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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 by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNIT INSTRUMENTS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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:
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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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[_] 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:
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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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Notes:
<PAGE>
[LETTERHEAD OF UNIT INSTRUMENTS, INC]
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NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
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September 5, 1997
To the Shareholders:
The Annual Meeting of Shareholders of Unit Instruments, Inc., a California
corporation, will be held on October 24, 1997, at 10:00 a.m., at the offices of
the Company at 22600 Savi Ranch Parkway, Yorba Linda, California, for the
following purposes:
1. To elect four persons to the Company's Board of Directors.
2. To consider and act upon the ratification of the appointment of Price
Waterhouse LLP as independent accountants for the fiscal year ending May
31, 1998.
3. To consider and act upon the adoption of the 1997 Stock Incentive Plan.
4. To transact such other business as may properly come before the meeting and
any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on August 29, 1997
as the record date for the determination of stockholders entitled to notice of,
and to vote at, this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
/s/ Gary N. Patten
Gary N. Patten
Secretary
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE, AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of Annual Meeting of Shareholders ................................. i
Proxy Statement........................................................... 1
Proposal No. 1 - Election of Directors................................... 3
Proposal No. 2 - Ratification of Independent Accountants................ 5
Proposal No. 3 - Ratification of 1997 Stock Incentive Plan.............. 6-9
Executive Compensation.................................................... 10-15
Company Performance - Comparison of Five Year Cumulative Total Return... 16
Security Ownership of Certain Beneficial Owners and Management............ 17-18
Compliance with Section 16(a) of the Securities Exchange Act of 1934...... 18
Other Matters............................................................. 19
</TABLE>
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO SIGN THE
ENCLOSED PROXY CARD AND PROMPTLY RETURN IT BY MAIL IN THE ENCLOSED STAMPED
ENVELOPE.
<PAGE>
UNIT INSTRUMENTS, INC.
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of Unit
Instruments, Inc. (the "Company") for use at the Annual Meeting of Shareholders
to be held on October 24, 1997 at 10:00 a.m., local time, or at any
adjournment(s) thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will
be held at the Company's principal office located at 22600 Savi Ranch Parkway,
Yorba Linda, California 92887. The Company's telephone number is (714) 921-
2640.
An Annual Report to Shareholders, containing financial statements for the
fiscal year ended May 31, 1997, is being mailed contemporaneously with this
Proxy Statement to all shareholders entitled to vote. This Proxy Statement and
the form of proxy were first mailed to shareholders on or about September 5,
1997.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on August 29, 1997 are
entitled to notice of and to vote at the meeting. At August 1, 1997, 4,431,631
shares of the Company's Common Stock (the "Common Stock") were issued and
outstanding.
REVOCABILITY OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attn:
Corporate Secretary) a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Every shareholder voting at the meeting for the election of directors may
cumulate such shareholder's votes and give one candidate a number of votes equal
to the number of
<PAGE>
directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute the shareholder's votes on the
same principle among as many candidates as the shareholder deems appropriate,
provided that votes cannot be cast for more than five candidates. However, no
shareholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate the shareholder's votes. On all other matters, each share
has one vote.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or fax.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the record
date. Shares that are voted "FOR", "AGAINST" or "ABSTAIN" on a matter are
treated as being present at the meeting for purposes of establishing quorum and
are also treated as shares "represented and voting" at the Annual Meeting (the
"Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a broker non-vote
will not affect the outcome of the voting on a proposal.
An automated system administered by the Company's transfer agent will be
used to tabulate proxies. Tabulated proxies will be transmitted to an employee
of the Company who will serve as inspector of elections.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting of Shareholders must
be received by the
2
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Company no later than April 24, 1998 in order to be eligible for inclusion in
the proxy statement and form of proxy relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of four (4) directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the four nominees named below, all of whom are presently 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 Annual Meeting of Shareholders, the proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner in accordance with cumulative voting as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. The four nominees for director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under California law. 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 Shareholders or
until a successor has been elected and qualified.
The names of the nominees, and certain information about them as of the
record date, are set forth below.
