair any rights
or obligations under any option theretofore granted to such option holder under
the Plan.
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13. Effective Date
The effective date of the Plan shall be March 6, 1997, subject
to its approval by shareholders of the Company not later than March 5, 1998.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE BETHLEHEM CORPORATION
PROXY - ANNUAL MEETING OF SHAREHOLDERS
APRIL 10, 1997
The undersigned, a Shareholder of The Bethlehem Corporation, a
Pennsylvania corporation (the "Company"), does hereby appoint Alan H.
Silverstein, Salvatore J. Zizza and Harold Bogatz and each of them, the true and
lawful attorneys and proxies with full power of substitution, for and in the
name, place and stead of the undersigned, to vote all of the shares of Common
Stock of the Company which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company to be
held Thursday, April 10, 1997 at 3:00 p.m. local time at the Holiday Inn, Route
512, Bethlehem, Pennsylvania or at any adjournment thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS
To vote for the election of Messrs. Harold Bogatz, Jan P. Gale, Ronald
H. Gale, B. Ord Houston and Salvatore J. Zizza as directors.
FOR ALL WITHHOLD
NOMINEES AUTHORITY CUMULATIVE VOTES FOR ONE OR MORE
LISTED ABOVE FOR ALL NOMINEES AS FOLLOWS:
NOMINEES
- ---- ----
Harold Bogatz --------
INSTRUCTIONS: To withhold authority to vote for Jan P. Gale --------
any individual nominee, write that Ronald H. Gale --------
Nominee's name on the line B. Ord Houston --------
provided below: Salvatore J. Zizza --------
- ---------------------
2. 1997 STOCK OPTION PLAN
To approve the 1997 Stock Option Plan.
______ FOR _____ AGAINST _____ ABSTAIN
3. GRANT OF STOCK OPTIONS
To approve the grant of Stock Options to each of Universal Process
Equipment, Inc. ("UPE"), James L. Leuthe and Salvatore J. Zizza.
______ FOR _____ AGAINST _____ ABSTAIN
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4. ISSUANCE OF STOCK TO UPE
To approve the issuance of 350,000 shares of the Company's common
stock, no par value, to UPE.
______ FOR _____ AGAINST _____ ABSTAIN
5. RATIFICATION OF APPOINTMENT OF AUDITORS
To ratify the appointment of BDO Seidman LLP as the Company's
independent auditors for the fiscal year ending May 31, 1997.
______ FOR _____ AGAINST _____ ABSTAIN
6. DISCRETIONARY AUTHORITY
To transact such other business as may properly come before the Meeting
and any adjournment thereof according to the proxies discretion and in their
discretion.
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 THROUGH 5.
Please mark, date and sign exactly as
your name appears on this proxy card.
When shares are held jointly, both
holders should sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title. If the holder is a
corporation or partnership, the full
corporate or partnership name should be
signed by a duly authorized officer.
----------------------------------------
Signature
----------------------------------------
Signature, if shares held jointly
Dated _______________________ 1997
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