SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box: [_] Confidential, for Use of the
[_] Preliminaryproxy statement Commission Only (as permitted
[X] Definitive proxy statement by Rule 14a-6(e)(2))
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Communications Systems, Inc.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Communications Systems, Inc.
- ------------------------------------------------------------------------------
(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), or 14a-6(i)(2
or Items 22(a)(2) of Schedule A.
[_] $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 transactions 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>
COMMUNICATIONS SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 14, 1996
Notice is hereby given that the Annual Meeting of Shareholders of
Communications Systems, Inc. will be held at The Marquette Hotel, 7th and
Marquette, 50th Floor, Minneapolis, Minnesota 55402, on Tuesday, May 14, 1996 at
3:00 p.m., Central Daylight Time, for the following purposes:
1. To elect three (3) directors to hold office until the 1999 Annual
Meeting of Shareholders or until their successors are elected.
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 22, 1996 as
the record date for determination of shareholders entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors
Richard A. Primuth,
Secretary
Hector, Minnesota
April 9, 1996
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON IF THEY SO DESIRE.
<PAGE>
COMMUNICATIONS SYSTEMS, INC.
213 South Main Street
Hector, Minnesota 55342
(320) 848-6231
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Communications
Systems, Inc. ("CSI" or the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the Annual
Meeting of Shareholders to be held at The Marquette Hotel, 7th and Marquette,
50th Floor, Minneapolis, Minnesota 55402 on Tuesday, May 14, 1996, beginning at
3:00 p.m. or at any adjournment or adjournments thereof. The cost of this
solicitation will be paid by the Company. In addition to solicitation by mail,
officers, directors and employees of the Company may solicit proxies by
telephone, telegraph or in person. The Company may also request banks and
brokers to solicit their customers who have a beneficial interest in the
Company's Common Stock registered in the names of nominees and will reimburse
such banks and brokers for their reasonable out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by receipt of a
proxy properly signed and dated subsequent to an earlier proxy, or by revocation
of a written proxy by request in person at the Annual Meeting. If not so
revoked, the shares represented by such proxy will be voted by the persons
designated as proxies in favor of the matters indicated. In the event any other
matters which properly come before the meeting require a vote of shareholders,
the persons named as proxies will vote in accordance with their judgment on such
matters. The Company's corporate offices are located at 213 South Main Street,
Hector, Minnesota 55342, and its telephone number is (612) 848-6231. The mailing
of this Proxy Statement to shareholders of the Company commenced on or about
April 9, 1996.
The total number of shares outstanding and entitled to vote at the meeting
as of March 22, 1996 consisted of 9,311,210 shares of $.05 par value Common
Stock. Only shareholders of record at the close of business on March 22, 1996
will be entitled to vote at the meeting. Each share of Common Stock is entitled
to one vote. Cumulative voting in the election of directors is not permitted.
The presence in person or by proxy of the holders of a majority of the shares
entitled to vote at the Annual Meeting of Shareholders constitutes a quorum for
the transaction of business.
Under Minnesota law, each item of business properly presented at a meeting
of shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or by
proxy, and entitled to vote on that item of business. However, if the shares
present and entitled to vote on any particular item of business would not
constitute a quorum for the transaction of business at the meeting, then that
item must be approved by holders of a majority of the minimum number of shares
that would constitute such a quorum. Votes cast by proxy or in person at the
Annual Meeting of Shareholders will be tabulated at the meeting to determine
whether or not a quorum is present. Abstentions on a particular item of business
will be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
approval of the matter. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's Common
Stock owned by each person known by the Company to own of record or beneficially
five percent (5%) or more of the Company's Common Stock and all officers and
directors of the Company as a group using information available as of March 12,
1996.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
Curtis A. Sampson 1,668,988(1) 17.9%
213 South Main Street
Hector, MN 55342
First Bank System Inc. 680,600 7.3%
601 2nd Ave. South
Minneapolis, MN 55402
George D. Bjurman 564,100 6.1%
& Associates
George Andrew Bjurman
Owen Thomas Barry III
10100 Santa Monica Blvd.
Suite 1200
Los Angeles, CA 90067
John C. Ortman 539,350(2) 5.8%
1506 17th Street
Lawrenceville, IL 62439
All directors and executive
officers as a group
(12 persons) 2,751,378(3) 29.6%
(1) Includes 13,898 shares owned by Mr. Sampson's spouse, as to which
beneficial ownership is disclaimed, 44,000 shares which may be purchased within
sixty days from the date hereof pursuant to outstanding stock options, and
342,593 shares owned by the Communications Systems, Inc. Employee Stock
Ownership Plan ("CSI ESOP") of which Mr. Sampson is a Trustee and 22,969 shares
of Company common stock owned by the Hector Communications Corporation Employee
Stock Ownership Plan ("Hector ESOP") of which Mr. Sampson is a Trustee. Mr.