<TABLE>
<CAPTION>
NAME OF NOMINEE Age PRINCIPAL OCCUPATION
------------------------------- ----------- -----------------------------------------
<S> <C> <C>
George Boyadjieff (1)(2) 59 President, Chief Executive Officer,
Varco International
Michael J. Doyle 44 President, Chief Executive Officer,
Unit Instruments
James C. Levinson (1) 69 Private Investor
Edward Rogas, Jr. (1)(2) 57 Vice President, Teradyne
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
</TABLE>
3
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Mr. Boyadjieff has been a director of the Company since 1995. He is
President and Chief Executive Officer of Varco International, Inc. ("Varco"), a
leading manufacturer of products used in the international oil and gas well
industry. Mr. Boyadjieff has been associated with Varco for over 25 years and
has served in a variety of technical and executive positions. He is also a
director of Varco.
Mr. Doyle has been President and Chief Executive Officer of the Company
since September, 1995. Formerly, he was President of Unit from 1984 to 1995
while it was a wholly-owned subsidiary of Autoclave Engineers, Inc. Mr. Doyle
also served as a director of Autoclave Engineers, Inc. from 1984 until its
merger into Unit in September, 1995. Mr. Doyle co-founded Unit Instruments in
1980.
Mr. Levinson is the current Chairman of the Board. He has served as a
director of the Company since 1995, and as a director of the Company's former
parent, Autoclave Engineers, Inc., from 1961 until its merger into the Company
in September, 1995. From 1966 to 1992, Mr. Levinson was Chairman of the Board,
President and Chief Executive Officer of Autoclave Engineers, Inc. From 1992 to
September, 1995, he was Chairman of the Board of Autoclave Engineers, Inc.
Mr. Rogas has been a director of the Company since 1995. He is Vice
President of Teradyne, Inc. ("Teradyne"), a leading manufacturer of
semiconductor, circuit-board and telecommunications test systems. Mr. Rogas has
been associated with Teradyne since 1976 in various management and executive
positions.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
fiscal 1997. No director attended fewer than 75% of such meetings or of
committee meetings held while such director was a member of the Board or of a
committee.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee recommends engagement of the Company's independent
accountants, approves services performed by such accountants and reviews and
evaluates the Company's accounting system and its system of internal accounting
controls. This Committee, consisting of A. Wade Blackman, George Boyadjieff and
Edward Rogas, held two meetings during fiscal 1997.
The Compensation Committee reviews and administers the compensation of the
officers of the Company and administers the Company's stock option plans. This
Committee, consisting of A. Wade Blackman, George Boyadjieff, James C. Levinson
and Edward Rogas, held one meeting during fiscal 1997.
4
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COMPENSATION OF DIRECTORS
Directors of the Company, other than those who are employees of the
Company, receive $2,000 for each attended meeting of the Board. Directors also
receive $2,000 for each committee meeting attended, unless such meeting is held
on the same day as a meeting of the Board of Directors, in which case no
additional compensation is paid. Directors are also reimbursed for out-of-
pocket expenses incurred in connection with attendance at meetings and other
services as a director.
Beginning September 1, 1993, each director, who is neither an employee nor
an officer of the Company or its subsidiaries, is automatically granted as
additional compensation an option to purchase a number of shares of the
Company's Common Stock obtained by dividing (a) the product of $1,500 multiplied
by the number of full fiscal quarters during which such person served as a
director during the preceding 12 months, by (b) 25% of the fair market value of
the Common Stock on the date the option is granted. In addition, each outside
director is automatically granted on September 1st of each year an option to
purchase one thousand (1,000) shares of the Company's Common Stock, provided
that such director shall have served as a director since at least December 31st
of the preceding year. The exercise price of these options is the fair market
price of the Company's Common Stock on the date the option is granted.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, and subject to the
ratification by the shareholders, the Board of Directors has appointed Price
Waterhouse LLP, independent public accountants, to serve for the fiscal year
ending May 31, 1998.
The Board of Directors recommends that the shareholders vote for
ratification of the appointment of Price Waterhouse LLP as the Company's
independent accountants to audit the financial statements for the Company for
the year ending May 31, 1998.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting of Shareholders with the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
questions.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
ratify Price Waterhouse LLP as the Company's independent accountants.
5
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
PROPOSAL NO. 3
APPROVAL OF 1997 STOCK INCENTIVE PLAN
INTRODUCTION
The Board of Directors adopted the 1997 Stock Incentive Plan (the "1997
Plan") on August 11, 1997, subject to approval by the Company's shareholders.
