<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.__ )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use by the
[X] Definitive Proxy Statement Commission Only (As permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CALNETICS 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), or 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(1):
- --------------------------------------------------------------------------------
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:
- --------------------------------------------------------------------------------
(1) Set forth the amount of which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[CALNETICS LOGO]
20401 Prairie Street
Chatsworth, California 91311
TO THE SHAREHOLDERS OF CALNETICS CORPORATION:
Attached are a Notice of Meeting and a Proxy Statement for the Annual Meeting of
Shareholders to be held on November 8, 1996. At the Annual Meeting, shareholders
will be asked to elect Directors for the ensuing year.
Sincerely,
/s/ Clinton G. Gerlach
----------------------
Clinton G. Gerlach
Chairman
/s/ Barbara Guyer
----------------------
Barbara Guyer
Secretary
September 27, 1996
<PAGE> 3
CALNETICS CORPORATION
20401 Prairie Street
Chatsworth, CA 91311
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 8, 1996
The Annual Meeting of Shareholders of Calnetics Corporation, a
California corporation (the "Company"), will be held on Friday, November 8,
1996, at 10:00 a.m., local time, at the Airtel Plaza Hotel, 7277 Valjean Avenue,
Van Nuys, California 91406, for the following purposes:
1. To elect five (5) Directors to hold office until the next
annual election of Directors by the shareholders, or until
their successors are elected and qualified.
2. To transact such other business as may properly come before
the Annual Meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on September
20, 1996 as the record date for determining the shareholders entitled to receive
notice of and vote at the Annual Meeting or at any adjournments or postponements
thereof.
Shareholders are cordially invited to attend the Annual Meeting in
person. In order that your shares may be represented at the Annual Meeting,
whether or not you plan to attend the Annual Meeting in person, please promptly
sign and date the enclosed proxy card and return it in the enclosed envelope,
which requires no postage if mailed in the United States. If you return an
executed proxy and then attend the Annual Meeting in person, you may allow your
proxy to remain in effect, or you may revoke your proxy and vote in person by
giving written notice of such revocation to the Company's Secretary at any time
prior to the exercise of the proxy. Attendance at the Annual Meeting will not
itself revoke a proxy.
By Order of the Board of Directors
/s/ Clinton G. Gerlach
----------------------
Clinton G. Gerlach
Chairman
/s/ Barbara Guyer
----------------------
Barbara Guyer
Secretary
Chatsworth, California
September 27, 1996
<PAGE> 4
CALNETICS CORPORATION
20401 Prairie Street
Chatsworth, California 91311
----------------------------------------------------
PROXY STATEMENT
----------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 8, 1996
This Proxy Statement and the accompanying form of proxy are being
sent to shareholders of Calnetics Corporation, a California corporation (the
"Company"), on or about September 27, 1996. The accompanying proxy is solicited
by and on behalf of the Board of Directors of the Company for use at the Annual
Meeting of Shareholders of the Company to be held at the Airtel Plaza Hotel,
7277 Valjean Avenue, Van Nuys, California on Friday, November 8,1996 at 10:00
a.m. local time and at any adjournments and postponements thereof (the "Annual
Meeting"), for the purposes stated in the accompanying Notice of Annual Meeting
of Shareholders.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE
ANNUAL MEETING, TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you return an executed proxy and
then attend the Annual Meeting in person, you may allow your proxy to
remain in effect, or you may revoke your proxy and vote in person by giving
written notice of such revocation to the Company's Secretary, or by filing a
duly executed proxy bearing a later date, at any time prior to the exercise of
the proxy. Attendance at the Annual Meeting will not by itself revoke a proxy.
Unless otherwise directed in the accompanying proxy, persons named
therein will vote each proxy FOR the election of the five (5) director nominees
listed below. As to any other business that may properly come before the Annual
Meeting, the proxy holders will vote in their discretion. The Company currently
does not know of any other such business.
