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):
[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:
(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:
<PAGE>
[LOGO] Electro-Sensors, Inc. 612/930-0100
6111 Blue Circle Drive
Minnetonka, Minnesota 55343
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1999
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 Wednesday, April 28, 1999, at 2:00 p.m., local time,
for the following purposes:
1. To set the number of directors at six;
2. To elect six directors to serve until the next annual meeting
of shareholders;
3. To approve auditors for the Company for the fiscal year ending
December 31, 1999; and
4. 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, 1998.
The Board of Directors has fixed the close of business on March 19,
1999, 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
Bradley D. Slye
PRESIDENT
Dated: March 25, 1999
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.
<PAGE>
[LOGO] Electro-Sensors, Inc. 612/930-0100
6111 Blue Circle Drive
Minnetonka, Minnesota 55343
- --------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1999
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 Wednesday, April
28, 1999, 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 25, 1999.
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.
1
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 19, 1999, 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 19, 1999,
1,975,454 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 1,975,454 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 19, 1999,
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:
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned(1) of Class
------------------- --------------------- --------
Peter R. Peterson 842,366(2) 42.0%
6111 Blue Circle Drive
Minnetonka, MN 55343
Jean C. Slattery 176,580(3) 8.9%
4378 Mackey Avenue
Minneapolis, MN 55424
Electro-Sensors, Inc. 109,455 5.5%
Employee Stock Owner-
ship Trust
6111 Blue Circle Drive
Minnetonka, MN 55343
Bradley D. Slye 42,347(4) 2.1%
6111 Blue Circle Drive
Minnetonka, MN 55343
Mark D. Laumann 42,134(5) 2.1%
6111 Blue Circle Drive
Minnetonka, MN 55343
John S. Strom 15,500(6)(7) *
5005 Arden Avenue
Edina, MN 55424
2
<PAGE>
Joseph A. Marino 7,000(7)(8) *
501 E. Highway 13, #108
Burnsville, MN 55337
Geoffrey W. Miller 0(7) *
4040 Orleans Lane N.
Plymouth, Minnesota 55441
Officers and Directors 949,347(9) 46.0%
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 3,000 shares held by Mr. Peterson's wife, 4,305 shares held by
the ESOP for the account of Mr. Peterson, and 31,500 shares purchasable
upon exercise of options presently exercisable or exercisable within 60
days of March 19, 1999.
(3) Includes 50,090 shares held by the estate of James P. Slattery and
16,912 shares held by the Company's Employee Stock Ownership Plan and
Trust ("ESOP") for the account of Mr. Slattery's estate. Jean C.
Slattery is the personal representative of such estate.
(4) Includes 560 shares held by Mr. Slye's wife, 30,000 shares purchasable
upon exercise of options presently exercisable or exercisable within 60
days of March 19, 1999 and 4,785 shares held by the ESOP for the
account of Mr. Slye.
(5) Includes 1,000 shares held in an Individual Retirement Account by Mr.
Laumann's wife, 7,824 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 19, 1999.
(6) Includes 15,500 shares purchasable upon exercise of options presently
exercisable or exercisable within 60 days of March 19, 1999.
(7) Does not include 2,000 shares which will become purchasable on the date
of the Annual Meeting pursuant to an automatic option grant under the
Company's 1997 Stock Option Plan.
(8) Includes 6,500 shares purchasable upon exercise of options presently
exercisable or exercisable within 60 days of March 19, 1999.
3
<PAGE>
(9) Includes 88,000 shares that may be purchased by officers and directors
upon exercise of options presently exercisable or exercisable within 60
days of March 19, 1999, and 16,914 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 six and that six 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 six, 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.
<TABLE>
<CAPTION>
Director
Name and Age Principal Occupation Since
- ------------ -------------------- --------
<S> <C> <C>
Bradley D. Slye (39) Chairman of the Board and President of the Company 1997
Mark D. Laumann (44) Treasurer of the Company 1994
Peter R. Peterson (65) President, P.R. Peterson Co. (a venture capital 1969
firm); Secretary of the Company
Joseph A. Marino (47) President and Chief Executive officer of Applied 1994
Biometrics, Inc. (a medical equipment manufacturer)
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
Geoffrey W. Miller (44) Vice President Operations and Finance of Amsan MN, 1999
Inc. (a distributor of janitorial supplies and
equipment)
John S. Strom (65) Retired 1989
</TABLE>
BUSINESS EXPERIENCE
Mr. Slye has been the Chairman of the Board and President of the
Company since January 6, 1997, when he was elected to succeed James P. Slattery,
the Company's former Chairman and President, who died on December 27, 1996. Mr.