Sampson disclaims any beneficial ownership of shares owned by the CSI ESOP and
the Hector ESOP in excess of the 20,362 shares allocated to his account as of
December 31, 1995.
(2) Includes 10,000 shares which may be purchased within sixty days from
the date hereof pursuant to outstanding stock options.
(3) Includes 2,131,729 shares owned by officers and directors as a group
directly, 46,087 shares held by their respective spouses, 208,000 shares which
may be purchased by directors and officers within 60 days from the date hereof
pursuant to outstanding stock options, 342,593 shares owned by the CSI ESOP and
22,969 shares of Company common stock owned by the Hector ESOP. Messrs. Curtis
A. Sampson, Wayne E. Sampson and Paul N. Hanson serve as Trustees of the CSI
ESOP and Mr. Curtis A. Sampson and Mr. Paul N. Hanson serve as Trustees of the
Hector ESOP; except for shares allocated to the respective accounts of Mr.
Curtis Sampson and Mr. Paul N. Hanson, Messrs. Sampson, Sampson and Hanson
disclaim beneficial ownership of the shares held by such ESOPs.
2
<PAGE>
1. ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends for election as
directors of the Company Mr. Edwin C. Freeman, Mr. Edward E. Strickland and Mr.
John C. Ortman each of whom is currently serving as a director of the Company.
The Board of Directors believes that each nominee named below will be able to
serve, but should a nominee be unable to serve as a director, the persons named
in the proxies have advised that they will vote for the election of such
substitute nominee as the Board of Directors may propose.
Information regarding the nominees and other directors filling unexpired
terms is set forth on the following page, including information regarding their
principal occupations currently and for the preceding five years. Ownership of
Common Stock of the Company is given as of March 12, 1996. To the best of the
Company's knowledge, unless otherwise indicated below, the persons indicated
possess sole voting and investment power with respect to their stock ownership.
<TABLE>
<CAPTION>
Year Amount of Percent of
Current Common Outstanding
Principal Occupation Director Term Stock Common
Name and Age and other Directorships Since Expires Ownership Stock
Nominees proposed for Election for Term Expiring in 1999
<S> <C> <C> <C> <C>
Edwin C. Freeman Vice President and General Manager, 1988 1996 20,100(1) .2%
(40) Bro-Tex, Inc. (paper and cloth wiper
products, and fiber product recycler)
since March, 1992; Project Manager,
Corporate Development, National
Computer Systems, Inc. from 1989 to
1992.
Edward E. Strickland Business and management 1981 1996 30,000(2) .3%
(69) consultant; Director of: Green Isle
Environmental Services, Inc.
(manufacturing); Bio-Vascular, Inc.
(medical devices); Intercim, Inc.
(factory management software);
Hector Communications Corporation
(independent telephone companies);
and, Avecor Cardiovascular, Inc.
(medical devices).
John C. Ortman Private Investor. Vice President-Sales 1990 1996 539,350(2) 5.8%
(74) of Suttle Apparatus Corporation (CSI's
telephone station apparatus subsidiary)
from 1968 to 1986.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Year Amount of Percent of
Current Common Outstanding
Principal Occupation Director Term Stock Common
Name and Age and other Directorships Since Expires Ownership Stock
Directors Serving Unexpired Terms
<S> <C> <C> <C> <C>
Paul J. Anderson Private Investor. 1975 1997 178,618(3) 1.9%
(64)
Wayne E. Sampson Management consultant; director of 1981 1997 367,093(4) 3.9%
(66)* Hector Communications Corporation.
Curtis A. Sampson Chairman of the Board, President and 1969 1998 1,668,988(5) 17.9%
(62)* Chief Executive Officer of the
Company; Chairman of the Board of
Hector Communications Corporation
(independent telephone companies).
Joseph W. Parris Attorney, Mediator, Arbitrator 1995 1998 110,000 1.2%
(76) and Private Investor
</TABLE>
* Wayne E. Sampson and Curtis A. Sampson are brothers.
(1) Includes 2,100 shares owned by Mr. Freeman's spouse, as to which
beneficial ownership is disclaimed and 10,000 shares which may be purchased
pursuant to outstanding and presently exercisable stock options.
