<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE CHERRY CORPORATION
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
THE CHERRY CORPORATION
3600 SUNSET AVENUE
WAUKEGAN, ILLINOIS 60087
847-662-9200
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 19, 1996
-----------------
To the Stockholders of
The Cherry Corporation:
Notice is hereby given that the annual meeting of stockholders of THE
CHERRY CORPORATION, a Delaware corporation, will be held at Midlane Country
Club, 14565 York House Road, Wadsworth, Illinois, on Wednesday, June 19, 1996,
at 4:00 p.m. local time, for the following purposes:
1. To elect nine directors of the Company to hold office for the ensuing
year.
2. To consider and act upon a proposal to approve the 1996 Employee Stock
Purchase Plan.
3. To consider and transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 26, 1996,
as the record date for determination of the holders of shares of the Company's
outstanding Class B Common Stock entitled to notice of and to vote at the
annual meeting of stockholders. Each holder of Class B Common Stock is
entitled to one vote per share on all matters to be voted on at the Annual
Meeting.
By Order of the Board of Directors
[SIG]
DAN A. KING
SECRETARY
May 20, 1996
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH
REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES. A PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
<PAGE>
THE CHERRY CORPORATION
3600 SUNSET AVENUE
WAUKEGAN, ILLINOIS 60087
847-662-9200
-------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1996
-----------------
VOTING INFORMATION
This Proxy Statement is being mailed to stockholders of The Cherry
Corporation (the "Company") on or about May 20, 1996 and is furnished in
connection with the Board of Directors' solicitation of proxies for the annual
meeting of stockholders to be held on June 19, 1996, for the purpose of
considering and acting upon the matters specified in the Notice of Annual
Meeting of Stockholders accompanying this Proxy Statement. If the form of proxy
which accompanies this Proxy Statement is executed and returned, it may be
revoked by the person giving it at any time prior to the voting thereof by
written notice to the Secretary, by delivery of a later dated proxy or by
requesting to vote in person at the meeting. Without extra compensation, certain
directors, officers and employees of the Company may make additional
solicitations in person or by telephone or telegraph. Expenses incurred in the
solicitation of proxies, including postage, printing and handling, and actual
expenses incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding documents to beneficial owners, will be paid by the Company.
The Company has two classes of common stock. They are Class A Common Stock,
par value $1.00 per share ("Class A Common Stock"), and Class B Common Stock,
par value $1.00 per share ("Class B Common Stock"). The holders of Class B
Common Stock are entitled to one vote per share upon each matter submitted to
the vote of the stockholders at this annual meeting. The holders of Class A
Common Stock will have no voting rights at this annual meeting.
For purposes of the meeting, a quorum means a majority of the outstanding
shares of Class B Common Stock. As of the close of business on April 26, 1996,
the record date for stockholders entitled to vote at the annual meeting, there
were outstanding 4,728,327 shares of Class B Common Stock, entitled to one vote
each. In determining whether a quorum exists at the meeting, all shares
represented in person or by proxy will be counted. A stockholder may, with
respect to the election of directors, (i) vote for the election of all named
director nominees, (ii) withhold authority to vote for all named director
nominees or (iii) vote for the election of all named director nominees other
than any nominee with respect to whom the stockholder withholds authority to
vote by so indicating in the appropriate space in the proxy. With respect to the
proposal to approve the 1996 Employee Stock Purchase Plan, a stockholder may (i)
vote for the proposal, (ii) vote against the proposal or (iii) abstain from
voting. Proxies properly executed and received by the Company prior to the
meeting and not revoked will be voted as directed therein on all matters
presented at the meeting. In the absence of a specific direction from the
stockholder, proxies will be voted for the election of all named director
nominees, each to hold office until the next annual meeting of stockholders or
until his successor is duly elected and qualified, and for the proposal to
approve the employee stock purchase plan.
Proxies relating to "street name" shares that are voted by brokers on some
but not all of the matters will be treated as shares present for purposes of
determining the presence of a quorum on all matters, but will be treated as
shares entitled to vote only as indicated below ("broker non-votes"). The
affirmative vote of the holders of a majority of the shares present in person or
by proxy at the meeting and entitled to vote is required in the election of
directors and with respect to the proposal for the employee stock purchase plan.
Withholding authority to vote for a director nominee will in effect count as a
vote against the director nominee. Broker non-votes will have no effect on any
proposal at this annual meeting.
<PAGE>
The Board of Directors knows of no other matter which may come up for action
at the meeting. However, if any other matter properly comes before the meeting,
the persons named in the proxy form enclosed will vote in accordance with their
judgment upon such matter.
Stockholders wishing to include proposals in the Company's proxy statement
and form of proxy for the 1997 annual meeting must submit such proposals so that
they are received by the Secretary of the Company at its Waukegan address by no
later than January 20, 1997.
The Annual Report to stockholders for the fiscal year ended February 29,
1996, accompanies this Proxy Statement. Additional copies of the Annual Report
may be obtained by writing to the Secretary of the Company.