The principal features of the 1997 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1997 Plan itself,
copies of which are available at no charge from the Secretary of the Company.
TERMINATION OF 1987 STOCK OPTION PLAN
The Board of Directors has determined that, as of and contingent upon the
approval of the 1997 Plan by the Company's shareholders, the Company's 1987
Stock Option Plan (the "1987 Plan") shall be terminated. As of June 18, 1997,
there were 451,890 shares available for grant under the 1987 Plan, which will no
longer be available under the 1987 Plan. Following such termination, all stock
options or stock purchase rights granted by the Company will be granted under
the 1997 Plan and any shares, which thereafter become available for issuance
under the 1987 Plan due to the forfeiture or lapse of options granted
thereunder, shall be added to the shares available for grant under the 1997
Plan.
1997 PLAN TERMS
The 1997 Plan provides for the grant by the Company of options and/or
rights to purchase up to an aggregate of 480,000 shares of Common Stock of the
Company, plus such number of additional shares as are or become available for
grant under the Company's 1987 Stock Option Plan to its directors, officers,
employees and consultants. Options granted under the 1997 Plan may be either
"incentive stock options," within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or "non-qualified stock options," as
determined by the Administrator; provided, however, that the Company may not
issue incentive stock options covering in excess of an aggregate of 480,000
shares during the term of the 1997 Plan. The purpose of the Stock Incentive
Plan is to provide participants with incentives which will encourage them to
acquire a proprietary interest in, and continue to provide services to, the
Company.
6
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The 1997 Plan is administered by the Compensation Committee, which has sole
discretion and authority, consistent with the provisions of the 1997 Plan, to
determine which eligible participants will receive options, the time when
options will be granted, the term of options granted and the number of shares
which will be subject to options granted under the 1997 Plan. As of August 11,
1997, there were no options outstanding under the 1997 Plan.
The exercise price of incentive stock options must at least be equal to the
fair market value of a share of Common Stock on the date the option is granted
(110% with respect to optionees who own at least 10% of the outstanding Common
Stock). Non-qualified stock options shall have an exercise price of not less
than 85% of the fair market value of a share of Common Stock on the date such
option is granted (110% with respect to optionees who own at least 10% of the
outstanding Common Stock). Payment of the exercise price may be made in cash, by
delivery of shares of the Company's Common Stock or, potentially, through the
delivery of a promissory note. The Compensation Committee has the authority to
determine the time or times at which options granted under the Plan become
exercisable, provided that options must expire no later than ten years from the
date of grant (five years with respect to optionees who own at least 10% of the
outstanding Common Stock). Options are non-transferable, other than upon death
by will and the laws of descent and distribution, and generally may be exercised
only by an employee while employed by the Company, or within three months after
termination of employment (one year for termination resulting from death or
disability).
In the event of (i) the acquisition, directly or indirectly, by any person
or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) of the beneficial ownership of more than fifty percent
(50%) of the outstanding securities of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the
Company is incorporated, (iii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, (iv) a complete liquidation or
dissolution of the Company, or (v) any merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from the persons holding those
securities immediately prior to such merger (each of such events shall
constitute a "Change in Control"), the 1997 Plan provides that the
Administrator, in its discretion may, at any time an Option or Right to Purchase
is granted, or at any time thereafter, take one or more of the following
actions: (A) provide for the purchase of each Option or Right to Purchase for
an amount of cash or other property that could have been received upon the
exercise of the Option or Right to Purchase had the Option been currently
exercisable, (B) adjust the terms of the Options and Rights to Purchase in a
manner determined by the Administrator to reflect the Change in Control, (C)
cause the Options and Rights to Purchase to be continued or assumed, or new
rights substituted therefor, by the surviving or another entity, through the
continuance of the Plan and the continuation or assumption of outstanding
Options and Rights to Purchase, or the substitution for such Options and Rights
to Purchase of new Options and new Rights to Purchase of comparable
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<PAGE>
value covering shares of a successor corporation, with appropriate adjustments
as to the number and kind of shares and Exercise Prices, in which event the 1997
Plan and such Options and Rights to Purchase, or the new options and rights to
purchase substituted therefor, shall continue in the manner and under the terms
so provided or (D) make such other provision as the Administrator may consider
equitable. If the Administrator does not take any of the foregoing actions, all
Options and Rights to Purchase shall terminate upon the consummation of the
Change in Control and the Administrator shall cause written notice of the
proposed transaction to be given to all Participants not less than fifteen (15)
days prior to the anticipated effective date of the proposed transaction,
provided however that if no provision is made for continuance of the 1997 Plan
and the continuance, assumption or substitution of outstanding Options or Rights
to Purchase, then concurrent with the effective date of the Change of Control
all Options, Rights of Purchase and Restricted Stock shall be accelerated and
concurrent with such date the holders of such Options and Rights to Purchase
shall have the right to exercise such Options and Rights of Purchase in respect
to any or all shares subject thereto. The Administrator shall have the right,
with respect to any specific Option, Right of Purchase or Restricted Stock
granted under the 1997 Plan, to provide that such Options, Rights of Purchase or
Restricted Stock shall be accelerated in any event upon the effective date of
the Change of Control. The Company anticipates providing for the acceleration of
vesting of options granted to certain officers and directors in the event of a
Change of Control.