(2) Includes 10,000 shares which may be purchased pursuant to outstanding
and presently exercisable stock options.
(3) Includes 30,309 shares owned by Mr. Anderson's wife, as to which
beneficial ownership is disclaimed, and 8,000 shares which may be purchased
pursuant to outstanding and presently exercisable stock options.
(4) Includes 14,000 shares owned by Mr. Sampson directly, 500 shares owned
by his spouse, as to which beneficial ownership is disclaimed, 342,593 shares
owned by the CSI ESOP of which Mr. Sampson is a Trustee and 10,000 shares which
may be purchased pursuant to outstanding and presently exercisable stock
options. Mr. Sampson disclaims any beneficial ownership of the shares owned by
the CSI ESOP.
(5) See footnote 1 under "Security Ownership of Certain Beneficial Owners
and Management."
4
<PAGE>
Information Regarding Board and Board Committees
The Board of Directors met four times during 1995. Each director nominee
and continuing director attended at least 75% of the 1995 meetings of the Board
and each committee on which such director served.
Directors who are not otherwise directly or indirectly compensated by the
Company (currently Messrs. P. J. Anderson, E. C. Freeman, J. C. Ortman, W. E.
Sampson and E. E. Strickland) receive a monthly retainer of $400 plus $400 for
each Board, Audit Committee or Compensation Committee meeting attended. Messrs.
Strickland and W. E. Sampson, in consideration for their additional services as
members of the Executive Committee, are paid an additional monthly retainer of
$350. Mr. C. A. Sampson received no additional cash compensation for service on
the Board.
Each non-employee member of the Board of Directors receives at the time of
the annual meeting of the shareholders an option to purchase 2,000 shares of the
Company's Common Stock. Each director's option is at a price equal to the fair
market value of the Company's Common Stock on the date of grant exercisable over
a ten-year period beginning six months after the date the option is granted.
The Company has an Audit Committee consisting of Messrs. Paul J. Anderson,
W. E. Sampson and E. E. Strickland which met twice during the last fiscal year.
The Audit Committee recommends to the full Board of Directors the selection of
independent accountants and reviews the activities and reports of the
independent accountants, as well as the internal accounting controls of the
Company.
The Company has a Compensation Committee consisting of Messrs. C. A.
Sampson, Edwin C. Freeman and W. E. Sampson. The Compensation Committee met
twice during the last fiscal year.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following tables show, for the fiscal years ending December 31, 1995,
1994 and 1993, the cash and other compensation paid to or accrued by the Company
for each executive officer whose total cash compensation exceeded $100,000
during fiscal 1995 in all capacities served, as well as information relating to
option grants, option exercises and fiscal year end option values applicable to
such persons.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Securities All
Underlying Other
Name and Principal Position Year Salary Bonus Options Compensation
<S> <C> <C> <C> <C> <C>
Curtis A. Sampson, Chief Executive 1995 $160,666 $25,000 12,000
Officer of the Company (1) 1994 $147,360 $25,000 8,000
1993 $142,948 -0- 10,600
John C. Hudson, Managing Director 1995 $ 87,130 $74,861 6,000 $41,017
Austin Taylor Communications (2) 1994 $ 85,475 $99,530 6,000 $57,035
1993 $ 75,000 $36,372 10,000 $40,500
Jeffrey K. Berg, President 1995 $ 99,132 $20,000 12,000 (3)
Suttle Apparatus Corporation 1994 $ 91,934 $20,000 12,000
1993 $ 86,018 $12,500 10,000
</TABLE>
Note: Certain columns have not been included in this table because the
information called for therein is not applicable to the Company or the
individual named above for the periods indicated.
(1) Mr. Sampson devotes approximately 60% of his working time to the
Company. The balance of his working time Mr. Sampson serves as Chairman and
Executive Officer of Hector Communications Corporation, for which he is
separately compensated.
(2) Mr. Hudson became an employee of the Company February 1, 1992. For each
of the three years, more than 75% of the amounts listed under "All Other
Compensation" represents the Company's contribution to Mr. Hudson's pension
plan.
(3) In July, 1994 the Company loaned Mr. Berg $100,000 at 8% per annum
under a promissory note providing for annual interest payments and for repayment
of the principal amount in July, 1998. The current balance of the loan is
$61,000. The loan is secured by options to acquire 22,000 shares of Company
common stock which were granted to Mr. Berg and which have an aggregate,
in-the-money value of approximately $112,625 as of date hereof.
