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 of the
Commission Only (as permitted
[ X ] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Three-Five Systems, Inc.
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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(j)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LOGO] THREE-FIVE SYSTEMS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 24, 1996
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The Annual Meeting of Stockholders of Three-Five Systems, Inc., a
Delaware corporation (the "Company"), will be held at 9:00 a.m. on Wednesday,
April 24, 1996, at the Company's corporate headquarters at 1600 North Desert
Drive, Tempe, Arizona, for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1996.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 15, 1996
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to mark,
sign, date, and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder of record
attending the meeting may vote in person even if he or she previously has
returned a proxy.
Sincerely,
Randal L. Buness
Secretary
Tempe, Arizona
March 19, 1996
<PAGE>
[LOGO] THREE-FIVE SYSTEMS, INC.
1600 N. Desert Drive
Tempe, Arizona 85281
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PROXY STATEMENT
- --------------------------------------------------------------------------------
VOTING AND OTHER MATTERS
General
The enclosed proxy is solicited on behalf of Three-Five Systems, Inc.,
a Delaware corporation (the "Company"), by the Company's board of directors (the
"Board of Directors") for use at the Annual Meeting of Stockholders to be held
Wednesday, April 24, 1996 at 9:00 a.m. (the "Meeting"), or at any adjournment
thereof, for the purposes set forth in this Proxy Statement and in the
accompanying Notice of Annual Meeting of Stockholders. The Meeting will be held
at the Company's corporate headquarters, 1600 North Desert Drive, Tempe,
Arizona.
These proxy solicitation materials were first mailed on or about March
22, 1996, to all stockholders entitled to vote at the Meeting.
Voting Securities and Voting Rights
Stockholders of record at the close of business on March 15, 1996 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 7,736,345 shares of the Company's
Common Stock, $0.01 par value per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of
the total number of shares of Common Stock outstanding constitutes a quorum for
the transaction of business at the Meeting. Each stockholder voting at the
Meeting, either in person or by proxy, may cast one vote per share of Common
Stock held on all matters to be voted on at the Meeting. Assuming that a quorum
is present, the affirmative vote of a majority of the shares of Common Stock of
the Company present in person or represented by proxy at the Meeting and
entitled to vote is required (i) for the election of directors, and (ii) for the
ratification of the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the year ending December 31, 1996.
Votes cast by proxy or in person at the Meeting will be tabulated by
the election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
Voting of Proxies
When a proxy is properly executed and returned, the shares it
represents will be voted at the Meeting as directed. If no specification is
indicated, the shares will be voted (i) "for" the election of the nominees set
forth in this Proxy Statement, and (ii) "for" the ratification of the
appointment of Arthur Andersen LLP as the independent auditors of the Company
for the year ending December 31, 1996.
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<PAGE>
Revocability of Proxies
Any person giving a proxy may revoke the proxy at any time before its
use by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
Solicitation
The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for expenses incurred in forwarding
solicitation materials to such beneficial owners. Proxies also may be solicited
by certain of the Company's directors and officers, personally or by telephone
or telegram, without additional compensation.
Annual Report and Other Matters
The 1995 Annual Report to Stockholders, which was mailed to
stockholders with or preceding this Proxy Statement, contains financial and
other information about the activities of the Company but is not incorporated
into this Proxy Statement and is not to be considered a part of these proxy
soliciting materials. The information contained in the "Compensation Committee
Report on Executive Compensation" below and "Performance Graph" below shall not
be deemed "filed" with the Securities and Exchange Commission (the "SEC") or
subject to Regulations 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide upon written request, without charge to each
stockholder of record as of the Record Date, a copy of the Company's annual
report on Form 10-K for the year ended December 31, 1995 as filed with the SEC.
Any exhibits listed in the Form 10-K report also will be furnished upon request
at the actual expense incurred by the Company in furnishing such exhibit. Any
such requests should be directed to the Company's Secretary at the Company's
executive offices set forth in this Proxy Statement.
ELECTION OF DIRECTORS
Nominees
The Company's bylaws provide that the number of directors shall be
fixed from time to time by resolution of the Board of Directors or stockholders.
