<PAGE>
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 (S)240.14a-11(c) or (S)240.14a-12
BROWN & SHARPE MANUFACTURING COMPANY
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
Brown & Sharpe Logo type/name
March 24, 1997
To the Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
of Brown & Sharpe Manufacturing Company to be held on Friday, April 25, 1997, at
10:00 a.m. at the Company's corporate offices, Precision Park, 200 Frenchtown
Road, North Kingstown, RI.
The accompanying formal Notice of Annual Meeting of Stockholders and
Proxy Statement contain the principal items of business to be considered and
acted upon at the meeting, including information about the Directors of the
Company continuing in office and the three nominees for election as Directors
for three-year terms. In addition to the foregoing, we will report on our
progress in improving the Company's performance and on plans for positioning the
Company to meet the challenges ahead. We welcome the opportunity to share our
thoughts with our stockholders and look forward to your questions and comments.
We hope you will be able to attend the meeting, but if you cannot do so,
it is important that your shares be represented. Accordingly, whether or not you
plan to personally attend the meeting, we urge you to mark, sign, date, and
promptly return the enclosed proxy card in the return envelope.
Sincerely yours,
/s/Frank T. Curtin
Frank T. Curtin
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
Precision Park
200 Frenchtown Road
North Kingstown, Rhode Island 02852-1700
Telephone (401) 886-2000
_____________________
NOTICE OF ANNUAL MEETING
_______________________
Notice is hereby given to the stockholders of Brown & Sharpe Manufacturing
Company that the Annual Meeting of stockholders will be held on Friday, April
25, 1997, at 10:00 a.m. at the Company's corporate offices, Precision Park, 200
Frenchtown Road, North Kingstown, Rhode Island, for the following purposes:
1. To fix the number of Directors at nine and to elect a class of three
Directors, whose names are set forth in the accompanying Proxy Statement, to
succeed the class whose term expires with this Annual Meeting of
Stockholders, to serve until the year 2000 Annual Meeting of Stockholders
and until their successors shall be elected and qualified.
2. To consider and act on a proposal to amend the Certificate of Incorporation
of the Company to increase the number of authorized shares of common stock,
$1.00 par value, from 17,000,000 shares to 32,000,000 shares by increasing
the authorized number of shares of Class A common stock from 15,000,000
shares to 30,000,000 shares, all as more fully set forth in the accompanying
Proxy Statement.
3. To approve an amendment to the Company's 1989 Equity Incentive Plan,
as amended, to increase the aggregate number of shares of stock authorized
for issuance and delivery in connection with awards under such Plan from
875,000 shares of Class A common stock to 1,525,000 shares, which may be
either Class A common stock or Class B common stock, in each case subject to
adjustment as provided in the Plan, all as more fully set forth in the
accompanying Proxy Statement.
4. To ratify and approve the appointment by the Board of Directors of the firm
of Ernst & Young LLP as the Company's independent accountants for the year
1997.
5. To transact such other business that may properly come before the meeting,
and any adjournments thereof.
The Board of Directors has fixed the close of business on Wednesday, March
12, 1997, as the record date for determining stockholders entitled to notice of
the meeting and to vote at the meeting, and any adjournments thereof. A copy of
the Company's Annual Report containing financial data and a summary of
operations for 1996 is being mailed to the stockholders with this Proxy
Statement.
In the event you cannot attend the Annual Meeting in person, PLEASE
COMPLETE, SIGN AND DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING POST-PAID ENVELOPE SO THAT YOUR SHARES OF COMPANY STOCK MAY BE
REPRESENTED AT THE MEETING.
By Order of the Board of Directors,
/s/James W. Hayes, III
James W. Hayes, III
Secretary
North Kingstown, Rhode Island
March 24, 1997
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
Precision Park
200 Frenchtown Road
North Kingstown, Rhode Island 02852-1700
Telephone (401) 886-2000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 1997
This Proxy Statement and the accompanying Proxy is furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Brown & Sharpe Manufacturing Company (the "Company") for use at the Company's
Annual Meeting of stockholders (the "Annual Meeting") to be held at the
Company's corporate offices, Precision Park, 200 Frenchtown Road, North
Kingstown, Rhode Island, on Friday, April 25, 1997, at 10:00 a.m., and at any
adjournments thereof.
Stockholders of record at the close of business on Wednesday, March 12,
1997, are entitled to receive notice of and to vote at the Annual Meeting. On
that date, the Company had 13,202,840 shares of common stock outstanding
comprised of 12,686,978 shares of Class A Common Stock, $1.00 par value (the
"Class A Stock") and 515,862 shares of Class B Common Stock, $1.00 par value
(the "Class B Stock"). The Company's Certificate of Incorporation provides
that each share of Class A Stock outstanding on the record date entitles the
holder thereof to one vote and each share of Class B Stock outstanding on the
record date entitles the holder thereof to ten votes except as otherwise
provided by law or by the Certificate of Incorporation. The holders of Class A
Stock are entitled to elect one Director at the Annual Meeting, and such
holders voting together with the holders of Class B Stock as a single class are
entitled to elect the remaining Directors to be elected at the Annual Meeting.
Except for the foregoing and as may otherwise be provided by law or the
Certificate of Incorporation, all other actions submitted to a vote of the
stockholders at the meeting will be voted on by the holders of Class A Stock
and Class B Stock voting together as a single class.
Proxies properly executed and returned will be voted at the Annual
Meeting in accordance with any directions noted thereon or, if no direction is
indicated, proxies will be voted FOR the election of the nominees for Directors
set forth herein and FOR the proposals to amend the Company's Certificate of
Incorporation, to amend the 1989 Equity Incentive Plan, and to ratify the
selection of independent accountants described in this Proxy Statement. Proxies
will be voted in the discretion of the holders of the proxy with respect to any
other business that may properly come before the Annual Meeting and all matters
incidental to the conduct of the Annual Meeting.
Any stockholder signing and delivering a proxy may revoke it at any
time before it is voted by delivering to the Secretary of the Company a written
revocation or a duly executed proxy bearing a date later than the date of the
proxy being revoked. Any stockholder personally attending the Annual Meeting may
also revoke his or her proxy and vote his or her shares of stock.
The approximate date this Proxy Statement is being mailed to
stockholders is March 24, 1997.
<PAGE>
ITEM I
ELECTION OF DIRECTORS
The Board of Directors proposes to fix the number of Directors at nine;
to designate a class of three Directors to serve until the year 2000 Annual
Meeting and until their successors have been duly elected and qualified (the
"2000 Class"); and to elect Messrs. Frank T. Curtin, Paul R. Tregurtha, and
Harry A. Hammerly, all of whom are currently members of the Board and who have
consented to stand for election to the 2000 Class. The Board has nominated Mr.
Hammerly for election by the holders of Class A Stock and Messrs. Curtin and
Tregurtha for election by the holders of Class A Stock and Class B Stock, voting
together as a single class.
Information is furnished below with respect to the nominees for
election to the 2000 Class as well as the Directors continuing in office. Henry
D. Sharpe, III is the son of Henry D. Sharpe, Jr., a significant stockholder of
the Company (see Table on Page 5) and former Chairman of the Board of Directors
who retired from the Board on October 25, 1996. Messrs. Harry A. Hammerly (a
nominee for election to the Board), Roger E. Levien, and J. Robert Held were
elected Directors by the Board of Directors on October 25, 1996 pursuant to
provisions of the by-laws of the Company to fill the unexpired terms of office
of Alberto de Benedictis, Vincenzo Cannatelli, and Enrico Albareto,
respectively, who resigned from office on such date following the sale in a
public offering by Finmeccanica S.p.A. in October of 1996 of substantially all
of its shares of Class A Stock. (See discussion "Certain Relationships and
Related Transactions".)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION
OF MESSRS. CURTIN, TREGURTHA, AND HAMMERLY.
<TABLE>
<CAPTION>
NAME (AGE) YEAR FIRST
(BOARD COMMITTEE ELECTED A PRINCIPAL OCCUPATION DURING LAST FIVE YEARS AND
MEMBERSHIP) DIRECTOR DIRECTORSHIPS IN PUBLIC REPORTING AND OTHER COMPANIES
- - ------------- ---------- -----------------------------------------------------
NOMINEES FOR ELECTION TO OFFICE
- - -------------------------------
For Terms Expiring in 2000
- - --------------------------
<S> <C> <C>
FRANK T. CURTIN (62) 1995 Chairman of the Board of Directors since October 1996
(Chairman, Executive Comm. and President and Chief Executive Officer since May 2,
Corporate Development Comm.) 1995; from January 1992 to May 1995, Vice President,
National Center for Manufacturing Sciences, a research and
development organization, Ann Arbor, MI; from 1989 to
May 1995, President, Curtin & Associates, a software
development company, Santa Barbara, CA and Ann Arbor, MI.
PAUL R. TREGURTHA (61) 1984 Chairman of the Board and Chief Executive Officer,
(Executive, Salary, and Chairman Mormac Marine Group, Inc., Stamford, CT, a marine
Corporate Development Comm.) transportation company; Director, Fleet Financial Group,
Inc., a bank holding company; Director, FPL Group, Inc.,
a utility company; Trustee, Teachers Insurance and
Annuity Assoc.; Chairman, Moran Transportation Company,
and Vice Chairman, Interlake Steamship Company,
Greenwich, CT, both marine transportation companies.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME (AGE) YEAR FIRST
(BOARD COMMITTEE ELECTED A PRINCIPAL OCCUPATION DURING LAST FIVE YEARS AND
MEMBERSHIP) DIRECTOR DIRECTORSHIPS IN PUBLIC REPORTING AND OTHER COMPANIES
- - ------------- ---------- -----------------------------------------------------
<S> <C> <C>
HARRY A. HAMMERLY (63) 1996 Former Executive Vice President, 3M Company, a manufacturer of
(Chairman, Audit Comm.) industrial, consumer, and health care products, Executive Vice
President, International Operations from September 1991 until
his retirement in July 1995, Executive Vice President,
Industrial Sector, from May 1989 to September 1991, employed by
3M Company from June 1995; Director, Apogee Enterprises, Inc.,
a fabricator and distributor of glass; Director, BMC
Industries, Inc., a manufacturer of precision etched products
and vision lenses; Director, Cincinnati Milacron, Inc., a
manufacturer of industrial machinery and cutting tools;
Director, the Geon Company, a manufacturer of PVC resins and
compounds; Director, Red Wing Shoe Company, a privately held
manufacturer of shoes and boots.
DIRECTORS CONTINUING IN OFFICE
- - ------------------------------
Terms Expiring in 1999
- - ---------------------
JOHN M. NELSON (65) 1975 Chairman of the Board, Wyman Gordon Company, Worcester, MA,
(Audit and Salary Comm.) manufacturer of forgings and castings, since May 1994 and
Chairman and Chief Executive Officer from May 1991 to May 1994;
Chairman of the Board, The TJX Companies, Inc., an off price
specialty apparel retailer, since June 1995; until October
1990, Chairman of the Board and Chief Executive Officer, Norton
Company, Worcester, MA, manufacturer of abrasive and ceramic
products; Director, Cambridge Biotech Company, a biotechnology
firm; Director, Commerce Holdings Inc., a holding company for a
property and casualty insurance company; and, Director, Stocker
& Yale Manufacturing Company, a specialty products company.
