SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ELECTRO-SENSORS, INC.
- --------------------------------------------------------------------------------
(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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Items 22(a)(2) of Schedule A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
[LOGO]
ELECTRO-SENSORS, INC. 612/930-0100
6111 BLUE CIRCLE DRIVE
MINNETONKA, MINNESOTA 55343
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 1996
To the Shareholders of Electro-Sensors, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
Electro-Sensors, Inc. will be held at the Decathlon Club, 1700 East 79th Street,
Bloomington, Minnesota, on Thursday, April 25, 1996, at 2:00 p.m., local time,
for the following purposes:
1. To set the number of directors at five;
2. To elect five directors to serve until the next annual meeting
of shareholders;
3. To approve the Company's 1996 Employee Stock Purchase Plan;
4. To approve auditors for the Company for the fiscal year ending
December 31, 1996; and
5. To take action upon any other business as may properly come
before the meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form of Proxy
and the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1995.
The Board of Directors has fixed the close of business on March 12, 1996, as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James P. Slattery
James P. Slattery
President
Dated: March 22, 1996
Minnetonka, Minnesota
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
VOTED AT THE MEETING. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR
PROXIES AND VOTE IN PERSON IF THEY DESIRE.
ELECTRO-SENSORS, INC. 612/930-0100
6111 BLUE CIRCLE DRIVE
MINNETONKA, MINNESOTA 55343
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 1996
GENERAL
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Electro-Sensors, Inc. (the "Company") to be voted
at the Annual Meeting of Shareholders to be held on Thursday, April 25, 1996, at
2:00 p.m., local time, and at all adjournments thereof. The mailing address of
the principal executive office of the Company is 6111 Blue Circle Drive,
Minnetonka, Minnesota 55343. This Proxy Statement, the related Proxy and Notice
of Annual Meeting are first being mailed to shareholders on or about March 22,
1996.
Any shareholder giving a proxy may revoke it at any time prior to its use at the
meeting by giving written notice of such revocation to the Secretary or other
officer of the Company or by filing a new written proxy with an officer of the
Company. Personal attendance at the meeting is not, by itself, sufficient to
revoke a proxy unless written notice of the revocation or a subsequent proxy is
delivered to an officer before the revoked or superseded proxy is used at the
meeting.
Proxies not revoked will be voted in accordance with the choice specified by
shareholders by means of the ballot provided on the proxy for that purpose.
Proxies which are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the number and slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote shall be deemed
present at the meeting for purposes of determining a quorum but shall not be
deemed to be represented at the meeting for purposes of calculating the vote
required for approval of such matter.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 12, 1996, as the record
date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders of record on such date will not be allowed to
vote at the Annual Meeting. At the close of business on March 12, 1996,
1,940,270 shares of the Company's Common Stock, par value $.10, were issued and
outstanding. The Common Stock is the only outstanding class of capital stock of
the Company entitled to vote at the Annual Meeting and such 1,940,270 shares are
the only shares which may be voted. Each share of Common Stock is entitled to
one vote. Holders of Common Stock are not entitled to cumulative voting rights.
SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table contains information as of March 12, 1996, concerning the
beneficial ownership of Common Stock of the Company by each person known to the
Company to be the beneficial owner of five percent (5%) or more of the Company's
Common Stock, by each executive officer of the Company named in the Summary
Compensation Table, by each director and nominee for director of the Company,
and by all directors and executive officers of the Company as a group:
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------ ------------------ --------
James P. Slattery 269,237(2)(3) 13.6%
6111 Blue Circle Drive
Minnetonka, MN 55343
Peter R. Peterson 867,335(3)(4) 43.8%
6111 Blue Circle Drive
Minnetonka, MN 55343
Electro-Sensors, Inc. 115,681 6.0%
Employee Stock Ownership Trust
6111 Blue Circle Drive
Minnetonka, MN 55343
Mark D. Laumann 37,664(3)(5) 1.9%
6111 Blue Circle Drive
Minnetonka, MN 55343
John S. Strom 21,500(3)(6) 1.1%
5036 France Avenue South
Edina, MN 55410
Joseph A. Marino 5,000(3)(7) *
501 E. Highway 13, #108
Burnsville, MN 55337
Officers and Directors 1,316,867(8) 64.4%
as a Group (5 persons)
* Indicates ownership of less than one percent.
(1) Unless otherwise indicated, each person named or included in the group
has the sole power to vote and sole power to direct the disposition of
all shares listed as beneficially owned by him.
(2) Includes 100,000 shares held by Mr. Slattery's wife, 40,500 shares
purchasable upon exercise of options presently exercisable or
exercisable within 60 days of March 12, 1996, and 16,802 shares held by
the Company's Employee Stock Ownership Plan and Trust ("ESOP") for the
account of Mr. Slattery.
(3) Does not include 4,500 shares subject to an option which will be
granted to and become purchasable by such individual on April 25, 1996
pursuant to an automatic option grant under the Company's 1987 Stock
Option Plan.
(4) Includes 3,000 shares held by Mr. Peterson's wife, 4,274 shares held by
the ESOP for the account of Mr. Peterson, and 40,500 shares purchasable
upon exercise of options presently exercisable or exercisable within 60
days of March 12, 1996.
(5) Includes 600 shares held in an Individual Retirement Account by Mr.
Laumann's wife, 7,764 shares held by the ESOP for the account of Mr.
Laumann, and 4,500 shares purchasable upon exercise of options
presently exercisable or exercisable within 60 days of March 12, 1996.
(6) Includes 13,500 shares purchasable upon exercise of options presently
exercisable or exercisable within 60 days of March 12, 1996.