6
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN 1995
Individual Grants
% of Total Potential Realizable
Number Options Value at Assumed
of Granted Annual
Securities to Rates of Stock
Underlying Employees Exercise Price Appreciation
Options in Price Expiration for Option Term
Name Granted 1995 Per Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Curtis A. Sampson 12,000 8.9% $15.40 4/10/00 $29,616 $85,764
John C. Hudson 6,000 4.4% 14.00 4/10/00 23,208 51,282
Jeffrey K. Berg 12,000 8.9% 14.00 4/10/00 46,415 102,564
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1995
AND YEAR-END OPTION VALUES
Value of Unexercised
in-the-Money Options
Value Realized at FY-End
(Market Price Number of Unexercised (Based on FY-End
Shares Acquired at exercise less Options at FY-End Price of $15.75/sh)
Name on Exercise exercise price) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Curtis A. Sampson 20,000 $242,625 36,000 8,000 $264,924 $2,800
John C. Hudson -- -- 18,000 4,000 99,125 7,000
Jeffrey K. Berg 14,000 158,625 26,000 8,000 125,125 14,000
</TABLE>
Compensation Committee Interlocks and Insider Participation
During fiscal 1995, Curtis A. Sampson and Wayne E. Sampson served as
members of the Company's Compensation Committee. Mr. C. A. Sampson is the
President and Chief Executive Officer of the Company and Mr. W. E. Sampson, a
director, is his brother.
COMPENSATION COMMITTEE REPORT
The Compensation Committee appointed by the Company's Board of Directors
has primary responsibility in regard to determinations relating to executive
compensation and administration of the Company's stock option plans. All
decisions by the Compensation Committee pertaining to the compensation of the
Company's executive officers are reviewed and approved by the full Board. Mr.
Curtis A. Sampson, the Company's Chairman and Chief Executive Officer, did not
participate in any discussions or decisions of either the Compensation Committee
or the Board of Directors relating to any aspect of his compensation.
7
<PAGE>
Compensation Policies
It is the objective of the Compensation Committee to pay compensation at
levels which will attract, retain and motivate executives with superior
leadership and management abilities and to structure the forms of compensation
paid such that their interests will be closely aligned with achievement of
superior financial performance by the Company. With these objectives in mind,
the compensation currently paid to the Company's executive officers principally
consists of three elements: base salary, bonus and periodic stock option awards.
Compensation Elements
Base salaries of the Company's executive officers are generally established
by reference to base salaries paid to executives in similar positions with
similar responsibilities based upon publicly available compensation surveys and
limited informal surveys by Compensation Committee members. Base salaries are
reviewed annually. Adjustments to base salaries are determined by reference to
individual and company performance having in mind both measurable financial
factors, as well as subjective judgments by the Compensation Committee in regard
to factors such as development and execution of strategic plans, changes in
areas of responsibility and the development and management of employees. The
Compensation Committee does not, however, assign specific weights to these
various factors in reaching its decisions.
Bonuses are intended to provide executives with an opportunity to receive
additional cash compensation, but only if they earn it through Company and
individual performance. After year end results are available, the Committee
determines each officer's bonus based on the Company's performance, as measured
by such factors as growth in earnings per share, as well as the Compensation
Committee's subjective assessment of individual performance in the executive's
area of responsibility, but without assigning specific weight to the various
factors considered.
Stock options are awarded to the Company's executives under the Company's
1992 Stock Plan. Stock options represent an additional vehicle for aligning
management's and stockholders' interests, specifically motivating executives to
remain focused on factors which will enhance the market value of the Company's
common stock. If there is no price appreciation in the common stock, the option
holders receive no benefit from the stock options, because options are granted
with an option exercise price at least equal to the fair market value of the
common stock on the date of grant.
The Compensation Committee did not utilize the foregoing methodology in
establishing Mr. Hudson's compensation. Rather, his compensation for 1993, 1994
and 1995 was established by a written contract negotiated at arm's length in
connection with the February 1, 1992 acquisition of Austin Taylor Communications
Ltd.
Chief Executive Officer Compensation
Mr. Curtis A. Sampson participates in the same executive compensation plans
provided to other senior executives and is evaluated by the same factors
applicable to the other executives as described above. Mr.Sampson's total cash
compensation for 1995 increased approximately 8% over 1994. In addition, Mr.
