SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
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Filed by a Party other than the Registrant
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Check the appropriate box:
X Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
- ------- 14a-6(e)(2))
Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
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PSC INC.
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(Name of Registrant as Specified in its Charter)
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(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)
$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
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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.
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(4) Proposed maximum aggregate value of transaction
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(5) Total fee paid:
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<PAGE>
Fee paid previously with preliminary materials
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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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
PSC Inc.
675 BASKET ROAD
WEBSTER, NEW YORK 14580
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
April 30, 1996
TO THE SHAREHOLDERS OF PSC Inc.:
The annual meeting of shareholders of PSC Inc. (the "Company") will be
held on Tuesday, April 30, 1996 at 9:00 a.m. at the Dryden Theatre, George
Eastman House, 900 East Avenue, Rochester, New York (the "Annual Meeting") for
the following purposes:
1. To elect three (3) directors, each to serve a three-year term.
2. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized Common
Shares from 25,000,000 shares to 40,000,000 shares.
3. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to authorize a new class of Preferred Shares,
consisting of 10,000,000 Preferred Shares.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 18,
1996 as the record date for the determination of shareholders entitled to vote
at the Annual Meeting and to receive notice thereof. The transfer books of the
Company will not be closed.
SHAREHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND TO
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
MARTIN S. WEINGARTEN
Secretary
DATED: Rochester, New York
March 25, 1996
<PAGE>
PSC Inc.
675 Basket Road
Webster, New York 14580
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of PSC Inc. (the
"Company") by the Board of Directors (the "Board") of the Company in connection
with the solicitation of the enclosed proxy for use at the annual meeting of
shareholders to be held on Tuesday, April 30, 1996 at the Dryden Theatre, George
Eastman House, 900 East Avenue, Rochester, New York, at 9:00 a.m., Eastern
Daylight Time, and at any adjournments thereof (the "Annual Meeting").
The principal executive offices of the Company are located at 675
Basket Road, Webster, New York 14580, and its telephone number is (716)
265-1600. The approximate date on which this Proxy Statement and the enclosed
proxy are first being sent to shareholders is March 25, 1996.
Voting Information
Only shareholders of record at the close of business on March 18, 1996
will be entitled to notice of and to vote at the Annual Meeting. As of March
18, 1996, 9,998,591 common shares, par value $.01 per share, of the Company
("Common Shares") were outstanding and entitled to vote at the Annual Meeting.
Shareholders are entitled to cast one vote for each share held of record at the
close of business on March 18, 1996 on each matter submitted to a vote at the
Annual Meeting. Any shareholder may revoke a proxy at any time prior to its
exercise by filing a later-dated proxy or a written notice of revocation with
the Secretary of the Company, 675 Basket Road, Webster, New York 14580, or by
voting in person at the Annual Meeting. If a shareholder is not attending the
Annual Meeting, any proxy or notice should be returned in time for receipt no
later than the close of business on the day preceding the Annual Meeting.
When proxies are properly dated, executed and returned, the shares they
represent will be voted at the Annual Meeting in accordance with the instruction
of the shareholder. If no specific instructions are given, the shares will be
voted FOR the election of the three nominees as directors, FOR the proposals to
amend the Company's Certificate of Incorporation to increase the Company's
authorized Common shares and FOR the proposal to amend the Company's Certificate
of Incorporation to authorize a new class of Preferred Shares.
The Board knows of no other matters to be presented at the Annual
Meeting. If any other matter should be presented at the Annual Meeting upon
which a vote properly may be taken, shares represented by all proxies received
by the Board will be voted with respect thereto in accordance with the judgment
of the persons named in the proxies.
<PAGE>
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
meeting.
Under the law of New York, the Company's state of incorporation,
abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Broker
non-votes occur where a broker holding stock in street name votes the shares on
some matters but not others. Usually, this occurs where brokers have not
received instructions from clients, in which case brokers are permitted to vote
on "routine" matters but not on non-routine matters. The missing votes on
non-routine matters are broker non-votes.
For the election of directors, only proxies and ballots marked "FOR all
nominees", "WITHHELD for all nominees" or specifying that votes be withheld for
one or more designated nominees are counted to determine the total number of
votes cast; votes that are withheld are excluded entirely from the vote and will
have no effect. Directors are elected by a plurality of the affirmative votes
cast. Since each of the proposals to amend the Company's Certificate of
Incorporation requires the affirmative vote of a majority of all outstanding
shares entitled to vote for approval, an abstention or a broker non-vote on a
proposal is counted in the tabulation of votes cast and will have the same legal
effect as a vote against such proposal.
Proxy Solicitation
The entire cost of the solicitation of proxies will be paid by the
Company. In addition to the solicitation of proxies by mail, some of the
officers and regular employees of the Company, without extra remuneration, may
solicit proxies, personally or by telephone, telegram or cable. The Company may
also request brokers, banks, nominees, custodians, fiduciaries, and others to
forward soliciting material to the beneficial owners of the Company's Common
Shares and will reimburse such persons for reasonable expenses incurred in
forwarding such materials. In addition, the Company has retained Chemical Mellon
Shareholder Services, L.L.C. to assist in distribution of proxy solicitation
materials and solicitation and collection of proxies for an anticipated fee of
not more than $9,000 plus out-of-pocket expenses.
<PAGE>
Proxy Statement Proposals
At the annual meeting each year, the Board of Directors submits to
shareholders its nominees for election as directors. In addition, the Board of
Directors may submit other matters to the shareholders for action at the annual
meeting.
Shareholders of the Company also may submit proposals for inclusion in
the proxy material. These proposals must meet the shareholder eligibility and
other requirements of the Securities and Exchange Commission. In order to be
included in the Company's 1997 proxy material, a shareholder's proposal must be
received not later than November 26, 1996 at the principal office of the
Company, 675 Basket Road, Webster, New York 14580.
In addition, the Company's By-Laws provide that in order for business
to be brought before an annual meeting of shareholders, a shareholder must
deliver written notice to the Secretary of the Company not less than 90 days
prior to the date of the meeting. The notice must set forth the shareholder's
name, address and number of shares of Company stock held, a representation that
the shareholder intends to appear in person or by proxy at the meeting to make
the proposals, a description of the business to be brought before the meeting,
the reasons for conducting such business at the annual meeting, any material
interest of the shareholder in the proposals, and such other information
regarding the proposal as would be required to be included in a proxy statement.
No such notice has been received by the Company.
The By-Laws also provide that if a shareholder intends to nominate a
candidate for election as a director, the shareholder must deliver written
notice of his or her intention to the Secretary of the Company. The notice must
be delivered not less than 90 days before the date of a meeting of shareholders.