(7) Includes 4,500 shares purchasable upon exercise of options presently
exercisable or exercisable within 60 days of March 12, 1996.
(8) Includes 103,500 shares that may be purchased by officers and directors
upon exercise of options presently exercisable or exercisable within 60
days of March 12, 1996, and 28,840 shares allocated to officers'
accounts under the ESOP.
ELECTION OF DIRECTORS
(PROPOSALS #1 AND #2)
General Information
The Bylaws of the Company provide that the number of directors, which shall not
be less than one, shall be determined by the shareholders at each annual
meeting. The Board of Directors recommends that the number of directors be set
at five and that five directors be elected at the Annual Meeting of Shareholders
to serve until the next Annual Meeting of Shareholders or until their successors
are duly elected and qualified. Under applicable Minnesota law, approval of the
proposal to set the number of directors at five, as well as the election of each
nominee, requires the affirmative vote of the holders of the greater of (1) a
majority of the voting power of the shares represented in person or by proxy at
the annual meeting with authority to vote on such matter or (2) a majority of
the voting power of the minimum number of shares that would constitute a quorum
for the transaction of business at the annual meeting.
The persons named below have been nominated for election by management. All
nominees are currently directors of the Company. In the absence of other
instructions, each proxy will be voted for each of the following nominees. If,
prior to the Annual Meeting of Shareholders, it should become known that any of
the following individuals will be unable to serve as a director after the Annual
Meeting by reason of death, incapacity or other unexpected occurrence, the
proxies will be voted for such substitute nominee as is selected by the Board of
Directors. The Board of Directors has no reason to believe that any of the
following nominees will be unable to serve.
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION SINCE
- ------------ -------------------- --------
James P. Slattery (63) Chairman of the Board and 1968
President of the Company
Peter R. Peterson (62) President, P.R. Peterson Co. 1969
(a venture capital firm);
Secretary of the Company
John S. Strom (62) Realtor, Scenic Point Properties 1989
Mark D. Laumann (41) Treasurer of the Company 1994
Joseph A. Marino (44) President and Chief Executive Officer 1994
of Applied Biometrics, Inc.
(a medical equipment manufacturer)
BUSINESS EXPERIENCE
Mr. Peterson has been active in the venture capital business for over 20
years. Mr. Peterson has been Secretary and a Director of the Company since
1969. Mr. Peterson is also a director of PPT Vision, Inc.
Mr. Slattery has been the President and Director of Marketing of the Company
since 1968 and became Chairman of the Board of the Company in January 1989.
Prior to his retirement in June 1994, Mr. Strom was engaged in real estate
sales, serving with Burnet Realty from April 1988 to December 1992, and with
Scenic Point Properties from January 1993 to June 1994. Prior to April 1988, he
had been employed by Norwest Corporation, a bank holding company, and Norwest
Bank Bloomington, since 1960. Most recently, he served as a Unit Controller for
Norwest Corporation from 1986 to March 1988, supervising retail operations for
Twin Cities Norwest banks, and from 1980 to 1986 he served as Senior Vice
President of Administration and Chief Financial Officer for Norwest Bank
Bloomington.
Mr. Laumann has been employed by the Company in various accounting capacities
since 1975, serving as Controller from March 1981 to January 1994, when he was
elected Treasurer and a Director.
Mr. Marino has been President and Chief Executive Officer of Applied
Biometrics, Inc. since January 1994, and served as President and Chief
Executive Officer of Biomedical Dynamics, a medical equipment manufacturer,
from July 1984 to December 1993. Mr. Marino is also a director of Applied
Biometrics, Inc.
COMMITTEE AND BOARD MEETINGS
The Company's Board of Directors has an Audit Committee which reviews the scope
of the independent accountants' audit and considers comments by the auditors
regarding internal controls and accounting procedures and management's response
to those comments. During 1995 the Audit Committee, which consisted of John S.
Strom and Joseph A. Marino, met twice. The Board also has a Stock Option
Committee, whose members are Messrs. Marino and Strom, which was established in
January 1996 for the purpose of administering the Company's employee stock
plans. The Company does not have a nominating committee.
During 1995 the Board of Directors of the Company held four formal meetings.
Each incumbent director attended 75% or more of the total number of meetings of
the Board and of all Committees on which he served.
COMPENSATION OF DIRECTORS
Nonemployee directors receive $2,000 per year for their service on the Board. In
addition, under the Company's 1987 Stock Option Plan, each person who is elected
or reelected as a director at a shareholder meeting is automatically granted an
option to purchase 4,500 shares of the Company's Common Stock at a price equal
to the fair market value of the Company's Common Stock on the date of such
meeting. On April 26, 1995, the Company granted options to purchase 4,500 shares
to Messrs. Slattery, Peterson, Strom, Laumann and Marino, each of whom was
reelected as a director at the 1995 annual meeting of shareholders. The options
were issued at a price of $3.125 per share and expire on the earliest of (i)
seven months after the Optionee ceases to be a director (unless the termination
is because of death), (ii) one year after the death of the Optionee, or (iii)
ten years after the date of grant.
CERTAIN TRANSACTIONS
In February 1991 the Company loaned the sum of $65,000 to James P. Slattery in
order that Mr. Slattery could exercise a stock option under the Company's 1982
Stock Option Plan. Such loan is represented by a promissory note due in February
1998 and bearing interest, payable monthly, at a rate which is adjusted annually
(currently 8.5%).