STOCK OWNERSHIP INFORMATION
The table below sets forth certain information as of April 26, 1996, with
respect to each person known by the Company to be the beneficial owner of more
than five percent of the outstanding shares of Class B Common Stock and the
beneficial ownership of both classes of stock of each director, each executive
officer shown in the Summary Compensation Table and all executive officers and
directors as a group. Except as set forth below, the address for such person or
group is the Company's Waukegan office.
<TABLE>
<CAPTION>
CLASS A -- NONVOTING CLASS B -- VOTING
---------------------------------- ----------------------------------
NUMBER OF SHARES PERCENT OF NUMBER OF SHARES PERCENT OF
BENEFICIALLY RESPECTIVE BENEFICIALLY RESPECTIVE
NAME OWNED CLASS OWNED CLASS
- -------------------------------------------------- --------------------- ---------- --------------------- ----------
<S> <C> <C> <C> <C>
Peter B. Cherry................................... 2,716,471(a)(b)(c) 35.6% 2,766,985(a)(b)(c) 58.4%
FMR Corporation................................... 852,800 11.2 568,400 12.0
82 Devonshire Street
Boston, MA 02109
Robert B. McDermott............................... 25,328(c) * 32,200 *
Alfred S. Budnick................................. 19,059(c) * 16,188(c) *
Klaus D. Lauterbach............................... 11,939(c) * 9,939 *
Dan A. King....................................... 10,952(c) * 9,247(c) *
Walter L. Cherry.................................. 52,969(c)(d) * 2,905(c)(d) *
Thomas L. Martin, Jr. ............................ 2,528(c) * 2,200 *
Charles W. Denny.................................. 1,328(c) * -- --
Peter A. Guglielmi................................ 328(c) * -- --
W. Ed Tyler....................................... -- -- -- --
Henry J. West..................................... -- -- 500 *
All Executive Officers and Directors
as a Group (11 persons)......................... 2,840,902(c) 37.2 2,840,164(c) 59.9
</TABLE>
- ---------
* Less than 1%
(a) The table includes 397,727 shares of Class A and Class B Common Stock held
by trusts for the benefit of Catherine C. Moore, of which Peter B. Cherry
and Virgina B. Cherry (his mother) are trustees with the power to vote the
Common Stock and to make dispositions. Mrs. Cherry and Mr. Cherry disclaim
beneficial ownership.
(b) The table includes 47,911 shares of Class A and Class B Common Stock held by
Mr. Cherry's wife as trustee for their children, as to which shares Mr.
Cherry disclaims beneficial ownership.
(c) The total number of shares of Class A Common Stock of the Company for
officers and directors includes shares held under options exercisable within
60 days as follows: Walter L. Cherry, 2,000; Peter B. Cherry, 6,000; Alfred
S. Budnick, 7,333; Dan A. King 5,000; Klaus D. Lauterbach, 2,000; Robert B.
McDermott, 328; Thomas L. Martin, Jr., 328; Charles W. Denny, 328 and Peter
A. Guglielmi, 328.
The total number of shares of Class B Common Stock of the Company for
officers and directors includes shares held under options exercisable within
60 days as follows: Walter L. Cherry, 2,000; Peter B. Cherry, 2,000; Alfred
S. Budnick, 4,500 and Dan A. King, 3,334.
2
<PAGE>
(d) The table includes 25,456 shares of Class A Common Stock and 383 shares of
Class B Common Stock held by Mr. Cherry's wife. Mr. Cherry disclaims
beneficial ownership.
ELECTION OF DIRECTORS
At the annual meeting of stockholders, nine directors, constituting the
entire Board of Directors of the Company, are to be elected to hold office until
the next annual meeting of stockholders or until their successors are duly
elected and qualified. Unless otherwise indicated on the proxy form, it is
intended that the proxies will be voted for the nominees listed below. It is
expected that these nominees will serve, but, if for any unforeseen cause any
such nominee should decline or be unable to serve, the proxies will be voted to
fill any vacancy so arising in accordance with the discretionary authority of
the persons named in the proxies unless otherwise indicated on the proxy form.
NOMINEES
The following information concerning the nominees has been furnished by the
nominees:
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION YEAR
DURING LAST FIVE YEARS ELECTED
NAME AGE AND OTHER DIRECTORSHIPS DIRECTOR
- --------------------------- ----------- -------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Peter B. Cherry............ 48 Chairman of the Board and President. 1977
Walter L. Cherry........... 79 Development Engineer, formerly Chairman of the Board and Chief 1953
Executive Officer.
Alfred S. Budnick.......... 58 Vice President of the Company and President of Cherry Semiconductor 1977
Corporation.
Thomas L. Martin, Jr. ..... 74 President Emeritus of Illinois Institute of Technology. 1979
Robert B. McDermott........ 68 Consultant, formerly partner, law firm of McDermott, Will & Emery; 1982
Mr. McDermott is also a director of Maynard Oil Company.
