<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:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6[e][2])
[ ] 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, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(i) 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 AND SHARPE MANUFACTURING COMPANY LETTERHEAD APPEARS HERE]
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 by 650,000 shares to 1,525,000 shares, 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 L.L.P. 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 shares of common stock outstanding
comprised of shares of Class A Common Stock, $1.00 par value (the
"Class A Stock") and 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 PRINCIPAL OCCUPATION DURING
(BOARD COMMITTEE ELECTED A LAST FIVE YEARS AND DIRECTORSHIPS
MEMBERSHIP) DIRECTOR IN PUBLIC REPORTING AND OTHER COMPANIES
- ---------------- ---------- ---------------------------------------
<S> <C> <C>
Nominees for Election to Office
- -------------------------------
For Terms Expiring in 2000
FRANK T. CURTIN (62) 1995 Chairman of the Board of Directors since
(Chairman, Executive Comm. October 1996 and President and Chief
Corporate Development Comm.) Executive Officer since May 2, 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
(Executive, Salary, and Officer, Mormac Marine Group, Inc.,
Chairman Corporate Stamford, CT, a marine transportation
Development Comm.) 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 PRINCIPAL OCCUPATION DURING
(BOARD COMMITTEE ELECTED A LAST FIVE YEARS AND DIRECTORSHIPS
MEMBERSHIP) DIRECTOR IN PUBLIC REPORTING AND OTHER COMPANIES
- ---------------- ---------- ---------------------------------------
<S> <C> <C>
HARRY A. HAMMERLY (63) 1996 Former Executive Vice President, 3M
(Chairman, Audit Comm.) Company, a manufacturer of 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,
(Audit and Salary Comm.) Worcester, MA, 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
(Executive and Chairman, Director, A. T. Cross Company Lincoln, RI,
Salary Comm.) manufacturer of fine writing instruments;
Trustee, Eastern Utilities Association;
Boston, MA.
ROGER E. LEVIEN ( 61) 1996 From January 1992 to the present, Vice
(Corporate Development President, Strategy and Innovation, Xerox
Comm.) 1996 [ ] 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,
(Audit and Corporate Boston, MA.
Development Comm.)
HENRY D. SHARPE, III (42) 1992 Co-founder and Technical Director, Design
(Audit Comm.) Lab, Inc., 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.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
J. ROBERT HELD (58) 1996 From 1988 to 1995 President and Chief
(Salary Comm.) 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>
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 hour 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.
4
<PAGE>
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.
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>
PERCENT OF
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 476,766 -- 3.7% 11.6%
International/(1)/ Class B 158,920 -- 30.7%
Two World Trade Center
New York, NY 10048-0774
Henry D. Sharpe, Jr./(2)/ Class A 476,766 7,200 3.7% 11.7%
c/o Brown & Sharpe Class B 158,920 2,400 31.1%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Frank T. Curtin/(3)/ Class A 411,147 -- 6.2% 16.1%
c/o Brown & Sharpe Class B 166,063 -- 31.7%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Charles A. Junkunc/(3)/ Class A 362,765 -- 5.7% 20.1%
c/o Brown & Sharpe Class B 194,396 -- 42.7%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
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>
Robert D. Batting/(3)/ Class A 311,147 -- 2.6% 11.1%
c/o Brown & Sharpe Class B 166,063 -- 32.0%
Manufacturing Company
200 Frenchtown Road
Precision Park
N. Kingstown, RI 02852-1700
Putnam Fiduciary Trust/(4)/ Class A 165,758 -- 2.0% 5.1%
Company Class B 52,744 -- 10.1% 10.0%
859 Willard Street
Quincy, MA 02169
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, 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.
6
<PAGE>
/(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.
7
<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>
PERCENT OF
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 -- 32.0%
Henry D. Sharpe, III/(2)/ Class A 55,145 -- * 1.7%
Class B 18,381 -- .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% 20.1%
Class B 194,396 -- 37.5%
Richard F. Paolino/(3)/ Class A 94,637 -- * *
Class B 2,323 -- *
Antonio Aparicio Class A 37,000 -- * *
Class B -- -- --
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
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 9.2% 26.5%
Executive Officers as a Group Class B 353,544 2,400 68.7%
(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".)
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.
9
<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.