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid during
each of the Company's last three fiscal years to the Company's Chairman,
President and Chief Executive Officer, the only executive officer whose salary
and bonus for fiscal 1995 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ------------------------ -------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(1)
- --------------------------- ---- ------- ------ ------------ --------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James P. Slattery, 1995 159,285 67,296 0 0 4,500 0 9,582
Chairman, President 1994 153,167 48,888 0 0 4,500 0 9,721
and CEO 1993 145,632 47,866 0 0 4,500 0 10,775
</TABLE>
(1) Amounts reflect allocations to individual's accounts of Company
contributions to the Employee Stock Ownership Plan and 401(k) Plan.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Slattery which provides for a
base salary (currently $165,500) subject to annual review, an annual bonus equal
to 5% of net pre-tax profits of the Company's Controls Division and Microflame
subsidiary and benefits as provided to all employees. In the event the Company
terminates Mr. Slattery's employment for any reason other than for cause, or in
the event of Mr. Slattery's voluntary termination or disability, the Company
will pay him an amount equal to one year's base salary. In the event of certain
changes in the corporate structure of the Company (including a merger, share
exchange, reorganization or liquidation) or in the event the Company's shares
cease to be publicly traded, the Company will pay Mr. Slattery two years' base
salary. Upon Mr. Slattery's death, the Company will pay his spouse an amount
equal to one year of Mr. Slattery's base salary.
OPTION/SAR GRANTS DURING 1995 FISCAL YEAR
The following table sets forth information regarding stock options granted to
the named executive officer during the fiscal year ended December 31, 1995. The
Company has not granted stock appreciation rights.
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE
- ---- ------------ ------------ ----------- ----------
James P. Slattery 4,500(1) 50% $3.125 04/26/2005
(1) Such option is exercisable in full as of April 26, 1995.
AGGREGATED OPTION/SAR EXERCISES DURING 1995 FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information related to options exercised by the
named executive officer during fiscal 1995 and the number and value of options
held at fiscal year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- --------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
James P. Slattery -0- -0- 40,500/0 $137,250/0
</TABLE>
(1) These amounts represent the difference between the exercise price of
the in-the-money options and the market price of the Company's Common
Stock on December 29, 1995. The closing price of the Company's Common
Stock on that day on the Nasdaq Stock Market was $7.00. Options are
in-the-money if the market value of the shares covered thereby is
greater than the option exercise price.
APPROVAL OF 1996 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL #3)
GENERAL
On September 18, 1995, the Board of Directors adopted, subject to shareholder
approval, the Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase
Plan") and reserved 100,000 shares of the Company's Common Stock for issuance
pursuant to the Plan. A general description of the basic features of the Stock
Purchase Plan is presented below, but such description is qualified in its
entirety by reference to the full text of the Stock Purchase Plan, a copy of
which may be obtained without charge upon written request to Mark D.
Laumann, the Company's Treasurer.
DESCRIPTION OF THE STOCK PURCHASE PLAN
PURPOSE. The purpose of the Stock Purchase Plan is to encourage stock ownership
by the Company's employees and in so doing to provide an incentive for the
Company's employees to remain in the Company's employ, to improve operations, to
increase profits and to contribute more significantly to the Company's success.
TERM. The term of the Stock Purchase Plan expires on December 31, 2000;
provided, that the Board of Directors may extend the term of the Plan for such
period as the Board deems advisable.
ADMINISTRATION. The Stock Purchase Plan is administered by the Stock Option
Committee of the Board of Directors (the "Committee"). The Plan gives broad
powers to the Committee to administer and interpret the Plan, including the
authority to limit the number of shares that may be optioned under the Stock
Purchase Plan during a phase.
ELIGIBILITY. All regular U.S. full-time or part-time employees (including
officers) of the Company or any subsidiary are eligible to participate in any of
the ten six-month phases of the Stock Purchase Plan. However, any employee who
would own (as determined under the Internal Revenue Code), immediately after the
grant of an option, stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company will not be granted an
option under the Stock Purchase Plan.
OPTIONS. Phases of the Stock Purchase Plan will commence in January and July of
each calendar year or such other months as the Committee may determine, with the
first phase beginning January 1, 1996. Before the commencement date of the
phase, each participating employee must have elected to have from 1% to 10% of
his or her compensation withheld over the pay periods in such phase. The
percentage designated may be increased or decreased during a phase or
discontinued entirely. Participants also have the right to withdraw all
accumulated payroll deductions before the end of a phase. Based on the amount of
salary deductions accumulated at the end of the phase, shares will be purchased
from the account of each participant at the termination date of such phase (six
months after the commencement date). In no event, however, may a participant
receive a grant of shares which would cause the employee to own 5% or more of
the Common Stock of the Company, nor may the total number of shares subject to a
participant's options during a phase exceed 1,000. The purchase price to be paid
by the employees will be the lower of the amount determined under Paragraphs A
and B below:
A. 85% of the closing price of the Company's Common Stock on the
commencement date of the phase; or
B. 85% of the closing price of the Company's Common Stock on the
termination date of the phase.
As required by tax law, in any calendar year no employee may receive options
under the Stock Purchase Plan for shares which have a fair market value in
excess of $25,000 determined at the time such option is granted. Any funds not
used to purchase shares will be carried over to the next phase unless the
employee requests a withdrawal of such funds. No interest is paid by the Company
on funds withheld and such funds are used by the Company for general operating
purposes. If an employee terminates employment for any reason or dies before the
end of a phase, all of the employee's accumulated payroll deductions will be
paid to the employee or to his or her estate, as the case may be.