The notice must set forth the name and address and number of shares of Company
stock owned by the shareholder, the name and address of the person to be
nominated, a representation that the shareholder intends to appear in person or
by proxy at the meeting to nominate the person specified in the notice, a
description of all arrangements or understandings between such shareholder and
each nominee and any other person (naming such person) pursuant to which the
nomination is to be made by such shareholder, the business address and
experience during the past five years of the nominee, any other directorships
held by the nominee, the nominee's involvement in certain legal proceedings
during the past five years and such other information concerning the nominee as
would be required to be included in a proxy statement soliciting proxies for the
election of the nominee. In addition, the notice must include the consent of the
nominee to serve as a director of the Company if elected. No such notice has
been received by the Company.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's Common Shares as of February 1,
1996 by (i) each person who was known by the Company to be the beneficial owner
of more than five percent (5%) of the Company's Common Shares, (ii) each of the
Company's directors and nominees for director, (iii) each of the Company's
executive officers named in the Summary Compensation Table, and (iv) all
directors and executive officers of the Company as a group. The information as
to each person has been furnished by such person, and, except as noted, each
person named in the table has sole voting and investment power with respect to
all shares shown as beneficially owned by him.
Shares Percent
Name of Beneficial Beneficially Beneficially
Owner Owned Owned
L. Michael Hone*(1) 1,052,912 9.67%
675 Basket Road
Webster, NY 14580
Milton P. Axelrod*(1)(2) 32,266 +
Robert S. Ehrlich*(1)(3) 223,000 2.21%
James W. Henry*(1)(4) 223,224 2.23%
Donald K. Hess*(1) 31,870 +
Thomas J. Morgan** 1,700 +
James C. O'Shea*(1) 21,492 +
Jack E. Rosenfeld*(1) 20,359 +
Abby R. Solomon*(1)(5) 67,287 +
Justin L. Vigdor*(1) 14,000 +
Jay M. Eastman**(1)(6) 171,046 1.69%
Stanley D. Seitz(1) 54,112 +
Richard N. Stathes(1) 65,380 +
William J. Woodard(1) 52,939 +
All directors and executive
officers as a group including
those named above
(23 persons)(7) 2,199,756 19.18%
* Member of the Board of Directors of the Company
**Nominee to the Board of Directors
+ Less than 1%
<PAGE>
(1) Includes the following shares subject to acquisition by the exercise of
stock options which are, or within 60 days after February 1, 1996 will be,
exercisable and are therefore deemed under Securities and Exchange Commission
regulations to be beneficially owned: Messrs. Axelrod, Henry, Hess, O'Shea,
Rosenfeld, Solomon and Vigdor, 10,000 shares each; Mr. Hone, 885,833 shares; Mr.
Ehrlich, 93,000 shares; Mr. Seitz, 53,953 shares; Dr.
Eastman, 145,286 shares; Mr. Stathes, 53,930 shares; Mr. Woodard, 52,230 shares.
(2) Does not include 9,452 shares held by his wife, as to which Mr. Axelrod
disclaims beneficial ownership.
(3) Includes 15,000 shares held by Ehrlich & Co. and 80,000 shares held
in the R. S. Ehrlich & Co. Pension Plan Trust (the pension plan for Ehrlich &
Co.). Mr. Ehrlich is the senior partner in Ehrlich & Co. and may be deemed to be
in control of that partnership. Accordingly, he may be deemed to beneficially
own the shares owned by Ehrlich & Co. and by the R. S. Ehrlich & Co. Pension
Plan Trust.
(4) Includes 68,999 shares held by Pacific Risk Management, Inc., 105,000
shares held by Pacific Risk Management, Inc. Pension Plan and Trust and 36,666
shares held by Mrs. Henry. Mr. Henry is President of Pacific Risk Management,
Inc. and may be deemed to be in control of that corporation. Accordingly, he may
be deemed to beneficially own the shares owned by Pacific Risk Management, Inc.
(5) Includes 4,236 shares held by Mr. Solomon as custodian for a child
and 3,586 shares held by his wife as custodian for a child.
(6) Includes 3,121 shares held by Dr. Eastman's wife, 16,005 shares held by his
wife as custodian for their minor children, and 3,465 shares held by his
children.
(7) Includes 1,471,280 shares subject to acquisition by the exercise of stock
options which are, or within 60 days after February 1, 1996 will be,
exercisable.
<PAGE>
ELECTION OF DIRECTORS
(Proxy Item 1)
The Board of Directors is composed of nine members and divided into
three classes, with each class consisting of three directors. The directors of
each class will be elected to three-year terms, with one class being elected
each year.
The term of directors in one class, consisting of three directors,
expires in 1996. At the Annual Meeting, Messrs. Jay M. Eastman, James W. Henry
and Thomas J. Morgan, will be nominated to serve until the Annual Meeting of
Shareholders in 1999 and until their successors have been duly elected and
qualified. Unless otherwise instructed on the proxy card, the proxy will be
voted for the election of the three nominees for directors. If you do not wish
your shares to be voted for particular nominees, please so indicate in the space
provided on the proxy card.
Only one of the nominees for director to be elected at this Annual
Meeting, James W. Henry, currently serves as a director of the Company, Messrs.
Milton Axelrod and Abby Solomon, whose terms expire at this Annual Meeting, will
retire as directors upon the expiration of their current terms. The Board of
Directors and the Company have greatly benefited from the guidance and
experience of Messrs. Axelrod and Solomon and are grateful for their
contributions. Jay M. Eastman and Thomas J. Morgan will be standing for election
for the first time.
If one or more of these nominees becomes unable or unwilling to serve
at the time of the Annual Meeting, the shares represented by proxy will be voted
for the remaining nominee(s) and for any substitute nominee(s) designated by the
Board of Directors. The Board of Directors does not anticipate that any nominee
will be unavailable or unable to serve.
Information Concerning Nominees for Directors and other Incumbent Members of the
Board of Directors
Certain biographical and other information about the three nominees for
election as directors and the directors continuing in office is presented below.
<PAGE>
Nominees for directors to be elected for a three-year term expiring in 1999:
Dr. Jay M. Eastman, age 47, is being elected to the Board for the first
time. He has served as Senior Vice President, Strategic Planning since January
1, 1996 and as as Executive Vice President of the Company from December 1987
until December 1995. He joined the Company in 1986 when the Company acquired
Optel Systems, Inc., a corporation which he co-founded and for which he served
as Chairman, President and Chief Executive Officer from its formation in 1981.
Until January 1983, Dr. Eastman was Director of the University of Rochester's
Laboratory for Laser Energetics. Dr. Eastman holds Ph.D. and Bachelor's degrees
in Optics from the University of Rochester and is a named inventor in 17 United
States patents, 14 of which relate to bar code scanning and have been assigned
to the Company, one of which relates to nuclear fusion and is owned by the
United States Department of Energy and two of which relate to laser
interferometry and are owned by the University of Rochester.
James W. Henry, age 44, has served as a director of the Company since
1989. He has been President of Pacific Risk Management, Inc., San Francisco,
California (a securities trading company), since April 1977.
Thomas J. Morgan, age 60, is being elected to the Board for the first time.