RUSSELL A. BOSS (58) 1990 President and Chief Executive Officer and a Director, A. T.
(Executive and Chairman, Cross Company Lincoln, RI, manufacturer of fine writing
Salary Comm.) instruments; Trustee, Eastern Utilities Association; Boston,
MA.
ROGER E. LEVIEN ( 61) 1996 From January 1992 to the present, Vice President, Strategy and
(Corporate Development Comm.) Innovation, Xerox Corporation, Stamford, CT, manufacturer of
document and office technology equipment.
Terms Expiring in 1998
- - ------------------------
HOWARD K. FUGUET (59) 1990 Partner of the law firm of Ropes & Gray, Boston, MA.
(Audit and Corporate
Development Comm.)
HENRY D. SHARPE, III (42) 1992 Co-founder and Technical Director, Design Lab, Inc.,
(Audit Comm.) Providence, RI, a multi-disciplinary product design firm
specializing in research and design of new products, re-design
of existing products, and engineering management services.
J. ROBERT HELD (58) 1996 Currently a consultant to the computer industry; from 1988 to
(Salary Comm.) 1995 President and Chief Executive Officer and a Director of
Chipcom Corporation, Southborough, MA, a computer
communications company; from 1984 to 1988 Vice President,
Division General Manager and from 1980 to 1984 Vice President,
Sales and Service, Genrad, Inc., Concord, MA, a manufacturer
of test equipment for the electronics industry.
</TABLE>
3
<PAGE>
GENERAL INFORMATION
RELATING TO THE BOARD OF DIRECTORS
The Board of Directors, which held five regular meetings and two special
meetings in 1996, maintains a standing Executive Committee, composed of Messrs.
Curtin, Boss, and Tregurtha, which has substantially all of the powers and
authority of the Board of Directors when the full Board is not in session. The
Executive Committee did not meet in 1996. The Board of Directors also maintains
standing committees on audit ("Audit Committee"), corporate development
("Corporate Development Committee") and compensation ("Salary Committee"), each
of which is composed exclusively of non-employee Directors. The Board does not
have a standing Nominating Committee. During 1996, each of the Directors, except
for Mr. Albareto, who resigned in October 1996 following the sale by
Finmeccanica S.p.A. of substantially all of its shares of Class A Stock,
participated in 75% or more of the aggregate number of meetings of the Board and
of the committees on which he is a member.
The Audit Committee, whose members are Messrs. Hammerly, Fuguet, Sharpe III,
and Nelson, recommends to the Board of Directors, for approval by the
stockholders, the appointment of a firm of independent certified public
accountants to audit the Company's financial statements. The Audit Committee
also meets with the independent accountants and the Company's Chief Financial
Officer to review the scope and results of the audit, the scope of audit and
non-audit services, the range of audit and non-audit fees, any proposed changes
in accounting policies, practices, or procedures, including those relating to
the Company's internal accounting controls, and the Company's financial
statements to be included in the Company's Annual Report to Stockholders and
other related matters. The Audit Committee met two times in 1996.
The Corporate Development Committee, whose members are Messrs. Curtin,
Fuguet, Tregurtha, and Levien, considers matters concerning the relationship
between the Company and its stockholders, including offers to purchase
outstanding Company stock, acquisition proposals, and other matters which could
affect the existence of the Company as an independent company or otherwise
affect the control of the Company. The Corporate Development Committee did not
hold any meetings in 1996.
The Salary Committee, whose members are Messrs. Boss, Tregurtha, Nelson, and
Held, performs a periodic review of the appropriate salaries and compensation
plans for the Executive Officers and other key management personnel of the
Company and administers the Amended Profit Incentive Plan, the 1989 Equity
Incentive Plan, and the Key Employees' Long-Term Deferred Cash Incentive Plan.
The Salary Committee met five times in 1996. See "Compensation Committee
Report".
As compensation for services rendered during 1996, the Company paid each
non-employee Director an annual retainer of $10,000, a fee of $800 for each
Board meeting attended, a fee of $400 for each teleconference meeting which
lasted more than one-half in duration, and a fee of $500 for each Committee
meeting attended ($200 if held on the same day as a Board meeting). Directors
who are members of the Audit Committee also receive an additional $1,000 in
their annual retainer fee.
Mr. Tregurtha has elected to defer 50% of his Director's fees under a
deferred stock equivalent unit contract with the Company dated September 3,
1987 pursuant to which all fees earned after that date were to be converted
into deferred stock equivalent units based on the market value of the Company's
stock on each fee payment date. Under such contract dividend equivalents in
amounts and timing equal to any cash dividends paid on the Company's
outstanding stock are similarly converted into additional stock equivalent
units. The Company paid no cash dividends on its stock in 1996. Mr. Tregurtha's
contract matures on October 1, 2005 or the earlier date of death or other
termination of Mr. Tregurtha as a Director. The contract was amended in 1992 to
provide that fee amounts deferred after May 1, 1991 (including any dividend
equivalent amounts) shall be payable on maturity only in cash, with amounts
deferred prior to such date payable in cash or shares of Company Class A Stock.
4
<PAGE>
The law firm of Ropes & Gray, Boston, Massachusetts, of which Mr. Fuguet is
a partner, has provided legal services to the Company since 1957.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
1. Security Ownership of Certain Beneficial Owners
Set forth below as of March 3, 1997 are the persons or groups known to the
Company who beneficially own, under the applicable rules and regulations of the
Securities and Exchange Commission, more than 5% of any class of the Company's
voting securities.
<TABLE>
<CAPTION>
Name and Address Title of Class Amount and Nature Percent Combined
of Beneficial Owner of Common Stock of Beneficial Ownership of Class Voting Power
- - ------------------- --------------- ----------------------- -------- -----------
Direct Indirect
------ --------
<S> <C> <C> <C> <C> <C>
Fiduciary Trust Company Class A 168,196 -- 1.3% 4.0%
International(1) Class B 56,064 -- 10.8%
Two World Trade Center
New York, NY 10048-0774
Henry D. Sharpe, Jr.(2) Class A 476,766 7,200 3.8% 11.7%
c/o Brown & Sharpe Class B 158,920 2,400 31.2%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Frank T. Curtin(3) Class A 411,147 -- 3.2% 11.6%
c/o Brown & Sharpe Class B 166,063 -- 32.1%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Charles A. Junkunc(3) Class A 362,765 -- 2.8% 12.9%
c/o Brown & Sharpe Class B 194,396 -- 37.6%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Robert D. Batting(3) Class A 311,147 -- 2.4% 11.0%
c/o Brown & Sharpe Class B 166,063 -- 32.1%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Putnam Fiduciary Trust(4) Class A 165,758 -- 1.3% 3.8%
Company Class B 52,744 -- 10.2%
859 Willard Street
Quincy, MA 02169
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name and Address Title of Class Amount and Nature Percent Combined
of Beneficial Owner of Common Stock of Beneficial Ownership of Class Voting Power
- - ------------------- --------------- ----------------------- -------- -----------
Direct Indirect
------ --------
<S> <C> <C> <C> <C> <C>
C. A. Delaney Capital(5) Class A 640,000 -- 5.25% 3.5%
Management Ltd. Class B -- -- --
BCE Place, Canada Trust
Tower 161 Bay Street,
Suite 5100
P.O. Box 713,
Toronto, Ontario
Canada M5J251
Palisade Capital
Management(6) Class A 612,300 -- 5.0% 3.4%
L.L.C. Class B -- -- --
One Bridge Plaza
Suite 695
Fort Lee, NJ 07024
</TABLE>
_____________________________
(1) Fiduciary Trust Company International, a bank, by virtue of various
investment management contracts and trust agreements with members of the
Sharpe family, holds the shares of Class A and Class B Stock in the Table.
See Footnote (2) below.
(2) Various members of the Sharpe family, including Henry D. Sharpe, Jr. and
Henry D. Sharpe, III, a Director continuing in office, beneficially owned
an aggregate of 645,286 shares of common stock of the Company comprised of
483,966 shares of Class A Stock and 161,320 shares of Class B Stock of the
Company. These holdings amount to 3.7% and 31.1%, respectively, of each
class of stock and represent 11.7% of the combined voting power of the
Class A Stock and Class B Stock. The table includes (a) an aggregate of
168,076 shares of Class A Stock and 56,024 shares of Class B Stock held by
Henry D. Sharpe, Jr.'s wife and children, including Henry D. Sharpe, III,
and by trusts, of which they are beneficiaries under agreements with
Fiduciary Trust Company International and under which they each have sole
voting and dispositive power with respect to their shares and with respect
to which Mr. Sharpe, Jr. disclaims beneficial ownership; (b) 120 shares of
Class A Stock and 40 shares of Class B Stock held by the Sharpe Family
Foundation, a charitable foundation, held by Fiduciary Trust Company
International with whom Mr. Sharpe, Jr. shares voting power and with
respect to which beneficial ownership is disclaimed; (c) 7,200 shares of
Class A Stock and 2,400 shares of Class B Stock as to which Henry D.
Sharpe, Jr. has neither voting nor dispositive power but as to which he is
a beneficiary under a trust established under the will of Henry D. Sharpe,
Sr.; and (d) 308,570 shares of Class A Stock and 102,856 shares of Class B
Stock held by Fiduciary Trust Company International as to which Henry D.
Sharpe, Jr. has sole voting and dispositive power .
(3) Messrs. Curtin, Junkunc, and Batting are Executive Officers of the Company
and serve as co-Trustees of the Brown & Sharpe Employee Stock Ownership
and Profit Participation Plan (the "ESOP"). The Table includes (i) 311,147
shares of Class A Stock and 166,063 shares of Class B Stock, which are
deemed to be beneficially owned by each of the foregoing persons, but as
to all of which ESOP shares (except, with respect to their own
respectively vested shares of Class A Stock and Class B Stock in such
plan) they disclaim beneficial ownership; (ii) shares of Class A Stock
issuable upon exercise of incentive stock options held by such Executive
Officers. (See II. Security Ownership of Management Footnote (4) and
Aggregated Options Table.); and (iii) with respect to Mr. Junkunc,
includes 5,618 shares of Class A Stock and 28,333 shares of Class B Stock
held by the Company's United Kingdom Pension Plan as to which Mr. Junkunc
has shared voting and investment power with respect to which Mr. Junkunc
disclaims beneficial ownership.
(4) Putnam Fiduciary Trust Company acts as Trustee of the Brown & Sharpe
Savings and Retirement Plan and the Brown & Sharpe Savings and Retirement
Plan for Management Employees, substantially similar tax qualified 401-K
savings plans covering U.S. employees (together referred to as the
"SARP"), and in that capacity shares voting power with respect to the
shares of Class A Stock and Class B Stock with and subject to direction
from participants in the SARP as to all of which shares Putnam disclaims
beneficial ownership.
(5) C. A. Delaney Capital Management Ltd., an investment manager, holds the
shares for the benefit of participants in the Spectrum United Canadian
Growth Fund and has sole voting and dispositive power with respect to the
shares of Company stock held in such Fund.
(6) Palisade Capital Management, L.L.C, a registered investment advisor, holds
the shares reported in accounts for the benefit of its clients and has
sole voting and dispositive power with respect to such shares.