AMENDMENT. The Board of Directors may, from time to time, revise or amend the
Stock Purchase Plan as the Board may deem proper and in the best interest of the
Company or as may be necessary to comply with Section 423 of the Internal
Revenue Code; provided, that no such revision or amendment may, without approval
of the Company's shareholders, (i) increase the total number of shares for which
options may be granted under the Stock Purchase Plan except as provided in the
case of stock splits, consolidations, stock dividends or similar events, (ii)
modify requirements as to eligibility for participation in the Plan or (iii)
materially increase the benefits accruing to participants under the Plan.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN. Options granted under the Stock
Purchase Plan are intended to qualify for favorable tax treatment to the
employees under Sections 421 and 423 of the Internal Revenue Code. Employee
contributions are made on an after-tax basis. The Company understands that under
existing federal income tax provisions, if shares are purchased pursuant to the
Stock Purchase Plan and are not disposed of by the participant within the
two-year period after the date the option was granted nor within the one-year
period after the date of transfer of the shares to the participant, and if the
participant was an employee of the Company at all times from the date of grant
of the option until the date of exercise of the option, then the participant
will not realize any taxable income until the participant sells the shares and
the Company will not be entitled to a deduction in connection with either the
grant or exercise of the option.
PLAN BENEFITS. To date, no shares have been issued under the Stock Purchase
Plan. Because participation in the Stock Purchase Plan is voluntary, the future
benefits that may be received by participating individuals or groups under the
Stock Purchase Plan cannot be determined at this time.
VOTE REQUIRED
The Board of Directors recommends that the shareholders approve the Employee
Stock Purchase Plan. Approval of such resolution requires the affirmative vote
of the greater of (i) a majority of the shares represented at the meeting with
authority to vote on such matter or (ii) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the transaction of
business at the meeting.
APPROVAL OF AUDITORS
(PROPOSAL #4)
The Company's Board of Directors retained Schweitzer Rubin Karon & Bremer as its
principal independent accountants for the fiscal year ended December 31, 1995
and has selected Schweitzer Rubin Karon & Bremer to serve as the Company's
auditors for the fiscal year ending December 31, 1996. The Board of Directors
desires that the selection of such auditors for the current fiscal year be
submitted to the shareholders for approval. If the selection is not approved,
the Board of Directors will reconsider its decision.
Representatives of Schweitzer Rubin Karon & Bremer are expected to be present at
the Annual Meeting. They will be given an opportunity to make a statement
regarding financial and accounting matters of the Company, if they so desire,
and will be available to respond to appropriate questions from the Company's
shareholders.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1995 accompanies this Notice of Annual Meeting and Proxy Statement.
No part of such Annual Report is incorporated herein and no part thereof is to
be considered proxy soliciting material.
SHAREHOLDER PROPOSALS
The Company did not receive from its shareholders any proposals for action at
the meeting. Any appropriate proposal submitted by a shareholder of the Company
and intended to be presented at the next annual meeting in calendar year 1997
must be received by the Company by November 22, 1996 to be includable in the
Company's proxy statement and related proxy for the 1997 annual meeting.
SOLICITATION
The cost of soliciting proxies, including the cost of preparing, assembling, and
mailing the proxies and soliciting material, as well as the cost of forwarding
the material to the beneficial owners of stock, will be borne by the Company.
Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit proxies personally
or by telephone.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If any
other matter properly comes before the meeting, the appointees named in the
proxies will vote the proxies in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James P. Slattery
James P. Slattery
President
Dated: March 22, 1996
Minnetonka, Minnesota
APPENDIX A
ELECTRO-SENSORS, INC.
PROXY FOR ANNUAL MEETING
APRIL 25, 1996
The undersigned hereby appoints JAMES P. SLATTERY and PETER R. PETERSON, and
each of them, with full power of substitution, his or her Proxies to represent
and vote, as designated below, all shares of the Common Stock of
Electro-Sensors, Inc. registered in the name of the undersigned at the 1996
Annual Meeting of Shareholders of the Company to be held at the Decathlon Club,
1700 East 79th Street, Bloomington, Minnesota, at 2:00 p.m., local time, on
April 25, 1996, and at any adjournment thereof. The undersigned hereby revokes
all proxies previously granted with respect to such Meeting.
The Board of Directors recommends that you vote FOR each proposal.
1. Set number of directors at five.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Elect five directors. (Nominees: J. Slattery, P. Peterson, J. Strom, M.
Laumann, J. Marino)
[ ] FOR all nominees listed above
(except those whose names have been written on the line below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed above
3. Approve 1996 Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed, on reverse side)
(continued from other side)
4. Approve appointment of Schweitzer Rubin Karon & Bremer as independent
auditors for the current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Other Matters. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH
PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date: _______________________________, 1996
___________________________________________
Signature
___________________________________________
Signature if held jointly
PLEASE DATE AND SIGN ABOVE exactly as name
appears at the left, indicating, where
proper, official position or representative
capacity. For stock held in joint tenancy,
each joint owner should sign.
APPENDIX B
ELECTRO-SENSORS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I - ESTABLISHMENT OF PLAN
1.01 ADOPTION BY BOARD OF DIRECTORS. By action of the Board of Directors of
Electro-Sensors, Inc. (the "Corporation") on September 18, 1995, and
subject to approval by its shareholders, the Corporation has adopted an
employee stock purchase plan pursuant to which eligible employees of
the Corporation and certain of its Subsidiaries may be offered the
opportunity to purchase shares of Stock of the Corporation. The terms
and conditions of this Plan are set forth in this plan document, as
amended from time to time as provided herein. The Corporation intends
that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended from time
to time, (the "Code") and shall be construed in a manner consistent
with the requirements of Code Section 423 and the regulations
thereunder.