Peter A. Guglielmi......... 53 Director, since 1993, and Chief Financial Officer, since 1988, 1993
Tellabs Inc. (voice and data communications equipment man-
ufacturer), President, Tellabs International, Inc. since 1993. Mr.
Guglielmi is also a director of Internet Communications Corp.
Charles W. Denny........... 60 President and Chief Executive Officer, since 1992, Groupe 1993
Schneider-North America, President and Chief Operating Officer,
since 1992, Executive Vice President, 1991-1992, Square D Company
(electrical distribution and industrial control products
manufacturer). Mr. Denny is also a director of Woodhead Industries,
Inc.
W. Ed Tyler................ 43 Executive Vice President, since 1995, and Sector President, In- 1995
formation Management Sector since 1996, Sector President, Networked
Services Sector, 1994-1996, President, Documentation Services,
1990-1994, R.R. Donnelley & Sons Co. (printing and printing related
services).
Henry J. West.............. 53 Group Vice President, since 1992, The Marmon Group (international 1995
association of manufacturing and service businesses); formerly
President, Sola Electric Division of General Signal (manufacturer
of electronic products).
</TABLE>
- ---------
Because of his equity interest in the Company, Mr. Peter B. Cherry may be
deemed a "control person" as that term is used under regulations of the
Securities and Exchange Commission.
3
<PAGE>
COMPENSATION
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the executive officers named
below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
NUMBER OF
SHARES
ANNUAL COMPENSATION (1) UNDERLYING ALL OTHER
--------------------------------- STOCK OPTIONS COMPENSATION (2)
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#) ($)
- --------------------------------------------- --------- ---------- ---------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Peter B. Cherry 1996 $ 375,871 $ -- 12,000 $ 3,976
Chairman of the Board 1995 348,508 80,000 -- 7,659
and President 1994 301,111 50,000 -- 10,743
Alfred S. Budnick 1996 231,500 45,000 8,500 5,250
Vice President of the Company 1995 216,300 203,518 -- 5,835
and President of a Subsidiary 1994 206,250 126,920 -- 7,356
Klaus D. Lauterbach 1996 352,448 27,972 6,000 --
Vice President of the Company 1995 346,071 48,566 -- --
and General Manager of a 1994 286,527 23,728 -- --
Subsidiary
Dan A. King 1996 158,794 -- 5,000 3,929
Vice President of Finance, 1995 148,294 41,325 -- 7,035
Secretary and Treasurer 1994 128,579 31,100 -- 5,362
</TABLE>
- ---------
(1) Table excludes perquisites as amounts received do not exceed the lesser of
$50,000 or 10% of any of the named officers salary and bonus.
(2) Represents Company contributions under 401(k) and profit sharing plans.
4
<PAGE>
The table below sets forth certain information with respect to stock options
granted under the Company's 1995 Stock Incentive Plan during fiscal 1996 to the
executive officers named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS (1) VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL
NUMBER OF RATES OF
SHARES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION
OPTIONS/SARS GRANTED TO EXERCISE OR FOR OPTION TERM (2)
GRANTED EMPLOYEES BASE PRICE EXPIRATION ----------------------
(#) IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
------------- ---------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Peter B. Cherry................... 12,000 10.3% $ 15.25 6/15/05 $ 115,088 $ 291,647
Alfred S. Budnick................. 8,500 7.3% 15.25 6/15/05 81,521 206,583
Klaus D. Lauterbach............... 6,000 5.2% 15.25 6/15/05 57,544 145,823
Dan A. King....................... 5,000 4.3% 15.25 6/15/05 47,953 121,519
</TABLE>
- ---------
(1) All options reported were granted on June 15, 1995, and become exercisable
in cumulative annual installments of 1/3 of the shares covered thereby on
each of the first, second and third anniversaries of the grant date.
(2) The amounts set forth represent the value that would be received by the
Named Executive Officer upon exercise of the option on the date before the
expiration date of the option based upon assumed annual growth rates in the
market value of the Company's common stock of 5% and 10%, rates prescribed
by applicable Securities and Exchange Commission rules. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Company's common stock and other factors such as the general condition
of the stock markets and the timing of the exercise of the options.
5
<PAGE>
The following table sets forth certain information with respect to options
exercised by the executive
officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT FY- MONEY OPTIONS AT
VALUE END (#) FY-END ($)
SHARES ACQUIRED ON REALIZED($) EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) (1) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------------------------ ------------------- ----------- -------------- -------------------
<S> <C> <C> <C> <C>
Peter B. Cherry
Class A............................ 0 $ 0 2,000/12,000 $ 10,250/$0
Class B............................ 0 0 2,000/0 $ 10,250/$0
Alfred S. Budnick
Class A............................ 0 0 4,500/8,500 $ 21,000/$0
Class B............................ 0 0 4,500/0 $ 21,000/$0
Klaus D. Lauterbach
Class A............................ 317 1,981 0/6,000 $ 0/$0
Class B............................ 317 1,981 0/0 $ 0/$0
Dan A. King
Class A............................ 0 0 3,334/5,000 $ 14,587/$0
Class B............................ 0 0 3,334/0 $ 14,587/$0
</TABLE>
- ---------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise or end of fiscal year multiplied by the applicable number of
shares.