Mr. Morgan is a consultant in quality control for the food and beverage industry
and in marketing for new businesses. From October 1984 until June 1995, Mr.
Morgan was the President, Chairman of the Board and Chief Executive Officer of
Verax Systems, Inc. (Rochester, NY) a manufacturer of data collection and
specialized software for statistical process control. Prior thereto, he was
Senior Vice President of Marketing for the Company (May 1983 to May 1984) and
Vice President of Marketing and Sales for Bausch & Lomb, Inc. (November 1964 to
May 1983).
Directors whose terms expire in 1997:
Donald K. Hess, age 65, has served as a director of the Company since
1987. From 1975 until his retirement in December 1995, Mr. Hess was Vice
President of the University of Rochester, Rochester, New York. He currently
continues his association with the University of Rochester on a part time basis
as Vice President Emeritus.
<PAGE>
James C. O'Shea, age 50, has served as a director of the Company since
1989. He has been Chairman of the Board and Chief Executive Officer of Bioject
Corp., a medical device manufacturer of needle free injection systems in
Portland, Oregon, since April 1995. Prior thereto, he was President of Biopure
Corporation, a biomedical manufacturer in Boston, Massachusetts, from January
1989 until April 1995 and held a variety of positions with Fresenius, USA, Inc.
(formerly Delmed, Inc.) from June 1981 to December 1988, the most recent of
which was that of Executive Vice President.
Justin L. Vigdor, age 66, has served as a director of the Company since
1989. He has been an attorney since 1951 and is a partner in the law firm of
Boylan, Brown, Code, Fowler, Vigdor & Wilson, LLP, Rochester, New York, counsel
to the Company. He is also a director of IEC Electronics Corp. in Newark, New
York.
Directors whose terms expire in 1998:
Robert S. Ehrlich, age 58, has served as a director of the Company
since 1983 and was Chairman of the Board of Directors from December 1987 until
July 1992. Since January 2, 1995 Mr. Ehrlich has been engaged to provide
consulting services to the Company. From August 1991 until December 1994, Mr.
Ehrlich was employed by the Company as a senior management executive. Mr.
Ehrlich has been Chairman of the Board of Electric Fuel Corporation ("EFC")
since January 1993 and Chief Financial Officer of EFC since May 1991. EFC is a
Jerusalem-based company engaged in the research, development and
commercialization of a powering system for electric vehicles based on a
mechanically rechargeable zinc air battery system. Mr. Ehrlich serves as a
director of Fresenius, USA, Inc. (formerly Delmed, Inc.), a manufacturer and
distributor of renal care systems, solutions and supplies.
L. Michael Hone, age 46, has served as Chairman of the Board of
Directors since July 1992 and as President and as a director of the Company
since December 1987 and as Chief Executive Officer since April 1989. His
previous positions with the Company were President/General Manager Webster
Operations (1986-1987), Vice President/General Manager Operations (1985-1986),
Vice President Sales and Marketing (1984-1985), National Sales Manager (1984),
and Regional Sales Manager (1981-1984). Prior to joining the Company, Mr. Hone
was employed by the 3M Company and by Citicorp. Mr. Hone is also a director of
Verax Systems, Inc., and Rochester Healthcare Information Group, Inc.,
Rochester, New York.
<PAGE>
Jack E. Rosenfeld, age 57, has served as a director of the Company
since 1989. He has been President and Chief Executive Officer of Hanover Direct,
Inc. (formerly Horn & Hardart Co.) since September 1990 and President and Chief
Executive Officer of its direct marketing subsidiary since May 1, 1988. From
July 1, 1986 until May 1, 1988, Mr. Rosenfeld was a partner in Rosenfeld & Co.,
a private investment banking group. Mr. Rosenfeld is also a director of Hanover
Direct, Inc. and EFC.
Information Regarding the Board and its Committees
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company and
its subsidiaries and appoints the corporate officers of the Company who are
responsible for conducting business on a day-to-day basis. In 1995, the Board of
Directors held five meetings.
Each director attended seventy-five percent or more of the meetings
held by the Board of Directors and the committees on which the director served.
The Board of Directors has three standing committees - Audit,
Executive, and Compensation.
The Audit Committee has the responsibility for recommending the
appointment of the Company's outside auditors, reviewing the scope and results
of audits, and reviewing internal accounting controls and systems. These reviews
include meetings with the independent auditors and representatives of
management, as well as separate and private meetings with the independent
auditors to insure that the scope of their activities had not been restricted
and that adequate responses to their recommendations had been received. In
addition, the Audit Committee reviews the estimated fees and types of non-audit
services to be rendered to the Company by the independent accountants for the
coming year. The minutes of the Audit Committee meetings as well as all of the
recommendations of the Audit Committee are submitted to the full Board of
Directors. The Audit Committee, consisting of Messrs. Hess (Chairman), Axelrod
and Solomon, met two times in 1995.
The Executive Committee is authorized to exercise the powers of the
Board of Directors in the interval between regular meetings of the Board and
serves as both the investment committee and the nominating committee of the
Board. The Executive Committee, consisting of Messrs. O'Shea (Chairman),
Ehrlich, Hone and Vigdor, held two meetings and took action by unanimous written
consent two times in 1995.
<PAGE>
The Compensation Committee (a) administers the Company's 1987 and 1994
Stock Option Plans and any other stock option plan of the Company, (b)
administers the Company's 1990 and 1995 Employee Stock Purchase Plans, (c)
reviews and makes recommendations with respect to management compensation,
including salaries and bonus awards, (d) examines the impact and effect of
various benefits and incentive plans and reviews and recommends changes or
amendments to such programs to the Board, and (e) reviews and approves employee
and consulting agreements. The Compensation Committee, consisting of Messrs.
Henry (Chairman), O'Shea and Rosenfeld, held three meetings and took action by
unanimous written consent six times during 1995.
Compensation of Directors
Directors who are employees or consultants of the Company (Messrs. Hone
and Ehrlich) receive no compensation for their services as directors or as
members of committees. Each director who is not an employee or consultant of the
Company is paid $400 for each Board and Committee meeting attended by him,
except that no more than $400 is paid if more than one meeting occurs on the
same day. For 1995, an aggregate of $20,000 was paid to the seven non-employee
directors. Each non-employee director is also reimbursed the reasonable expenses
incurred in attending the meeting. In addition, each of the seven non-employee
directors received $7,500 for services rendered in 1995.
Under the Company's plan for Deferral of Directors' Fees (the "Deferral
Plan"), each director who is not an employee of the Company may elect each year
to defer all or part of his director's fees by filing an irrevocable election
with the Company before the beginning of the year or such shorter period for
which the election may be effective. Each participating director will have the
deferred compensation credited to an account that will also be credited with an
assumed interest at an annual rate that is equal to the prime interest rate of
the Company's senior institutional lender. The amount in each participating
director's account, including the accrued assumed interest, will be paid in
accordance with the payment option selected by the participating director at the
time the irrevocable election is made. Under the Deferral Plan, a participating
director may elect to receive either lump sum or installment payments (not
exceeding 10 installments). During 1995, no directors participated in the
Deferral Plan and no assumed interest was accrued.