FEDERAL TAX CONSEQUENCES
The following is a brief summary of the tax effects under the Code that may
accrue to participants in the 1997 Plan.
Incentive Stock Options. No taxable income will be recognized by an
optionee under the 1997 Plan upon either the grant or the exercise of an
incentive stock option; provided the optionee holds the stock for at least two
years after the grant of the options and one year after the exercise of the
option. If an incentive stock option is exercised more than three months after
a termination due to retirement, it will be treated as a sale or other
disposition of the shares acquired upon exercise of an incentive stock option,
and the tax treatment of the gain or loss realized will depend upon how long the
shares were held before their sale or disposition. The Company receives no tax
benefit from incentive stock options granted unless the optionee fails to meet
the holding requirements set forth above.
Non-qualified Stock Options. No taxable income is recognized by an
optionee upon the grant of a non-qualified stock option. Upon exercise,
however, the optionee will recognize ordinary income in the amount by which the
fair market value of the shares purchased, on the date of exercise, exceeds the
exercise price paid for such shares. The income recognized by the optionee will
be subject to income tax withholding by the company out of the optionee's
current compensation. If such compensation is insufficient to pay the taxes
due, the optionee will be required to make a direct payment to the Company for
the balance of the tax withholding obligation. The Company will be entitled to
a tax deduction
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<PAGE>
equal to the amount of ordinary income recognized by the optionee, provided the
applicable withholding requirements are satisfied.
Restricted Stock. The receipt of restricted stock will not result in a
taxable event until the applicable period(s) of restriction lapse, unless the
participant makes an election under Section 83(b) of the Code to be taxed as of
the date of grant. If a Section 83(b) election is made, the participant will
recognize ordinary income in an amount equal to the excess of the fair market
value of such shares on the date of grant over the amount paid for such shares.
If no amount is paid for such shares, the participant will recognize ordinary
income in an amount equal to the fair market value of such shares on the date of
the grant. Even if the amount paid and the fair market value of the shares are
the same (in which case there would be no ordinary income, a Section 83(b)
election must be made to avoid deferral of the date ordinary income is
recognized. If no Section 83(b) election is made, a taxable event will occur on
each date the participant's ownership rights vest (i.e., when the period(s) of
restriction lapse) as to the number of shares that vest on that date, and the
holding period for long-term capital gain purposes will not commence until the
date the shares vest. The participant will recognize ordinary income on each
date shares vest in any amount equal to the excess of the fair market value of
such shares on that date over the amount paid for such shares.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast will be required to
approve the 1997 Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN.