1.02 SHAREHOLDER APPROVAL AND TERM. This Plan shall become effective January
1, 1996, and shall terminate on December 31, 2000; provided, however,
that the Plan shall be subject to approval by the shareholders of the
Corporation within twelve (12) months after the Plan was adopted by the
Board or, if earlier, at the next annual meeting of the shareholders,
in the manner provided under Code Section 423 and the regulations
thereunder; and provided, further that the Board of Directors may
extend the term of the Plan for such period as the Board, in its sole
discretion, deems advisable. In the event that the shareholders fail to
approve the Plan at such annual shareholders' meeting, this Plan shall
not become effective and shall have no force or effect.
ARTICLE II - PURPOSE
2.01 PURPOSE. The primary purpose of the Plan is to provide an opportunity
for Eligible Employees of the Corporation to become shareholders of the
Corporation, thereby providing them with an incentive to remain in the
Corporation's employ, to improve operations, to increase profits and to
contribute more significantly to the Corporation's success.
ARTICLE III - DEFINITIONS
3.01 "ADMINISTRATOR" means the Compensation Committee appointed by the Board
of Directors. The Compensation Committee may, in its sole discretion,
authorize the officers of the Corporation to carry out the day-to-day
operation of the Plan. In its sole discretion, the Board may take such
actions as may be taken by the Administrator, in addition to those
powers expressly reserved to the Board under this Plan.
3.02 "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of
Electro-Sensors, Inc.
3.03 "COMPENSATION" means the Participant's total compensation, including
base pay, overtime and all bonuses.
3.04 "CORPORATION" means Electro-Sensors, Inc., a Minnesota corporation.
3.05 "ELIGIBLE EMPLOYEE" means any employee who is a United States full-time
or part-time employee of the Corporation or one of its Subsidiaries
whose customary employment is more than 20 hours per week and who,
immediately prior to the commencement of a Phase, has been employed by
the Corporation or Subsidiary for at least six (6) consecutive months.
3.06 "ENROLLMENT PERIOD" means the period determined by the Administrator
for purposes of accepting elections to participate during a Phase from
Eligible Employees.
3.07 Subject to the limitations set forth in Section 9.03, a "PARTICIPANT"
means an Eligible Employee who has been granted an option and is
participating during a Phase through payroll deductions.
3.08 "PHASE" means the period beginning on the date that the option was
granted, otherwise referred to as the commencement date of the Phase,
and ending on the date that the option is exercised, otherwise referred
to as the termination date of the Phase.
3.09 "PLAN" means the Electro-Sensors, Inc. 1996 Employee Stock Purchase
Plan.
3.10 "STOCK" means the voting common stock of the Corporation.
3.11 "SUBSIDIARY" means any corporation defined as a subsidiary of the
Corporation in Code Section 424(f), or any successor provision, as of
the effective date of the Plan, and such other corporations that
qualify as subsidiaries of the Corporation under Code Section 424(f),
or any successor provision, as the Board approves to participate in
this Plan from time to time.
ARTICLE IV - ADMINISTRATION
4.01 ADMINISTRATION. Except for those matters expressly reserved to the
Board pursuant to any provisions of the Plan, the Administrator shall
have full responsibility for administration of the Plan, which
responsibility shall include, but shall not be limited to, the
following:
(a) The Administrator shall, subject to the provisions of the
Plan, establish, adopt and revise such rules and procedures
for administering the Plan, and shall make all other
determinations as it may deem necessary or advisable for the
administration of the Plan;
(b) The Administrator shall, subject to the provisions of the
Plan, determine all terms and conditions that shall apply to
the grant and exercise of options under this Plan, including,
but not limited to, the number of shares of Stock that may be
granted, the date of grant, the exercise price and the manner
of exercise of an option. The Administrator may, in its
discretion, consider the recommendations of the management of
the Corporation when determining such terms and conditions;
(c) The Administrator shall have the exclusive authority to
interpret the provisions of the Plan, and each such
interpretation or determination shall be conclusive and
binding for all purposes and on all persons, including, but
not limited to, the Corporation and its Subsidiaries, the
shareholders of the Corporation and its Subsidiaries, the
Administrator, the directors, officers and employees of the
Corporation and its Subsidiaries, and the Participants and the
respective successors-in-interest of all of the foregoing; and
(d) The Administrator shall keep minutes of its meetings or other
written records of its decisions regarding the Plan and shall,
upon requests, provide copies to the Board.
ARTICLE V - PHASES OF THE PLAN
5.01 PHASES. The Plan shall be carried out in one or more Phases of six (6)
months each. Unless otherwise determined by the Administrator, in its
discretion, Phases shall commence on January 1 and July 1 of each
calendar year during the term of the Plan, with the first Phase
beginning January 1, 1996, and ending June 30, 1996. No two Phases
shall run concurrently.
5.02 LIMITATIONS. The Administrator may, in its discretion, limit the number
of shares available for option grants during any Phase as it deems
appropriate. Without limiting the foregoing, in the event all of the
shares of Stock reserved for the grant of options under Section 12.01
is issued pursuant to the terms hereof prior to the commencement of one
or more Phases or the number of shares of Stock remaining is so small,
in the opinion of the Administrator, as to render administration of any
succeeding Phase impracticable, such Phase or Phases may be cancelled
or the number of shares of Stock limited as provided herein. In
addition, if, based on the payroll deductions authorized by
Participants at the beginning of a Phase, the Administrator determines
that the number of shares of Stock which would be purchased at the end
of a Phase exceeds the number of shares of Stock remaining reserved
under Section 12.01 hereof for issuance under the Plan, or if the
number of shares of Stock for which options are to be granted exceeds
the number of shares designated for option grants by the Administrator
for such Phase, then the Administrator shall make a pro rata allocation
of the shares of Stock remaining available in as nearly uniform and
equitable a manner as the Administrator shall consider practicable as
of the commencement date of the Phase or, if the Administrator so
elects, as of the termination date of the Phase. In the event such
allocation is made as of the commencement date of a Phase, the payroll
deductions which otherwise would have been made on behalf of
Participants shall be reduced accordingly.