<PAGE>
The Company's 1987 Stock Option Plan (the "1987 Plan") and the
Company's 1994 Stock Option Plan (the "1994 Plan") each provides for automatic
grants of stock options to each member of the Board of Directors who is not also
an employee or consultant of the Company. All directors, except Messrs. Ehrlich
and Hone, are non-employee directors.
Under the 1987 Plan as amended, a Non-Employee Director Stock Option
("NEDSO") for 3,333 shares will be granted to each non-employee director
automatically every year on the date of the Annual Meeting of Shareholders and
pursuant to the 1994 Plan a NEDSO for 3,167 shares will automatically be granted
to each non-employee director at the same time. At such time as there no longer
are shares available for options under the 1987 Plan, NEDSOs for 6,500 shares
will be granted to each non-employee director under the 1994 Plan each year on
the date of the Annual Meeting.
On the date of the 1995 Annual Meeting of Shareholders, NEDSOs to
purchase an aggregate of 6,500 shares were granted to each non-employee director
at a purchase price of $12.75 per share, the fair market value on the date of
the grant. Said NEDSOs are exercisable in two equal installments on May 3, 1996
and May 3, 1997 and terminate on May 3, 2000.
Under a consulting agreement with the Company, Mr. Ehrlich renders services
to the Company from time to time in such areas as strategic planning, corporate
development, mergers and acquisitions and development of overseas markets. In
1995 he received a consulting fee of $54,000. The consulting agreement with Mr.
Ehrlich contains a covenant not to compete. The agreement terminates in December
1996. On May 3, 1995, Mr. Ehrlich was granted a Non-Statutory Stock Option under
the Company's 1987 and 1994 Plans to purchase an aggregate of 6,500 shares at a
purchase price of $12.75 per share, the fair market value on the date of grant.
Said options are exercisable in two equal installments on May 3, 1996 and May 3,
1997 and terminate on May 3, 2000.
Directors' and Officers' Liability Insurance Policy
The Company has an insurance policy for $10,000,000 effective until
January 20, 1997, which protects its officers and directors against losses which
certain persons may incur because of their acts or omissions as officers or
directors. The policy is written by Federal Insurance Company at an annual
premium of $124,375.
<PAGE>
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated officers of
the Company.
<TABLE>
<CAPTION>
Long
Term
Comp.
------
Annual Compensation Awards
------------------------------- ------
Other All
Annual Securities Other
Name and Comp. Underlying Comp.
Principal Position Year Salary ($) Bonus($)(1) ($)(2) Options(#) ($)(3)
- --------------------- ---- ---------- ----------- -- --- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Michael Hone 1995 $270,624 $ 86,426 $47,111 --- $7,275
Chairman of the Board, 1994 197,096 108,531 51,387 820,833 4,550
President and Chief 1993 154,350 54,005 ---- 120,000 4,481
Executive Officer
Jay M. Eastman 1995 112,115 15,040 15,076 --- 3,386
Executive 1994 114,231 51,277 ---- 62,453 2,600
Vice President 1993 103,000 28,168 ---- 20,000 2,600
Richard N. Stathes 1995 155,846 4,954 ---- --- 2,125
Vice President, 1994 148,216 11,672 ---- 33,930 719
North American Sales 1993 115,018 2,991 ---- 15,000 826
Stanley D. Seitz (4) 1995 135,098 12,060 14,697 --- 2,235
Senior Vice President
Operations 1994 106,431 40,983 50,023 61,453 ---
William J. Woodard (5) 1995 118,984 7,273 16,134 --- 3,438
Vice President,
Finance and Treasurer 1994 43,541 12,315 4,437 15,000 1,499
</TABLE>
(1) The bonus amounts are payable pursuant to the Company's Management Incentive
Plan and Employee Profit Sharing Plan described below under the caption "Report
of the Compensation Committee of the Board of Directors on Executive
Compensation." In addition, a portion of Mr. Hone's bonus for 1995 consists of a
Recognition Bonus. See "Employment Agreements and Arrangements" and "Report of
the Compensation Committee of the Board of Directors on Executive Compensation."
(2) Except as noted, none of the executive officers named in the Summary
Compensation Table received personal benefits in excess of the lesser of $50,000
or 10% of such individual's reported salary and bonus for 1995, 1994 or 1993.
The amounts shown for 1995 include reimbursement for automobile expenses as
follows: Mr. Hone, $15,348; Mr. Eastman, $12,355; Mr. Seitz, $10,296; and Mr.
Woodard, $10, 296. The other personal benefits included in these numbers
represent reimbursement for family travel expenses and personal financial
planning services and amounts paid on behalf of the individuals for premiums on
enhanced life and disability insurance policies. Of the amount shown for Mr.
Hone in 1994 $14,052 represents automobile expenses and $36,691 represents
reimbursement for family travel expenses. Of the amount shown for Mr. Seitz in
1994 $4,580 represents automobile expenses, $7,476 represents reimbursement for
family travel expenses, and $37,967 represents relocation expenses.
<PAGE>
(3) For 1995, "All Other Compensation" includes (a) the Company's matching
contributions to its 401(k) Profit Sharing Plan and (b) the amount paid on
behalf of the individual for the term portion of insurance under the Company's
Executive Split Dollar Plan.
For 1994, "All Other Compensation" represents the Company's matching
contributions made to its 401(k) Profit Sharing Plan.
(4) Mr. Seitz became an executive officer of the Company in January 1994.
(5) Mr. Woodard became an executive officer of the Company in August 1994.
Options and Stock Appreciation Rights
No stock options or stock appreciation rights were granted during
fiscal 1995 to the executive officers named in the Summary Compensation Table
above.
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table, concerning the
exercise of options during fiscal year 1995 and unexercised option held as of
the fiscal year ended December 31, 1995.
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN 1995 AND 1995 YEAR-END OPTION VALUES
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Option In-the-Money Options at
at December 31, 1995 (#) December 31, 1995 ($)(2)
---------------------------- ------------------------
Shares Acquired Value
Name on Exercise (#)(1) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. Michael Hone .. -- $ -- 873,333 265,000 $704,996 $601,875
Jay M. Eastman ... 20,000 $150,400 141,286 18,667 515,462 62,001
Richard N. Stathes -- $ -- 51,430 12,500 47,604 41,250
Stanley D. Seitz . -- $ -- 50,203 11,250 27,500 30,938
William J. Woodard -- $ -- 47,230 10,000 17,475 3,700
</TABLE>
(1) An individual, upon exercise of an option, does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead, the
amounts contained in the Value Realized column reflect the increase in the price
of the Company's Common Shares from the option grant date to the option exercise
date. Value is calculated based on the difference between the option price and
closing market price of the Common Shares on the date of exercise multiplied by
the number of shares to which the exercise relates. No cash is realized until
the shares received upon exercise of an option are sold.