VOTING SECURITIES
Common shareholders of record at the close of business on September
20, 1996 (the "Record Date") will be entitled to vote on all matters presented
at the Annual Meeting. On the Record Date there were 2,969,799 shares of the
Company's Common Stock (the "Common Stock") outstanding. The presence, either in
person or by proxy, of persons entitled to vote a majority of the outstanding
Common Stock is necessary to constitute a quorum for the transaction of business
at the Annual Meeting and any adjournments and postponements thereof.
Abstentions and broker non- votes are counted for the purpose of determining a
quorum, but are not considered as having voted for the purpose of determining
the outcome of a vote. In order for a proposal to be approved, the votes cast in
favor must (i) exceed the votes cast against and (ii) constitute at least a
majority of the required quorum.
<PAGE> 5
On each matter to be considered at the Annual Meeting,
shareholders will be entitled to cast one vote for each share of Common Stock
held on the Record Date, except that shareholders are entitled to cumulative
voting rights in the election of Directors. Cumulative voting rights entitle a
shareholder either to give one nominee that number of votes equal to the number
of directors to be elected multiplied by the number of shares owned by him or
her on the Record Date, or to distribute such number of votes among two or more
nominees in such proportion as the shareholder may choose. The five nominees for
Director receiving the highest number of votes at the Annual Meeting will be
elected. In order for one or all shareholders to cumulate votes, any one
shareholder must give written notice to the Secretary prior to the voting at the
Annual Meeting of his or her intention to cumulate his or her votes. In the
event anyone other than the five nominees listed herein should be nominated for
election as a Director, the persons named in the proxy to vote such shares on
behalf of the shareholder will have authority, to be executed in their
discretion, to vote cumulatively for less than all the nominees.
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the Record Date by (i) persons or
groups known by the Company to be the beneficial owner of more than 5% of the
Common Stock, (ii) each of the Company's Directors and nominees who own Common
Stock, (iii) each executive officer of the Company named in the Summary
Compensation Table herein and (iv) all Directors and executive officers as a
group. Except as otherwise indicated in the footnotes to the following table,
each of the persons listed below has sole voting and investment power with
respect to the shares of outstanding Common Stock shown as beneficially owned by
such person.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER(1) OWNERSHIP(2) OF CLASS
- -------------- ---------------------- ------------ --------
<S> <C> <C> <C>
Common Stock Clinton G. Gerlach, 1,175,504 (3)(5) 40%
Fred E. Edward 202,064 (4)(5) 7%
Peter H. Griffith 0 *
Michael A. Hornak 144,500 (6) 5%
Steven L. Strawn 140,000 (5)(6)(7) 5%
Lon Schultz 51,500 (8) 2%
All Directors and Executive Officers
as a Group (7 persons) 1,721,568 58%
</TABLE>
- ------------
* Less than one percent.
2
<PAGE> 6
(1) Unless otherwise indicated the address of the beneficial owner is
20401 Prairie Street, Chatsworth, California 91311.
(2) Except for powers held jointly with a person's spouse, represents
sole voting and investment power unless otherwise indicated.
(3) Includes 1,085,504 shares held of record by Gerlach Holding
Corporation, a Delaware corporation ("GHC"), owned by the following
entities or individuals by the percentages indicated: The Gerlach
Family Trust (52%) and Mr. Gerlach's son and daughter, Clinton G.
Gerlach, II (24%) and Kimberlee Ann Grot (24%). Each of the GHC
shareholders has a right of first refusal on a prorata basis covering
the GHC stock owned by the remaining GHC shareholders pursuant to a
right of first refusal agreement dated July 1, 1992. Also includes
(i) 10,000 shares of Common Stock held of record by the Gerlach
Family Trust and (ii) 80,000 shares of Common Stock held of record by
Mr. Gerlach's nephew, Charles Gerlach, as to which Mr. Gerlach has
sole voting power.
(4) Held of record by the Fred and Evelyn Edward Family Trust, Fred
Edward, Trustee, (the "Edward Trust").