6
<PAGE>
II. Security Ownership of Management
The following table and accompanying footnotes set forth certain
information about the beneficial ownership of the Company's Class A Stock and
Class B Stock as of March 3, 1997 by the Directors and Nominees and the named
Executive Officers included in the Summary Compensation Table and all Directors
and Executive Officers as a group.
<TABLE>
<CAPTION>
Name and Address Title of Class Amount and Nature Percent Combined
of Beneficial Owner of Common Stock of Beneficial Ownership of Class Voting Power
- - ------------------- --------------- ----------------------- -------- -----------
Direct Indirect
------ --------
<S> <C> <C> <C> <C> <C>
Frank T. Curtin(1) Class A 411,147 -- 3.2% 11.6%
Class B 166,063 -- 32.1%
Henry D. Sharpe, III(2) Class A 55,145 -- * 1.7%
Class B 18,381 -- 3.5%
John M. Nelson Class A 1,453 -- * *
Class B 151 -- *
Howard K. Fuguet Class A 1,000 -- * *
Class B -- -- --
Russell A. Boss Class A 1,000 -- * *
Class B -- -- --
Paul R. Tregurtha Class A 705 -- * *
Class B 13 -- *
Harry A. Hammerly Class A 2,000 -- * *
Class B -- -- --
J. Robert Held Class A -- -- -- --
Class B -- -- --
Roger E. Levien Class A -- -- -- --
Class B -- -- --
Charles A. Junkunc(1) Class A 362,765 -- 2.8% 12.9%
Class B 194,396 -- 37.6%
Richard F. Paolino(3) Class A 94,637 -- * *
Class B 2,323 -- *
Antonio Aparicio Class A 37,000 -- * *
Class B -- -- --
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name and Address Title of Class Amount and Nature Percent Combined
of Beneficial Owner of Common Stock of Beneficial Ownership of Class Voting Power
- - ------------------- --------------- ----------------------- -------- -----------
Direct Indirect
------ --------
<S> <C> <C> <C> <C> <C>
Sergio Cappa Class A -- -- -- --
Class B -- -- --
All Directors, Nominees
and Class A 1,147,591 7,200 9.1% 26.4%
Executive Officers as a Group Class B 353,544 2,400 68.8%
(21 persons)(4)
</TABLE>
*Less than one percent (1%).
_____________________________
(1) See Footnote (3) to I. Security Ownership of Certain Beneficial Owners.
(2) See Footnote (2) I. Security Ownership of Certain Beneficial Owners.
(3) Mr. Paolino resigned from the Company on January 31, 1997. See Footnote
(3) Summary Compensation Table and Employment, Severance, and Other
Agreements.
(4) With respect to Executive Officers who are not Directors, includes (i)
77,200 shares of Class A Stock as to which certain of the Executive
Officers have sole voting and investment power; (ii) 5,618 shares of
Class A Stock and 28,333 shares of Class B Stock held in the Company's
pension plan covering its United Kingdom employees as to which Mr.
Junkunc has shared voting and investment power; (iii) 5,393 vested
shares of Class A Stock and 2,832 vested shares of Class B Stock as to
which certain Executive Officers have shared voting power as
participants in the SARP and ESOP; and (iv) 270,499 shares of Class A
Stock subject to stock options presently exercisable or exercisable
within sixty (60) days of the expected March 24, 1997 date of mailing of
this Proxy Statement granted to the named Executive Officers and other
Executive Officers pursuant to the Company's Amended 1973 Stock Option
Plan (under which no further awards can be made) and 1989 Equity
Incentive Plan. (See Options and SAR Table under the heading "Executive
Compensation".)
Section 16(a) Beneficial Ownership Reporting Compliance
As required by Securities and Exchange Commission rules, the Company notes
that a new director, J. Robert Held, and Messrs. Sergio Cappa, Marcus Burton,
and Christopher J. Garcia, new Executive Officers of the Company, filed their
Form 3 initial reports of beneficial ownership of Company securities after the
due date.
Compensation Committee Report
Compensation Philosophy
The Salary Committee of the Board of Directors (the "Committee") presents
its report on executive compensation for the year 1996. Following the
combination with DEA S.p.A. in late 1994 and a corporate restructuring in 1995
which included hiring a new President and Chief Executive Officer and putting
into place a new senior level management team, the Committee has adopted a
philosophy to link executive compensation to continued improvements in corporate
performance and increases in shareholder value as measured primarily by the
Corporation's stock price. The Committee's guidelines for compensation decisions
are guided by the following principles:
. To provide a competitive total compensation package that enables the Company
to attract and retain the key executive talent needed to accomplish its
corporate goals.
. To integrate compensation programs with the Company's annual and long-term
business objectives and strategy in order to focus executive behavior on the
fulfillment of those objectives.
8
<PAGE>
. To provide variable compensation opportunities that are directly linked with
the performance of the Company and that align executive remuneration with the
interests of the stockholders.
In addition, the Committee also considers in implementing its decisions the
impact of Section 162(m) of the Internal Revenue Code of 1986 (the "Code"),
which in certain circumstances disallows compensation deductions in excess of
$1,000,000. This disallowance provision does not apply to performance-based
compensation, commissions, and certain other forms of compensation. The
Committee has determined that the Corporation's incentive compensation plans
should comply, to the extent practicable, with the Code's requirements for
performance-based compensation to ensure that the Corporation will be entitled
to full deductibility of all compensation paid under those plans.
Compensation Program
The Committee, which is composed of outside Directors who have no
interlocking relationships within the meaning of regulations of the Securities
and Exchange Commission, is responsible for reviewing the Company's overall
compensation program, reviewing the compensation of the Executive Officers, and
administering the cash bonus, deferred cash award, and stock based bonus award
plans to ensure that pay levels and incentive opportunities are competitive and,
of equal importance, reflect the performance of the Company. The components of
the compensation program for executives are described below.
Base Salary. The factors considered in determining the appropriate salary
are level of responsibility, prior experience and accomplishments, and the
relative importance of the job in terms of achieving corporate objectives and
general salary ranges for comparable positions at similar size companies or
divisions within the industry. Each Executive Officer's salary is reviewed
annually. Adjustments may be recommended based upon individual performance,
inflationary and competitive factors, and overall corporate results.
Annual Incentive Compensation. Under the Company's Amended Profit Incentive
Plan ("PIP"), Executive officers are eligible to receive a planned annual cash
bonus of up to a specified percentage (generally 30% to 40% for Executive
Officers) of base salary. At the beginning of each fiscal year, the Committee
establishes for each executive a maximum aggregate percentage bonus opportunity
(generally 60% for executive officers), which is comprised of separate bonus
categories tied to the satisfaction of a specified, largely quantitative formula
of corporation goals (e.g., net income and achievement of specific objectives).
Actual bonuses paid may be above or below the amount planned depending on
achievement of objectives but may not exceed 200% of the planned bonus. In order
to assure that the PIP would effectively encourage and reward superior
performance, the Committee in early 1996 restructured the specific performance
targets comprising the overall formula for the Executive Officers to focus their
content on promoting cross-divisional and inter-Company cooperation and also
focusing on net income and various determinants of cash flow. In addition, up to
30% of certain executives' annual bonuses, including up to 30% for the Chief
Executive Officer for 1996 (for 1995 the CEO's bonus was fixed in his May, 1995
employment agreement), were independent of the target formula and instead were
subject to award at the discretion of the Committee. Bonuses under the PIP for
performance in 1996 were made to a total of approximately seventy-eight
executives, including thirteen Executive Officers, in the aggregate. (See
information shown in the Summary Compensation Table.) For the named Executive
Officers other than the Chief Executive Officer (see below), 1996 performance
exceeded established performance goals and, accordingly, bonuses awarded with
respect to such 1996 performance and reported in the Bonus column in the Summary
Compensation Table were at the high end of the target ranges. The Committee
determined to award special bonuses to certain Executive Officers, including
Messrs. Curtin and Junkunc who were key contributors in the successful
completion of the Company's public stock offering concluded in October of 1996.
9
<PAGE>
Long-Term Incentive Awards
Stock Options. Stock options, restricted stock, and other stock based awards
granted under the Corporation's stock incentive plan for management, the 1989
Equity Incentive Plan (which has been approved by the stockholders), provide
incentive to executives by giving them a strong economic interest in maximizing
stock price appreciation, thereby better aligning their interests with the
Corporations' stockholders. Accordingly, each executive's total compensation is
significantly dependent upon stock performance. Option exercise prices are set
at 100% of fair market value on the date of grant and the options expire after
10 years. The options granted by the Committee vest over a period of years,
typically 50% after one year and 25% per year for the next two years, in order
to encourage management continuity and better align compensation to long-term
stock value. Significant awards of stock options were made in 1994 and 1995 to
the Company's CEO and certain other executives including those named in the
compensation table; and therefore, no awards of options were made to such
persons during 1996. Awards of options for an aggregate of 70,000 shares of
Class A Stock were made to three new Executive Officers not included in the
table who joined the management team in 1996.
Long-Term Deferred Cash Incentive Plan. This component of executive
compensation consists of the Key Employees' Long-Term Deferred Cash Incentive
Plan (the "LTDCIP"), pursuant to which the Company may make annual deferred cash
awards out of a bonus "pool" calculated as a percentage (6%) of adjusted pre-tax
earnings. Participants are entitled to an award credit equal to a pro rata
percentage of the bonus pool based on their salary relative to the aggregate
salaries of participants in the bonus pool for the award year. The Committee
designated twelve Executive officers as eligible participants for the 1996 award
year. Participants become vested in awards and interest accrued on their account
balances on the earliest to occur of the participants death or disability,
retirement from the Company at age 65, or the third anniversary of the year of
each award. Participants forfeit any unvested award credits if their employment
terminates. The Committee approved awards pursuant to the twelve Executive
Officers participating for 1996 including those named in the Summary
Compensation Table.
Compensation of Chief Executive Officer
Mr. Curtin joined the Agreement entered into on May 2, 1995 for a term of
three years, Mr. Curtin's base salary during 1995 was set at the annual rate of
$300,000 (his base salary was raised to $315,000 for 1996) plus a fixed
incentive bonus for 1995 of $75,000 and 10% annual contributions to a
supplemental executive retirement plan and a provision for an incentive bonus
for later years up to the maximum provided in the PIP in the discretion of the
Committee. The agreement also provided for the grant of options of 200,000
shares of Class A common stock at fair market value on May 3, 1995.
The Committee established Mr. Curtin's target annual cash bonus for 1996 at
40% of his salary. The Compensation Committee awarded Mr. Curtin a cash bonus
under the PIP of $252,000 for 1996, representing approximately 80% of his
salary. In determining Mr. Curtin's 1996 annual bonus, the Committee reviewed
the Corporation's performance and Mr. Curtin's individual performance against a
set of performance objectives which were approved by the Committee in early
1996. Mr. Curtin received an award credit under the LTDCIP in the amount of
$105,604.
The Committee concluded that Mr. Curtin's compensation arrangements are
appropriate in light of his continuing performance as Chief Executive Officer
and the significant improvements in the Corporation's profitability.