Sampson was granted options to purchase 12,000 shares in 1995 compared to an
option to purchase 8,000 shares awarded in the prior year. The two other members
of the Compensation Committee believe that Mr. C. A. Sampson's cash and option
compensation is reasonable in relation to the Company's performance during the
year which saw the Company's revenues increase 15% from 1994 and the Company's
net income increase 34%. Also, in regard to stock options granted to Mr.
Sampson, because of his significant holdings of Company common stock, under
applicable IRS rules, Mr. Sampson's options are priced at 110% of the market
price on the date of grant. The two other members of the Compensation Committee
believe, based upon their general knowledge of compensation paid to other chief
executives and published regional salary data (but without conducting a formal
survey), that Mr. Sampson's total compensation is below that which could be
reasonably justified in relation to the scope of his responsibilities, as well
as the financial performance of the Company and total shareholder return during
the past several years.
Submitted by the Compensation Committee of the Board of Directors
Edwin C. Freeman Curtis A. Sampson Wayne E. Sampson
8
<PAGE>
PERFORMANCE GRAPH
The following graph presents, at the end of each of the Company's last five
fiscal years, the cumulative total return on the common stock of the Company as
compared to the cumulative total return of the NASDAQ Stock Market Total Return
Index (U.S. Companies), NASDAQ Telecommunications Stock Total Return Index, and
the NASDAQ Electronics Total Return Index assuming, in each case, the investment
of $100 on December 31, 1990 and the reinvestment of all dividends.
<TABLE>
<CAPTION>
Comparison Of Five-Year Cumulative Total Return
Total Return at December 31,
<S> <C> <C> <C> <C> <C> <C>
Company or Index 1990 1991 1992 1993 1994 1995
Communications Systems, Inc. 100 225 249 436 420 539
NASDAQ Stock Market 100 161 187 215 210 296
NASDAQ Electronics Component Stocks 100 142 222 306 337 560
NASDAQ Telecommunications Stock 100 138 169 261 216 260
</TABLE>
CERTAIN TRANSACTIONS
Transactions and Shared Management with Hector Communications Corporation
On July 23, 1990, the Company transferred the stock of the independent
telephone companies it owned to Hector Communications Corporation ("HCC") and
thereafter distributed the HCC common stock to its shareholders pro rata at the
rate of one share of HCC common stock for each two shares of the Company's
common stock. Thereafter the Company has had no continuing financial interest in
HCC, except for such matters as arise under the Distribution Agreement described
below, and except that certain executive officers and other employees of the
Company are also employed by and perform similar functions for HCC
In August, 1990 HCC and the Company entered into a Distribution Agreement
pursuant to which the Company has continued to make available to HCC certain
centralized staff services and systems, such as payroll and pension plan
administration, with the related costs and expenses being paid by HCC. In 1995
and 1994 HCC paid the Company $279,000 and $267,000, respectively, for such
services, amounts which management believes are no less than the cost the
Company incurred in connection with providing such services.
Two of the Company's executive officers, Curtis A. Sampson and Paul N.
Hanson, each devote approximately 60% of their working time to the Company.
Messrs. Sampson and Hanson devote the remainder of their working time to HCC, of
which Mr. Sampson serves as Chairman and Chief Executive Officer and Mr. Hanson
serves as a director and Treasurer. These officers are separately compensated by
HCC for their services to HCC.
9
<PAGE>
Reports to the Securities and Exchange Commission
The Company's officers, directors and beneficial holders of 10% or more of
the Company's securities are required to file reports of their beneficial
ownership with the Securities and Exchange Commission on SEC Forms 3, 4 and 5.
According to the Company's records, during the period from January 1, 1995 to
December 31, 1995, officers, directors and ten percent beneficial holders of the
Company filed all reports with the Securities and Exchange Commission required
under Section 16(a) related to their beneficial ownership. To the best of the
Company's knowledge, all such reports have been filed in a timely manner.
THE COMPANY'S AUDITORS
Deloitte & Touche LLP have been the auditors for the Company since 1982 and
have been selected by the Board of Directors, upon recommendation of the Audit
Committee, to serve as such for the current fiscal year. A representative of
Deloitte & Touche LLP is expected to be present at the Annual Meeting of
Shareholders and will have an opportunity to make a statement and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders of a company, after timely notice to the Company, to present
proposals for shareholder action in the Company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by Company action in accordance
with the Commission's proxy rules. The next annual meeting of the shareholders
of Communications Systems, Inc. is expected to be held on or about May 14, 1997
and proxy materials in connection with that meeting are expected to be mailed on
or about March 31, 1997. Shareholder proposals prepared in accordance with the
Commission's proxy rules to be included in the Company's Proxy Statement must be
received at the Company's corporate office, 213 South Main Street, Hector,
Minnesota 55342, Attention: President, by December 15, 1996, in order to be
considered for inclusion in the Board of Directors' Proxy Statement and proxy
card for the 1997 Annual Meeting of Shareholders. Any such proposals must be in
writing and signed by the shareholder.