ARTICLE VI - ELIGIBILITY
6.01 ELIGIBILITY. Subject to the limitations of Section 9.03, each employee
who is an Eligible Employee on or immediately prior to the commencement
of a Phase shall be eligible to participate in such Phase.
ARTICLE VII - PARTICIPATION
7.01 PARTICIPATION. Participation in the Plan is voluntary. An Eligible
Employee who desires to participate in any Phase of the Plan must
complete the Plan enrollment form provided by the Administrator and
deliver such form to the Administrator or its designated representative
during the Enrollment Period established by the Administrator prior to
the commencement date of the Phase.
7.02 SUBSEQUENT PHASES. An Eligible Employee who elects to participate in a
Phase of the Plan shall be deemed to have elected to participate in
each subsequent Phase during that and all subsequent calendar years
unless such Participant elects to discontinue payroll deductions during
a Phase or exercises his or her right to withdraw amounts previously
withheld, as provided under Article 10 hereof. In such event, such
Participant must complete a change of election form or a new Plan
enrollment form and file such form with the Administrator during the
Enrollment Period prior to the next Phase with respect to which the
Eligible Employee wishes to participate.
ARTICLE VIII - PAYMENT: PAYROLL DEDUCTIONS
8.01 ENROLLMENT. Each Eligible Employee electing to participate shall
indicate such election on the Plan enrollment form and designate
therein a percentage of such Participant's Compensation to be paid
during the Phase. Such percentage shall be at least one percent (1%)
but not more than ten percent (10%) of such Participant's Compensation
to be paid during such Phase, or such other maximum percentage as the
Administrator may establish from time to time, and must be designated
in whole percentages. In order to be effective, such Plan enrollment
form must be properly completed and received by the Administrator by
the due date indicated on such form, or by such other date established
by the Administrator.
8.02 PAYROLL DEDUCTIONS. Payroll deductions for a Participant shall commence
on the first paycheck issued for the payroll period which begins on or
immediately after the commencement date of the Phase and shall
terminate on the last paycheck issued for the payroll period which
begins on or immediately prior to the termination date of that Phase,
unless the Participant elects to discontinue payroll deductions or
exercises his or her right to withdraw all accumulated payroll
deductions previously withheld during the Phase as provided in Article
10 hereof. The authorized payroll deductions shall be made over the pay
periods of such Phase by deducting from the Participant's Compensation
for each such pay period that percentage specified by the Participant
in the Plan enrollment form.
Unless the Participant elected to discontinue payroll deductions or
exercised his or her right to withdraw all accumulated payroll
deductions previously withheld during the preceding Phase (in which
event the Participant must complete a change of election form or a new
Plan enrollment form, as the case may be, to continue participation for
any subsequent Phase), the Corporation shall continue to withhold from
such Participant's Compensation the same designated percentage
specified by the Participant in the most recent Plan enrollment form
previously completed by the Participant for all subsequent Phases;
provided, however, that the Participant may, if he or she so chooses,
increase, decrease or discontinue payroll deductions for any or all
such subsequent Phases by properly completing a change of election form
during the Enrollment Period for such subsequent Phase and delivering
such form to the Administrator by the due date for receipt of such
forms for that Phase.
8.03 INCREASES OR DECREASES DURING A PHASE. In addition to the right to
discontinue or withdraw payroll deductions during a Phase as provided
in Article 10 and the right to increase or decrease or discontinue
payroll deductions for subsequent Phases as provided in Section 8.02, a
Participant may increase or decrease the percentage of Compensation
designated to be deducted during a Phase by completing a change of
election form and filing such form with the Administrator on or before
the date that is thirty (30) days prior to the date of the last
paycheck during that Phase, or on or before such other date established
by the Corporation; provided, however, that the Participant may
exercise the right to increase or decrease his or her payroll
deductions only once during each Phase.
ARTICLE IX - OPTIONS
9.01 GRANT OF OPTION. Subject to Article 10, a Participant who has elected
to participate in the manner described in Article VIII and who is
employed by the Corporation or a Subsidiary as of the commencement date
of a Phase shall be granted an option as of such date to purchase that
number of whole shares of Stock determined by dividing the total amount
to be credited to the Participant's account by the option price per
share set forth in Section 9.02(a) below; provided, however, that in no
event shall the total number of shares subject to all of the
Participant's options during any phase exceed 1,000 shares of Stock, or
such other number as the Board or Administrator may establish. The
option price per share for such Stock shall be determined under Section
9.02 hereof, and the number of shares exercisable shall be determined
under Section 9.03 hereof.
9.02 OPTION PRICE. Subject to the limitations hereinbelow, the option price
for such Stock shall be the lower of the amounts determined under
paragraphs (a) and (b) below:
(a) Eighty-five percent (85%) of the closing price for a share of
the Corporation's Stock as reported on the NASDAQ National
Market System or on an established securities exchange as of
the commencement date of the Phase; or
(b) Eighty-five percent (85%) of the closing price for a share of
the Corporation's Stock as reported on the NASDAQ National
Market System or on an established securities exchange as of
the termination date of the Phase.
In the event that the commencement or termination date of a Phase is a
Saturday, Sunday or holiday, or in the event there was no trade of the
Corporation's Stock on such applicable date, the amounts determined
under the foregoing subsections shall be determined using the price as
of the last preceding trading day.
If the Corporation's Stock is not listed on the NASDAQ National Market
System or on an established securities exchange, then the option price
shall equal the lesser of (i) eighty-five percent (85%) of the fair
market value of a share of the Corporation's Stock as of the
commencement date of the Phase; or (ii) eighty-five percent (85%) of
the fair market value of such stock as of the termination date of the
Phase. Such "fair market value" shall be determined by the Board.