(5) GHC has a right of first refusal covering the 202,064 shares of
Common Stock owned by the Edward Trust pursuant to a certain right of
first refusal agreement, dated as of March 11, 1988. In addition,
pursuant to agreements Mr. Gerlach, through GHC, has a right of first
refusal covering (i) 40,000 shares of Common Stock owned by Steven L.
Strawn, Vice President and Director of the Company and (ii) 71,230
shares of Common Stock owned by another shareholder of the Company.
(6) Includes presently exercisable options to acquire 33,333 shares of
Common Stock at an exercisable price of $2.00 per share, but does not
include options to acquire16,667 shares of Common Stock at an
exercisable price of $2.00 per share which will become exercisable in
March of 1997.
(7) Includes presently exercisable options with the Company to acquire
25,000 shares of Common Stock at an exercise price of $1.438 per
share.
(8) Includes presently exercisable options to acquire 33,333 shares of
Common Stock at an exercise price of $3.00 per share, but does not
include options to acquire16,667 shares of Common Stock at an
exercisable price of $3.00 per share, which becomes exercisable in
July, 1997.
3
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
the rules issued thereunder, the Directors and executive officers of the Company
are required to timely file with the Securities and Exchange Commission and with
the National Association of Securities Dealers reports of ownership and changes
in ownership of the Common Stock. Copies of such reports are required to be
furnished to the Company. Based solely on its review of the copies of such
reports furnished to the Company, or written representations that no reports
were required, the Company believes that during fiscal 1996, all of its
Directors and executive officers complied with Section 16(a) requirements,
except one report filed late on Form 5 by Lon Schultz relating to two open
market purchases of Common Stock and beneficial ownership.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Directors are elected at each annual meeting of
shareholders. The number of authorized Directors of the Company is between five
and nine Directors, and is currently set at five. Five Directors are to be
elected at the Annual Meeting to serve until the annual meeting of shareholders
in 1997 and until their respective successors are elected and qualified. Should
any of the nominees decline or be unable to serve as Director, the persons
authorized in the proxy to vote on your behalf will vote for such substitute
nominees as may be recommended by the Company's existing Board of Directors,
unless other directions are given in the proxy. Each of the nominees has
consented to serve as a Director if elected, and the Company knows of no reason
why any nominee listed below would not be available for election or, if elected,
would not be willing or able to serve. Unless otherwise directed in the
accompanying proxy, the persons named therein will vote FOR the election of the
five director nominees listed below.
INFORMATION CONCERNING DIRECTOR NOMINEES
Set forth below is information concerning each of the five nominees for election
as Directors at the Annual Meeting, including his principal occupation or
employment and business experience during the last five years. All nominees
currently serve as Directors.
Name Age Position
---- --- --------
Clinton G. Gerlach 70 Chairman of the Board, President,
Chief Executive Officer and Director
Fred E. Edward 78 Director
4
<PAGE> 8
Peter H. Griffith 37 Managing Director of Wedbush Morgan Securities
Michael A. Hornak 53 Vice President and Director
Steven L. Strawn 42 Vice President and Director
Clinton G. Gerlach has served as the President, Chairman of the Board, Chief
Executive Officer and Director of the Company since March of 1988 and as the
Chairman of the Board and Director of the Company's subsidiary, Manchester
Plastics Co., Inc. ("Manchester Plastics"), since September 1989, and as
Director, Chairman of the Board and Chief Executive Officer of the Company's
subsidiary, Ny- Glass Plastics, Inc. ("Ny-Glass Plastics"), since June 1992, and
as Director and Chairman of the Board of the Company's subsidiary, Agricultural
Products, Inc. ("API"), since June 1994. Mr. Gerlach was the Chairman of the
Board and Chief Executive Officer of Gerlach Industries, Inc. from November 1983
to December 1986 and was the Chairman of the Board and Chief Executive Officer
of Tannetics, Inc. from August 1969 to November 1983. From January 1987 to March
1988, Mr. Gerlach was self employed. Mr. Gerlach retired effective July 24, 1996
as a Director of Zero Corporation (a manufacturer of cases, cabinets, cooling
and cargo enclosures).