The Bylaws of the Company establish an advance notice procedure with regard
to (i) certain business to be brought before an annual meeting of shareholders
of the Company and (ii) the nomination by shareholders of candidates for
election as directors.
Properly Brought Business. The Bylaws provide that at the annual meeting
only such business may be conducted as is of a nature that is appropriate for
consideration at an annual meeting and has been either specified in the notice
of the meeting, otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or otherwise properly brought before the
meeting by a shareholder who has given timely written notice to the Secretary of
the Company of such shareholder's intention to bring such business before the
meeting. To be timely, the notice must be given by such shareholder to the
Secretary of the Company not less than 45 days nor more than 75 days prior to a
meeting date corresponding to the previous year's annual meeting. Notice
relating to the conduct of such business at an annual meeting must contain
certain information as described in Section 2.9 of the Company's Bylaws, which
are available for inspection by shareholders at the Company's principal
executive offices pursuant to Section 302A.461, subd. 4 of the Minnesota
Statutes. Nothing in the Bylaws precludes discussion by any shareholder of any
business properly brought before the annual meeting in accordance with the
Company's Bylaws.
Shareholder Nominations. The Bylaws provide that a notice of proposed
shareholder nominations for the election of directors must be timely given in
writing to the Secretary of the Company prior to the meeting at which directors
are to be elected. To be timely, the notice must be given by such shareholder to
the Secretary of the Company not less than 45 days nor more than 75 days prior
to a meeting date corresponding to the previous year's annual meeting. The
notice to the Company from a shareholder who intends to nominate a person at the
meeting for election as a director must contain certain information as described
in Section 3.7 of the Company's Bylaws, which are available for inspection by
shareholders as described above. If the presiding officer of a meeting of
shareholders determines that a person was not nominated in accordance with the
foregoing procedure, such person will not be eligible for election as a
director.
10
<PAGE>
OTHER MATTERS
Management knows of no other matters that will be presented at the meeting.
If any other matters arise at the meeting, it is intended that the shares
represented by the proxies in the accompanying form will be voted in accordance
with the judgment of the persons named in the proxy.
The Company is transmitting with this Proxy Statement its Annual Report for
the year ended December 31, 1995. Shareholders may receive, without charge, a
copy of the Company's 1995 Form 10-K Report as filed with the Securities and
Exchange Commission by writing to Assistant Secretary, Communications Systems,
Inc., 213 South Main Street, Hector, Minnesota 55342.
By Order of the Board of Directors,
Richard A. Primuth,
Secretary
11
<PAGE>
COMMUNICATIONS SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 14, 1996
The undersigned hereby appoints Curtis A. Sampson and Joseph W. Parris, or
any of them, as proxies, with full power of substitution to vote all the shares
of common stock which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of Communications Systems, Inc.,
to be held Tuesday, May 14, 1996, at 3:00 p.m. Central Daylight Time at The
Marquette Hotel, 7th and Marquette, 50th Floor, Minneapolis, Minnesota 55402, or
at any adjournments thereof, hereby revoking all former proxies. The undersigned
said proxies to vote as follows:
1. Election of Directors for terms expiring at 1999 Annual Shareholders Meeting.
__WITH AUTHORITY to vote for all __WITHOUT AUTHORITY to vote for nominees
nominees listed below (except as listed below
indicated to the contrary)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.)
Edwin C. Freeman Edward E. Strickland John C. Ortman
___________________________________
(Continued and to be signed on reverse side)
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(Continued from previous side)
2. In their discretion upon any matters coming before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION
OF THE DIRECTORS AND THE PROPOSALS SUMMARIZED ON THE REVERSE SIDE OF
THIS CARD UNLESS OTHERWISE SPECIFIED.
Number of Shares:
Dated ____________________, 1996
____________________________________
Signature
____________________________________
Signature if held jointly
Please date and sign exactly as your name(s) appears below
indicating, where proper, official position or representative
capacity in which you are signing. When signing as executor,
administrator, trustee or guardian, give full title as such; when
shares have been issued in names of two or more persons, all should
sign.
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