Russell A. Boss, Chairman
John M. Nelson
Paul R. Tregurtha
J Robert Held
10
<PAGE>
Stock Performance Graph
The following graph sets forth information comparing the cumulative total
return to holders of the Company's Class A Stock over the Company's last five
fiscal years beginning at the market close on the last trading day before the
beginning of the Company's fifth preceding fiscal year (the "Measuring Period")
with (1) the cumulative total return of the Standard & Poor's 500 Stock Index,
and (2) the cumulative total return of the Standard & Poor's Machinery
(Diversified) index. The graph assumes $100 invested in December 31, 1991 in
Company Class A common stock and $100 invested at the same time in each of the
S&P indexes shown and assumes that all dividends are reinvested.
<TABLE>
<CAPTION>
BNS S&P Machinery
Date Class A S&P 500 Index
- - --------- --------- ---------- -----------
<S> <C> <C> <C>
12/31/91 100 100 100
12/31/92 73.973 104.464 99.669
12/31/93 83.562 111.834 144.826
12/30/94 72.603 110.113 138.394
12/29/95 112.329 147.673 167.094
12/31/96 153.425 177.597 204.209
</TABLE>
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
during each of the Company's last three fiscal years for Mr. Frank T. Curtin,
the Company's Chairman of the Board, President, and Chief Executive Officer and
the four other highest-paid Executive Officers (as such term is defined under
rules promulgated under the Securities and Exchange Act of 1934), who were
serving in such capacity as of the end of the Company's last completed fiscal
year and whose earned compensation exceeded $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation Awards
-----------------------------
Annual Compensation Awards Pay-outs
- - ---------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Annual Stock Underlying All Other
Name and Compen- Award(s) Options/ LTIP Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) ($)(6) SARs (#) Payouts ($) sation ($)
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank T. Curtin(1)(7) 1996 315,000 327,000 -- -- -- -- 160,364
President and 1995 193,846 75,000 71,937 -- 200,000 -- 44,886
Chief Executive 1994 -- -- -- -- -- -- --
Officer
Charles A. Junkunc(2)(7) 1996 218,500 181,00 -- -- -- -- 116,835
Vice President and 1995 190,000 61,332 -- -- 40,000 -- 43,674
Chief Financial Officer 1994 190,000 19,000 -- 39,000 25,000 -- 21,247
Richard F. Paolino(3)(7) 1996 235,246 45,302 -- -- -- -- 30,861
Vice President - 1995 214,230 44,880 -- -- 30,000 -- 49,257
Customer Development 1994 190,000 19,000 -- -- 25,000 -- 20,854
Antonio Aparicio(4)(7) 1996 255,790 89,648 -- -- -- -- 133,831
Vice President - 1995 251,256 75,636 -- -- 33,000 -- 66,956
Precision Measuring 1994 216,962 16,500 -- 26,000 25,000 -- 18,904
Instruments
Sergio Cappa(5)(7) 1996 220,134 35,000 -- -- -- -- 104,578
Vice President & 1995 137,145 -- -- -- 30,000 -- 35,806
Managing Director, 1994 -- -- -- -- -- -- --
DEA - Brown & Sharpe
S.p.A.
</TABLE>
____________________________
(1) Mr. Curtin commenced his employment with the Company on May 2, 1995. Column
(d) includes for 1996 a special bonus in the amount of $75,000 paid in
connection with successful completion of the public stock offering in 1996.
The salary shown for 1995 in Column (c) was the amount paid to him from his
commencement date of employment through December 31, 1995. For 1995 the
bonus amount in Column (d) was guaranteed, for the 1995 "short" year only,
under his Employment Agreement and the amount in Column (e) represents
payment of relocation and moving expenses. Column (i) includes amounts of
$32,721 for 1996 and $19,384 for 1995 for Mr. Curtin, provided under his
Employment Agreement (see Page 15), representing retirement benefits
provided in excess of limitations imposed by the Internal Revenue Code on
Company contributions to the named executives' SARP and ESOP retirement
accounts, which are credited to a non-qualified unfunded deferred
compensation Supplemental Executive Retirement Plan account (the "SERP"),
and an amount of $14,742 representing the value of the 1996 year-end
Company contributions to the executives SARP (4% plus Company matching
contributions) and ESOP (2% in shares of Class A Stock).
12
<PAGE>
(Footnotes cont'd. from previous page)
(2) Column (d) includes for 1996 a special bonus in the amount of $50,000 paid
in connection with the successful completion of the public stock offering
in 1996. Column (i) includes for 1996 the value of the 1996 year-end
Company contributions to the executives SARP and ESOP retirement accounts
in the amount of $14,742 and amounts of $6,446 for 1995 and $21,688 for
1996, including interest earned in 1996 to the executives SERP account.
(3) Column (i) includes for 1996 the value of the 1996 year-end Company
contributions to the executives SARP and ESOP in the amount of $14,742 and
amounts of $6,629, $8,842 and $16,119 including interest for 1994, 1995,
and 1996, respectively, to the executives SERP account. Mr. Paolino
resigned from employment with the Company on January 31, 1997 (see
Employment Severance and Other Agreements.
(4) Mr. Aparicio is employed by Tesa - Brown & Sharpe S.A., a Swiss corporation
("Tesa:) and subsidiary of the Company. Amounts shown converted from Swiss
Franc equivalent for 1996, 1995, and 1994 at the average U.S. dollar
exchange rates of $.8100, $.8461, and $.7332, respectively. Column (i)
includes dollar value of contributions made to Tesa - Brown & Sharpe S.A.
retirement plans for Mr. Aparicio's benefit for 1994, 1995, and 1996 in the
amounts of $18,904; $36,346; and $41,587.
(5) Mr. Cappa commenced his employment with DEA - Brown & Sharpe S.p.A., an
Italian corporation ("DEA") and subsidiary of the Company, in May of 1995,
and his compensation for such year reflects the short period of employment.
Column (i) includes the values of contributions by DEA in the amounts of
$25,563 and $17,581 for 1996 and 1995, respectively, to the executives
statutory retirement plan. Amounts shown converted from Italian Lire
equivalent for 1996 and 1995 at the average U.S. dollar exchange rates of
$.00064898 and $.00061500, respectively.
(6) The table indicates the dollar value at the date of the award of restricted
stock. The table set forth below provides information relating to unvested
restricted stock awarded to and held by the Executive Officers listed in
the above table:
<TABLE>
<CAPTION>
Total Number Restricted Aggregate Market Value
Unvested Shares Held Restricted Unvested Shares
Name as of Fiscal Year-End* Held as at Fiscal Year-End
---- --------------------- --------------------------
<S> <C> <C>
Charles A. Junkunc 12,500 $175,000
Richard F. Paolino 10,100 $141,400
Antonio Aparicio 11,000 $154,400
</TABLE>
* The award to Mr. Paolino was made in 1992 and the awards to Messrs. Junkunc
and Aparicio were made in 1992 and 1994. Restrictions lapse ratably over
five (5) years from the date of award with 25% of the shares awarded
vesting two years and three years, respectively, after such date and the
remaining 50% of the shares vesting five (5) years after such date. The
Company in 1991 omitted and has not reinstated its dividend on its Class A
Stock; however, should it be reinstated, dividends would be paid on the
restricted stock reported. At December 31, 1996 the closing market price of
the Company's shares of Class A Stock was $14.00 per share.
(7) Includes amounts of $112,901, $80,405, $92,244, and $79,015 for 1996
for Messrs. Curtin, Junkunc, Aparicio, and Cappa, respectively and $25,502,
$24,996, $28,183, $30,610 and $18,225 for 1995 for Messrs. Curtin, Junkunc,
Paolino, Aparicio, and Cappa, respectively, credited to a long-term
deferred cash incentive plan memorandum account established for the
executive beginning with the end of the 1995 fiscal year. On February 23,
1996 the Board of Directors approved, on recommendation of the Salary
Committee, the Brown & Sharpe Key Employees' Long-Term Deferred Cash
Incentive Plan ("LTDCIP") with effect from January 1, 1995 (see discussion
in Compensation Committee Report). The LTDCIP is intended to be a non-
qualified unfunded pension plan within the meaning of Section 3(2) of the
Employee Retirement Income Security Act. Under the LTDCIP award credits are
to be made annually beginning with the 1995 year for LTDCIP participants
based on one year's financial performance of the Company out of an award
pool of 6% of pre-tax adjusted earnings. Participants become vested in each
accrued annual award after three years subject to accelerated vesting upon
a change of control (as defined) and with payout of the credited vested
amounts plus interest accrued at a market rate deferred until retirement at
age 65, death or disability, or earlier upon termination of employment for
reasons other than cause. The amount credited to Mr. Paolino's account for
1995 and accrued interest was forfeited by him pursuant to the LTDCIP as a
result of his resignation from employment, and such amount was reallocated
proportionately to 1995 participants' accounts including those Executive
Officers named in the Table.
13
<PAGE>
STOCK OPTION/SAR GRANTS
Under the provisions of the Company's 1989 Equity Incentive Plan ("EIP"), a
variety of stock and stock based awards, performance cash awards and related
benefits, including stock options and stock appreciation rights ("SARs"), may
be awarded to Executive Officers and other key employees of the Company and its
subsidiaries. Options previously awarded and remaining outstanding under the
Company's Amended 1973 Stock Option Plan (the "73 Plan"), which plan
terminated on April 26, 1989 and under which no further awards can be made, are
subject to being exercised by recipients and are included, if applicable, in
the amounts set forth in the table below. There were no options or SARs
awarded under the EIP to the Executive Officers named in the Summary
Compensation Table in 1996.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table summarizes options and SARs exercised during 1996 and
presents the value of unexercised options and SARs held by the named Executive
Officers at fiscal year-end:
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End (#)
Shares
Acquired on Value Exercisable (E)/ Exercisable (E)/
Name Exercise (#) Realized ($) Unexercisable(U) Unexercisable (U)
- - ------------------------------------------------------------------------------------------------------------------------------
(E) (U) (E) (U)
-- -- -- --
<S> <C> <C> <C> <C> <C> <C>
Frank T. Curtin None -- -- 200,000 -- 1,450,000
Charles A. Junkunc None -- 25,000 40,000 187,500 280,000
Richard F. Paolino None -- 77,999 -- 433,373 --
Antonio Aparicio None -- 25,000 33,000 187,500 231,000
Sergio Cappa None -- -- 30,000 -- 210,000
</TABLE>
FOREIGN RETIREMENT PLANS
Tesa - Brown & Sharpe S.A. ("Tesa"), one of the Company's principal foreign
subsidiaries, maintains a defined contribution retirement plan required by Swiss
law, pursuant to which benefits accrue on behalf of Mr. Aparicio annually in an
amount equal to a percentage (based on the executive's age and on his salary) of
annual compensation and under which interest accrues on accrued benefit amounts
at a compound annual rate of 4%. Upon retirement, the executive is entitled to
receive an annual pension in an amount equal to 7.2% of the executive's total
accrued benefits, and the estimated annual pension payable upon retirement at
normal retirement age under such plan is an amount equivalent to $114,433 for
Mr. Aparicio. In addition, Tesa sponsors a separate defined contribution plan
pursuant to which Mr. Aparicio is eligible to receive a lump-sum payment upon
retirement. The estimated lump sums payable to Mr. Aparicio upon retirement
under this sponsored plan at normal retirement age is an amount equivalent to
$418,038. (Amounts converted at the rate of $.8100 per Swiss Franc.)