Peter H. Griffith has served as Managing Director of Wedbush Morgan Securities
("Wedbush Morgan") since November 1993. Mr. Griffith also serves as the Head of
Investment Banking and Equity Research for Wedbush Morgan. From September 1992
to November 1993, Mr. Griffith served as Senior Vice President, Investment
Banking for Wedbush Morgan and from October 1989 to September 1992, Mr. Griffith
served as Vice President, Investment Banking for Wedbush Morgan. Prior to
October, 1989, Mr. Griffith was a Senior Manager with Ernst & Young LLP and is a
certified public accountant. Mr. Griffith was elected as a Director by the Board
on August 30, 1996 to fill a vacancy created by the death of Raymond H. Heller.
Fred E. Edward has been a Director of the Company since 1971. Between May 1971
and March 1988, Mr. Edward held various offices with the Company, including
Chairman of the Board, President and Chief Executive Officer. For more than the
past five years, Mr. Edward has been and currently is a private investor.
Michael A. Hornak has been a Vice President of the Company since 1974 and a
Director of the Company since 1984. Mr. Hornak has also been President of the
Ny-Glass Plastics division of the Company since 1985, President, Director and
Chief Financial Officer of Ny-Glass Plastics since June 1992, and was President
of the Hydro Flight division of the Company from 1983 to 1985.
Steven L. Strawn has been a Vice President of the Company since September 1989
and Director since February 1992. Mr. Strawn has also been President, Director
and Chief Operations Officer of the Company's subsidiary, Manchester Plastics,
since 1989, the date of the acquisition, and held various other positions with
its predecessor, Manchester Products, from 1980 to 1989.
5
<PAGE> 9
INFORMATION REGARDING THE BOARD OF DIRECTORS
During fiscal year 1996, there were nine (9) meetings of the Board of
Directors. Each Director attended at least 75% of the total number of meetings
of the Board of Directors and the committees of the Board of Directors on which
he serves. During fiscal 1996, Directors who are not employees of the Company
received $200 each for each Board of Directors or committee meeting attended.
Effective July 1, 1996, other than for meetings transacted only by written
consent, Directors who are not employees of the Company receive $1,000 for each
meeting of the Board of Directors attended and $500 for each committee meeting
attended. Directors who are not employees of the Company are eligible for the
grant of options under the 1993 Nonstatutory Stock Option Plan and 1995 Employee
Stock Option Plan, but to date no such options have been granted.
COMMITTEES
The Company has no standing committees of the Board of Directors,
other than the Audit Committee and the Stock Option Committee. The principal
duties of the Audit Committee are to nominate the firm of independent outside
auditors for appointment by the Board of Directors, to review the scope of their
audit engagement, and to meet with the Company's financial management and
independent outside auditors to discuss matters relating to internal accounting
controls and the results of audits performed by the Company's independent
outside auditors. The current members of the Audit Committee are Fred E. Edward,
Chairman, Peter H. Griffith and Clinton G. Gerlach.
The Audit Committee held one (1) meeting during fiscal 1996.
Messrs. Edward, Griffith and Gerlach currently serve on the Stock
Option Committee, the functions of which include making all determinations
necessary for the administration of the Company's 1993 Nonstatutory Stock Option
Plan and 1995 Employee Stock Option Plan.The Stock Option Committee held one (1)
meeting during fiscal 1996.