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SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the fiscal years
1995 - 1997 to the Company's Chief Executive Officer and the four other most
highly paid executive officers.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ----------------------- -----------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS OTHER COMPENSATION
POSITION YEAR ($) ($)(1) ($) ($) (#) ($) ($)(2)
- ------------------------- ---- ------- ------ ------------ ---------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MICHAEL J. DOYLE 1997 199,992 -- 9,000 -- 7,000 -- 21,138
PRESIDENT AND CHIEF 1996 180,417 96,000 9,000 -- 150,000 133,785 5,280
EXECUTIVE OFFICER 1995 160,937 105,273 9,000 -- -- -- 11,250
GARY N. PATTEN 1997 149,989 -- 8,400 -- 55,600 -- 5,125
VICE PRESIDENT, CHIEF 1996 138,451 54,000 7,700 -- 42,220 -- 1,940
FINANCIAL OFFICER AND 1995 -- -- -- -- -- -- --
SECRETARY
JOHN W. LEGGAT 1997 149,989 -- 8,400 -- -- -- 4,500
VICE PRESIDENT, SALES 1996 138,451 54,000 7,700 -- 35,110 -- 1,940
AND MARKETING 1995 -- -- -- -- -- -- --
NELSON URDANETA 1997 150,000 -- 8,400 -- 5,600 -- 4,633
VICE PRESIDENT, 1996 134,998 48,600 8,400 -- 63,330 47,250 4,110
ENGINEERING 1995 134,662 60,410 8,400 -- -- -- 4,040
MICHAEL SALOKA 1997 130,000 -- 8,400 -- 4,200 -- 3,900
VICE PRESIDENT, 1996 130,000 46,800 8,400 -- 42,220 45,500 4,260
INTERNATIONAL 1995 120,256 58,170 8,400 -- -- -- 3,610
</TABLE>
(1) Represents bonuses earned by the Named Executive in the year indicated;
which were paid in the subsequent year.
(2) Represents Company contributions under the 401(K) Plan and $18,400 benefit
from exercise of stock options by Mr. Doyle in 1997.
10
<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information for the Named Executive
Officers with respect to grants by the Company during fiscal 1997 of stock
options pursuant to the Company's 1987 Stock Plan to purchase Common Stock of
the Company.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1997 (1)
---------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM (3)
GRANTED IN FISCAL BASE PRICE EXPIRATION ----------------
NAME (#) YEAR (2) ($/SH) DATE 5%($) 10%($)
- ---- --------------- ---------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Doyle 7,000 3.0% $9.63 10/15/2006 $ 42,000 $107,000
Gary N. Patten 5,600 2.4% $9.63 10/15/2006 $ 34,000 $ 86,000
50,000 21.2% $9.50 12/23/2006 $303,000 $768,000
John W. Leggat -- -- -- -- -- --
Nelson Urdaneta 5,600 2.4% $9.63 10/15/2006 $ 34,000 $ 86,000
Michael Saloka 4,200 1.8% $9.63 10/15/2006 $ 25,000 $ 64,000
</TABLE>
(1) These stock options were granted pursuant to the 1987 Stock Plan. All stock
options have ten year terms and vest at the rate of 20% of the total shares
on each of the first five anniversaries of the date of grant.
(2) An aggregate of 235,834 stock options to purchase shares of Common Stock,
pursuant to the 1987 Stock Plan, were granted to employees during fiscal
1997.
(3) Potential realizable value is based on an assumption that the stock price
of Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten year option term. One share
of stock purchased at $9.63 in 1997 would yield profits of $6.06 per share
at 5% appreciation over ten years, or $15.35 per share at 10% appreciation
over the same period. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price.
DEFERRED COMPENSATION AGREEMENTS
The Company has deferred compensation agreements with one current and one
former employee, Messrs. Doyle and Levinson, respectively. Under the agreements,
the Company will make fixed monthly post-retirement payments to each employee
until their death, in amounts based upon the employees' annual salaries at the
time of retirement. Pursuant to such agreements, the employees have agreed to
refrain from competing with the Company, to maintain the confidentiality of the
Company's trade secrets and to renounce all personal interest in patents, know-
how and other intellectual property developed by them during their employment by
the Company. Mr. Levinson began receiving payments under the deferred
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compensation program in October, 1995, upon his retirement from active service
with the Company.
LONG TERM INCENTIVE PLAN
The Company's predecessor, Autoclave Engineers, Inc., maintained a Long
Term Incentive Plan ("LTI") for each of its operating subsidiaries, of which
Unit Instruments was a subsidiary at that time. Upon the reorganization, the LTI
Plan for the divested operating subsidiaries was terminated and payments were
made to four (4) LTI participants in the Plan. Mr. Doyle was one of the
participants in the LTI Plan and his earned incentive, through the date of
termination, was $133,785, as is reflected in the "Summary Compensation Table."
INVOLUNTARY SEVERANCE AGREEMENTS
The Company has entered into agreements with seven officers of the Company,
inclusively, Messrs. Doyle, Patten, Leggat, Urdaneta, Saloka, Lamirande and Ms.