Mr. Sergio Cappa, a corporate Vice President and Managing Director of DEA -
Brown & Sharpe S.p.A. ("DEA"), an Italian company and one of the Company's
principal foreign subsidiaries, is entitled to receive a
14
<PAGE>
statutory pension under Italian law at age sixty. Amounts contributed by DEA to
such government pension scheme were $17,581 for 1995 and $25,563 for 1996
(amounts converted at the rate of $.0006489 per Italian Lira)
EMPLOYMENT, SEVERANCE, AND OTHER AGREEMENTS
Mr. Frank T. Curtin has an Employment Agreement with the Company for a
three-year term of employment commencing on May 2, 1995 in the capacity of
President and Chief Executive Officer. The Agreement provides for (i) an annual
base salary of $300,000 subject to increases at the discretion of the Board of
Directors (which base salary was increased by the Board, effective January 1,
1996, to $315,000), (ii) a guaranteed cash incentive bonus for 1995 performance
of $75,000, (iii) future cash incentive bonuses for subsequent fiscal years in
an amount not to exceed the maximum amount permitted under the PIP with all or
a portion thereof to be "earned out" and subject to achievement of objectives
determined by the Compensation Committee of the Board (See Compensation
Committee Report) and (iv) participation in other executive employee benefits.
Pursuant to the Agreement, Mr. Curtin also received an award of incentive stock
options disclosed in the Table on Page 12, and the Company agreed to annually
contribute an amount equal to 10% of his base salary to a Supplemental
Executive Retirement Plan account for his benefit. The Agreement provides that
the Company may terminate his employment for a reason other than death,
disability, or for cause (as defined in the Agreement) subject, however, to
continuation of his base salary and benefits for the unexpired term remaining
under the Agreement, but in any event not less than twelve months. No salary or
benefits are continued if the employment is terminated by the Company for cause
or upon death or disability. In addition Mr. Curtin has the right under the
Agreement to terminate his employment following a Change of Control of the
Company (as defined in the Agreement) in the event his position or job
responsibilities change or the compensation and benefits reserved to him in the
Agreement are not provided. In such event the Company would be required to
continue to pay him the base salary and benefits in effect at the time of such
termination for the unexpired term of the Employment Agreement.
The Company has an Employment/Severance Agreement dated March 14, 1988 as
amended with Richard F. Paolino, a Vice President. The Agreement provided for a
term of employment, commencing upon the date of a Change of Control (as defined
for the purposes in the Agreement) of the Company, which commenced on the
occurrence Stock in connection with the acquisition on September 28, 1994 by the
Company of DEA S.p.A. The agreement provided for certain severance payment
benefits, all to be paid to Mr. Paolino in the event his employment with the
Company terminated. Mr. Paolino terminated his employment with the Company on
January 31, 1997. Pursuant to the Agreement, the Company made a severance
payment to Mr. Paolino in February of 1997 in the amount of $319,404.
The Company has an agreement with Charles A. Junkunc, Vice President and
Chief Financial Officer, who joined the Company on May 4, 1992, to pay a
severance amount to him equal to his annual salary in effect at the time of any
termination (except for cause) and to continue his basic employee benefits for
a one-year period in the event his employment with the Company is terminated
for any reason. In addition to the foregoing, the Company is obligated to pay a
bonus equal to the average of the bonus payments received by him during the
three years (or such lesser period) prior to termination, pro rated according
to the number of months of service during the year in which any termination
occurs. Upon any termination Mr. Junkunc, if requested by the Company, is to
provide consulting services to the Company for one year, with offsets against
the payments to be made by the Company for any income received from other
sources.
The Company's Swiss subsidiary, Tesa - Brown & Sharpe S.A., has an
employment agreement with Antonio Aparicio entered into in October 1995 which
provides payment of a severance amount to Mr. Aparicio upon termination of
employment equal to the salary paid to him during the twelve-month period prior
to the effective date of termination.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CHANGE OF OWNERSHIP OF CLASS A STOCK AND SHARE VOTING ARRANGEMENTS
A substantial change in ownership of the common stock of the Company
occurred in October of 1996 following completion of a public offering of
7,886,000 shares of Class A common stock of the Company, which included
3,305,679 outstanding shares of Class A Stock held by Finmeccanica S.p.A., an
Italian corporation ("Finmeccanica"). Finmeccanica had earlier acquired
3,450,000 newly issued shares of Class A Stock from the Company as purchase
consideration in connection with the acquisition by the Company in September
1994 of Finmeccanica's metrology business comprised of DEA S.p.A., now known as
DEA - Brown & Sharpe S.p.A. ("DEA"), and its subsidiaries. As a result of
Finmeccanica's sale of substantially all of its shares of Class A Stock in the
public offering and as required by the provisions of a Shareholders Agreement
entered into with the Company at the time of the acquisition, three members of
the Board of Directors who were Finmeccanica shareholder representatives,
Messrs. Vincenzo Cannatelli, Alberto de Benedictis, and Enrico Albareto,
resigned from the Board on October 25, 1996.
The Shareholders Agreement containing, in addition to requiring three
Finmeccanica Board seats, certain provisions relating to voting Finmeccanica
stock, preemptive rights to acquire newly issued shares, and restrictions on
transfer of Finmeccanica's stock was terminated on the date of sale of
Finmeccanica's shares of Class A Stock. An agreement between Henry D. Sharpe,
Jr. (See "Security Ownership of Certain Beneficial Holders".) and Finmeccanica
entered into at the time of the DEA acquisition governing the voting of their
respective shares of Class A Stock for certain nominees for election to the
Board was also terminated on such date. A Credit Support Agreement entered into
between the Company and Finmeccanica at the time of the DEA S.p.A. acquisition,
however, remains in effect. Pursuant to such Agreement, Finmeccanica has
unconditionally guaranteed payment by the Company to the New York branches of
Banca Commerciale Italiana and Istituto Bancario San Paolo di Torino of an
aggregate of $25 million of term loan debt of the Company included in
connection with the DEA acquisition coming due on September 28, 1997.
ITEM 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK TO 32,000,000 SHARES, $1.00 PAR VALUE
The Board of Directors on February 14, 1997 approved, subject to stockholder
approval, and recommends that the stockholders approve an amendment of the
Certificate of Incorporation of the Company to increase the authorized number
of shares of common stock, $1.00 par value, of which there are two classes,
Class A Stock and Class B Stock, from 17,000,000 to 32,000,000 shares by
increasing the number of authorized shares of Class A Stock from 15,000,000
shares to 30,000,000 shares. The Class A Stock is listed on the New York Stock
Exchange. The number of authorized shares of Class B Stock will remain at
2,000,000.
Currently the authorized capital stock of the Company consists of 1,000,000
shares of Preferred Stock, $1.00 par value per share; 15,000,000 shares of
Class A common stock, $1.00 par value per share; and 2,000,000 shares of Class
B common stock, $1.00 par value per share. Each share of Class A Stock
entitles the holder thereof to one vote per share and each share of Class B
stock entitles the holder thereof to ten votes per share except to the extent
otherwise provided in the Certificate of Incorporation or in the Delaware
General Corporation Law. The holders of the outstanding shares of Class A
Stock are entitled under Delaware corporation law to vote as a class upon the
proposed amendment to increase the number of authorized shares of such class
If the stockholders approve this amendment, it will become effective upon the
filing of a Certificate of Amendment with the Secretary of State of Delaware,
which is expected to take place promptly after the meeting.
16
<PAGE>
At March 12, 1997 the Company had 12,686,978 shares of Class A Stock issued
and outstanding, 2,270,430 shares were authorized and unissued and 42,592
shares of such class were held in the Company's treasury; and, 515,862 shares
of Class B Stock issued and outstanding and 1,484,138 shares of such class were
authorized and unissued. As of that date, an aggregate of 1,814,956 shares of
Class A Stock were reserved for issuance including 708,748 shares reserved for
issuance upon exercise of outstanding options under the Company's stock plans
and 53,450 additional shares available for issuance upon the further grant of
options or other stock based awards under such stock plans. In addition 57,758
shares were reserved for issuance pursuant to the Company's Employee Stock
Ownership and Profit Participation ("ESOP") Plan; 515,862 shares were reserved
for issuance upon conversion of shares of Class B Stock; and 495,238 shares
were reserved for issuance upon conversion of the Company's 9 1/4% Convertible
Subordinate Debentures due December 15, 2005. Other than increasing the number
of shares of Class A Stock authorized for issuance, the amendment does not
alter or change the powers preferences, or special rights of the holders of
shares of Class A Stock.
The Board of Directors is empowered to provide from time to time for the
issuance of one or more series of Preferred Stock, none of which is currently
issued, without further stockholder action and to designate various terms and
provisions with respect to each such series whether issued or not, including
without limitation, the dividend rate; redemption price; terms of any sinking
fund; conversion rights, if any; voting rights, if any; and rights of the
holders upon liquidation. The effect of the issuance of any shares of
Preferred Stock upon the rights of holders of the Stock may not be determined
until the Board of Directors specifies the rights of the holders of such
Preferred Stock. However, such effects may qualify or limit the rights of
holders of the Stock and might include, among other things, restricting
dividends on the Stock, diluting the voting power of the Stock, impairment of
the liquidation rights of the Stock, and delaying or preventing a change in
control of the Company without further action by the stockholders. The Company
has no present plans to issue any shares of Preferred Stock.
The Board of Directors believes that it is desirable to have available a
substantial number of authorized but unissued shares of Class A Stock which may
be issued from time to time, without further authorization of the stockholders,
in order to be able to provide for stock splits or stock dividends, stock
options, and other equity incentives, to be able to take advantage of
acquisition opportunities and to meet future capital needs. Following the
recently completed public offering of 4,424,361 newly issued shares of Class A
Stock, the number of authorized shares remaining is not adequate to meet the
foregoing purposes. The New York Stock Exchange currently has a listing
requirement, the effect of which is to require a listed company issuing shares
of authorized but unissued stock in a transaction in an amount greater than
18.5% of its then outstanding stock to obtain prior stockholder approval.
In addition to the foregoing uses for authorized but unissued stock,
additional authorized but unissued shares of common stock might be used in the
context of a defense against or response to possible or threatened hostile
takeovers. For example, authorized and unissued shares of common stock or of
the 1,000,000 authorized but unissued shares of Preferred Stock could be used
in an effort to defeat certain takeover attempts because the issuance of
additional shares (whether or not in connection with an acquisition or
otherwise) could dilute the ownership interest of a substantial shareholder,
increase the total amount of consideration necessary for a shareholder to
obtain control or increase the voting power of friendly third parties. In 1988
the Company implemented a number of measures discussed below considered to be
potential defenses to a hostile takeover of the Company.
On April 29, 1988 the stockholders approved several actions taken by the
Board of Directors which could be viewed as anti-takeover defenses. Among the
actions approved were three amendments to the Company's Certificate of
Incorporation, including one creating a second class of common stock, the Class
B Stock, having ten votes per share; one increasing the authorized common stock
from 7,500,000 to 15,000,000 shares; and one requiring that shareholders act
only at a meeting (and not by written consent). In March 1988 the Company
adopted a Preferred Stock Purchase Rights Plan, and in connection therewith the
Company designated a new series of Preferred Stock as
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part of its authorized 1,000,000 shares of Preferred Stock comprised of 170,000
shares of Series A participating Preferred Stock. No shares of Series A
Participating Preferred Stock have been issued. When issued, shares of Series A
Participating Preferred Stock will have 100 votes per share. No distributions
can be made to holders of shares of stock ranking junior, either as to dividends
or upon liquidation or winding up, to the Series A Participating Preferred Stock
unless prior thereto the holders of the Series A Participating Stock shall have
received $100 per share plus an amount equal to accrued and unpaid dividends to
the date of such payment. Following such payment, no additional distributions
can be made to the holders of Series A Participating Preferred Stock unless the
holders of Stock shall have received a per share "common adjustment" payment
based on a formula adjustment.