9.03 LIMITATIONS. No employee shall be granted an option hereunder:
(a) Which permits his or her rights to purchase Stock under all
employee stock purchase plans of the Corporation or its
Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) of fair market value of such Stock
(determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time;
(b) If such employee would own and/or hold, immediately after the
grant of the option, Stock possessing five percent (5%) or
more of the total combined voting power or value of all
classes of stock of the Corporation or of any Subsidiary. For
purposes of determining stock ownership under this paragraph,
the rules of Section 424(d), or any successor provision, of
the Code shall apply.
(c) Which, if exercised, would cause the limits established by the
Administrator under Section 5.02 to be exceeded.
9.04 EXERCISE OF OPTION. Subject to a Participant's right to withdraw in the
manner provided in Section 10.01, a Participant's option for the
purchase of shares of Stock will be exercised automatically on the
termination date of that Phase. However, in no event shall a
Participant be allowed to exercise an option for more shares of Stock
than can be purchased with the payroll deductions accumulated by the
Participant during such Phase, whether or not the accumulated payroll
deductions are less than the full percentage amount that such
Participant elected to contribute at the beginning of such Phase.
9.05 DELIVERY OF SHARES. As promptly as practicable after the termination of
any Phase, the Corporation's transfer agent or other authorized
representative shall deliver to each Participant herein certificates
for that number of whole shares of Stock purchased upon the exercise of
the Participant's option. Any accumulated payroll deductions remaining
after the exercise of the Participant's option pursuant to Section 9.04
above shall remain credited to the Participant's bookkeeping account
and applied to the purchase of shares of Stock in the next succeeding
Phase, unless the Participant requests a withdrawal of such amount
pursuant to Section 10.01.
ARTICLE X - WITHDRAWAL OR
DISCONTINUATION OF PAYROLL WITHHOLDINGS
10.01 WITHDRAWAL. A Participant may request a withdrawal of all accumulated
payroll deductions then credited to the Participant's bookkeeping
account by completing a change of election form and filing such form
with the Administrator. The Participant's request shall be effective as
of the beginning of the next payroll period immediately following the
date that the Administrator receives the Participant's properly
completed change of election form. As soon as administratively feasible
after the end of that Phase, all payroll deductions credited to a
bookkeeping account for the Participant will be paid to such
Participant, without interest, and no further payroll deductions will
be made during that Phase or any future Phase unless the Participant
completes a new Plan enrollment form as provided in Section 8.02 above.
If the Participant requests a withdrawal, the option granted to the
Participant under that Phase of the Plan shall immediately lapse and
shall not be exercisable. Partial withdrawals of payroll deductions are
not permitted.
Notwithstanding the foregoing, in order to be effective for a
particular Phase, the Participant's request for withdrawal must be
properly completed and received by the Administrator on or before the
date that is thirty (30) days before the date of the last paycheck
during the Phase, or on or before such other date established by the
Administrator. Requests for withdrawal that are received after that due
date shall not be effective and no withdrawal shall be made, unless
otherwise determined by the Administrator.
10.02 DISCONTINUATION. A Participant may also request that the Administrator
discontinue any further payroll deductions that would otherwise be made
during the remainder of the Phase by completing a change of election
form and filing such form with the Administrator on or before the date
that is thirty (30) days before the date of the last paycheck during
the phase, or on or before such other date established by the
Administrator. The Participant's request shall be effective as of the
beginning of the next payroll period immediately following the date
that the Administrator receives the Participant's properly completed
change of election form. Upon the effective date of the Participant's
request, the Corporation will discontinue making payroll deductions for
such Participant for that Phase, and all future Phases, unless the
Participant completes another change of election form as provided
above.
ARTICLE XI - TERMINATION OF EMPLOYMENT
11.01 If a Participant's employment terminates with the Corporation for any
reason, voluntarily or involuntarily, including by reason of retirement
or death, the payroll deductions credited to such Participant's
bookkeeping account for such Phase, if any, will be returned to the
Participant (or, in the case of death, to the Participant's estate),
without interest, and any options granted to such Participant under the
Plan shall immediately lapse and shall not be exercisable. The return
of such payroll deductions shall be made to the Participant (or to the
Participant's estate) as soon as administratively practicable. In the
event that such termination occurs near the end of a Phase and the
Corporation is unable to discontinue payroll deductions for such
Participant for his or her final paycheck(s), such deductions shall
still be made but shall be returned to the Participant (or his or her
estate) as provided herein. In no event shall the accumulated payroll
deductions be used to purchase any shares of Stock.
If the option lapses as a result of the Participant's death, any
accumulated payroll deductions credited to the Participant's
bookkeeping account will be paid to the Participant's estate, without
interest. In the event a Participant dies after exercise of the
Participant's option but prior to delivery of the Stock to be
transferred pursuant to the exercise of the option under Section 9.04
above, any such Stock and/or accumulated payroll deductions remaining
after such exercise shall be paid by the Corporation to the
Participant's estate.
The Corporation will not be responsible for or be required to give
effect to the disposition of any cash or Stock or the exercise of any
option in accordance with any will or other testamentary disposition
made by such Participant or in accordance with the provisions of any
law concerning intestacy, or otherwise. No person shall, prior to the
death of a Participant, acquire any interest in any Stock, in any
option or in the cash credited to the Participant's bookkeeping account
during any Phase of the Plan.