Tricoli, providing severance benefits in the event they are terminated within
three (3) years following a change in control of the Company. Pursuant to such
agreements, a change in control occurs (i) when any person becomes the
beneficial owner of securities of the Company representing more than 20% of the
combined voting power of the Company's then outstanding securities; (ii) if,
during any period of two consecutive years, individuals who constitute the Board
of Directors cease to constitute a majority of the Board of Directors; (iii) if
all, or substantially all, of the Company's assets are sold or transferred to a
third party; (iv) if the Company consolidates or merges with another company and
the Company is not the survivor; or (v) if the Company no longer has a class of
securities registered pursuant to Section 12 of the Exchange Act. The agreements
provide that if the officer is terminated following a change in control of the
Company, the Company shall pay such officer a sum equal to three times his or
her annual salary and bonus paid during the twelve-month period immediately
preceding the termination, vest the officer in any unvested benefits under any
retirement or deferred compensation plan in which the officer participates, and
pay for a three year continuation of such officer's health, life, disability and
accident insurance. However, the agreements provide that to the extent such
benefits would constitute an "excess parachute payment" under Section 280G of
the Internal Revenue Code of 1986, the severance payments payable thereunder
shall be reduced.
OPTION EXERCISE AND FISCAL YEAR-END VALUE TABLE
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the 1987 Stock Option Plan,
including (i) the number of shares purchased upon exercise of options in fiscal
1997, (ii) the net value realized upon such exercise, (iii) the number of
unexercised options outstanding at May 31, 1997 and (iv) the value of such
unexercised options at May 31, 1997:
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AGGREGATED OPTIONS/EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES VALUE YEAR END (#) AT FISCAL YEAR END (1) ($)
ACQUIRED ON REALIZED ------------------------------- ------------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Doyle 10,000 18,600 53,712 127,000 $64,838 --
Gary N. Patten -- -- 8,444 89,376 -- --
John W. Leggat -- -- 7,022 28,088 -- --
Nelson Urdaneta -- -- 31,665 37,265 -- --
Michael Saloka -- -- 10,149 37,976 $ 2,345 --
</TABLE>
(1) Market value of underlying securities at yearend minus the exercise price
multiplied by the number of shares.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors establishes the
compensation plans and polices and the specific compensation levels for
executive officers and administers the 1987 Stock Plan.
COMPENSATION POLICIES
There are three major elements of the Company's executive compensation
program: base salaries, incentive bonuses and long-term stock options.
The Compensation Committee establishes the salaries of executive
officers primarily by reference to data contained in the American
Electronics Association (AEA) survey of executive compensation in the
electronics industry. The Committee also cross-references this survey data
with salary surveys for the Southern California companies. In addition, the
Committee considers factors such as relative Company performance, the
individual's past performance, his or her future potential and the
individual's experience and ability as judged by the Committee. For fiscal
1997, the Compensation Committee, upon a recommendation by management,
froze all salaries for Director and Vice President level positions. This
action was taken because of the downturn in the semiconductor equipment
market and the resulting impact on the Company's performance for the fiscal
year.
Annual bonuses for executive officers are primarily based on the
achievement of performance targets set forth in the Company's operating
plan for the year. The
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annual cash bonus for executives, other than the Chief Executive Officer,
Michael J. Doyle, is based on operating profits in relation to the
Company's operating plan and a factor based on Mr. Doyle's subjective
judgment of the executive's performance. No bonuses were earned for fiscal
1997 because of the downturn in the semiconductor equipment market and the
corresponding effect on the Company's financial performance.
The Compensation Committee believes that stock options are an
effective long-term compensation device in that they serve to align the
interests of the executive officers with those of the shareholders and
motivate officers to remain in the Company's employ.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Doyle's base salary of $200,000 has not been increased since
September, 1995 upon the reorganization. This increase was based upon
survey data and range recommendations from an outside executive
compensation consulting firm for chief executive officers of high
technology public companies. Mr. Doyle was previously President of the
Company when it was a subsidiary of the predecessor company. Mr. Doyle did
not receive an increase in base pay for fiscal 1997 because of the downturn
in the semiconductor equipment market and the resulting impact on the
Company's performance for fiscal 1997.