6
<PAGE> 10
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth all cash compensation paid or accrued
by the Company for services rendered during the three fiscal years ended June
30, 1996 by the President and Chief Executive Officer and the three other most
highly compensated executive officers of the Company. There were no other
executive officers of the Company whose total annual salary and bonus exceeded
$100,000 in fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) BONUS($) OPTIONS COMPENSATION
- ---------------------------- ---- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Clinton G. Gerlach (1) 1996 -- -- -- --
President, Chief Executive 1995 -- -- -- --
Officer and Chairman 1994 -- -- -- --
of the Board
Michael A. Hornak (2) 1996 $ 81,861 $10,000 -- $ 8,216
Vice President and President 1995 $ 77,246 $ 5,000 $ 7,594
of Ny-Glass Plastics 1994 $ 70,804 $ 5,000 50,000 $ 4,416
Steven L. Strawn (3) 1996 $ 94,039 $10,000 -- $10,400
Vice President and President 1995 $ 96,181 $ 7,500 -- $10,351
of Manchester Plastics 1994 $ 84,020 $ 5,000 50,000 $10,307
Lon Schultz (4) 1996 $360,734 $40,000 -- $34,804
President and Treasurer 1995 $353,887 $20,000 50,000 $22,749
of API 1994 $ 58,333 -- -- $ 4,944
</TABLE>
- ----------------------
(1) Receives no compensation for his services in such capacities. The
Company paid $60,000 to GHC during the fiscal year ended June 30,
1996, $56,000 to GHC during the fiscal year ended June 30, 1995 and
$54,000 to GHC during the fiscal year ended June 30, 1994, to
reimburse Mr. Gerlach for expenses incurred in connection with his
performance of services for the Company. In addition, Mr. Gerlach has
use of a vehicle owned by the Company.
7
<PAGE> 11
(2) The Company provides a vehicle for Mr. Hornak and the operating
expense paid by the Company for such vehicle in the fiscal year ended
June 30, 1996 was $7,708, fiscal year ended June 30, 1995 was $7,145
and fiscal year ended June 30, 1994 was $4,026, and the Company paid
life insurance premiums of $508 for fiscal year ended June 30, 1996,
$449 for the fiscal year ended June 30,1995 and $390 for fiscal year
ended June 30, 1994.
(3) The Company provides a car allowance of $10,000 per fiscal year for
Mr. Strawn, and the Company paid life insurance premiums of $400 for
fiscal year ended June 30, 1996, $351 for the fiscal year ended June
30, 1995 and $307 for the fiscal year ended June 30, 1994.
(4) The Company provides a vehicle for Mr. Schultz and the operating
expense paid by the Company for such vehicle in fiscal year ended
June 30, 1996 was $9,980, in fiscal year ended June 30, 1995 was
$7,900 and in fiscal year ended June 30, 1994 was $1,380, and the
Company paid life insurance premiums of $15,753 for the fiscal year
ended June 30, 1996, $9,674 for fiscal year ended June 30, 1995 and
$2,800 for fiscal year ended June 30, 1994. Mr. Schultz also received
profit sharing of $9,071 for fiscal year ended June 30, 1996, $5,175
for fiscal year ended June 30, 1995 and $764 for May and June 1994.
Mr. Schultz was not affiliated with the Company prior to the
Company's acquisition of API in fiscal 1994.
STOCK OPTIONS
Until its termination in February 1993, the Company had in effect an
Employee Stock Option Plan (the "1988 Plan") which was adopted by the Board of
Directors of the Company and approved at the 1988 Annual Meeting of
Shareholders. The 1988 Plan provided for the grant of options that qualified as
incentive stock options ("ISOs") under Section 422A of the Internal Revenue Code
(the "Code"), options that did not so qualify ("Non-ISOs") and stock
appreciation rights ("SARs") associated with stock options. The 1988 Plan
provided for the grant of options to purchase up to 275,000 shares of Common
Stock, subject to adjustment in the event of a reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split. Those that
were eligible for awards under the 1988 Plan are key employees. The exercise
price for options granted under the 1988 Plan may not be less than the fair
market value of the stock on the date the options were granted. The term of each
ISO may not exceed ten years, and the term of each Non-ISO may not exceed ten
years and one month.
As of June 30, 1996, there were outstanding options to purchase up to
89,000 shares of Common Stock that were granted under the 1988 Plan.
