<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Pico Products, 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| $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies: ______________________________________
(2) Aggregate number of securities to which transaction applies:
--------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): _______________
(4) Proposed maximum aggregate value of transaction:______________
(5) Total fee paid:_______________________________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_______________________________________
(2) Form, Schedule or Registration Statement No.:_________________
(3) Filing Party:_________________________________________________
(4) Date Filed:___________________________________________________
<PAGE>
PICO PRODUCTS, INC.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
November 15, 1996
Dear Shareholder:
The Company's Annual Meeting of Shareholders for the fiscal year ended
July 31, 1996 (the "Meeting"), will be held at 9:00 a.m. Pacific Time on
Thursday, December 12, 1996, at the Ritz-Carlton Huntington Hotel, 1401 South
Oak Knoll Avenue, Pasadena, California 91106. We hope that you will attend.
The formal Notice of Annual Meeting of Shareholders and the Proxy
Statement for the Meeting are on the following pages.
You will note that the Board of Directors of the Company recommends a
vote "FOR" the election of six directors to serve until the Annual Meeting of
Shareholders for the fiscal year ending July 31, 1997, "FOR" the adoption of the
Company's 1996 Incentive Stock Plan, "FOR" the proposal to change the name of
the Company to "Pico Telecommunications, Inc.," and "FOR" the ratification of
Deloitte & Touche LLP as independent public accountants of the Company.
In order to assure that a quorum is present at the Meeting, you are
urged to sign and mail the enclosed proxy card at once, even though you may plan
to attend in person. You may revoke the proxy granted in the proxy card at any
time prior to its being voted by filing with the Secretary of the Company either
an instrument of revocation or a duly executed proxy card bearing a later date.
If you attend the Meeting, you may elect to revoke the proxy and vote your
shares in person.
The prompt return of your proxy card will help us avoid the expense of
further requests for proxies.
For your convenience in returning your proxy card, we enclose a return
envelope which requires no postage.
Very truly yours,
Everett T. Keech
Chairman and Chief
Executive Officer
<PAGE>
PICO PRODUCTS, INC.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
------------------------------------------------------------
NOTICEOF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 12, 1996
------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Pico
Products, Inc. (the "Company") for the fiscal year ended July 31, 1996, will be
held at the Ritz-Carlton Huntington Hotel, 1401 South Oak Knoll Avenue,
Pasadena, California 91106, on Thursday, December 12, 1996, at 9:00 a.m. Pacific
Time, for the following purposes:
1. To elect the members of the Board of Directors to serve until
the next annual meeting of shareholders and until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to adopt the Company's
1996 Incentive Stock Plan.
3. To consider and act upon a proposal to change the name of the
Company to "Pico Telecommunications, Inc."
4. To consider and act upon a proposal to ratify the selection by
the Board of Directors of Deloitte & Touche LLP as the
independent public accountants for Pico Products, Inc. for the
fiscal year ending July 31, 1997.
5. To consider and transact such other business as may properly
be brought before the Meeting or any adjournment thereof.
Only shareholders of record at the close of business on November 8,
1996, will be entitled to vote at the Meeting.
By Order of the Board of Directors,
Spencer W. Franck, Jr.
Secretary
Lakeview Terrace, California
November 15, 1996
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the Meeting, please complete, date, sign
and mail your proxy card promptly in the enclosed postage paid envelope.
- --------------------------------------------------------------------------------
<PAGE>
PICO PRODUCTS, INC.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
December 12, 1996
This Proxy Statement and the enclosed form of proxy card are intended
to be sent or given to shareholders of Pico Products, Inc. (the "Company") on or
about November 15, 1996, in connection with the solicitation of proxies by the
management of the Company ("Management") on behalf of the Board of Directors of
the Company for use at the Annual Meeting of Shareholders for the fiscal year
ended July 31, 1996 (the "Meeting"), which will be held on Thursday, December
12, 1996, at 9:00 a.m. Pacific Time at the Ritz-Carlton Huntington Hotel, 1401
South Oak Knoll Avenue, Pasadena, California 91106.
If the enclosed proxy card is properly signed and returned, the shares
represented by the proxy card will be voted and, if the shareholder indicates a
voting choice in the proxy card, the shares will be voted in accordance with the
choice. If the proxy card is signed but no specification is made, the shares
represented by the proxy card will be voted FOR the election of the nominees for
director listed below, FOR the adoption of the Company's 1996 Incentive Stock
Plan (the "1996 Plan"), FOR the proposal to change the name of the Company to
"Pico Telecommunications, Inc.," and FOR the ratification of the appointment of
Deloitte & Touche LLP as the independent public accountants for the Company for
the fiscal year ending July 31, 1997. Management knows of no business that will
be presented at the Meeting other than that which is set forth in this Proxy
Statement. If any other matter properly comes before the Meeting, the proxy
holders will vote the shares represented by the proxy cards in accordance with
their best judgment, subject to contrary shareholder instructions on any
specific proxy.