All directors are elected at each annual meeting of the Company's stockholders
for a term of one year and hold office until their successors are elected and
qualified.
A board of four directors is to be elected at the Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for each of the nominees named below. All of the nominees currently are
directors of the Company. In the event that any such nominee is unable or
declines to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee designated by the current Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director. The term of office of each person elected as a director
will continue until the next annual meeting of stockholders or until a successor
has been elected and qualified.
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<PAGE>
The following table sets forth certain information regarding the
nominees for directors of the Company:
Name Age Position
---- --- --------
David R. Buchanan 63 Chairman of the Board, President, and
Chief Executive Officer
Burton E. McGillivray 39 Director
David C. Malmberg 53 Director
Jeffrey A. Wilson 49 Director
David R. Buchanan has been Chairman of the Board, President, Chief
Executive Officer, and a Director of the Company since its formation in February
1990. Mr. Buchanan served as Treasurer of the Company from May 1990 until
January 1994 and as Chairman of the Board and Chief Executive Officer,
President, and a Director of one of the predecessors of the Company from October
1986, February 1987, and November 1985, respectively, until the predecessor's
merger into the Company in May 1990.
Burton E. McGillivray has been a Director of the Company since its
formation. Mr. McGillivray served as a Director of one of the Company's
predecessors from September 1986 until March 1987 and from July 1987 until its
merger with the Company. Since January 1994, Mr. McGillivray has served as
Managing Director of First Chicago Equity Capital ("FCEC"). From December 1992
until January 1994, Mr. McGillivray was a Chicago-based private investor. From
September 1984 to December 1992, Mr. McGillivray was employed by Continental
Illinois Venture Corporation ("CIVC") and Continental Equity Capital Corporation
("CECC"). He served as Managing Director of both CIVC and CECC from 1989 to
1992. The primary business of CIVC, CECC, and FCEC is making equity investments
in high-growth businesses. Mr. McGillivray is a member of the boards of
directors for CFM Technologies, Inc., CFC Aviation, Inc., Ceco Products Corp.,
and Pacer Propane Holding, Inc.
David C. Malmberg has been a Director of the Company since April 1993.
Mr. Malmberg is a private investor and management consultant. Before resigning
in May 1994, Mr. Malmberg spent 22 years at National Computer Systems, including
13 years as its President and Chief Operating Officer. Mr. Malmberg serves as
the Chairman of the Board of Directors of National City Bank of Minneapolis and
is a member of the boards of directors of National City Bancorporation, York and
Associates, Inc., PPT Vision, Inc., and the Board of Trustees for Mankato State
University.
Jeffrey A. Wilson has been a Director of the Company since November
1994. He is currently a private investor and management consultant. From January
1995 to October 1995, Mr. Wilson was Chief Executive Officer and a Director of
Docucopy/Compex. From September 1990 to April 1994, Mr. Wilson was President,
Chief Executive Officer, and a Director of Terminal Data Corporation. From
December 1988 until September 1990, Mr. Wilson was a consultant to, and then
President of, Adaptive Information Systems, a subsidiary of Hitachi. From March
1986 until December 1988, Mr. Wilson was President and Chief Executive Officer
of Bell & Howell Records Management Company. Mr. Wilson is a member of the board
of directors of VIP Ltd., a software development and services company.
Directors hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified. Officers serve at the
pleasure of the Board of Directors. There are no family relationships among any
of the directors or officers of the Company. Messrs. McGillivray, Malmberg, and
Wilson serve as the members of the Audit Committee and Compensation Committees
of the Board of Directors, with Mr. McGillivray serving as Chair of the Audit
Committee and Mr. Malmberg serving as Chair of the Compensation Committee.
3
<PAGE>
Meetings and Committees of the Board of Directors
The Company's bylaws authorize the Board of Directors to appoint among
its members one or more committees composed of one or more directors. The Board
of Directors has appointed an Audit Committee and a Compensation Committee. The
Audit Committee reviews the annual financial statements, the significant
accounting issues, and the scope of the audit with the Company's independent
auditors and is available to discuss with the auditors any other audit related
matters that may arise during the year. The Compensation Committee reviews and
acts on matters relating to compensation levels and benefit plans for key
executives of the Company.