The Company currently has in effect the 1993 Nonstatuatory Stock
Option Plan (the "1993 Plan") which was adopted by the Board of Directors of the
Company and approved at the 1993 Annual Meeting of Shareholders. The 1993 Plan
provides for the grant of options to purchase up to 250,000 shares of Common
Stock, subject to adjustment in the event of a reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split. Those
eligible for the awards under the 1993 Plan are key employees, including
officers and directors. The 1993 Plan
8
<PAGE> 12
is administered by a committee of three directors which have been appointed by
the Board of Directors. The exercise price for options granted under the 1993
Plan may not be less than the fair market value of the stock on the date any
such option is granted. The 1993 Plan expires on March 1, 2003 unless previously
terminated.
The Company currently has in effect the 1995 Employee Stock Option
Plan (the "1995 Plan") which was adopted by the Board of Directors of the
Company and approved at the 1995 Annual Meeting of Shareholders. The 1995 Plan
provides for the grant of options that qualify as ISOs under the Code. The 1995
Plan provides for the grant of options to purchase up to 250,000 shares of
Common Stock, subject to adjustment in the event of a reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock
split. Those eligible for the awards under the 1995 Plan are key employees,
including officers and employee-directors. The 1995 Plan is administered by a
committee of three directors who have been appointed by the Board of Directors.
The exercise price for options granted under the 1995 Plan may not be less than
the fair market value of the stock on the date any such option is granted (110%
of the fair market value for optionees who are 10% or more shareholders on the
grant date). The term of each ISO may not exceed ten years (five years for
optionees who are 10% or more shareholders at time of grant). The 1995 Plan
expires on June 14, 2005 unless previously terminated.
No options were granted under the 1993 Plan or the 1995 Plan during
the fiscal year ended 1996, and as of June 30, 1996, options were available for
grants of up to 100,000 and 250,000 shares under the 1993 Plan and 1995 Plan,
respectively.
AGGREGATED OPTION* EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 6/30/96 AT 6/30/96(2)($)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED(1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clinton G. Gerlach -- -- -- -- -- --
Michael A. Hornak -- -- 33,667 16,667 235,669 116,669
Steven L. Strawn 20,000 58,740 58,667 16,667 424,719 116,669
Lon Schultz -- -- 33,333 16,667 199,998 100,000
</TABLE>
- ----------------
* The Company has not granted Stock Appreciation Rights.
(1) Represents the difference between the fair market value on the date
of exercise of the option and the exercise price of the option.
(2) Based on the closing price of $9.00 quoted on the Nasdaq National
Daily Quotation Service on June 30, 1996.
9
<PAGE> 13
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
Pursuant to a June 1994 employment agreement, Mr. Schultz agreed to
serve as the President and as a Director of the Company's subsidiary, API, for
an initial term of three years commencing on June 20, 1994. The agreement
provides for a monthly salary of $29,167 and maintenance by API during the term
of the agreement of certain existing life insurance policies covering the life
of Mr. Schultz with a 50% beneficiary named by Mr. Schultz. Under the agreement,
Mr. Schultz is entitled to his monthly salary for the remainder of the term of
the agreement if he is terminated without cause. In the event Mr. Schultz is
terminated for cause or due to death or long-term disability, Mr. Schultz or his
estate shall be entitled to receive a monthly salary of $16,667 for the
remainder of the term of the agreement.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Board of Directors generally administers the Company's executive
compensation programs as the Company does not have a Compensation Committee.
Individual directors who are also executive officers of the Company do not
participate in decisions regarding their compensation. The Company does have a
Stock Option Committee that is responsible for recommending to the Board and
administering all elements of stock option grants, including determination of
recipients of stock options under the Company's plans, the number of shares
underlying all option grants and the other terms applicable to each option. The
Board of Directors reviews and approves salaries of all elected officers,
including those of the executive officers named in the Summary Compensation
Table. The Company's executive compensation programs are designed to:
- provide competitive levels of base compensation in order to
attract, retain and motivate high-quality employees;
- tie individual total compensation to individual performance
and the success of the Company; and
- align the interests of the Company's executive officers
with those of its shareholders.