Any proxy granted in a proxy card may be revoked by the shareholder
giving it, at any time prior to its being voted, by filing with the Secretary of
the Company an instrument of revocation or a duly executed proxy card bearing a
later date. Any proxy granted in a proxy card may also be revoked by the
shareholder's attendance at the Meeting and election, by filing an instrument of
revocation, to vote in person.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on November 8,
1996, as the record date (the "Record Date") for the determination of the
shareholders of the Company entitled to notice of, and to vote at, the Meeting.
At that date, there were outstanding [4,055,246] shares of the Company's Common
Stock, $.01 par value (the "Common Stock"). The shareholders of record on the
Record Date will be entitled to one vote per shares of Common Stock on each
matter submitted to the Meeting. No other voting securities of the Company are
outstanding. The presence at the Meeting, in person or by proxy, of the holders
of a majority of the Common Stock entitled to vote shall constitute a quorum for
the transaction of business at the Meeting. Assuming a quorum is present, the
affirmative vote of (i) a plurality of the votes cast at the Meeting will be
required for the election of directors, (ii) the holders of a majority of the
issued and outstanding Common Stock entitled to vote will be required to approve
the adoption of the 1996 Plan and for the approval of the proposal to change the
name of the Company, and (iii) a majority of the votes cast at the Meeting will
be required for the ratification of Deloitte & Touche LLP as the independent
public accountants for the fiscal year ending July 31, 1997, as well as for
approval of such other matters as may properly come before the Meeting or any
adjournment of the Meeting.
With respect to the vote for the election of directors, abstentions
will have the same effect as a "no" vote, and broker non-votes will have no
effect on the outcome of the vote. With respect to the adoption of the 1996 Plan
<PAGE>
and the approval of the proposal to change the name of the Company, abstentions
and broker non-votes will have the same effect as a "no" vote. With respect to
the ratification of the Company's independent public accountants, abstentions
and broker non-votes will have no effect on the outcome of the vote. In the
event a broker that is a record holder of Common Stock does not return a signed
proxy, the Common Stock represented by such proxy will not be considered present
at the Meeting and, therefore, will not be counted towards a quorum.
The following table sets forth, as of September 30, 1996, the number
and percentage of shares of the Company's Common Stock (the Company's only
outstanding class of capital stock) which, according to information supplied to
the Company, are beneficially owned by: (i) each person who is the beneficial
owner of more than 5% of the Common Stock; (ii) each of the directors and the
nominees for directorship of the Company individually; (iii) the chief executive
officer of the Company; (iv) each of the named executive officers (as that
phrase is defined in the section of this Proxy Statement entitled "Executive
Compensation"); and (v) all current directors and executive officers of the
Company as a group. Unless otherwise indicated, the persons named in the table
below have sole voting and investment power with respect to all Common Stock
shown as beneficially owned by them.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially Owned Percent of
as of Class
Name and Address September 30, 1996 (Approx.)(1)
- ---------------- ------------------ ------------
<S> <C> <C>
Robert G. Cunningham 0 *
c/o Pico Products, Inc.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
Charles G. Emley, Jr. (2) 10,667 *
817 S. Madison Avenue
Pasadena, California 91106
Robert J. Greiner, Jr. (3) 109,233 2.7%
c/o Pico Products, Inc.
6315 Fly Road
East Syracuse, New York 13057
David A. Heenan (4) 0 *
c/o The Estate of James Campbell
900 Fort Street Mall, Suite 1450
Honolulu, Hawaii 96813
Everett T. Keech (5) 194,767 4.6%
c/o Pico Products, Inc.
One Tower Bridge, Suite 501
West Conshohocken, Pennsylvania 19428
Joseph T. Kingsley (6) 13,500 *
c/o Pico Products, Inc.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
George M. Knapp (7) 178,325 4.4%
133 Ridgecrest Drive
Santa Fe, New Mexico 87501
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially Owned Percent of
as of Class
Name and Address September 30, 1996 (Approx.)(1)
- ---------------- ------------------ ------------
<S> <C> <C>
E.B. Leisenring, Jr. (8) 25,667 *
One Tower Bridge, Suite 501
West Conshohocken, Pennsylvania 19428
Pierson G. Mapes 4,000 *
8 Sterlington Road
Pierson Lakes
Sloatsburg, New York 10974
William W. Mauritz (9) 40,867 1.0%
c/o DeSilva & Partners, Inc.