The Board of Directors of the Company held a total of four meetings
during the fiscal year ended December 31, 1995. The Company's Audit Committee
met separately at two formal meetings during the fiscal year ended December 31,
1995. The Company's Compensation Committee held two formal meetings during the
fiscal year ended December 31, 1995. No director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors, and
(ii) the total number of meetings held by all Committees of the Board on which
such director was a member.
Director Compensation and Other Information
The Company pays each independent director an annual fee in the amount
of $9,000, plus $500 for each board or committee meeting attended, other than
committee meetings held on the same day as a board meeting. The Company also
reimburses each independent director for travel and related expenses incurred in
connection with attendance at board and committee meetings. Mr. Buchanan, an
executive officer of the Company, receives no additional compensation for his
services as a director. The terms of the Company's 1994 Automatic Stock Option
Plan for Non-employee Directors (the "1994 Plan") provide for the automatic
grant of options to purchase 500 shares of the Company's Common Stock to
non-employee directors at the time of the meeting of the Board of Directors held
immediately following each annual meeting of stockholders. The 1994 Plan also
provides that each non- employee director will receive an automatic grant to
acquire 1,000 shares of the Company's Common Stock on the date of his or her
first appointment or election to the Board of Directors. Pursuant to the 1994
Plan, each of Messrs. McGillivray, Malmberg, and Wilson will receive an
automatic grant of options to purchase 500 shares of Common Stock at the time of
the Board of Directors meeting immediately following the Meeting.
4
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The following table sets forth the total compensation received by the
Company's Chief Executive Officer and its two other most highly compensated
executive officers whose aggregate cash compensation exceeded $100,000 for
services in all capacities to the Company and its subsidiaries for the fiscal
year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Awards
------
Annual Compensation(1) Securities All Other
Name and ---------------------------- Underlying Compensation
Principal Position Year Salary($) Bonus($) Options(#) ($)(2)
- ------------------ ---- --------- -------- ---------- --------
David R. Buchanan 1995 $254,169 $ --- --- $ 2,782
Chairman, President, and 1994 226,848 268,110 --- 6,948
Chief Executive Officer 1993 199,029 210,129 --- 11,540
James F. Bowser(3) 1995 $121,208 $ --- --- $ 388
Vice President of 1994 109,319 78,910 10,000 4,580
Sales and Marketing 1993 71,803 28,528 --- 3,330
Dan J. Schott(4) 1995 $117,550 $ --- --- $ 606
Vice President of 1994 107,565 88,910 40,000 2,201
Technology
- ----------
(1) Messrs. Buchanan, Bowser, and Schott also received certain perquisites,
the value of which did not exceed 10% of their annual salary and bonus.
(2) Amounts shown for fiscal year 1995 consist of term life insurance
premiums of $2,782, $388, and $606 for Messrs. Buchanan, Bowser, and
Schott, respectively.
(3) Mr. Bowser has served as Vice President of Sales and Marketing since
January 1996 and served as Vice President of Manufacturing Operations
from January 1994 until January 1996.
(4) Mr. Schott joined the Company as Vice President of Technology in
January 1994.
Option Grants
The Company did not grant any stock options to the named executive
officers in the fiscal year ended December 31, 1995.
5
<PAGE>
Option Holdings
The following table contains certain information respecting the options
held by the named executive officers.
YEAR END OPTION VALUES
Number of Unexercised Value of Unexercised In-the-
Options at Fiscal Money Options at Fiscal
Year-End (#) Year-End ($)(1)
---------------------------- ------------------------------
Name Exercisable Unexercisable(2) Exercisable Unexercisable(2)
- ---------------- ----------- ---------------- ----------- ----------------
David R. Buchanan 106,856 --- $1,634,224 ---
James F. Bowser 2,000 18,000 $ 32,750 $130,375
Dan J. Schott --- 40,000 --- ---
(1) Calculated based upon the December 31, 1995 New York Stock Exchange
closing price of $16.875 per share, multiplied by the applicable number
of shares in-the-money, less the aggregate exercise price for such
shares.
(2) Not vested as of December 31, 1995.