BASE SALARY
Base salary is targeted to be moderate but competitive in relation to
salaries commanded by those in similar positions in comparable companies. The
Board reviews management recommendations for executives' salaries and examines
data for executives with similar responsibilities in comparable companies in the
Company's industry. Individual salary determinations are based on
10
<PAGE> 14
experience, sustained performance and comparison to peers inside and outside the
Company.
STOCK OPTIONS
The Stock Option Committee administers the Company's option plans,
including the 1993 Plan and the 1995 Plan, and is responsible for the
recommendation to the Board of Directors of stock option grants. The 1993 and
1995 Plans are designed to align the interests of management with those of the
Company's shareholders. The number of stock options granted varies by fiscal
year in the discretion of the Stock Option Committee and is related to the
recipient's base compensation and level of responsibility. In past years, option
grants have typically been made to only one or two officers in a given fiscal
year.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
At his election, Clinton G. Gerlach, the President, Chief Executive
Officer and Chairman of the Board of the Company, serves without compensation.
Mr. Gerlach is reimbursed by payment to GHC for various expenses incurred in
connection with his performance of services for the Company, and has use of a
vehicle owned by the Company.
BOARD OF DIRECTORS
Clinton G, Gerlach (Chairman)
Fred E. Edward
Peter H. Griffith
Michael A. Hornak
Steven L. Strawn
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following current members of the Company's Board of Directors are
current or former officers or employees of the Company: Clinton G. Gerlach
(President, Chief Executive Officer and Chairman of the Board); Fred E. Edward
(former President, Chief Executive Officer and Chairman of the Board); Michael
A. Hornak (Vice President); and Steven L. Strawn (Vice President). There are no
Compensation Committee interlocks between the Company's Board of Directors and
other entities involving the Company's executive officers and Board members who
serve as executive officers or board members of such other entities.
ANNUAL REPORT
11
<PAGE> 15
A copy of the Company's 1996 Annual Report, which contains audited
financial statements of the Company for the fiscal year ended June 30, 1996, is
being mailed with this Proxy Statement to the shareholders of record on the
Record Date, but such Annual Report is not incorporated herein (except for items
specifically incorporated herein) and is not deemed to be a part of this proxy
solicitation material. If any shareholder of record did not receive such Annual
Report, we will immediately mail an Annual Report upon receipt by the Secretary
of the Company of a written request from such shareholder.
A COPY OF THE ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS FOR THE
FISCAL YEAR ENDED JUNE 30, 1996 IS AVAILABLE WITHOUT CHARGE TO ANY SHAREHOLDER
OF THE COMPANY UPON WRITTEN REQUEST TO: BARBARA GUYER, CORPORATE SECRETARY,
CALNETICS CORPORATION, 20401 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311. THE
COMPANY WILL FURNISH TO ANY SHAREHOLDER OF THE COMPANY ANY SPECIFIC EXHIBIT(S)
TO THE ANNUAL REPORT UPON WRITTEN REQUEST AND UPON PAYMENT OF THE COMPANY'S
REASONABLE EXPENSES IN FURNISHING ANY SUCH EXHIBIT(S).
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders intended to be included in next year's
proxy statement and proxy and presented at the 1997 Annual Meeting must be
received in writing by the Secretary of the Company at the address set forth on
the first page of this Proxy Statement by May 31, 1997.
PROXY SOLICITATION
All costs of preparing, printing, assembling, and mailing the Notice
of Annual Meeting of Shareholders, Proxy Statement and the form proxy and the
solicitations of proxies will be borne by the Company. Following the original
mailing of the proxy material, solicitations of proxies may be made by personal
interview, mail, telephone, facsimile or telegram by Directors, officers, and
regular employees of the Company who will not receive additional compensation
for such solicitations. The Company may also request banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries to forward
solicitation material to their principals, and the Company will reimburse them
for their expenses.