(2) The closing price for the Company's Common Shares as reported by the Nasdaq
National Market on December 31, 1995 was $9.25. Value is calculated on the basis
of the difference between the option price and $9.25 multiplied by the number of
Common Shares underlying the option.
Employment Agreements and Arrangements
L. Michael Hone
On September 14, 1995, the Company entered into an employment agreement
(the "Agreement") with Mr. Hone designed to assure the Company of his continued
employment as Chairman of the Board, President and Chief Executive Officer. The
"Initial Term" under the Agreement will expire on December 31, 1999. However,
unless written notice is given to the contrary by either the Company or Mr. Hone
at least 180 days prior to the expiration date, the employment period will
automatically be extended for an additional two years (the "Additional Term").
Under the Agreement, Mr. Hone receives a salary at the annual rate of
not less than $325,000, a recognition bonus ("Recognition Bonus") in each year
during the Initial Term and the Additional Term in an amount not less than 25%
of the Base Salary then in effect, and a performance bonus ("Performance
Bonus"), each year beginning January 1, 1996, if, the Company achieves or
exceeds certain performance goals ("Performance Goal"), as adopted by the Board
of Directors prior to the beginning of each year. If 90-99% of the Performance
Goal is achieved, the Performance Bonus will be not less than 25% of Base
Salary, if 100-109% of the Performance Goal is achieved, the Performance Bonus
will not be less than 50% of Base Salary, if 110-119% of the
<PAGE>
Performance Goal is achieved, the Performance Bonus will not be less than 75% of
Base Salary, and if 120% or more of the Performance Goal is achieved, the
Performance Bonus will not be less than 95% of Base Salary. The Performance
Bonus will be in lieu of any bonuses under the Company's current Management
Incentive Plan.
Under the Agreement, the Company will pay the premiums associated with
a personal life insurance policy with a minimum coverage of $5,000,000 in term
insurance, which policy will be owned by Mr. Hone, and the Company will provide
to Mr. Hone a retirement benefit equal to 60% replacement of his compensation.
The Agreement also provides for the forgiveness of indebtedness under certain
circumstances. See "Interest of Directors and Management in Certain Transaction"
below.
If Mr. Hone's services are terminated without cause (as defined in the
Agreement), the Company will continue to pay him the Base Salary, the
Recognition Bonus, and Performance Bonus and all benefits in the same manner and
at the same times until the end of the Initial Term or Additional Term, as the
case may be.
The Agreement contains a covenant not-to-compete for a period of
thirty-six (36) months after the expiration of the Initial Term and the
Additional Term, if any. In the event of the termination of the services of Mr.
Hone for disability or without cause (as defined in the Agreement) or at the
expiration of the Term of the Agreement or at the expiration prior to age 60 of
any mutually agreed upon extension of his employment, the Company will pay Mr.
Hone in 36 equal monthly installments over the three-year non-competition period
an amount equal to 3 times the sum of the Base Salary and Recognition Bonus as
then in effect. In addition, all benefits will continue for a period of three
years after such termination.
<PAGE>
In the event the termination of Mr. Hone's services by the Company as a
result of a Change in Control (as defined in the Agreement) or upon the
resignation of Mr. Hone in certain circumstances following a Non-Approved Change
in Control (as defined in the Agreement), the Company will pay Mr. Hone an
amount equal to 3 times the sum of his Base Salary and Recognition Bonus as then
in effect and all benefits will continue for a period of three years after such
termination. The Agreement also provides for the reimbursement of Mr. Hone for
legal expenses incurred in connection with any legal action which may be
required to collect the Company's obligations under this section of the
Agreement.
If Mr. Hone's services are terminated as a result of a Change in
Control or without cause (as defined in the Agreement), he shall be obligated to
provide services to the Company as a consultant as the Board of Directors may
request from time to time for a period expiring 30 days after the latest date
upon which any option held by him is exercisable. During such period, his
compensation for services as a consultant will be $1000 per annum plus such
additional remuneration as the parties may mutually agree upon.
If any of the payments to Mr. Hone are considered "excess parachute
payments" as defined in Section 280G of the Internal Revenue Code, the payments
will be reduced to avoid such a characterization.
Jay M. Eastman
The Company's employment agreement with Dr. Eastman, pursuant to which he
was employed as Executive Vice President, expired on December 31, 1995. It
contained a covenant not-to-compete and provided for a lump sum payment equal to
2.9 times his annual base salary in the event of the termination of his
employment as the result of a change-in-control (as defined in the agreement).
On January 1, 1996, Dr. Eastman became Senior Vice President - Strategic
Planning. He is also a nominee for director at this Annual Meeting. It is
anticipated that a new employment agreement will be entered into with Dr.
Eastman reflecting his new position and responsibilities.
<PAGE>
Interest of Directors and Management in Certain Transactions
Pursuant to the Company's 1987 Stock Option Plan, the Company has made
loans to certain optionees in amounts sufficient to exercise stock options and
to pay the federal and state income taxes incurred upon the exercise of said
options. All loans are evidenced by promissory notes given by the optionee, bear
interest at not less than the rate in effect for the Company's senior
indebtedness to a financial institution, which is payable annually, extend for a
period of not more than five years, and are secured by a pledge of the shares
purchased with the proceeds of the loan.
The following is the amount of indebtedness owed to the Company by all
directors and executive officers whose debt at anytime during 1995 was in excess
of $60,000.
<TABLE>
<CAPTION>
Largest Aggregate Amount
Amount of Indebtedness Outstanding
Name of Individual at any time during 1995 on 2/1/96 Rate of Interest
- ------------------ ----------------------- --------- ----------------
<S> <C> <C> <C>
L. Michael Hone $360,431 $360,431 7.34%
Chairman of the Board
President & Chief
Executive Officer
Robert S. Ehrlich $232,500 $232,500 7.34%
Director
</TABLE>
Pursuant to the Company's employment agreement with Mr. Hone, in the
event of any termination of his services, except for termination for cause, and
except for the voluntary termination of services by Mr. Hone, any indebtedness
owing by him to the Company at the time of such termination will be forgiven and
extinguished and the Company will pay or reimburse to Mr. Hone the amount of
taxes incurred by him in connection with any such forgiveness.
In 1995, the Company paid approximately $441,300 to Boylan, Brown,
Code, Fowler, Vigdor & Wilson, LLP for legal services rendered. Justin L.
Vigdor, a director, is a member of that firm and Martin S. Weingarten, secretary
of the Company, is of counsel to that firm.
<PAGE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934 that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following Performance Graph and
the Report of the Compensation Committee of the Board of Directors on Executive
Compensation shall not be incorporated by reference into any such filings.
CORPORATE PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total
return of the Company's Common Shares from December 31, 1990 through December
31, 1995, with the Standard and Poor's 500 Index and the Standard and Poor's
High Tech Composite Index. Comparisons of such sort are required by the
Securities and Exchange Commission and, therefore, are not intended to forecast
or be indicative of possible future performance of the Company's Common Shares.