Employment Agreements
The Company has no written employment contracts with its officers,
directors, or other employees. The Company offers its employees medical, life,
and disability insurance benefits. The executive officers and other key
personnel of the Company are eligible to receive profit sharing distributions
and discretionary bonuses, and are eligible to receive stock options under the
Company's stock option plans.
401(k) Profit Sharing Plan
On September 1, 1990, the Company adopted a profit sharing plan
pursuant to Section 401(k) (the "401(k) Plan") of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"). Pursuant to the 401(k) Plan, all
eligible employees may contribute through payroll deductions up to the maximum
allowable under Section 402(g) of the Internal Revenue Code, which is $9,240 for
calendar year 1995. In addition, the 401(k) Plan provides that the Company may
make matching and discretionary contributions in such amount as may be
determined by the Board of Directors. The Company did not make any discretionary
contributions pursuant to the 401(k) Plan to executive officers or other
employees for 1995.
Stock Option Plans
The Company currently has three stock options plans: the 1990 Incentive
Stock Option Plan (the "1990 Plan"), the 1993 Stock Option Plan (the "1993
Plan"), and the 1994 Automatic Stock Option Plan for Non-Employee Directors (the
"1994 Plan"). The eligible persons under the 1990 Plan and 1993 Plan include key
personnel, consultants, and independent contractors who perform valuable
services for the Company. Directors who are not employees receive automatic
grants of stock options under the 1994 Plan, but are not eligible under either
the 1990 Plan or the 1993 Plan.
In conjunction with stockholder approval of the 1993 Plan, the Board
terminated the 1990 Plan with respect to 85,454 options which were unissued as
of the date that the 1993 Plan was adopted. Under the 1990 Plan, there were
312,076 options issued but unexercised as of March 15, 1996. If any option
terminates or expires without
6
<PAGE>
having been exercised in full, stock not issued under such stock option will
become available for reissuance under the 1990 Plan.
Under the 1993 Plan, 385,454 shares of Common Stock of the Company may
be issued pursuant to the granting of options to acquire Common Stock of the
Company, the direct granting of Common Stock, or the granting of stock
appreciation rights. If any option terminates or expires without having been
exercised in full, stock not issued under such option will become available for
reissuance under the 1993 Plan. There were outstanding options to acquire
225,500 shares of the Company's Common Stock under the 1993 Plan as of March 15,
1996.
Under the 1994 Plan, 100,000 shares of Common Stock of the Company may
be issued upon exercise of stock options automatically granted to non-employee
directors of the Company pursuant to the terms described in the section above
entitled "Elections of Directors - Director Compensation and Other Information."
Persons other than non-employee directors of the Company are not eligible to
receive options granted pursuant to the 1994 Plan. There were outstanding
options to acquire 6,500 shares of the Company's Common Stock under the 1994
Plan as of March 15, 1996.
If any change in the Common Stock of the Company occurs through merger,
consolidation, reorganization, capitalization, stock dividend, split-up,
combination of shares, exchange of shares, change in corporate structure, or
otherwise, adjustments will be made as to the maximum number of shares subject
to the 1990 Plan, 1993 Plan, and the 1994 Plan, and the number of shares and
exercise price per share of stock subject to outstanding options.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1995, the Company's
Compensation Committee consisted of Messrs. McGillivray, Malmberg, and Wilson.
None of such individuals had any contractual or other relationships with the
Company during such fiscal year except as directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee of the Board of Directors (the "Committee")
consists exclusively of independent, non-employee directors. The Committee is
responsible for reviewing and recommending for approval by the Board of
Directors the Company's compensation practices, executive salary levels, and
variable compensation programs, both cash-based and equity-based. The Committee
generally reviews base salary levels for executive officers of the Company at or
about the start of each fiscal year and approves actual bonuses at the end of
each fiscal year based upon Company and individual performance.
David C. Malmberg served as Chairman of the Committee, and Burton E.
McGillivray and Jeffrey A. Wilson served as Committee members during 1995.