12
<PAGE> 16
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
CALNETICS CORP. 100 78.57 157.14 185.71 257.14 514.29
NASDAQ MARKET INDEX 100 107.75 132.27 145.04 170.11 214.14
SIC CONDE INDEX 100 230 275 340 514.96 872.8
</TABLE>
CERTAIN TRANSACTIONS AND OTHER MATTERS
In connection with the acquisition of API in fiscal year 1994, the
Company issued to certain parties related to Mr. Schultz (the Lon Schultz
Charitable Remainder Unitrust and Leslie Schultz) notes payable of approximately
$124,000 each as part of the consideration for their shares of API common stock.
The notes payable are five-year unsecured notes with interest payable
semi-annually and principal due in four equal annual installments commencing
June, 1996.
13
<PAGE> 17
On June 20, 1994, Mr. Schultz and API entered into a three-year
employment contract whereby Mr. Schultz will serve as President and a Director
of API for a monthly salary of $29,167. API also agreed to maintain certain
existing life insurance policies covering the life of Mr. Schultz during the
term of the employment agreement. Mr. Schultz has designated 50% beneficiaries
with respect to such policies.
On June 20, 1994, API and Story Plastics, Inc., a California
corporation ("Story"), entered into a four-year Parts Purchase and Supply
Agreement whereby Story agreed to supply various injected molded parts to API
and API agreed to purchase such parts as it reasonably needs based on past
purchases of such parts. The agreement by API to purchase its reasonable needs
of such parts from Story decreases each year such that by the fourth year API is
only required to purchase 25% of its reasonable needs from Story. Mr. Schultz is
a Director of Story and owns approximately 9% of its outstanding common stock.
For the year ending June 30, 1996, API purchased $1,843,839 in parts from Story.
INDEPENDENT ACCOUNTANTS
The Company may engage the accounting firm of Arthur Andersen LLP as
independent accountants to audit the Company's financial statements for the
fiscal year ended June 30, 1997. Arthur Andersen LLP has audited the Company's
financial statements since the fiscal year ended June 30, 1993.
One or more representatives of Arthur Andersen LLP are expected to
attend the Annual Meeting with the opportunity to make a statement if they
desire to do so and be available to respond to appropriate questions.
OTHER BUSINESS
The Company is unaware of any other matters to be presented at the
Annual Meeting. If any other matters properly come before the Annual Meeting, it
is the intention of the persons named in the enclosed proxy card to vote the
proxy in accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Clinton G. Gerlach
-----------------------------------------
Clinton G. Gerlach, Chairman of the Board
/s/ Barbara Guyer
-------------------------
Barbara Guyer, Secretary
September 27, 1996
Chatsworth, California
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<PAGE> 18
PROXY
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
CALNETICS CORPORATION
20401 Prairie Street, Chatsworth, California 91311
ANNUAL MEETING OF SHAREHOLDERS, FRIDAY, NOVEMBER 8, 1996
The undersigned hereby appoints Michael A. Hornak and Steven L. Strawn, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of common stock of Calnetics Corporation held of record by the
undersigned on September 20, 1996, at the annual meeting of shareholders to be
held on November 8, 1996, or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN A MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES SET FORTH IN ITEM 1.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
(continued on the reverse side)
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
FOR all nominees listed below (except as WITHHOLD AUTHORITY to vote for all
marked to the contrary below) [ ] nominees below [ ]
</TABLE>
Nominees: Fred E. Edward, Clinton G. Gerlach, Peter H. Griffith, Michael A.
Hornak, Steven L. Strawn (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting
If cumulative voting procedures are involved at the meeting, and this Proxy card
is "FOR" the nominees listed or if no direction is given, the designated Proxies
are authorized to distribute votes represented by this Proxy in their discretion
so as to elect the maximum number of management nominees which may be elected by
cumulative voting.
DATED:____________, 1996
------------------------------------
Signature
------------------------------------
Signature if held jointly
Please sign exactly as name appears below. When
shares are held by joint tenants, both should
sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