866 Third Avenue
New York, New York 10022
Norman F. Reinhardt (10) 6,668 *
c/o Pico Products, Inc.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
J. Michael Sills (11) 211,810 5.2%
126 Shady Lane
Fayetteville, New York 13066
Standard Chartered Equitor Trustee 350,000 8.4%
CI Limited (12)
P.O. Box 284
Commercial House, Commercial Street
St. Helier, Jersey, Channel Islands
All directors and officers as a group 795,504 18.2%
(12 individuals)
</TABLE>
- -----------------------------------
* Denotes less than one percent of class.
(1) The percent of class for any person or group who, as of September 30,
1996, beneficially owned any shares pursuant to options which are
exercisable within 60 days of September 30, 1996, is calculated
assuming all such options have been exercised in full and adding the
number of shares subject to such options to the total number of shares
issued and outstanding on September 30, 1996.
(2) Includes options for 5,000 shares of Common Stock granted by the Board
of Directors; such options were not granted pursuant to or under any of
the Company's option plans and are, therefore, non-qualified. Also,
includes options for 667 shares of Common Stock granted under the 1992
Incentive Stock Plan. Mr. Emley had the right to acquire beneficial
ownership of the shares underlying the foregoing options within 60 days
of September 30, 1996.
(3) Includes options for 5,000 shares of Common Stock granted under the
1981 Non-Qualified Stock Plan and options for 3,333 shares of Common
Stock granted under the 1992 Incentive Stock Plan. Mr. Greiner had the
right to acquire beneficial ownership of the shares underlying the
foregoing options within 60 days of September 30, 1996. Also includes
30,000 shares of Common Stock subscribed for by Mr. Greiner by delivery
of a note payable to the Company as payment of the exercise price due
upon exercise of certain stock options. Such shares remain unissued and
Mr. Greiner is not entitled to exercise the rights of a stockholder
with respect to such shares (including, but not limited to, the right
to vote or the right to receive dividends) until payment in full of the
note.
-3-
<PAGE>
(4) Does not include 1,300 shares of Common Stock owned by Mr. Heenan's
wife. Mr. Heenan disclaims beneficial ownership of such 1,300 shares of
Common Stock.
(5) Includes options for 25,000 shares of Common Stock granted under the
1981 Non-Qualified Stock Option Plan and options for 41,667 shares of
Common Stock granted under the 1992 Incentive Stock Plan. Mr. Keech had
the right to acquire beneficial ownership of the shares underlying the
foregoing options within 60 days of September 30, 1996. Also includes
125,000 shares of Common Stock subscribed for by Mr. Keech by delivery
of a note payable to the Company as payment of the exercise price due
upon exercise of certain stock options. Such shares remain unissued and
Mr. Keech is not entitled to the full rights of a stockholder with
respect to such shares (including, but not limited to, the right to
vote or the right to receive dividends) until payment in full of the
note. Also includes 100 shares of Common Stock held by Mr. Keech as
custodian for his minor child under the Uniform Gifts to Minors Act.
(6) Includes options for 7,500 shares of Common Stock granted under the
1992 Incentive Stock Plan. Mr. Kingsley had the right to acquire
beneficial ownership of the shares underlying these options within 60
days of September 30, 1996.
(7) Includes options for 6,667 shares of Common Stock granted under the
1992 Incentive Stock Plan. Mr. Knapp had the right to acquire
beneficial ownership of the shares underlying these options within 60
days of September 30, 1996. Does not include 4,242 shares of Common
Stock owned by Mr. Knapp's adult son. Mr. Knapp disclaims beneficial
ownership of such 4,242 shares of Common Stock.
(8) Includes options for 667 shares of Common Stock granted under the 1992
Incentive Stock Plan. Mr. Leisenring had the right to acquire
beneficial ownership of the shares underlying these options within 60
days of September 30, 1996. Does not include 11,000 shares of Common
Stock owned by a trust of which Mr. Leisenring's wife, Julia B.
Leisenring, is the sole beneficiary. Mr. Leisenring disclaims
beneficial ownership of such 11,000 shares of Common Stock.
(9) Includes options for 25,000 shares of Common Stock granted under the
1981 Non-Qualified Stock Option Plan and options for 10,667 shares of
Common Stock granted under the 1992 Incentive Stock Plan. Mr. Mauritz
had the right to acquire beneficial ownership of the shares underlying
these options within 60 days of September 30, 1996.
(10) Includes options for 5,001 shares of Common Stock granted under the
1981 Non-Qualified Stock Option Plan and options for 1,667 shares of
Common Stock granted under the 1992 Incentive Stock Plan. Mr. Reinhardt
had the right to acquire beneficial ownership of the shares underlying
these options within 60 days of September 30 1996.