Philosophy
The executive compensation program seeks to provide a level of
compensation that is competitive with companies similar in both size and
industry. The Committee obtained the comparative data used to assess
competitiveness from the American Electronics Association Executive Compensation
Survey. Actual total compensation levels may differ from competitive levels in
surveyed companies as a result of annual and long-term Company performance as
well as individual performance. The Committee uses its discretion to set
executive compensation when, in its judgment, external, internal, or an
individual's circumstances warrant.
7
<PAGE>
Compensation Program
The four primary components of executive compensation consist of base
salary, employee profit sharing distributions, annual discretionary bonuses, and
stock option grants.
Base Salary
The Committee reviews salaries recommended by the Chief Executive
Officer for executive officers other than the Chief Executive Officer. In
formulating these recommendations, the Chief Executive Officer considers the
overall performance of the Company and conducts an informal evaluation of
individual officer performance. Final decisions on any adjustments to the base
salary for executives other than the Chief Executive Officer are made by the
Committee in conjunction with the Chief Executive Officer. The Committee's
evaluation of the recommendations by the Chief Executive Officer considers the
same factors outlined above and is subjective with no particular weight assigned
to any one factor. Base salaries for fiscal 1995 were determined by the
Committee in April 1995. Base salaries were not increased for 1995 except for
two executive officers whose salaries were increased approximately 10% to a
level competitive with similar positions in comparable companies.
Employee Profit Sharing Distributions
The Company may elect to make profit sharing distributions under which
all employees of the Company, including officers, are eligible to receive a
bonus out of a portion of the Company's profits. The Board of Directors
determines the amount of the distribution, if any, as a subjective percentage of
net income based upon year-to-year profit growth. The designated amount is
distributed to eligible employees based upon the ratio of the individual salary
to total salaries for all employees. At the discretion of the Board of
Directors, a portion of this profit sharing distribution may be paid into the
401(k) retirement plan on behalf of the employees. The Committee determined that
no profit sharing distributions were warranted for fiscal 1995.
Annual Discretionary Bonuses
The annual discretionary bonuses are designed to provide incentive
compensation to key officers and employees who contribute substantially to the
success of the Company. The bonuses are intended to maintain a strong link
between overall Company performance and enhanced stockholder value by rewarding
results that exceed industry averages. Bonuses may be awarded to selected
officers and employees from a pool based on a subjective percentage of the
Company's net income for the fiscal year. Projected bonuses are accrued monthly
and paid annually based on the overall performance of the Company to date,
taking into consideration achievement of sales, net income, and other
performance criteria as well as individual responsibility, performance, and
compensation level. The Committee's evaluation of these factors is subjective,
with no particular weight being assigned to any one factor. The Committee
determined that the Company's performance did not warrant the payment of any
discretionary bonuses for fiscal 1995.
Stock Option Grants
The Company grants stock options periodically to executive officers and
other key employees to provide additional incentive to work to maximize
long-term total return to stockholders. The options generally include a vesting
period of five or more years in order to encourage optionholders to continue in
the employ of the Company, although the Board of Directors retains the right to
accelerate the vesting of options granted by the Company. In general, stock
options are granted to senior level and key employees at the onset of
employment. However, if in the opinion of the Board of Directors, the
outstanding service of an individual merits an additional grant, the Board may
elect to issue a stock option to that employee.
8
<PAGE>
Benefits
The Company provides various employee benefit programs to its executive
officers, including medical and life insurance benefits, an employee 401(k)
retirement savings plan, and short- and long-term disability insurance. These
programs are generally available to all employees of the Company.
Chief Executive Officer Compensation
The Committee considers the same factors outlined above for other
executive officers in evaluating the base salary and other compensation of David
R. Buchanan, the Company's Chief Executive Officer. The Committee's evaluation
of Mr. Buchanan's base salary is subjective, with no particular weight assigned
to any one factor. The Committee established Mr. Buchanan's base salary at
$250,000 throughout 1995. The Committee believes that this base salary is
competitive with that paid to chief executive officers of comparable companies.
The Committee determined that the Company's performance did not merit payment of
a discretionary bonus to Mr. Buchanan for 1995.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
each of any publicly held corporation's chief executive officer and four other
most highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Company currently intends to structure the performance-based portion of
the compensation of its executive officers in a manner that complies with
Section 162(m).