BOARD OF DIRECTORS
The Board of Directors held four meetings in fiscal 1996. All directors were
present for at least 75% of the meetings for which they were in office.
Non-employee directors are paid an annual fee of $15,000, plus $1,500 for each
meeting they attend. Employee directors receive no compensation as such.
Non-employee directors in office on adjournment of the Company's annual
meeting also receive a nonqualified stock option to purchase the number of whole
shares of Class A Common Stock equal to the amount of the director's annual fee
divided by the fair market value of a share of Class A Common Stock on the date
of the annual meeting.
The Board of Directors has an Audit Committee and a Compensation Committee,
each composed of all of the non-employee directors. The Committee Chairman
receives $1,500 and the other members receive $500 for each meeting held. The
Audit Committee and Compensation Committee held two meetings in fiscal 1996. The
Board has no Nominating Committee.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
Pursuant to an agreement dated May 26, 1992 between Cherry Semiconductor
Corporation (CSC) and Mr. Budnick, CSC has agreed to compensate Mr. Budnick if
he is terminated within 5 years subsequent to a change in control of CSC. The
agreement provides for a payment of between one to three times Mr. Budnick's
annual salary depending upon the amount of time which has lapsed subsequent to
the change in control. In general, a change of control occurs if CSC is sold.
6
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for the
Company's executive compensation policies. It annually determines the
compensation to be paid to the executive officers of the Company. The Committee
is composed of outside directors.
OVERVIEW AND PHILOSOPHY
The executive compensation program is intended to provide overall levels of
compensation for the executive officers which are competitive for the industries
and the geographic areas within which they operate, the individual's experience,
and contribution to the long-run success of the Company. The Russell 3000 (see
Performance Graph) includes companies that operate in the industries which the
Committee considers. The Committee believes that its task of determining fair
and competitive compensation is ultimately judgmental.
The program is composed of base salary, annual incentive compensation,
equity based incentives, and other benefits generally available to all
employees. As of February 29, 1996, options on 179,500 shares of the Company's
stock were outstanding and 116,500 options were granted during the fiscal year
then ended.
BASE SALARY
The base salary for each executive is intended primarily to be competitive
with companies in the industries and geographic areas in which the Company
competes. Surveys from outside firms and consultants are used to help determine
what is competitive. In making annual adjustments to base salary, the Committee
also considers the individual's performance over a period of time as well as any
other information which may be available as to the value of the particular
individual's past and prospective future services to the Company. This
information includes comments and performance evaluations by the Company's Chief
Executive Officer. The Committee considers all such data; it does not prescribe
the relative weight to be given to any particular component.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation is ordinarily determined by a formula which
considers the return on investment of the Company or its component parts.
LONG-TERM INCENTIVES
In general, the Committee believes that equity based compensation should
form a part of an executive's total compensation package. Incentive stock
options are granted to executives because they directly relate the executive's
earnings to the stock price appreciation realized by the Company's stockholders
over the option period. Stock options also provide executives the opportunity to
acquire an ownership interest in the Company. The number of shares covered by
each executive's option was determined by factors similar to those considered in
establishing base salary.
OTHER
Other benefits are generally those available to all other employees in the
Company, or a subsidiary, as appropriate. Together with perquisites, these
benefits did not exceed 10% of any executive's combined salary and bonus in
fiscal 1996.
COMPENSATION FOR THE PRESIDENT (CHIEF EXECUTIVE OFFICER)
The Committee applies the same standards in establishing the compensation of
the Company's Chief Executive Officer as are used for other executives. However,
there are procedural differences. The Chief Executive Officer does not
participate in setting the amount and nature of his compensation. Peter Cherry
did not receive an incentive compensation award for the fiscal year 1996.
The Committee does not expect that Section 162(m) of the Internal Revenue
Code will limit the deductibility of compensation expected to be paid by the
Company in the foreseeable future.
7
<PAGE>
This report is submitted by the Compensation Committee of the Board of
Directors:
Robert B. McDermott, Chairman
Charles W. Denny
W. Ed Tyler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert McDermott was formerly a partner in the law firm of McDermott, Will &
Emery which provides legal services to the Company on a regular basis.
Walter L. Cherry, a Director of the Company, is an employee of the Company
and received $105,000 in fiscal 1996 for his services as an employee.