Slye has served as a Design Engineer for the Company since 1987 and as
Engineering Manager since 1990. He received his BSEE degree from the University
of Minnesota in 1983, following which he was employed as an electrical engineer
by Micro Component Technology, Inc. in Shoreview, Minnesota prior to joining the
Company.
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. Peterson has been active in the venture capital business for over
20 years. Mr. Peterson has been a Director of the Company since 1969 and
Secretary since 1973. Mr. Peterson is also a director of PPT Vision, Inc.
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.
Mr. Miller has been Vice President Operations and Finance of Amsan MN,
Inc., dba Brissman Kennedy, Inc., since April 1985.
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.
5
<PAGE>
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 1998 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 administers the
Company's employee stock plans. During 1998 the Stock Option Committee met
twice. The Company does not have a nominating committee.
During 1998 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
During fiscal 1998 directors who were also employees of the Company
received $4,000 per year for their service on the Board, and non-employee
directors received $5,000 for their service. Commencing July 1, 1998,
non-employee directors will receive $1,500 per quarter for their services on the
Board. In addition, under the Company's 1997 Stock Option Plan, each
non-employee director is automatically granted a 2,000 share option upon each
election or re-election as a director by the shareholders. As of April 29, 1998,
the date of the 1998 annual meeting, Messrs. Marino and Strom each received an
option for the purchase of 2,000 shares at an exercise price of $3.875.
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 executive
officers whose salary and bonus for fiscal 1998 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------- -------
------------------------------ SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(s) SARs PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(2)
- ------------------ ------- ------- ------ ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bradley D. Slye, 1998 130,271 20,000 0 0 0 0 8,014
Chairman, President 1997(1) 123,271 20,000 0 0 50,000 0 6,670
and CEO
Mark D. Laumann, 1998 111,071 0 0 0 0 0 5,924
Treasurer 1997 106,947 0 0 0 0 0 5,787
1996 101,947 0 0 0 0 0 5,226
</TABLE>
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6
<PAGE>
(1) Mr. Slye has served as an executive officer of the Company since
January 6, 1997.
(2) Amounts reflect allocations to individuals' accounts of Company
contributions to the Employee Stock Ownership Plan and 401(k) Plan.
OPTION/SAR GRANTS DURING 1998 FISCAL YEAR
No options or stock appreciation rights were granted to the named
executive officers during the fiscal year ended December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES DURING 1998 FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information related to options exercised
by the named executive officers during fiscal 1998 and the number and value of
options held at fiscal year end.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable (1)
- ----------------- --------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Bradley D. Slye -0- -0- 20,000/30,000 7,500/$11,250
Mark D. Laumann -0- -0- 4,500/0 0/0
</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 31, 1998. The closing price of the Company's Common
Stock on that day on the Nasdaq Stock Market was $3.625. Options are
in-the-money if the market value of the shares covered thereby is
greater than the option exercise price.
APPROVAL OF AUDITORS
(PROPOSAL #3)
The Company's Board of Directors retained Schweitzer Karon & Bremer,
LLC as its principal independent accountants for the fiscal year ended December
31, 1998 and has selected Schweitzer Karon & Bremer, LLC to serve as the
Company's auditors for the fiscal year ending December 31, 1999. 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.
7
<PAGE>
Representatives of Schweitzer Karon & Bremer, LLC 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.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders ("Insiders") are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company, during the fiscal year ended December 31,
1998, all Section 16(a) filing requirements applicable to Insiders were complied
with except that Jean C. Slattery, a former beneficial owner of more than 10
percent of the Company's Common Stock, was late filing a form reporting eleven
transactions.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1998 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 1999 must be received by the Company by November 24, 1999 to be considered
for inclusion in the Company's proxy statement and related proxy for the 2000
annual meeting.
Also, if a shareholder proposal intended to be presented at the 2000
annual meeting but not included in the Company's proxy statement and proxy is
received by the Company after February 8, 2000, then management named in the
Company's proxy form for the 2000 annual meeting will have discretionary
authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
8
<PAGE>
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
Bradley D. Slye
PRESIDENT
Dated: March 24, 1999
Minnetonka, Minnesota
9
<PAGE>
ELECTRO-SENSORS, INC.
PROXY FOR ANNUAL MEETING
APRIL 28, 1999
The undersigned hereby appoints BRADLEY D. SLYE 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 1999
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 28, 1999, 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 six.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Elect six directors. (Nominees: B. Slye, M. Laumann, P.
Peterson, G. Miller, J. Marino, J. Strom)
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
above (except those whose vote for all nominees
names have been written listed above
on the line below)
--------------------------------------------------------------
3. Approve appointment of Schweitzer Karon & Bremer, LLC as
independent auditors for the current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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 , 1999
------------------------------
----------------------------------------
----------------------------------------
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.