Mr. Doyle is entitled to an annual cash bonus which, for fiscal 1997,
was not applicable based on the Company's operating loss. Mr. Doyle's
target bonus rate was 40% of his annual base salary, with such amount
adjusted up or down depending on actual adjusted operating profits. For
fiscal 1997, The Company did not achieve an operating profit. Accordingly,
Mr. Doyle did not receive a bonus.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
As a result of legislation adopted in 1993, the Internal Revenue Code
now limits the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of the other four most highly
compensated executive officers. For this purpose, compensation can include,
in addition to cash compensation, the difference between the exercise price
of stock options and the value of the underlying stock on the date of
exercise. Under this legislation, the Company may deduct compensation with
respect to any of these individuals only to the extent that during any
fiscal year such compensation does not exceed $1 million or meeting certain
other conditions (such as shareholder approval). Based on the Company's
current compensation plans and policies, and proposed regulations
interpreting the new legislation, the Company and the Committee believe
that, for the near future,
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<PAGE>
there is little risk that the Company will lose any significant tax
deduction for executive compensation.
A. Wade Blackman George Boyadjieff
of the Compensation Committee of the Compensation Committee
James C. Levinson Edward Rogas, Jr.
of the Compensation Committee of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of A. Wade Blackman, George
Boyadjieff, James C. Levinson and Edward Rogas, Jr. who are non-employee
directors with no interlocking relationships as defined by the Securities and
Exchange Commission.
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<PAGE>
PERFORMANCE GRAPH
The following graph shows the value as of May 31, 1997 of a $100 investment
made on May 31, 1992 in the Company's Common Stock, as compared with similar
investments based upon (i) the NASDAQ U.S. Stock Index (Broad Market), a
composite index of the NASDAQ Stock Market prepared by Media General Financial
Services; and (ii) an industry index prepared by Media General Financial
Services consisting of companies classified under SIC Code 3559. The stock
performance shown below is not necessarily indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG UNIT INSTRUMENTS, INC.(CA) COMPANY, INDUSTRY
INDEX AND BROAD MARKET
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period UNIT INSTRUMENTS, INDUSTRY BROAD
(Fiscal Year Covered) INC.(CA) 500 INDEX MARKET
- ------------------- ---------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1992 $100 $100 $100
FYE 1993 $ 96.64 $170.06 $119.67
FYE 1994 $114.64 $232.42 $131.23
FYE 1995 $172.83 $400.23 $143.63
FYE 1996 $197.82 $405.07 $202.74
FYE 1997 $130.15 $575.33 $227.47
</TABLE>
16
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information as of June 30, 1997,
except as otherwise noted, regarding the equity securities of Unit beneficially
owned by (i) the directors, (ii) the executive officers named in the "Summary
Compensation Table", (iii) the directors and executive officers of Unit as a
group, and (iv) the only beneficial owners known to Unit to hold more than 5% of
the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED (1)(2) COMPANY'S COMMON STOCK
---- ------------------------- ----------------------
<S> <C> <C>
Directors and Named Executive Officers:
A. Wade Blackman 67,050 (3) 1.5%
George Boyadjieff 3,000 (4) *
Michael J. Doyle 181,789 (5) 4.0%
John W. Leggat 16,544 (6) *
James C. Levinson 110,573 (7) 2.5%
Gary N. Patten 35,888 (8) *
Edward Rogas, Jr. 3,000 (9) *
Michael G. Saloka 18,642 (10) *
Nelson Urdaneta 44,331 (11) 1.0%
All Directors and Officers as a group (12 persons) 585,333 (12) 12.5%
Others:
J & L Levinson Partnership 370,697 (13) 8.5%
700 Louisiana Street
Houston, TX 77002
U.S. Bancorp 296,050 (2) 6.7%
1118 West Fifth Avenue
Portland, OR 97202
Dimensional Fund Advisors, Inc. 295,000 (2) 6.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable or exercisable within 60 days
of June 30, 1997 are deemed to be beneficially owned by the person holding
such option or warrant for computing the percentage ownership of such
person, but are not treated as outstanding for computing the percentage of
any other person. Applicable percentages of beneficial ownership are based
on 4,424,038 shares of common stock outstanding on June 30, 1997.
(2) Information is as of December 31, 1996, and is based on Schedule 13G's
filed with the Securities and Exchange Commission by the respective
entities.