8
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock with the
cumulative total return of the Russell 3000, the Russell 3000 Electrical
Equipment Industry and the Russell 3000 Semiconductors/Components Industry
indices for the period of five years commencing March 1, 1991 and ending
February 29, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL 3000
THE CHERRY CORPORATION RUSSELL 3000 ELECTRICAL RUSSELL 3000
<S> <C> <C> <C> <C>
Equipment Industry Semiconductor/Components Industry
1991 100.0 100.0 100.0 100.0
1992 181.0 119.1 120.9 113.0
1993 528.6 132.0 137.3 132.7
1994 473.8 144.8 149.2 158.3
1995 586.4 153.4 167.2 253.1
1996 351.7 206.0 207.1 299.9
</TABLE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
The Cherry Corporation 100.0 181.0 528.6 473.8 586.4 351.7
Russell 3000 100.0 119.1 132.0 144.8 153.4 206.0
Russell 3000 Electrical Equipment Industry 100.0 120.9 137.3 149.2 167.2 207.1
Russell 3000 Semiconductors/Components Industry 100.0 113.0 132.7 158.3 253.1 299.9
</TABLE>
- ---------
(1) On March 1, 1991, the only publicly-traded equity security of the Company
was Common Stock ("Prior Common Stock"). Effective July 12, 1994, the Prior
Common Stock was reclassified into Class B Common Stock and effective July
14, 1994, a 100% stock dividend of Class A Common Stock was paid to the
holders of the Prior Common Stock. For periods in which more than one class
of common stock was outstanding, performance data is based upon a weighted
average of the return of each class.
(2) The Company has selected the Russell 3000 Electrical Equipment Industry and
Semiconductors/ Components Industry for comparison of total stockholder
return. The Company was previously included in the Electrical Equipment
Industry index but was moved to the Semiconductors/Components Industry index
by the Frank Russell Company. The Company believes that both indices provide
a comparison as prescribed by the Securities and Exchange Commission
requirements. These industry indices are only computed quarterly on a
calendar year basis and therefore the indices shown above for
9
<PAGE>
these industries are as of March 31 of the respective years. Although the
Company's total return is based upon its fiscal year end of the last day of
February, it believes that any difference that may result is not material.
(3) The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
PROPOSAL TO APPROVE THE CHERRY CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
BACKGROUND
The Board of Directors believes it is in the best interests of the Company
to encourage stock ownership by employees of the Company. Accordingly, on May
10, 1996, the Board of Directors adopted, subject to stockholder approval, The
Cherry Corporation 1996 Employee Stock Purchase Plan (the "Stock Purchase
Plan"). An aggregate of 400,000 shares of the Company's Class A Common Stock
(subject to adjustment for any dividend, stock split or other relevant changes
in the Company's capitalization) (the "Shares") may be sold pursuant to the
Stock Purchase Plan, plus any Shares remaining under the Company's 1980 Employee
Stock Purchase Plan. The text of the Stock Purchase Plan is attached as Exhibit
A to this Proxy Statement. The following is a summary of the material provisions
of the Stock Purchase Plan.
ADMINISTRATION AND ELIGIBILITY
The Stock Purchase Plan is administered by the Compensation Committee (as
such is established from time to time) (the "Committee"). The Committee has the
authority to make rules and regulations governing the administration of the
Stock Purchase Plan.
All employees of the Company are eligible to participate in the Stock
Purchase Plan except that the following may be excluded at the discretion of the
Committee: (i) employees whose customary employment is 20 hours or less per
week; (ii) employees whose customary employment is for not more than 5 months
per year; and (iii) employees who have been employed for less than two years. As
of February 29, 1996, approximately 2,300 employees were eligible to participate
in the Stock Purchase Plan.
PARTICIPATION AND TERMS
An eligible employee may elect to participate in the Stock Purchase Plan as
of any Enrollment Date. Enrollment Dates occur on the first day of an offering
period of each year. To participate in the Stock Purchase Plan an employee must
complete an enrollment and payroll deduction authorization form provided by the
Company which indicates the amounts to be deducted from his or her salary and
applied to the purchase of the Shares on the Share Purchase Date (as hereinafter
defined). The payroll deduction must be within limits set by the Committee.
A Payroll Deduction Account is established for each participating employee
by the Company and all payroll deductions made on behalf of each employee are
credited to each such employee's respective Payroll Deduction Account. On the
last trading day of each offering period (the "Share Purchase Date"), the amount
credited to each participating employee's Payroll Deduction Account is applied
to purchase as many whole Shares as may be purchased with such amount at the
applicable Purchase Price.
The Purchase Price for the Shares will not be less than the lesser of 85% of
the closing price of shares of Class A Common Stock as reported on the NASDAQ
National Market (i) on the last trading day prior to the commencement of the
applicable offering period; or (ii) on the Share Purchase Date. The Committee
shall have the authority to establish the actual Purchase Price. The Company's
previous plan had a discount of 5% and the Company anticipates a similar
discount under the Stock Purchase Plan. Employees may purchase Shares through
the Stock Purchase Plan only by payroll deductions.
AMENDMENT AND TERMINATION
The Board of Directors of the Company may amend the Stock Purchase Plan at
any time, provided that if stockholder approval is required for the Plan to
continue to comply with the requirements of Securities
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and Exchange Commission Regulation Section 240.16b-3 or Section 423 of the
Internal Revenue Code (the "Code"), such amendment shall not be effective unless
approved by the Company's stockholders within twelve months after the date of
adoption by the Board of Directors.
The Stock Purchase Plan may be terminated by the Board of Directors at any
time.