Upon the approval in 1988 of the proposal to create a class of common stock
having ten votes per shares, the Board of Directors declared a dividend to
holders of the existing common stock, redesignated as Class A Stock, of one
share of Class B Stock for each three shares of Class A Stock. Each share of
Class B Stock entitles the holder to ten votes per share on all matters, except
that the holders of Class A Stock are entitled to elect one-third of the
directors, with the remaining two-thirds of the directors to be elected by the
combined vote of both classes of common stock and except as may otherwise be
provided in the Certificate of Incorporation in the case of certain votes to
approve certain business combinations and except as may be otherwise provided
in the General Corporation law of Delaware. The Class B Stock is not
transferable except in certain limited circumstances specified in the Company's
Certificate of Incorporation, including transfers to specified family members.
The Class B Stock is convertible at all times into Class A Stock on a
share-for-share basis, by sending to the Company's Transfer Agent the
certificate, unsigned, together with a letter indicating that such shares, or a
portion thereof, are desired to be so converted. A stockholder who does not
wish to complete the conversion process prior to a sale or transfer may effect
a sale or transfer of the Class A Stock into which such stockholder's Class B
Stock is convertible by simply delivering the certificate or certificates for
such shares of Class B Stock to a broker, properly endorsed and otherwise in
good order for transfer. The broker may then present the certificate or
certificates to the Company's Transfer Agent which, if the transfer is
otherwise in good order, will issue to the purchaser a certificate for the
number of shares of Class A Stock sold or transferred.
In addition the Board of Directors has the power to convert at any time all
outstanding shares of Class B Stock into shares of Class A Stock.
Class B Stock are entitled to dividends when and as declared by the Board of
Directors; however, no cash dividends may be declared on the Class
unless cash dividends of at least an equal per share amount are declared and
paid on the Class A Stock. Under the Company's present borrowing arrangements,
the Company is prohibited from paying any dividends on its capital stock.
Shares of authorized but unissued Class A Stock and Class B Stock may be
issued from time to time by the Board of Directors without further stockholder
action except as required by applicable law of the State of Delaware, under
which the Company is incorporated, the Certificate of Incorporation, or the
rules of the New York Stock Exchange. In that connection, the rules of the New
York Stock Exchange presently do not prohibit the issuance of the previously
authorized but unissued Class B Stock and such issuance will generally be
permitted subject to consultation with the Exchange.
The holders of the Company's common stock do not have preemptive rights to
subscribe to shares of common stock or other securities issued by the Company.
The issue of additional authorized shares of common stock may dilute the voting
power and equity interest of present stockholders. The Company does not as of
the date of this Proxy Statement have any plans or intentions to issue any
common stock other than pursuant to share reservations in connection with the
Company's existing compensation, incentive and retirement plans, the Company's
outstanding convertible debentures and the Rights Plan. It is not possible to
predict in advance whether the issue of additional shares will have a dilutive
effect on earnings per share as it depends on the specific events associated
with a particular transaction. However, additional shares issued pursuant to
employee benefit plans would tend to have a dilutive effect on earnings per
share. In addition, the Company has in the past made significant acquisitions
and is
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from time to time involved in discussions and negotiations concerning possible
future acquisitions by the Company. Any such discussions or negotiations may,
depending on the circumstances, not be disclosed prior to reaching a definitive
agreement. Any such future acquisition could involve the issuance of additional
common stock by the Company. Any issuance of additional shares of common stock
would have the effect of reducing the percentage voting interest of previously
outstanding common stock.
VOTE REQUIRED FOR APPROVAL
Approval of the proposed amendment to the Company's Certificate of
Incorporation described above will require the affirmative vote of a majority
of the votes entitled to be cast by the holders of Class A Stock voting as a
separate class and the affirmative vote of a majority of the votes entitled to
be cast by the holders of Class A Stock and Class B Stock voting together as a
single class.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
AMENDMENT TO INCREASE THE AUTHORIZED COMMON STOCK.
ITEM 3
APPROVAL OF AN AMENDMENT TO THE 1989 EQUITY INCENTIVE PLAN
INCREASING THE NUMBER OF SHARES AUTHORIZED TO BE
AWARDED AND DELIVERED THEREUNDER
Subject to approval by the stockholders at the 1997 Annual Meeting, the
Board of Directors at its regular meeting held on February 14, 1997 approved a
proposal to amend the Company's 1989 Equity Incentive Plan (the "Plan") to
increase by 650,000 shares to 1,525,000 shares the aggregate number of shares
of stock of the Company which may be issued and delivered upon options,
restricted stock awards, or other stock-based awards granted to employees under
the Plan and to provide that shares of Class B Stock may also be delivered
under the Plan. The Plan, as originally approved by the stockholders at the
April 28, 1989 Annual Meeting, authorized the issuance of 225,000 shares of the
Company's Class A Stock and was amended by the Board of Directors on February
21, 1992 and approved by the stockholders of the Company at the 1992 Annual
Meeting, to increase the number of shares authorized for delivery under the
Plan by 150,000 shares, and was further amended by the Board of Directors on
February 15, 1995 and approved by the stockholders at the 1995 Annual Meeting,
to increase the number of shares authorized for delivery under the Plan by
500,000 shares for an aggregate of 875,000 shares of Class A Stock currently
authorized for issuance.
As of March 12, 1996, incentive stock options for a total of 719,250 shares
of the Company's Class A Stock and restricted stock awards for a total of
102,300 shares of Class A Stock in each case net of forfeitures have been
awarded under the Plan leaving 53,450 shares available for the granting of
options, restricted stock awards or other stock-based future awards under the
Plan. The Board of Directors believes that the number of shares remaining
available for issuance under the Plan is insufficient to continue to fulfill
the purposes of the Plan, which expires on February 24, 1999, as originally
approved by the stockholders and that the number of shares authorized for
delivery thereunder should be increased to 1,525,000.
The stockholders approved at the 1995 Annual Meeting an additional amendment
to the Plan approved by the Board limiting to 300,000 the number of shares that
may be awarded in a stock option grant to an individual in any calendar year
during the remaining term of the Plan. Section 162(m) of the Internal Revenue
Code places limitations on the deductibility of compensation in excess of $1
million paid to the Chief Executive Officer and the four other most highly
compensated Executive Officers unless the compensation is performance based, as
defined. For compensation attributable to stock options and stock appreciation
rights to qualify as performance based, the plan
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under which they are granted must state a maximum number of shares with respect
to which options and rights may be granted during a specified period.
The Directors believe that the Plan is an important means of attracting,
holding and motivating key employees of the Company and that the Plan is a
necessary and integral part of the Company's overall management compensation
program. As noted under the heading "Compensation Committee Report" earlier in
the Proxy Statement, the principal reason for the proposed increase in the
aggregate number of shares deliverable under the Company's 1989 Equity
Incentive Plan, as proposed for stockholder approval in this Item 3, is to have
sufficient shares available to make substantial stock awards, together with
mid-term cash awards (for each year in a three-year period) to the group of
senior executives, principally the Executive Officers, who have the task of
turning around the Company's financial performance following the acquisitions
completed in 1994. To date cash performance awards have not been made under the
1989 Equity Incentive Plan. The foregoing proposed amendments will make no
change to the Plan other than increasing the total number of shares authorized
to be delivered under the Plan and to permit shares of Class B Stock to be
delivered under the Plan. Rules of the New York Stock Exchange precluding the
delivery of Class B Stock have been modified to permit such issuance, and the
Board of Directors believes that it would be advisable, as was originally
intended, that Class B Stock be available for this purpose.
Set forth below is a summary of the Plan as is now in effect.
ADMINISTRATION; ELIGIBLE EMPLOYEES. The Plan is administered by the Salary
Committee of the Board, consisting of no fewer than three persons appointed by
and serving on the Board of Directors, all of the members of which Committee
must be by the Securities and Exchange Commission and all of whom are considered
"outside directors" for purposes of Code Section 162(m) and the regulations
thereunder. The Committee has full power to, among other matters, select from
among the employees eligible for awards, the individuals to whom awards will be
granted, to make any combination of awards to any participants, to determine the
specific terms of each grant, waive compliance with any term or condition of a
grant, and with the consent of the employee, substitute one grant for another,
subject to the provisions of the Equity Incentive Plan. Persons eligible to
participate in the Equity Incentive Plan will be those key employees of the
Company or any of its subsidiaries who are in a position to make a significant
contribution to the success of the Company or its subsidiaries, as selected from
time to time by the Committee. At March 12, 1996 approximately seventy-eight
persons, including one Director and twelve other officers, were eligible to
participate in awards under the Equity Incentive Plan.
STOCK OPTIONS. The Plan permits the granting of options that qualify as
incentive stock options under the Internal Revenue Code ("incentive options" or
"ISOs") and stock options that do not so qualify ("non-statutory options"). The
option exercise price of each option shall be determined by the Committee but
shall not be less than 100% of the fair market value of the shares on the date
of grant (110% in case of ISOs granted to a ten percent shareholder).
The term of each option will be fixed by the Committee but may not exceed
ten years from the date of grant (five years in the case of an ISO granted to a
ten percent stockholder). The Committee will determine at what time or times
each option may be exercised. Options may be made exercisable in installments,
and the exercisability of options may be accelerated by the Committee. The
Committee may, in its discretion, provide that upon exercise of an option,
instead of receiving shares free from restrictions under the Plan, the
participant will receive shares of Restricted Stock or Deferred Stock awards.
Also, if the market price of the Common Stock subject to an option exceeds the
exercise price of the option at the time of exercise, the Committee may, in its
discretion and upon request by an employee, cancel the option and pay to the
employee an amount in cash equal to the difference between the fair market
value of the Common Stock which would have been purchased pursuant to the
exercise (determined on the date the option is cancelled) and the aggregate
exercise price which would have been paid.
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The exercise price of options granted under the Equity Incentive Plan must
be paid in full in cash or by check or other instrument acceptable to the
Committee or, if the terms of the option permit (or for a non-statutory option,
if the Committee permits at or after the grant of the option), by shares of
Common Stock, which have been held for at least six months (unless the
Committee approves in any instance a shorter period); by a promissory note
payable on terms acceptable to the Committee; by delivery of an unconditional
and irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price; or by any combination of the
foregoing, provided that the par value must be paid in cash or by check or
other instrument acceptable to the Committee.
In the event of termination of employment by reason of retirement at or
after age 60 with the consent of the Company, total and permanent disability,
or death, an option will thereafter be exercisable until the date the option
would have terminated if the participant had remained an employee or such
earlier date as may be established by the Committee either at or after grant of
the award. If an optionee terminates employment by reason of retirement or
total and permanent disability and thereafter dies while the option is still
exercisable, the option will be exercisable until the date the option would
have terminated if the participant had remained an employee or such earlier
date as may be established by the Committee either at or after grant of the
award.