10
<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 Company in May of 1995. Pursuant to an Employment
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
11
<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 yearly change in cumulative total return is measured by
dividing (i) the sum of (a) the cumulative amount of dividends for each fiscal
year, assuming dividend reinvestment, and (b) the change in share price between
the beginning and end of the Measuring Period, by (ii) the share price at the
beginning of the Measuring Period. 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>
12
<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 $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMEPNSATION AWARDS
---------------------------------------
ANNUAL COMPENSATION AWARDS PAY-OUTS
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER RESTIRCTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND COMPEN- AWARD(S) OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) 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 Chief 1995 193,846 75,000 71,937 -- 200,000 -- 44,886
Executive Officer 1994 -- -- -- -- -- -- --
Charles A. Junkune/(2)(7)/ 1996 218,500 181,100 -- -- -- -- 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. Paolina/(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 - Broan &
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).
13
<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.
14
<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.)
15
<PAGE>
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 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 13, and the Company agreed to annually
contribute an amount of 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. 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. No salary
or benefits are continued if the employment is terminated for cause or upon
death or disability.
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 of the acquisition by Finmeccanica S.p.A. of shares of Class A 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.
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CHANGE OF OWNERSHIP 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 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.
17
<PAGE>
At March 12, 1997 the Company had shares of Class A Stock issued and
outstanding, shares were authorized and unissued and 42,592 shares of such
class were held in the Company's treasury; and, shares of Class B Stock
issued and outstanding and shares of such class were authorized and
unissued. As of that date, an aggregate of shares of Class A Stock were
reserved for issuance of which 708,748 shares were reserved for issuance upon
exercise of outstanding options under the Company's stock plans and 53,450
additional shares were reserved 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; 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
18
<PAGE>
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 approval 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.
Holders of 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 B
Stock 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
19
<PAGE>
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. Recently enacted 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. For compensation attributable to stock options and stock
appreciation rights to qualify as performance based, the plan
20
<PAGE>
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
Company could benefit from this amendment by being able to deduct for income tax
purposes any income realized by one of the designated Executive Officers in
excess of $1 million upon the exercise of a non-qualified stock option or stock
appreciation right.
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 "disinterested persons" as that term is defined under rules promulgated
by the Securities and Exchange Commission and all of whom are considered
"outside directors" for purposes of Code Section 162(m) and the regulations,
including proposed 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 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 Equity
incentive 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
21
<PAGE>
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.
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 exempt options may be awarded under the Plan to any Participant in any
calendar year is, in each case, 300,000 shares. 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.
22
<PAGE>
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, if any,
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
23
<PAGE>
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.
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 mat 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. Rule 16b-3 requires such approval if the amendment
materially increased benefits accruing to Company Directors and Officers under
the Plan, materially increased the number of securities issuable under the Plan
or materially modified eligibility requirements under the Plan.
24
<PAGE>
STOCK WITHHOLDING. In the case of an award under which Common Stock
may be delivered, the Committee may permit the participant or other appropriate
person 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, however, excluding 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
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 did not constitute
a change in control under the EIP.
FEDERAL INCOME TAX EFFECTS
In general, neither the grant or the exercise of an incentive stock option
will result in taxable income to the option holder or a deduction to the
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 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.
25
<PAGE>
The amount of ordinary income realized on a disqualifying disposition may be
limited when the 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.
Special rules will apply in the case of officers or directors subject to
the short-swing profit limitations of Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), who exercise options within six
months of the grant of those options.
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. However, final regulations
under Section 162(m) have not yet been issued.
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 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.
26
<PAGE>
ITEM 4
RATIFICATION OF APPOINTMENT
OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Ernst & Young L.L.P., 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 L.L.P., 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 L.L.P. 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL
TO APPOINT ERNST & YOUNG L.L.P. 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 L.L.P. 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. A majority of the votes 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
27
<PAGE>
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 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.
28
<PAGE>
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
29
<PAGE>
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
P APRIL 25, 1997
R
O 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
X undersigned at the Annual Meeting of Stockholders called for Friday,
April 25, 1997, at 10:00 A.M., at Precision Park, 200 Frenchtown Road,
Y North Kingstown, Rhode Island, and at any adjournments, all shares of
stock which the undersigned would be entitled to vote if present in
accordance with their judgment upon any matters that may properly come
before said meeting and vote as specified on the reverse.
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
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.
---------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
---------------
<PAGE>
DETACH HERE
BRO F
Please mark
[X] 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 such class of
stock in the space indicated below.
CLASS A STOCK: CLASS B STOCK:
Hammerly, Curtin and Tregurtha Curtin and Tregurtha
FOR WITHHELD FOR WITHHELD
ALL [ ] FROM [ ] ALL [ ] FROM [ ]
NOMINEES ALL NOMINEES ALL
NOMINEES NOMINEES
For, except vote withheld For, except vote withheld
from nominee(s) below from 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.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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
---------------- ------ ----------------------- -----