The graph assumes that $100 was invested on December 31, 1990 in each of the
Company's Common Shares, the Standard and Poor's 500 Index and the Standard and
Poor's High Tech Composite Index and that all dividends were reinvested.
<TABLE>
Comparison of Five Year Cumulative Total Return*
Among PSC Inc., The S&P 500 Index and
The S&P High Tech Composite Index
<CAPTION>
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C>
PSC Inc. $100 $330 $435 $209 $452 $322
S&P 500 100 130 140 155 157 215
S&P High Tech Composite 100 114 119 146 170 245
</TABLE>
* $100 invested on 12/31/90 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors (James Henry, James O'Shea and
Jack Rosenfeld) approves all of the policies under which compensation is paid or
awarded to the Company's executive officers.
The Company's policy on executive compensation is to provide
competitive compensation that will attract, motivate, and retain executives with
superior abilities.
The Company's compensation program for executive officers consists of
the following key elements: base salary, annual cash incentives and equity based
incentives. Salary and annual incentive payments are mainly designed to reward
current and past performances. Equity based incentives are primarily designed to
provide strong incentives for long-term future performance. The policies with
respect to each of these elements, as well as the basis for determining the
compensation of the Chairman of the Board, President and Chief Executive
Officer, Mr. Hone, are described below.
In order to determine the competitiveness of its pay structure, the
Company and the Committee utilize the services of an independent compensation
consultant and in November 1993, October 1994 and September 1995 they were
presented with reports from the consultant (the "1993 Report", "1994 Report" and
"1995 Report", respectively) analyzing compensation information for similar
sized companies in comparable industries.
Base Salary: Base salaries for executive officers (other than Mr. Hone)
are recommended by management and are based upon an evaluation of the
responsibilities of the position and comparing it with other executive officer
positions in comparable companies. The Committee reviews the recommendations and
makes salary adjustments based upon the individual's experience in the position
and his performance level. The base salaries are normally reviewed annually. On
the basis of the 1993 Report, the base salaries of the executive officers in
1993 were generally below the average salary range in the survey. In 1994 and
1995, the base salaries were adjusted to correspond approximately with the
average of salaries offered for the positions by similar sized companies in
comparable industries.
<PAGE>
Annual Incentive: To reward performance, the Company provides eligible
executives with additional current compensation in the form of bonuses. The
annual incentive program consists of two bonus plans: the Employee Profit
Sharing Plan ("EPSP") in which all employees who have been employed by the
Company for 90 days or more are eligible to receive payments and the Management
Incentive Plan ("MIP") in which key executives are eligible to participate. Each
of these plans is closely related to Company performance. Under each of the
plans, a pool not exceeding 10% of the Company's net income before taxes,
bonuses and non-recurring costs is established. In the case of the EPSP, each
employee is entitled to receive a payment which is equal to that percentage of
the pool that his total wage or salary for the prior 60 months bears to the
total wages and salaries for all such employees for the same 60 months. In the
case of the MIP, awards are made to such key executives as are determined in the
discretion of the Committee based upon the individual's contribution to the
financial performance of the Company, subject to the following limitations: (i)
the maximum award to an executive officer in any fiscal year may not exceed an
amount equal to his base salary during that year, and (2) the maximum award to
any other non-corporate or subsidiary officer in any fiscal year may not exceed
an amount equal to 20% of his base salary during that year. The MIP awards made
in 1995 were below the bonus averages set forth in the 1993 Report.
Equity Based Incentives: Stock options are granted to aid in the
retention of key employees and to align the interests of key employees with
those of the shareholders. Stock option grants are discretionary and reflect the
current performance and continuing contribution of the individual to the success
of the Company. The Committee is responsible for determining the individuals to
whom grants should be made, the time of grants and the number of shares subject
to each option. Stock options are granted with an exercise price equal to the
fair market value of the Company's Common Shares on the day of grant. Any value
received by the executive from an option grant depends completely upon increases
in the price of the Company's Common Shares. Consequently, the full value of an
executive's compensation package cannot be realized unless an appreciation in
the price of the Company's Common Shares occurs over a period of years.
No stock option grants were made to executive officers in 1995 except
for certain option grants to individuals who first became executive officers in
1995.
<PAGE>
CEO Compensation
The compensation of the Chief Executive Officer reflects the same
elements as the compensation of the other executive officers. As discussed above
("Executive Officer Compensation - Employment Agreement and Arrangements"), a
new employment agreement was entered into with Mr. Hone in September 1995. After
reviewing the Consultant's 1995 Report and examining the salary range for the
Chairman and CEO position for similar-sized high technology companies and after
considering Mr. Hone's experience and performance as Chairman and CEO, the
Committee set Mr. Hone's base salary at $325,000 which was the 75th percentile
of the market based salary ranges.
Within the Agreement, the annual incentive program consists of two parts: a
Recognition Bonus and a Performance Bonus. The Recognition Bonus is intended
both to compensate Mr. Hone for extending the term of his employment agreement
and to recognize the significant contributions he has made to the successful
growth and development of the Company. The Performance Bonus is based on an
actual profitability within the Company and ranges from 25% to 95% of base
salary. The Performance Bonus will begin in the 1996 fiscal year and will
replace the MIP bonus that otherwise would have been paid to Mr. Hone. Based on
the 1995 Report, the incentive program is within industry norms.
Of the $86,426 received by Mr. Hone as bonus for 1995, $7,646 represented
his award from the EPSP and was calculated in the same manner as that for all
other employees, $18,000 represented his award from the MIP and $60,780
represented the Recognition Bonus. In making the MIP award, the Committee
considered that under Mr. Hone's leadership in 1995 the Company was able to
report a 45% increase in sales over 1994, a 72% increase in international sales
over 1994, the completion of a secondary offering, the acquisition of certain
technology licenses, the introduction of new technologically advanced products,
and the formation of a new subsidiary, with an office in Miami, Florida, to
support and expand the Company's distribution network in the Latin American and
Carribean markets.
Stock Retention
In 1994, the Committee established a requirement that all executive
officers and certain key employees own a specified guideline amount of shares
based on a multiple of pay. Executives were given a five-year period to achieve
their stock ownership goals. The Committee believes that all shareholders will
benefit when the Company is managed with a goal of maximizing the return to
shareholders and that shareholder return can best be maximized when executives
are shareholders and, therefore, also conduct business in their own best
self-interest.
<PAGE>
Tax Considerations
Effective January 1, 1994, Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), places a limit of $1,000,000 on the amount of
compensation that may be deducted by a publicly-held corporation in any year
with respect to each of its five most highly paid executive officers. Certain
performance based compensation that has been approved by stockholders is not
subject to the deduction limit. At the 1994 and 1995 Annual Meetings, the
Company obtained shareholder approval of the 1987 and 1994 Stock Option Plans,
respectively, to qualify options under said Plans as performance based
compensation and to maximize the tax deductibility of such options. Accordingly,
any gains realized upon the exercise of stock options granted under said Plans
will qualify as "performance-based compensation" and will be fully deductible by
the Company.