FEDERAL INCOME TAX CONSEQUENCES
The Stock Purchase Plan is intended to be an "employee stock purchase plan"
as defined in Section 423 of the Code. As a result, an employee participant will
pay no federal income tax upon enrolling in the Stock Purchase Plan or upon
purchase of the Shares. A participant may recognize income and/or gain or loss
upon the sale or other disposition of Shares purchased under the plan, the
amount and character of which will depend on whether the Shares are held for two
years from the first day of the offering period.
If the participant sells or otherwise disposes of the Shares within that
two-year period, the participant will recognize ordinary income at the time of
disposition in an amount equal to the excess of the market price of the Shares
on the date of purchase over the purchase price and the Company will be entitled
to a tax deduction for the same amount.
If the participant sells or otherwise disposes of the Shares after holding
the Shares for the two-year period, the participant will recognize ordinary
income at the time in an amount equal to the lesser of (i) the excess of the
market price of the Shares on the first day of the offering period over the
Purchase Price, or (ii) the excess of the market price of the Shares at the time
of disposition over the purchase price. The Company will not be entitled to any
tax deduction with respect to Shares purchased under the plan if the Shares are
held for the requisite two-year period.
The employee may also recognize capital gain or loss at the time of
disposition of the Shares, either short-term or long-term, depending on the
holding period for the Shares.
OTHER INFORMATION
The Stock Purchase Plan is intended to go into effect on January 1, 1997. As
of May 10, 1996, the closing price of the Company's Class A Common Stock was
$11.75.
The affirmative vote of holders of a majority of the Shares of Class B
Common Stock represented and entitled to vote at the meeting is required for
approval of the Stock Purchase Plan. Abstentions will count as a vote against
the proposal but broker/nonvotes will have no effect.
The Board of Directors believes that the Stock Purchase Plan is in the best
interests of the Company and its stockholders and therefore recommends a vote
"FOR" this proposal.
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ACCOUNTING INFORMATION
Selection of the independent auditors is made by the Board of Directors upon
consultation with the Audit Committee. The Company's Independent Public
Accountants for fiscal year ended February 29, 1996, were Arthur Andersen LLP.
The Board of Directors will vote upon the selection of auditors for the current
fiscal year at a future Board meeting. Arthur Andersen LLP is expected to have
representatives at the annual meeting of stockholders who will be available to
respond to appropriate questions at that time and have an opportunity to make a
statement if they desire to do so.
By Order of the Board of Directors
DAN A. KING
SECRETARY
May 20, 1996
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EXHIBIT A
THE CHERRY CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Cherry Corporation, a Delaware corporation (the
"Company"), hereby adopts this Employee Stock Purchase Plan (the "Plan"). The
purpose of the Plan is to provide an opportunity for the employees of the
Company and any designated subsidiaries to purchase shares of the Class A
nonvoting stock ("Class A Stock") of the Company through voluntary automatic
payroll deductions, thereby attracting, retaining and rewarding such persons and
strengthening the mutuality of interest between such persons and the Company's
stockholders.
2. SHARES SUBJECT TO PLAN. An aggregate of 400,000 shares (the "Shares")
of Class A Stock of the Company may be sold pursuant to the Plan, plus any
shares remaining under the Company's 1980 Employee Stock Purchase Plan. Such
Shares may be authorized but unissued shares, treasury shares or shares
purchased in the open market. If there is any change in the outstanding shares
of Class A Stock by reason of a stock dividend or distribution, stock split,
recapitalization, combination or exchange of shares, or a merger, consolidation
or other corporate reorganization in which the Company is the surviving
corporation, the number of Shares available for sale shall be equitably adjusted
by the Committee appointed to administer the Plan to give proper effect to such
change.
3. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") which shall be the Compensation Committee of the Board of Directors
or another committee consisting of not less than two directors of the Company
appointed by the Board of Directors, none of whom shall participate in the Plan
and all of whom shall qualify as disinterested persons within the meaning of
Securities and Exchange Commission Regulation Section 240.16b-3 or any successor
regulation. The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Shares made
available hereunder as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on all
participants and their legal representatives. No member of the Board, no member
of the Committee and no employee of the Company shall be liable for any act or
failure to act hereunder, by any other member or employee or by any agent to
whom duties in connection with the administration of this Plan have been
delegated or, except in circumstances involving his or her bad faith, gross
negligence or fraud, for any act or failure to act by the member or employee.
4. ELIGIBILITY. All employees of the Company, and of each qualified
subsidiary of the Company designated for participation by the Board of
Directors, shall be eligible to participate in the Plan, provided, however, that
the Committee in its discretion may exclude:
(a) employees whose customary employment is 20 hours or less per week;
(b) employees whose customary employment is for not more than 5 months
per year; and
(c) employees who have been employed for less than two years.
For the purposes of this Plan, the term "qualified subsidiary" means any
subsidiary, 50% or more of the total combined voting power of all classes of
stock which is now owned or hereafter acquired by the Company or any such
qualified subsidiary.