If an optionee terminates employment for any reason other than retirement,
total and permanent disability or death, his or her options, to the extent then
exercisable, will remain exercisable until the earlier of (i) the date which is
three months after the date of termination of employment or such later date as
may be determined by the Committee either at or after grant of the Award; and
(ii) the date on which the award would have terminated if the participant had
remained an employee. However, if employment was terminated for cause (as
defined in the Plan), any awards held by the optionee at the time of termination
shall promptly expire.
To qualify as incentive options, options must meet additional Federal tax
requirements, including limits on the value of shares subject to incentive
options that vest annually for any participant, a shorter exercise period after
termination and a higher minimum exercise price in the case of certain large
stockholders.
SPECIAL LIMITATIONS APPLICABLE TO CERTAIN AWARDS. The Committee has
discretion under the Plan to award options that satisfy certain performance
based compensation arrangements intended to be exempt from the deduction
limitations of Section 162(m) of the Internal Revenue Code as well as options
that are not intended to satisfy those requirements, provided such non-exempt
options will not jeopardize the continued exemption under Section 162(m)(4)(C)
of exempt options. Subject to adjustment and to the extent such adjustment is
consistent with the continued satisfaction by exempt options of the
requirements of Section 162(m)(4)(C) of the Code, the maximum number of shares
of Stock for which options may be awarded under the Plan to any Participant in
any calendar year is 300,000 shares. However, following the issue of final
regulations under Section 162(m), the Committee has determined not to grant
exempt options under the Plan. The re-grant of a cancelled option or the
repricing of an option is treated as a separate award to the extent required
under Section 162(m)(4)(C) of the Code.
STOCK APPRECIATION RIGHTS. The Committee may also grant stock appreciation
rights, alone or in conjunction with options, entitling the holder upon
exercise to receive an amount in any combination of cash or shares of
unrestricted Common Stock, Restricted Stock, or Deferred Stock awards (as
determined by the Committee), not greater in value than the increase since the
date of grant in the value of the shares covered by such right. Stock
appreciation rights may be granted separately from or in tandem with the grant
of an option. In the case of stock appreciation rights granted in tandem with
options, each stock appreciation right will be exercisable only at such time or
times, and to the extent, that the related option is exercisable and will
terminate upon the termination or exercise of any accompanying option. The
accompanying option will terminate upon the exercise of the related stock
appreciation right.
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In the event of the termination of an employee holding a stock appreciation
right, the exercisability of such right will be treated in the same manner as a
non-statutory option, such treatment being more fully described above.
RESTRICTED STOCK AND UNRESTRICTED STOCK. The Committee may also award
shares of Common Stock subject to such conditions and restrictions as the
Committee may determine ("Restricted Stock"). The purchase price of shares of
Restricted Stock shall equal the par value of those shares.
Recipients of Restricted Stock must accept an award within 60 days of the
grant of such award by written instrument and tender full payment in order to
have any rights with respect to the Restricted Stock. The Committee may, at any
time, accelerate the dates on which the restrictions will lapse or waive the
restrictions. Generally, shares of Restricted Stock are non-transferable, and
if a participant who holds shares of Restricted Stock terminates employment for
any reason except retirement prior to the lapse or waiver of the restrictions,
the employee must resell to the Company the shares of Restricted Stock for the
amount paid for such shares, or forfeit them to the Company if no cash was
paid. Prior to the lapse of restrictions on shares of Restricted Stock, the
participant will have all rights of a stockholder with respect to the shares,
including voting and dividend rights, subject only to the conditions and
restrictions generally applicable to Restricted Stock.
The Committee may also grant shares (at a purchase price equal to par value)
which are free from any restrictions under the Plan ("Unrestricted Stock"), in
recognition of past services or in other circumstances where the Committee
determines the grant to be in the best interests of the Company.
DEFERRED STOCK. The Committee may also make deferred stock awards under the
Plan ("Deferred Stock Awards"). These are awards entitling the recipient to
receive shares of Common Stock in one or more installments at a future date or
dates, and on such conditions as may be determined by the Committee. Except as
otherwise specified in the grant or agreed to by the Committee, all such rights
will terminate upon the participant's termination of employment. The Committee
may at any time accelerate the time at which delivery of all or any part of the
shares will take place.
PERFORMANCE AWARDS. The Committee may also grant awards based on certain
performance criteria ("Performance Awards") entitling the recipient to receive,
without payment, shares of Common Stock or cash performance awards in such
combinations the Committee may determine. Payment of the award may be
conditional on achievement of individual, departmental or any other category of
performance goals over a fixed or determinable period and such other conditions
as the Committee shall determine. Except as otherwise specified in the grant or
agreed to by the Committee, rights under a Performance Award will terminate upon
a participant's termination of employment.
Any conditions in any award may be waived or modified by the Committee at
any time prior to termination of employment. Cash awards have not been made
under the Plan. However, as noted above, the Committee is considering a program
of cash awards and stock options as incentives for the senior executives who
are responsible for turning around the Company's financial performance.
LOANS. The Company may make a loan to a participant ("Loan"), either on the
date of or after the grant of any award to the participant. A Loan may be made
either in connection with the purchase (whether upon exercise of an option or
otherwise) of Common Stock under the award or with the payment of any Federal
income tax with respect to income recognized as a result of the award. The
Committee will have full authority to decide whether to make a Loan and to
determine the amount, terms and conditions of the Loan, including the interest
rate, if any, whether the Loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the Loan is to be repaid and
the conditions, if any, under which it may be forgiven. However, no Loan may
have a term (including extensions) exceeding ten years in duration.
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SUPPLEMENTAL GRANTS. In connection with any award the Committee may, at the
time such award is made or at a later date, provide for and grant a cash award
to the participant ("Supplemental Grant") not to exceed an amount equal to (1)
the amount of any Federal, state and local income tax or ordinary income for
which the participant will be liable with respect to the award, plus (2) an
additional amount on a grossed-up basis necessary to make the participant whole
after tax, discharging all the participant's income tax liabilities arising
from all payments made in connection with awards.
DIVIDENDS AND DEFERRALS. Except as specifically provided by the Plan, the
recipient of an award will not give a participant rights as a Shareholder; the
participant will obtain such rights subject to any limitations imposed by the
Plan or the instrument evidencing the award, upon the actual receipt of Common
Stock. The Committee may permit the immediate payment or the deferral or
investment of benefits in an amount equal to cash dividends which would have
been paid if shares subject to an award had been outstanding at the time of
payment of such dividends. It may also permit participants to make elections to
defer receipt of benefits under the Plan.
ADJUSTMENTS FOR STOCK DIVIDENDS MERGERS ETC. The Committee is required to
make appropriate adjustments in connection with outstanding awards and the
maximum number of shares that may be delivered under the Plan to reflect stock
dividends, stock splits and similar events. The Committee may also make such
adjustments to take into account material changes in law or in accounting
practices or principles, mergers, consolidations, acquisitions, dispositions,
or any similar corporate transactions, or any other event if it is determined
by the Committee that adjustments are appropriate to avoid distortion in the
operation of the Plan.
NON-TRANSFERABILITY OF AWARDS. No award (other than an award in the form of
an outright transfer of cash or Unrestricted Stock) may be transferred other
than by will or by the laws of descent and distribution, and during an
employee's lifetime an award requiring exercise may be exercised only by the
participant (or in the event of incapacity, the person or persons legally
appointed to act on the participant's behalf).
EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, AND TERMINATION. Neither
adoption of the Plan nor the grant of awards to a participant affects the
Company's right to grant to such participant awards that are not subject to the
Plan, to issue to such participant Common Stock as a bonus or otherwise, or to
adopt other plans or arrangements under which Common Stock may be issued to
employees.
The Committee may at any time discontinue granting awards under the Plan.
The Board may at any time or times amend the Plan or any outstanding award for
any purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any former grants of awards, provided that (except to
the extent expressly required or permitted by the Plan) no such amendment will,
without the approval of the Stockholders of the Company) increase the maximum
number of shares available under the Plan, change the group of persons eligible
to receive awards under the Plan, or extend the time within which awards may be
granted. No amendment or termination of Plan may adversely affect the rights of
any participant (without the participant's consent) under any award previously
granted. Moreover, any amendment requiring Stockholder approval for purposes of
satisfying any then applicable incentive stock option requirements under
Federal tax law or the requirements of Rule 16b-3 under the Securities and
Exchange Act of 1934 shall be subject to such Stockholder approval to the
extent then required. Currently, the incentive stock option regulations would
require Stockholder approval for an increase in the maximum number of shares
issuable pursuant to incentive options under the Plan or a modification in
eligibility requirements under the Plan.
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STOCK WITHHOLDING. In the case of an award under delivered, the Committee may
permit the participant to elect to have the Company hold back from the shares to
be delivered for delivery to the Company shares of Common Stock having a value
sufficient to satisfy any Federal, state, and local withholding tax
requirements.
PAST SERVICE AS CONSIDERATION. Where a participant purchases Common Stock
under an award for a price equal to the par value of the Stock, the Committee
may determine that the price has been satisfied by past services rendered by
the participant.
CHANGE IN CONTROL PROVISIONS. In the event of a Change in Control as
described below the Plan provides that: (a) each outstanding option and
appreciation right will immediately become exercisable in full; (b) Restricted
Stock will immediately become free of all restrictions and conditions; (c)
conditions on other awards which relate solely to the passage of time and
continued employment will be removed but other conditions will continue to
apply unless otherwise provided in the instrument evidencing the awards or by
agreement between the Company and the participant; and (d) unless otherwise
provided in the award, during the 60-day period following the Change in
Control, a participant holding an option or an appreciation right will have the
right to surrender all or part of his or her award to the Company and receive
cash payment equal, in general, to the difference between (i) the exercise
price and (in) the value of the stock determined by reference to the highest
reported value of the stock in the 60-day period ending on the date of the
Change in Control or, if higher, the highest price paid for the stock by
certain persons described in the definition of the term Change in Control.
Under the Plan a Change of Control of the Company is deemed to have occurred
if (a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (except the Company's subsidiaries and trustees
of employee benefit plans holding shares) becomes the beneficial owner of 35%
or more of the combined voting power of the Company's then outstanding stock
excluding, however, shares held by beneficial owners of 20% or more combined
voting power as of February 24, 1989; or (b) the Company stockholders approve a
merger or consolidation of the Company with another company except where
Company securities outstanding prior to such transaction would represent at
least 65% of the voting power following such transaction, or such a transaction
is implemented to effect a recapitalization of the Company and no person
acquires more than 50% voting power; or (c) during any two-year period persons
who constitute the Board at the beginning of such period whose election by the
Board or nomination for election by the stockholders was approved by two-thirds
of the Directors then in office who held office at the beginning of the period
cease to constitute at least a majority of the Board; or (d) the Company's
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale of all of the assets of the Company. The issue of
shares of Class A Stock to Finmeccanica S.p.A. in connection with the DEA
acquisition in 1994 did not constitute a change in control under the Plan.
FEDERAL INCOME TAX EFFECTS
In general, neither the grant or the exercise of an incentive stock option
will result in taxable income Company. However, option holders exercising
incentive stock options may become subject to the alternative minimum tax by
reason of that exercise.