Compensation Committee
James W. Henry, Chairman
James O'Shea
Jack E. Rosenfeld
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee consist of Messrs. James W. Henry
(Chairman), James O'Shea and Jack E. Rosenfeld. All three members are
non-employee directors and none has any direct or indirect material interest in
or relationship with the Company outside of his position as director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") reports of ownership and changes in
ownership of common stock and other equity securities of the Company. Officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during the 1995 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
<PAGE>
PROPOSALS TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES AND
TO AUTHORIZE A NEW CLASS OF PREFERRED SHARES
(Proxy Items 2 and 3)
The Board of Directors has approved, and recommends to the shareholders
for their approval and adoption, two amendments to the Company's Certificate of
Incorporation (the "Certificate"). One amendment would increase the number of
authorized Common Shares, par value $.01 per share, of the Company from
25,000,000 shares to 40,000,000 shares and the other amendment would authorize a
new class of Preferred Shares, consisting of 10,000,000 Preferred Shares, par
value $.01 per share. Each amendment will be voted upon separately and neither
is conditioned upon the approval of the other.
As of March 18, 1996, there were 9,998,591 Common Shares issued and
outstanding. Additionally, approximately 4,275,000 Common Shares are reserved
for issuance under the Company's stock option plans and Employee Stock Purchase
Plan. Thus, an aggregate of 14,221,000 Common Shares are issued and outstanding
or reserved for issuance, representing approximately 57% of the Company's
authorized Common Shares.
The Company currently has no authorized Preferred Shares.
The additional Common Shares for which authorization is sought would
become part of the existing class of Common Shares. The new Common Shares, when
issued, would have the same rights and privileges as the Common Shares presently
outstanding. No shareholder of the Company has any preemptive right to subscribe
for or purchase any of the Common Shares, and, once authorized, such Common
Shares would be available for issuance at such time and on such terms as the
Board of Directors may consider appropriate.
Holders of Common Shares are entitled to such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therfor. The Company has not paid any cash dividends on the Common
Shares since 1979.
Holders of the Common Shares have no redemption, conversion or sinking
fund rights. Holders of Common Shares are entitled to one vote per share on all
matters submitted to a vote of holders of Common Shares and do not have any
cumulative voting rights. In the event of a liquidation, dissolution or
winding-up of the Company, the holders of Common Shares are entitled to share
equally and ratably in the assets of the Company, if any, remaining after the
payment of all debts and liabilities of the Company and the liquidation
preference of any outstanding Preferred Shares.
<PAGE>
The Preferred Shares for which authorization is sought would be
available for issuance at such time and on such terms as the Board of Directors
may consider appropriate. No Preferred Shares have ever been issued, and the
Company has no present plans to issue any Preferred Shares. The Board of
Directors would be authorized to provide for the issuance of Preferred Shares in
one or more series and to fix the designations, preferences, powers and
relative, participating, optional or other rights and restrictions thereof,
including without limitation, the dividend rate, conversion rights, voting
rights and redemption price and liquidation preference, to fix the number of
shares constituting any such series and to increase and decrease the number of
shares of such series. The Board of Directors of the Company, without obtaining
shareholder approval, would be able to issue the Preferred Shares with voting
rights or conversion rights which could adversely affect the voting power of the
holders of Common Shares.
In the opinion of the Board of Directors of the Company, the additional
authorized Common Shares and the newly authorized Preferred Shares will benefit
the Company by providing flexibility to the Board of Directors, without
requiring further action or authorization by the Company's shareholders (except
as may be required by law or the rules of any stock exchange on which the
Company's securities may then be listed), to issue additional Common Shares and
Preferred Shares from time to time in responding to business needs and
opportunities as they arise, or for other proper corporate purposes. These
opportunities, needs and purposes might include, for example, the obtaining of
capital funds through public and private offerings of Common Shares or Preferred
Shares or of securities convertible into Common Shares or Preferred Shares and
the use of Common Shares or Preferred Shares in connection with structuring
possible acquisitions of businesses and assets. Additionally, the Board, in its
discretion, could in the future declare stock splits or stock dividends or,
subject to shareholder approval, increase, establish or extend stock option and
other stock awards plans. Further, the availability of Preferred Shares, the
rights of which could be fixed by the Board from time to time, would provide the
Board with added flexibility to tailor the characteristics of a class of capital
stock to meet the needs of a particular financing, acquisition or other proper
corporate purpose. The Company has no present plans, arrangements or
understandings with respect to possible acquisitions, financings, stock splits,
dividends or other actions requiring the availability of the additional
authorized Common Shares or Preferred Shares other than in connection with the
issuance of Common Shares pursuant to the Company's stock option plans and
Employee Stock Purchase Plan.
<PAGE>
If approved by the shareholders, the additional authorized Common
Shares and the newly authorized Preferred Shares will allow the Company to take
prompt action with respect to corporate opportunities that develop without the
delay and expense incident to the holding of a special meeting of shareholders
to consider any specific issuance. It is not the present intention of the Board
of Directors to seek shareholder approval prior to any issuance of additional
Common Shares or issuance of the Preferred Shares unless required by law or by
the rules of any stock exchange on which the Company's shares may then be
listed. The Company's Common Shares currently trade on the Nasdaq National
Market tier of The Nasdaq Stock Market. The rules of Nasdaq require shareholder
approval (i) in connection with the acquisition of certain stock or assets,
including another business from a director, officer or substantial stockholder,
or from an entity in which one of such persons has a substantial direct or
indirect interest, (ii) in a transaction or a series of transactions (except for
a public offering of Common Shares for cash) that would result in an increase in
the number of shares or voting power of the outstanding shares by 20% or more,
(iii) where the issuance of Common Shares would result in a change of control of
the Company or (iv) in connection with a stock option or purchase plan under
which stock may be acquired by officers or directors.
Although the Board of Directors would only authorize the issuance of
additional Common Shares and the Preferred Shares based on its judgment as to
the best interests of the Company and its shareholders, the issuance of
additional authorized shares could have the effect of diluting the voting power
or book value per share of the outstanding Common Shares. The Board of Directors
(if consistent with its fiduciary responsibilities) could also attempt to deter
future takeover attempts by issuing additional Common Shares or Preferred Shares
to dilute the ownership of persons seeking to gain control of the Company and to
impede any unsolicited bid for control of the Company which the Board believed
was not in the best interests of the Company and its shareholders. For example,
the Company might seek to frustrate a takeover attempt by making a private sale
of a large block of shares to a third party who was opposed to such an attempt
or by issuing Preferred Shares or stock rights to shareholders which shares or
rights would acquire certain characteristics (such as conversion or redemption
rights) upon an unfriendly attempted takeover. In addition, the Board has the
ability to fix the characteristics of the authorized Preferred Shares. These
include, among other things, each share having more than one vote, voting as a
separate class on certain matters, special conversion rights or redemption
features. The Company, however, is aware of no such takeover attempt and has no
plans or arrangements with respect to the same. The issuance of any additional
shares will be on terms deemed to be in the best interests of the Company and
its shareholders.