(3) Includes 67,050 shares which Mr. Blackman has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(4) Includes 3,000 shares which Mr. Boyadjieff has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
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<PAGE>
(5) Includes 83,712 shares which Mr. Doyle has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(6) Includes 14,044 shares which Mr. Leggat has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(7) Includes 12,842 shares which Mr. Levinson has the right to acquire, by
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997, and 72,899 shares
which Mr. Levinson may be deemed to beneficially own through his
partnership interest in the J & L Levinson Partnership. Does not include
297,798 shares owned by Mr. Levinson's wife, Marilyn G. Levinson, through
her partnership interest in the J & L Levinson Partnership, as to which Mr.
Levinson disclaims beneficial ownership.
(8) Includes 16,888 shares which Mr. Patten has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(9) Includes 3,000 shares which Mr. Rogas has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(10) Includes 18,593 shares which Mr. Saloka has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(11) Includes 44,331 shares which Mr. Urdaneta has the right to acquire by the
exercise of stock options that are currently exercisable or will become
exercisable within sixty (60) days of June 30, 1997.
(12) Includes 293,670 shares which executive officers and directors have the
right to acquire by exercise of stock options that are currently
exercisable or will become exercisable within sixty (60) days of June 30,
1997.
(13) J & L Levinson Partnership is a General Partnership of which James C.
Levinson and Marilyn G. Levinson are the sole General Partners.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the Securities and Exchange Commission (the
"SEC") and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent shareholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during the fiscal year ended May 31, 1997, Michael G. Saloka inadvertently
filed one Form 4 late. Other than this delayed filing, again based solely on its
review of copies of such forms received by it or written representations from
certain reporting persons, the Company believes that all other filing
requirements applicable to its officers, directors and ten percent shareholders
were fulfilled.
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<PAGE>
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 to vote the shares they represent as the
Board of Directors may recommend.
It is important that your stock be represented at the meeting, regardless
of the number of shares that you hold. You are, therefore, urged to execute and
return the accompanying proxy in the envelope that has been enclosed, at your
earliest convenience.
By Order of
the Board of Directors
/s/ Gary N. Patten
September 5, 1997 Gary N. Patten
Secretary
19
<PAGE>
UNIT INSTRUMENTS, INC.
22600 SAVI RANCH PARKWAY
YORBA LINDA, CA 92887
THIS PROXY IS SOLICITED ON BEHALF OF THE UNIT INSTRUMENTS, INC. BOARD OF
DIRECTORS
The undersigned appoints Michael J. Doyle and Gary N. Patten, and each of
them, as proxies of the undersigned, each with the power to appoint his
substitute, and hereby authorizes each of them, separately, to represent and to
vote, as designated below, all the shares of Common Stock of Unit Instruments,
Inc. held of record by the undersigned on August 29, 1997 or with respect to
which the undersigned is otherwise entitled to vote or act, at the Annual
Meeting of Shareholders to be held on October 24, 1997 or any adjournment
thereof, upon matters set forth in the Notice of Annual Meeting dated September
5, 1997, a copy of which has been received by the undersigned.
1. ELECTION OF DIRECTORS: For the election of George Boyadjieff, Michael J.
Doyle, James C. Levinson and Edward Rogas, Jr.
[_] FOR ALL [_] WITHHOLD AUTHORITY FOR ALL
[_] WITHHOLD AUTHORITY AS MARKED BELOW
- --------------------------------------------------------------------------------
2. To consider and act upon a proposal to ratify the selection of the firm of
Price Waterhouse LLP as auditors of the Corporation for the fiscal year
ending May 31, 1998.
[_] FOR[_] AGAINST[_] ABSTAIN
3. To consider and act upon the adoption of the 1997 Stock Incentive Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof,
upon matters incident to the conduct of the meeting and upon the election of
substituted nominees for Director designated by the Board of Directors if
one or more of the persons named in Proposal 1 above is unable to serve as a
Director.
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 THE ELECTION OF DIRECTORS AND FOR THE PROPOSALS IN ITEM 2 AND ITEM 3,
AND AUTHORITY WILL BE DEEMED GRANTED UNDER PROPOSAL 4.
(To be signed and dated on other side)
(Continued from other side)
Dated: _____________, 1997
__________________________
Signature
__________________________
Signature if held jointly
Please sign exactly as
the name appears hereon.
When shares are held by
joint tenants, both
should sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give
full title as such. If a
corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