5. PARTICIPATION. An eligible employee may elect to participate in the
Plan as of any "Enrollment Date". Enrollment Dates shall occur on the first day
of an Offering Period (as defined in paragraph 8). Any such election shall be
made by completing and forwarding to the Company an enrollment and payroll
deduction authorization form prior to such Enrollment Date, authorizing payroll
deductions in such amount as the employee may request but in no event less than
the minimum nor more than the maximum amount as the Committee shall determine. A
participating employee may increase or decrease his payroll deductions as of any
subsequent Enrollment Date by completing and forwarding to the Company a revised
payroll
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deduction authorization form; provided, that changes in payroll deductions shall
not be permitted to the extent that they would result in total payroll
deductions below the minimum or above the maximum amount specified by the
Committee. An eligible employee may not initiate, increase or decrease payroll
deductions as of any date other than an Enrollment Date except by withdrawing
from the Plan as provided in paragraph 7.
6. PAYROLL DEDUCTION ACCOUNTS. The Company shall establish on its books
and records a "Payroll Deduction Account" for each participating employee, and
shall credit all payroll deductions made on behalf of each employee pursuant to
paragraph 5 to his or her Payroll Deduction Account. No interest shall be
credited to any Payroll Deduction Account.
7. WITHDRAWALS. An employee may withdraw from an Offering Period at any
time by completing and forwarding a written notice to the Company. Upon receipt
of such notice, payroll deductions on behalf of the employee shall be
discontinued commencing with the immediately following payroll period, and such
employee may not again be eligible to participate in the Plan until the
subsequent Enrollment Date. Amounts credited to the Payroll Deduction Account of
any employee who withdraws shall be refunded to the employee as soon as
practicable after the withdrawal.
8. OFFERING PERIODS. The Plan shall be implemented by consecutive
twelve-month Offering Periods with a new Offering Period commencing on the first
trading day on or after the first day of each January during the term of the
Plan, or on such other date as the Committee shall determine, and continuing
thereafter to the end of such period, subject to termination in accordance with
paragraph 17 hereof. The first Offering Period hereunder shall commence on
January 1, 1997. "Trading day" shall mean a day on which the NASDAQ National
Market System is open for trading. The Committee shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings. The last trading day of each Offering Period prior
to the termination of the Plan (or such other trading date as the Committee
shall determine) shall constitute the purchase dates (the "Share Purchase
Dates") on which each employee for whom a Payroll Deduction Account has been
maintained shall purchase the number of Shares determined under paragraph 9(a).
Notwithstanding the foregoing, the Company shall not permit the exercise of any
right to purchase Shares
(a) to an employee who, immediately after the right is granted, would
own shares possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company or any subsidiary; or
(b) which would permit an employee's rights to purchase shares under
this Plan, or under any other qualified employee stock purchase plan
maintained by the Company or any subsidiary, to accrue at a rate in excess
of $25,000 in fair market value for each calendar year.
For the purposes of subparagraph (a), the provisions of Section 424(d) of
the Internal Revenue Code shall apply in determining the stock ownership of an
employee, and the shares which an employee may purchase under outstanding rights
or options shall be treated as shares owned by the employee.
9. PURCHASE OF SHARES.
(a) Subject to the limitations set forth in paragraphs 7 and 8, each
employee participating in an offering shall purchase as many whole Shares as
may be purchased with the amounts credited to his or her Payroll Deduction
Account seven days prior to the Share Purchase Date (or such other date as
the Committee shall determine) (the "Cutoff Date"). Employees may purchase
Shares only through payroll deductions, and cash contributions shall not be
permitted.
(b) The "Purchase Price" for Shares purchased under the Plan shall be
not less than the lesser of (i) an amount equal to 85% of the closing price
of shares of the Class A Stock on the last trading prior to the commencement
of the Offering Period or (ii) an amount equal to 85% of the closing price
of shares of the Class A Stock on the Share Purchase Date. For these
purposes, the closing price shall be as
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reported on the NASDAQ National Market System in the WALL STREET JOURNAL,
Midwest Edition. The Committee shall have the authority to establish a
different Purchase Price as long as any such Purchase Price complies with
the provisions of Section 423 of the Code.
(c) On each Share Purchase Date, the amount credited to each
participating employee's Payroll Deduction Account as of the immediately
preceding Cutoff Date shall be applied to purchase as many whole Shares as
may be purchased with such amount at the applicable Purchase Price. Any
amount remaining in an employee's Payroll Deduction Account as of the
relevant Cutoff Date in excess of the amount that may properly be applied to
the purchase of Shares shall be refunded to the employee as soon as
practicable.
10. BROKERAGE ACCOUNTS OR PLAN SHARE ACCOUNTS. By enrolling in the Plan,
each participating employee shall be deemed to have authorized the establishment
of a brokerage account on his or her behalf at a securities brokerage firm
selected by the Committee. Alternatively, the Committee may provide for Plan
share accounts for each participating employee to be established by the Company
or by an outside entity selected by the Committee which is not a brokerage firm.