11.02 In the event that any Subsidiary ceases to be a Subsidiary of the
Corporation, the employees of such Subsidiary shall be considered to
have terminated their employment for purposes of Section 11.01 hereof
as of the date the Subsidiary ceased to be a Subsidiary of the
Corporation.
ARTICLE XII - STOCK RESERVED FOR OPTIONS
12.01 One Hundred Thousand (100,000) shares of Stock, which may be authorized
but unissued shares of the Corporation (or the number and kind of
securities to which said 100,000 shares may be adjusted in accordance
with Section 14.01 hereof) are reserved for issuance upon the exercise
of options to be granted under the Plan. Shares subject to the
unexercised portion of any lapsed or expired option may again be
subject to option under the Plan.
12.02 The Participant shall have no rights as a shareholder with respect to
any shares of Stock subject to the Participant's option until the date
of the issuance of a stock certificate evidencing such shares as
provided in Section 9.05. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is
prior to the date such stock certificate is actually issued, except as
otherwise provided in Section 14.01 hereof.
ARTICLE XIII - ACCOUNTING AND USE OF FUNDS
13.01 Payroll deductions for Participants shall be credited to bookkeeping
accounts established by the Corporation for each such Participant under
the Plan. A Participant may not make any cash payments into such
account. Such account shall be solely for bookkeeping purposes and
shall not require the Corporation to establish any separate fund or
trust hereunder. All funds from payroll deductions received or held by
the Corporation under the Plan may be used, without limitation, for any
corporate purpose by the Corporation, which shall not be obligated to
segregate such funds from its other funds. In no event shall
Participants be entitled to interest on the amounts credited to such
bookkeeping accounts.
ARTICLE XIV - ADJUSTMENT PROVISION
14.01 Subject to any required action by the shareholders of the Corporation,
in the event of an increase or decrease in the number of outstanding
shares of Stock or in the event the Stock is changed into or exchanged
for a different number or kind of shares of stock or other securities
of the Corporation or another corporation by reason of a
reorganization, merger, consolidation, divestiture (including a
spin-off), liquidation, recapitalization, reclassification, stock
dividend, stock split, combination of shares, rights offering or any
other change in the corporate structure or shares of the Corporation,
the Board (or, if the Corporation is not the surviving corporation in
any such transaction, the board of directors of the surviving
corporation), in its sole discretion, shall adjust the number and kind
of securities subject to and reserved under the Plan and, to prevent
the dilution or enlargement of rights of those Eligible Employees to
whom options have been granted, shall adjust the number and kind of
securities subject to such outstanding options and, where applicable,
the exercise price per share for such securities.
In the event of the sale by the Corporation of substantially all of its
assets and the consequent discontinuance of its business, or in the
event of a merger, exchange, consolidation, reorganization, divestiture
(including a spin-off), liquidation, reclassification or extraordinary
dividend (collectively referred to as a "transaction"), after which the
Corporation is not the surviving corporation, the Board may, in its
sole discretion, at the time of adoption of the plan for such
transaction, provide for one or more of the following:
(a) The acceleration of the exercisability of outstanding options
granted at the commencement of the Phase then in effect, to
the extent of the accumulated payroll deductions made as of
the date of such acceleration pursuant to Article 8 hereof;
(b) The complete termination of this Plan and a refund of amounts
credited to the Participants' bookkeeping accounts hereunder;
or
(c) The continuance of the Plan only with respect to completion of
the then current Phase and the exercise of options thereunder.
In the event of such continuance, Participants shall have the
right to exercise their options as to an equivalent number of
shares of stock of the corporation succeeding the Corporation
by reason of such transaction.
In the event of a transaction where the Corporation survives, then the
Plan shall continue in effect, unless the Board takes one or more of
the actions set forth above. The grant of an option pursuant to the
Plan shall not limit in any way the right or power of the Corporation
to make adjustments, reclassifications, reorganizations or changes in
its capital or business structure or to merge, exchange or consolidate
or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
ARTICLE XV - NONTRANSFERABILITY OF OPTIONS
15.01 Options granted under any Phase of the Plan shall not be transferable
and shall be exercisable only by the Participant during the
Participant's lifetime.
15.02 Neither payroll deductions granted to a Participant's account, nor any
rights with regard to the exercise of an option or to receive Stock
under any Phase of the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way by the Participant. Any such attempted
assignment, transfer, pledge or other disposition shall be null and
void and without effect, except that the Corporation may, at its
option, treat such act as an election to withdraw in accordance with
Section 10.01.
ARTICLE XVI - AMENDMENT AND TERMINATION
16.01 The Plan may be terminated at any time by the Board of Directors,
provided that, except as permitted in Section 14.01 hereof, no such
termination shall take effect with respect to any options then
outstanding. The Board may, from time to time, amend the Plan as it may
deem proper and in the best interests of the Corporation or as may be
necessary to comply with Code Section 423, or any successor provision,
or other applicable laws or regulations; provided, however, no such
amendment shall, without the consent of a Participant, materially
adversely affect or impair the right of a Participant with respect to
any outstanding option; and provided, further, that no such amendment
shall, unless the shareholders of the Corporation have approved the
same, directly or indirectly:
(a) increase the total number of shares for which options may be
granted under the Plan (except as provided in Section 14.01
herein);
(b) modify the group of Subsidiaries whose employees may be
eligible to participate in the Plan or materially modify any
other requirements as to eligibility for participation in the
Plan; or
(c) materially increase the benefits accruing to Participants
under the Plan.
ARTICLE XVII - NOTICES
17.01 All notices, forms, elections or other communications in connection
with the Plan or any Phase thereof shall be in such form as specified
by the Corporation from time to time, and shall be deemed to have been
duly given when received by the Participant or his or her personal
representative or by the Corporation or its designated representative,
as the case may be.