If the stock received upon the exercise of an incentive stock option is
held for at least two years from the date of grant of the option and at least
one year after the date of exercise, any gain or loss recognized upon the
disposition of the stock will be considered long-term capital gain or loss and
will be taxed accordingly. If shares received upon exercise of an incentive
stock option are disposed of before the holding period requirements described
above have been satisfied (a "disqualifying disposition"), the option holder
will realize ordinary income and the Company will be entitled to a deduction
equal in general to the difference between the option price and the value of
the stock on the date of exercise. The amount of ordinary income realized on a
disqualifying disposition may be limited when the
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stock is sold for less than its value on the exercise date. Incentive options
granted to an optionee will be treated for Federal income tax purposes as non-
statutory options (see below) to the extent the aggregate value (determined as
of the time of grant) of the stock for which the options first become
exercisable in any calendar year exceeds $100,000.
In the case of non-statutory options, no income results upon the grant of
the option. When an option holder exercises a non-statutory option, he or she
will realize ordinary income, subject to withholding, equal in general to the
excess of the then-fair market value of the stock over the option price. The
Company will in general be entitled to a deduction equal to the amount of
ordinary income realized by the optionee, provided the Company satisfies
certain withholding and reporting requirements.
Section 162(m) of the Internal Revenue Code limits to $1 million the
deduction a public corporation may claim with respect to the remuneration paid
in any year to any of the corporation's top five officers. The deduction
limitation is subject to a number of important exceptions, including an
exception for so-called "performance-based" compensation It is anticipated
that options granted under the Plan as proposed to be amended will be eligible
for an exception from the $1 million deduction limitation.
The Internal Revenue Code also imposes a 20% additional tax, and denies a
deduction, where remuneration paid in connection with a change in control
exceeds specified limits. In determining whether these limits have been
exceeded, options that vest upon a change in control of the Company or that are
awarded within twelve months prior to the change in control may be taken into
account.
The foregoing summary is limited to Federal income tax consequences and does
not purport to be a complete description of those taxes.
VOTE REQUIRED FOR APPROVAL
Approval of the Amendment described above to the 1989 Equity Incentive Plan
will require the affirmative vote of the holders of the shares of Class A Stock
and Class B Stock voting together as a single class representing a majority of
the votes cast on the proposal. The amendment shall become effective upon
stockholder approval thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENTS TO THE 1989 EQUITY INCENTIVE PLAN.
ITEM 4
RATIFICATION OF APPOINTMENT
OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP, who has acted as the
Company's independent accountants since January 1, 1996, as the Company's
independent accountants for fiscal year 1997, subject to approval by the
stockholders. In the event the stockholders do not ratify the selection of
Ernst & Young LLP, the Board of Directors will consider the selection of
another accounting firm to serve as the Company's independent accountants.
Neither Ernst & Young nor any of its partners has any direct or indirect
financial interest in or any connection (other than as independent auditor)
with the Company or any subsidiary. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and to respond to appropriate questions.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPOINT ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE 1997
FISCAL YEAR.
GENERAL INFORMATION
VOTING OF PROXIES
Each valid proxy in the enclosed form received by the Company will be voted
by the persons named therein. All shares represented by the proxy will be voted
FOR the election of the Board's nominees named herein as Directors unless the
stockholder specifies otherwise or authority to vote for the proposed slate of
Directors or any individual Director has been withheld. If for any reason any
of such nominees should not be available as a candidate for Director, the
proxies will be voted for such other candidate or candidates as may be
nominated by the Board of Directors. With respect to the proposals to amend the
Certificate of Incorporation, to amend the 1989 Equity Incentive Plan, and to
ratify the appointment of Ernst & Young LLP as the Company's independent
accountants, all shares represented by a proxy will be voted FOR such proposal,
unless the proxy specifies that it should be voted against a proposal or not
voted at all. If any other matter should come before the meeting, then the
persons named in the enclosed form of proxy will have discretionary authority
to vote all proxies with respect thereto in accordance with their judgment.
Consistent with Delaware law and under the Company's by-laws, the holders of
shares entitled to cast a majority of the votes entitled to be cast on a
particular matter, present in person or represented by proxy, constitutes a
quorum as to such matter. Votes cast by proxy or in person at the Annual
Meeting will be counted by persons appointed by the Board of Directors to act
as Judges of Election for the meeting.
The three nominees for election as Directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of
Directors shall be elected Directors. The affirmative vote of a majority of
the votes of Class A Stock entitled to be cast on the matter and the
affirmative vote of a majority of the votes of Class A Stock and Class B Stock
voting together entitled to be cast on the matter is necessary to approve the
action proposed in Item 2, and a majority of the votes properly cast on the
matter is necessary to approve the actions proposed in Items 3 and 4, as well
as any other matter which comes before the Annual Meeting, except where
applicable law or the Company's Certificate of Incorporation or by-laws require
otherwise.
The Judges of Election will count the total number of votes cast FOR
approval of proposals, other than the election of Directors, for purposes of
determining whether sufficient affirmative votes have been cast. The Judges of
Election will count shares represented by proxies that withhold authority to
vote for a nominee for election as a Director or that reflect abstentions and
"broker non-votes" (i.e., shares represented at the Annual Meeting held by
brokers or nominees as to which (i) instructions have not been received from
the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on a particular matter)
only as shares that are present and entitled to vote on the matter for purposes
of determining the presence of a quorum, but neither abstentions nor broker
non-votes will have any effect on the outcome of voting on the matter.
FOR SAVINGS AND RETIREMENT PLAN AND ESOP PARTICIPANTS
For participants in the Brown & Sharpe Savings and Retirement Plan and the
Brown & Sharpe Savings and Retirement Plan for Management Employees (together
the "SARP"), the accompanying proxy card indicates the number of shares of
Class A Stock and Class B Stock held in your participant's account under the
symbols SPA and SPB, respectively. When a participant proxy card is returned
properly signed, Putnam Fiduciary Trust Company ("Putnam Trust"), the Trustee
of the shares of Class A and Class B Stock held in the SARP, will vote the
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participant's shares held in the SARP in the manner directed by the
participant, or if the participant makes no directions, Putnam Trust will vote
the participant's shares on those matters presented to the stockholders in
proportion to instructions received from all participants voting.
For participants in the Brown & Sharpe Employee Stock Ownership and Profit
Participation Plan (the "ESOP") the accompanying proxy card indicates the
number of shares of Class A Stock and Class B Stock held in the ESOP and
allocated to the participant's account under the symbols ESA and ESB,
respectively. When an ESOP participant's proxy card is returned properly
signed, Putnam Trust, the ESOP record keeper will tabulate and report the
aggregate voting instructions received to the ESOP Trustees, Messrs. Frank T.
Curtin, Charles A. Junkunc, and Robert D. Batting, (the "ESOP Trustees") who
will then vote the aggregate ESOP shares voted in the manner directed by ESOP
participants on the matters presented to the stockholders. The ESOP Trustees
will vote ESOP shares for which no instructions are received from ESOP
participants on the matters presented in proportion to instructions received
from ESOP participants voting. All individual voting instructions of
participants in the SARP and ESOP will be held in confidence.
SOLICITATION OF PROXIES
The entire expense of solicitation of proxies will be borne by the Company.
The Company has retained Corporate Investor Communications Inc. of Carlstadt,
New Jersey , a proxy soliciting organization to solicit management proxies for
the Annual Meeting, whose fees for such services are estimated to be $5,500,
plus reasonable out-of-pocket expense reimbursement. In addition to the
foregoing solicitation, Directors, officers, and employees of the Company may
solicit in person, by telephone, facsimile, or telegram. The Company will
reimburse persons holding stock for others in their names or in nominee names
for their reasonable expenses in sending soliciting material to the beneficial
owners of common stock.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
All stockholder proposals intended to be submitted at the Company's 1998
Annual Meeting must be received by the Secretary of the Company on or before
November 20, 1997 in order to be considered for inclusion in the Company's 1998
proxy materials.
IMPORTANT NOTICE
No matter how small your holdings, if you do not plan to attend the meeting
in person, you are respectfully requested to complete, sign, date, and return
the accompanying Proxy in the enclosed, post-paid envelope at your earliest
convenience.
By Order of the Board of Directors,
/s/James W. Hayes, III
James W. Hayes, III
Secretary
North Kingstown, Rhode Island 02852
March 24, 1997
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DETACH HERE BRO F
BROWN & SHARPE MANUFACTURING COMPANY
PROXY FOR CLASS A COMMON STOCK AND CLASS B COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
APRIL 25, 1997
The undersigned appoints each of John M. Nelson, Henry D. Sharpe, III
and Howard K. Fuguet proxies with power of substitution to vote for the
undersigned at the Annual Meeting of Stockholders called for Friday, April
P 25, 1997, at 10:00 A.M., at Precision Park, 200 Frenchtown
Road, North Kingstown, Rhode Island, and at any adjournments, all shares of
R stock which the undersigned would be entitled to vote if present in
accordance with their judgment upon any matters that may properly come
O before said meeting and to vote as specified on the reverse.
X A majority of the proxies present and acting at the meeting in person or
by substitute (or if only one shall be so present, then that one) shall have
Y and may exercise all of the power and authority of said proxies hereunder.
The undersigned hereby revokes any proxy previously given and acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement pertaining to
the aforesaid meeting and a copy of the Company's Annual Report for the year
ended December 31, 1996.
YOUR SHAREHOLDINGS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK ON THE
BACK ARE DESIGNATED "CLA" AND "CLB" RESPECTIVELY, AND FOR PARTICIPANTS IN THE
COMPANY SAVINGS AND RETIREMENT PLANS AND ESOP ARE DESIGNATED "SPA" AND "SPB",
AND "ESA" AND "ESB" RESPECTIVELY.
TO APPROVE THE BOARD OF DIRECTORS' RECOMMENDATIONS, SIMPLY SIGN AND DATE THE
BACK. YOU NEED NOT MARK ANY BOXES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE>
DETACH HERE BRO F
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
1. Election of Directors: To fix the number of Directors at nine and to elect
three Directors as set forth in the Proxy Statement. Class A Stock may be voted
for Messrs. Hammerly, Curtin and Tregurtha and Class B Stock may be voted only
for Messrs. Curtin and Tregurtha as indicated below. Holders of Class A Stock
and Class B Stock who wish to provide instructions should vote in the space
indicated below.
CLASS A STOCK: CLASS B STOCK:
Hammerly, Curtin and Tregurtha Curtin and Tregurtha
WITHHELD WITHHELD
FOR FROM FOR FROM
ALL ALL ALL ALL
NOMINEES [_] NOMINEES [_] NOMINEES [_] NOMINEES [_]
For, except vote withheld from For, except vote withheld from
nominee(s) below: nominee(s) below:
[_] [_]
2. To approve the proposal to amend the Certificate of Incorporation to increase
the number of authorized shares of Common Stock (including the Class A Stock).
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To approve the proposal to amend the 1989 Equity Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To ratify the appointment of Ernst & Young LLP as the Company's independent
accountants for the fiscal year ending December 31, 1997.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE THE PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
INDICATED AND FOR PROPOSALS 2, 3 AND 4:
Note: When signing as Executor, Administrator, Trustee, Guardian, etc., add full
title. (Sign exactly as name appears on this card)
Signature:_______________________ Date:_________
Signature:_______________________ Date:_________