Shares purchased by an employee pursuant to the Plan shall be held in the
employee's brokerage or Plan share account ("Plan Share Account") in his or her
name, or if the employee so indicates on his or her payroll deduction
authorization form, in the employee's name jointly with a member of the
employee's family, with right of survivorship.
11. RIGHTS AS STOCKHOLDER. An employee shall have no stockholder rights
with respect to Shares subject to any purchase rights granted under this Plan
until payment for such Shares has been completed at the close of business on the
relevant Share Purchase Date.
12. CERTIFICATES. Certificates for Shares purchased under the Plan will
not be issued automatically. However, certificates for whole Shares purchased
may be issued as soon as practicable following an employee's written request.
The Company may make a reasonable charge for the issuance of such certificates.
Fractional interests in Shares shall be carried forward in an employee's Plan
Share Account until they equal one whole Share or until the termination of the
employee's participation in the Plan, in which event an amount in cash equal to
the value of such fractional interest shall be paid to the employee in cash.
13. TERMINATION OF EMPLOYMENT. If a participating employee's employment is
terminated for any reason, if an employee dies, if an employee becomes disabled
or if an employee otherwise ceases to be eligible to participate in the Plan,
payroll deductions on behalf of the employee shall be discontinued and any
amounts then credited to the employee's Payroll Deduction Account shall be
refunded as soon as practicable.
14. RIGHTS NOT TRANSFERABLE. Rights granted under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during an employee's lifetime only
by the employee.
15. EMPLOYMENT RIGHTS. Neither participation in the Plan, nor the exercise
of any right granted under the Plan, shall be made a condition of employment, or
of continued employment with the Company or any subsidiary. Participation in the
Plan does not limit the right of the Company or any subsidiary to terminate a
participating employee's employment at any time or give to an employee any right
to remain employed by the Company or any subsidiary in any particular position
or at any particular rate of remuneration.
16. APPLICATION OF FUNDS. All funds received by the Company for Shares
sold by the Company on any Share Purchase Date pursuant to this Plan may be used
for any corporate purpose.
17. AMENDMENTS AND TERMINATION. The Board of Directors may amend the Plan
at any time, provided that no such amendment shall be effective unless approved
within 12 months after the date of the adoption of such amendment by stockholder
vote if stockholder approval is required for the Plan to continue to comply with
the requirements of Securities and Exchange Commission Regulation Section
240.16b-3 or Section 423 of the Internal Revenue Code. The Board of Directors
may suspend the Plan or discontinue the Plan at any time. Upon termination of
the Plan, all payroll deductions shall cease and all amounts then
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credited to the participating employees' Payroll Deduction Accounts shall be
equitably applied to the purchase of whole Shares then available for sale, and
any remaining amounts shall be promptly refunded to the participating employees.
18. APPLICABLE LAWS. This Plan, and all rights granted hereunder, are
intended to meet the requirements of an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code, as from time to time amended, and the
Plan shall be construed and interpreted to accomplish this intent. Sales of
Shares under the Plan are subject to, and shall be accomplished only in
accordance with, the requirements of all applicable securities and other laws.
19. EXPENSES. Except to the extent provided in paragraph 12, all expenses
of administering the Plan, including expenses incurred in connection with the
purchase of Shares in the open market for sale to participating employees, shall
be borne by the Company and its subsidiaries.
20. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of Directors
on May 10, 1996, subject to stockholder approval. The Plan and any action taken
hereunder shall be null and void if stockholder approval is not obtained at the
next annual meeting of stockholders.
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THE CHERRY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
1. Election of Directors
Walter L. Cherry, Peter B. Cherry, Alfred S. Budnick,
Thomas L. Martin, Jr., Robert B. McDermott,
Peter A. Guglielmi, Charles W. Denny, W. Ed Tyler,
Henry J. West
FOR all nominees listed WITHHOLD AUTHORITY
below (except as to vote for all nominees
marked to the contrary) listed below
/ / / /
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name on the space provided below.)
---------------------------------------------
For Against Abstain
2. Approval of 1996 Employee Stock Purchase Plan / / / / / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(IF THE STOCK IS REGISTERED IN THE NAME OF MORE THAN ONE PERSON, THE PROXY
SHOULD BE SIGNED BY ALL NAMED HOLDERS. IF SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, CORPORATE OFFICIAL, ETC., PLEASE GIVE FULL
TITLE AS SUCH.)
(Signature)
- ----------------------------------------
DATED: , 1996
----------------------------------
(Signature)
- ----------------------------------------
<PAGE>
PROXY
THE CHERRY CORPORATION
3600 SUNSET AVENUE, WAUKEGAN, ILLINOIS 60087
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Walter L. Cherry and Peter B. Cherry, and
each of them, as proxies, each with full power of substitution, to
represent and to vote, as designated below, all of the undersigned's Class B
Common Stock in The Cherry Corporation at the annual meeting of stockholders of
The Cherry Corporation to be held on Wednesday June 19, 1996, and at any
adjournment thereof, with the same authority as if the undersigned were
personally present.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES
RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AND PROPOSAL 2.
(Please date and sign on reverse side.)