This report has been furnished by the members of the Compensation
Committee of the Board of Directors of the Company.
David C. Malmberg, Chairman
Burton E. McGillivray
Jeffrey A. Wilson
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10 percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and greater than 10 percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
received by it during the fiscal year ended December 31, 1995, and written
representations that no other reports were required, the Company believes that
each person who, at any time during such fiscal year, was a director, officer,
or beneficial owner of more than 10 percent of the Company's Common Stock
complied with all Section 16(a) filing requirements during such fiscal year or
prior fiscal years.
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COMPANY PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder returns,
assuming reinvestment of dividends, for (i) the Company's Common Stock; (ii) the
Standard and Poor's SmallCap 600 Index; and (iii) the Electrical Components &
Other Equipment Industry Index of Standard and Poor's Mid Cap Index. The graph
assumes an investment of $100 on May 1, 1990, the date on which the Company's
Common Stock became registered under Section 12 of the Exchange Act as a result
of the Company's merger with its predecessors. The calculation of cumulative
stockholder return on the Company's Common Stock does not include reinvestment
of dividends because the Company did not pay dividends during the measurement
period. The performance shown is not necessarily indicative of future
performance.
<TABLE>
<CAPTION>
5/1/90 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Three-Five Systems, Inc. $ 100 $ 134 $ 267 $ 483 $4,700 $9,700 $4,500
S&P SmallCap 600 Index $ 100 $ 83 $ 123 $ 149 $ 177 $ 169 $ 219
Electrical Components & Other $ 100 $ 110 $ 180 $ 203 $ 322 $ 399 $ 573
Equipment Industry Index
</TABLE>
10
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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock on March 15, 1996 (except as
otherwise noted) by (i) each director and each executive officer of the Company,
(ii) all directors and officers of the Company as a group, and (iii) each person
known by the Company to own more than five percent of the Company's Common
Stock.
Shares Beneficially
Name of Beneficial Owner Owned
------------------------ --------------------------
Number(l) Percent(2)
--------- ----------
Directors and Executive Officers:
David R. Buchanan................................. 849,118 (3) 10.83%
James F. Bowser................................... 84,500 (4) 1.09%
Dan J. Schott..................................... 6,000 (5) *
David M. Rzasa(6)................................. 500 *
Randal L. Buness(7)............................... 2,000 *
Vincent C. Hren(8)................................ 0 *
Burton E. McGillivray............................. 67,833 (9) *
David C. Malmberg................................. 23,333 (10) *
Jeffrey A. Wilson................................. 3,433 (11) *
All directors and executive
officers as a group (nine persons)...............1,036,717 13.40%
Non-management 5% Stockholders:
LGT Asset Management, Inc.(12)...................1,055,700 13.65%
Eugene M. Lang.................................... 526,512 (13) 6.81%
- ----------
*Less than 1% of the outstanding shares of Common Stock.
(1) Includes, when applicable, shares owned of record by such person's
minor children and spouse and by other related individuals and entities
over whose shares of Common Stock such person has custody, voting
control, or power of disposition. Also includes shares of Common Stock
that the identified person had the right to acquire within 60 days of
March 15, 1996 by the exercise of stock options.
(2) The percentages shown include the shares of Common Stock which the
person will have the right to acquire within 60 days of March 15, 1996.
In calculating the percentage of ownership, all shares of Common Stock
which the identified person will have the right to acquire within 60
days of March 15, 1996 upon the exercise of stock options are deemed to
be outstanding for the purpose of computing the percentage of shares of
Common Stock owned by such person, but are not deemed to be outstanding
for the purpose of computing the percentage of the shares of Common
Stock owned by any other person.
(3) Includes 106,856 shares of Common Stock issuable upon exercise of
vested stock options.
(4) Includes 4,500 shares of Common Stock issuable upon exercise of vested
stock options.
(5) Includes 4,000 shares of Common Stock issuable upon exercise of vested
stock options.
(6) Mr. Rzasa is the Company's Executive Vice President and Chief Operating
Officer.
(7) Mr. Buness is the Company's Vice President-Finance and Administration,
Chief Financial Officer,
Secretary, and Treasurer.