<PAGE>
The Company's Board of Directors has not proposed either of the
amendments to the Certificate as anti-takeover measures, nor does the Board
presently intend for the foreseeable future to propose anti-takeover measures in
any future proxy solicitations. Any actions taken by the Company to discourage
an attempt to acquire control of the Company may result in shareholders not
being able to participate in any possible premiums which may arise in the
absence of anti-takeover provisions, as well as may be used to entrench
management's position even if such change in control may be beneficial to
shareholders.
The approval of each of the amendments to the Certificate will not of
itself cause any change in the capital stock or surplus of the Company. However,
any future issuance of Common Shares or Preferred Shares may have a dilutive
effect on the present equity holdings of shareholders of the Company.
Certain provisions of the Company's Certificate and by-laws may be
deemed to have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a shareholder might consider in such
shareholder's best interest, including those attempts that might result in a
premium over the market price for the shares held by shareholders. The
Certificate provides for the Board of Directors to be divided into three classes
of directors serving staggered three-year terms. As a result, approximately
one-third of the Board of Directors will be elected each year. In addition, the
Certificate provides that shareholders may remove a director only for cause and
only by the vote of the holders of two-thirds of the Common Shares of the
Company. This provision, when coupled with the provision of the Certificate
authorizing only the Board of Directors to fill vacant directorships, will
preclude shareholders from removing incumbent directors without cause and
simultaneously gaining control of the Board of Directors by filling the
vacancies created by such removal with their own nominees, and will make more
difficult, and therefore may discourage, a proxy contest to change control of
the Company. The Certificate also provides that special meetings of shareholders
of the Company may be called only by the Board of Directors. These provisions of
the Certificate may be changed only by the affirmative vote of the holders of
two-thirds of the Common Shares of the Company entitled to vote on such matters
at a meeting duly called for such purpose.
The By-laws provide that shareholders seeking to bring business before
an annual meeting of shareholders, or to nominate candidates for election as
directors at an annual or special meeting of shareholders, must provide prior
written notice thereof, as set forth in the By-Laws. See "General Information
Proxy Statement Proposals."
If approved by the shareholders at the Annual Meeting, the increase in
the number of Common Shares and the authorization of the new class of Preferred
Shares would become effective upon the filing of the Certificate of Amendment to
the Certificate of Incorporation with the New York Secretary of State, which
filing would take place shortly after the Annual Meeting.
<PAGE>
If both amendments are approved, the text of Paragraph 4 of the
Certificate of Incorporation, as amended, would be as follows:
"4. The aggregate number of shares of which the Corporation shall have
authority to issue is Fifty Million (50,000,000) shares of which Forty
Million (40,000,000) shares shall be Common Shares, having a par value
of $.01 per share and Ten Million (10,000,000) shares shall be
Preferred Shares, having a par value of $.01 per share.
Subject to the limitations and in the manner provided by law, Preferred
Shares may be issued from time to time in series, and the Board of
Directors of the Corporation is hereby expressly empowered and
authorized to establish and designate series, to fix the number of
shares constituting each series, and to fix the designations and the
relative rights, preferences and limitations of the shares of each
series."
Approval of each of the amendments to the Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
Common Shares entitled to vote at the Annual Meeting. Abstentions and broker
non-votes will have the same effect as a vote against an amendment. Each
amendment will be voted upon separately and neither is conditioned upon the
approval of the other.
The Board of Directors recommends that shareholders vote FOR the
approval of each of the proposed amendments to the Company's Certificate of
Incorporation.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP have been the Company's independent public
accountants since June 1985, and have been retained by the Board of Directors
for the current year.
It is anticipated that representatives of Arthur Andersen LLP will be
present at the Annual Meeting and they will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be presented at the
Annual Meeting, but if other maters properly come before the meeting, the
persons named as Proxies in the enclosed Proxy will vote according to their best
judgment. Shareholders are requested to date and sign the enclosed Proxy and to
mail it promptly in the enclosed postage-paid envelope. If you attend the Annual
Meeting, you may revoke your Proxy at that time and vote in person, if you wish.
Otherwise your Proxy will be voted for you.
THE COMPANY WILL MAKE AVAILABLE AT NO COST, UPON THE WRITTEN REQUEST OF A
SHAREHOLDER, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1995 (WITHOUT EXHIBITS) AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. COPIES OF EXHIBITS TO THE COMPANY'S FORM 10-K WILL BE MADE
AVAILABLE, UPON WRITTEN REQUEST OF A SHAREHOLDER AND THE PAYMENT TO THE COMPANY
OF THE REASONABLE COSTS OF REPRODUCTION AND MAILING.
By Order of the Board of Directors
Martin S. Weingarten
Secretary
Dated: March 25, 1996
Rochester, New York
<PAGE>
APPENDIX A.
PROXY
PROXY PSC INC. PROXY
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 30, 1996
The undersigned, revoking all prior proxies, hereby appoints L. Michael Hone and
Justin L. Vigdor, and either one of them with full power of substitution, as
proxy or proxies to vote for the undersigned, in the name of the undersigned,
all of the Common Shares of PSC Inc. (the "Company") of the undersigned, as if
the undersigned were personally present and voting at the Company's Annual
Meeting of Shareholders to be held at the Dryden Theatre, George Eastman House,
900 East Avenue, Rochester, New York on April 30, 1996 at 9:00 a.m. (the "Annual
Meeting"), and at any and all adjournments thereof, upon the following matters:
(Continued and to be signed on reverse side)
Common
------------
1. Election of three (3) directors, each to serve a three-year term.
FOR all nominees WITHHOLD
listed below AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
--------------- -----------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Jay M. Eastman James W. Henry Thomas J. Morgan
--------------- -------------- ----------------
2. Proposal to amend the Certificate of Incorporation to increase the
number of authorized Common Shares.
FOR AGAINST ABSTAIN
-------------- -------------- ----------------
3. Proposal to amend the Certificate of Incorporation to authorize a new
class of Preferred Shares.
FOR AGAINST ABSTAIN
--------------- --------------- ---------------
<PAGE>
4. Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ELECTION OF THE NOMINEES FOR DIRECTORS SPECIFIED IN THE PROXY STATEMENT AND
FOR PROPOSALS 2 AND 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Dated: , 1996
------------
Signature
-----------------------
Signature
-----------------------
IMPORTANT: Sign the Proxy exactly as your name or names appear on your Common
Share certificate; in the case of Common Shares held in joint tenancy, each
joint tenant must sign. Fiduciaries should indicate their full titles and the
capacity in which they sign. Please complete, sign, date and return this Proxy
promptly in the enclosed envelope.