(8) Mr. Hren is the Company's Vice President-Manufacturing Operations.
(9) Includes 1,833 shares of Common Stock issuable upon exercise of vested
stock options.
(10) Includes 1,833 shares of Common Stock issuable upon exercise of vested
stock options.
(11) Includes 833 shares of Common Stock issuable upon exercise of vested
stock options.
(12) The address of LGT Asset Management, Inc. is 50 California Street, 27th
Floor, San Francisco, California 94111.
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(13) Includes 18,538, 203,000, and 111,304 shares of Common Stock owned by
REFAC Technology Development Corporation ("REFAC"), REFAC
International, Ltd. ("RIL"), and REFAC Financial Corporation ("RFC"),
respectively. Mr. Lang may be deemed to have shared voting and
investment power with respect to such shares. REFAC may be deemed to
beneficially own, and to have shared voting and investment power with
respect to, the shares held of record by RIL and RFC. RIL may be deemed
to have shared voting and investment power with respect to the shares
held of record by RFC. REFAC, RFC, and RIL disclaim beneficial
ownership of Common Stock except for Common Stock owned of record by
such person. Mr. Lang disclaims beneficial ownership of the shares held
by REFAC, RIL, and RFC. The address of Mr. Lang is 122 East 42nd
Street, Suite 4000, New York, New York 10168.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending December 31, 1996 and recommends that
stockholders vote in favor of the ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. The Board of Directors anticipates that representatives of Arthur
Andersen LLP will be present at the Meeting, will have the opportunity to make a
statement if they desire, and will be available to respond to appropriate
questions.
DEADLINE FOR RECEIPT OF STOCKHOLDERS PROPOSALS
Stockholder proposals that are intended to be presented by such
stockholders at the annual meeting of stockholders of the Company for the fiscal
year ending December 31, 1996 must be received by the Company no later than
November 20, 1996 in order to be included in the proxy statement and form of
proxy relating to such meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting.
If any other matters properly come before the Meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
Dated: March 19, 1996
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THREE-FIVE SYSTEMS, INC.
1996 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of THREE-FIVE SYSTEMS, INC., a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement of the Company, each dated March 19,
1996, and hereby appoints David R. Buchanan and Randal L. Buness, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1996 Annual Meeting of Stockholders of the Company, to be held on Wednesday,
April 24, 1996, at 9:00 a.m., local time, at the Company's corporate
headquarters at 1600 North Desert Drive, Tempe, Arizona, and at any adjournment
or adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
This Proxy will be voted as directed or, if no contrary direction is
indicated, will be voted FOR the election of directors; FOR the ratification of
the appointment of Arthur Andersen LLP as the independent auditors of the
Company; and as said Proxies deem advisable on such other matters as may come
before the meeting.
A majority of such attorneys or substitutes as shall be present and shall
act at said meeting or any adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
Continued, and to be signed and dated, on reverse side.
THREE-FIVE SYSTEMS, INC.
P.O. BOX 11186
NEW YORK, N.Y. 10203-0186
1. ELECTION OF DIRECTORS:
FOR all nominees |X| WITHHOLD AUTHORITY to vote |X| *EXCEPTIONS |X|
listed below. for all nominees listed below.
Nominees
David R. Buchanan, Burton E. McGillivray, David C. Malmberg, Jeffrey A. Wilson
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions
- ------------------- ------------------- ------------------- -------------------
2. Proposal to ratify the appointment And upon such matters which may
of Arthur Andersen LLP as the properly come before the meeting
independent auditors of the Company. or any adjournment or adjournments
thereof.
FOR |X| AGAINST |X| ABSTAIN |X|
Change of Address and |X|
or Comments Mark Here
(This Proxy should be dated, signed by the
stockholder(s) exactly as his or her name
appears hereon, and returned promptly in
the enclosed envelope. Persons signing a
fiduciary capacity should so indicate. If
shares are held by joint tenants or as
community property, both stockholders
should sign.)
Dated: , 1996
-------------------
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Signature
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Signature
Votes must be indicated |X|
(x) In Black or Blue ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