(11) Includes options for 10,000 shares of Common Stock which were granted
under the 1981 Non-Qualified Stock Option Plan and options for 10,667
shares of Common Stock granted under the 1992 Incentive Stock Plan. Mr.
Sills had the right to acquire beneficial ownership of the shares
underlying these options within 60 days of September 30, 1996. Does not
include 300 shares of Common Stock owned by Mr. Sills' adult son. Mr.
Sills disclaims beneficial ownership of such 300 shares of Common
Stock.
-4-
<PAGE>
(12) Standard Chartered Equitor Trustee CI Limited ("Standard Chartered") is
a trust corporation that acts as a custodian of Scimitar Development
Capital Fund, a trust organized under the laws of Bermuda (the
"Scimitar Fund"), and is the trustee of Scimitar Development Capital
"B" Fund, a trust organized under the laws of Jersey (the "Capital "B"
Fund"). Standard Chartered is deemed to have beneficial ownership of
350,000 shares of Common Stock, which consist of 250,000 shares of
Common Stock and 100,000 warrants to purchase Common Stock which are
exercisable within 60 days of September 30, 1996 (the "Warrants"). The
Scimitar Fund purchased 61,140 of the Warrants, and the Capital "B"
Fund purchased 38,860 of the Warrants. Standard Chartered shares voting
and dispositive power for 152,850 shares of Common Stock with the
Scimitar Fund and 61,140 shares of Common Stock to be purchased
pursuant to the exercise of the Warrants with the Scimitar Fund.
Standard Chartered shares voting and dispositive power for 97,150
shares of Common Stock with the Capital "B" fund and 38,860 shares of
Common Stock to be purchased pursuant to the exercise of the Warrants
with the Capital "B" Fund.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of the ownership and changes in the ownership of
such securities with the Securities and Exchange Commission ("SEC") and the
American Stock Exchange. Officers, directors and beneficial owners of more than
ten percent of the Company's stock are required by SEC regulation to furnish the
Company with copies of all such forms which they file.
Based solely on the Company's review of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended July 31, 1996, all filing requirements applicable to its officers,
directors and persons who own more than ten percent of the Common Stock were
complied with, except the following: (i) with respect to initial holdings, a
Form 3 was filed late by Mr. Cunningham; (ii) with respect to two transactions,
a Form 4 was filed late by Mr. Greiner; (iii) with respect to one transaction, a
Form 4 was filed late by Mr. Knapp; (iv) with respect to one transaction, a Form
4 was filed late by Mr. Leisenring; and (v) with respect to one transaction, a
Form 5 was filed late by Mr. Reinhardt.
ELECTION OF DIRECTORS
The By-laws of the Company provide that the Company's Board of
Directors shall consist of not less than three nor more than eleven directors,
as determined by the Company's Board of Directors, and that each director shall
hold office until the next Annual Meeting of Shareholders and until a successor
shall be duly elected and qualified. The present number of directors
constituting the entire Board is eight. Messrs. Knapp and Sills are not standing
for reelection as directors of the Company. Upon the completion of Messrs. Knapp
and Sills' current term, the Company's Board has determined to reduce the number
of directors constituting the entire Board to six. Consequently, at the Meeting
six directors are to be elected to serve until the 1997 Annual Meeting and until
their respective successors have been elected and qualified.
The persons designated as proxies in the accompanying proxy card intend
to vote FOR the six nominees designated by Management listed below, unless a
contrary instruction is stated on the proxy card. If for any reason any such
nominee should become unavailable for election, the persons designated as
proxies in the proxy card may vote the proxy for the election of a substitute
designated by Management, unless a contrary instruction is given on the proxy
card. Management has no reason to believe that any of the nominees will be
unable or unwilling to serve if elected, and all nominees have expressed their
intention to serve the entire term for which election is sought.
The Board of Directors recommends the reelection of each of the six
directors standing for reelection. An affirmative vote of a plurality of the
votes cast at the Meeting and entitled to vote thereon is required for the
election of each director. The names of the persons presently serving as
directors of the Company, including those who have been nominated for
reelection, and the executive officers of the Company are listed below, together
with their ages and certain other information as of September 30, 1996 (except
as otherwise indicated):
-5-
<PAGE>
DIRECTORS AND OFFICERS
Name Age Director Since Position
- ---- --- -------------- --------
Everett T. Keech 56 1991 Chairman of the Board
and Chief Executive
Officer
Charles G. Emley, Jr. 55 1993 Director
David A. Heenan 56 1995 Director
George M. Knapp* 58 1979 Director
E.B. Leisenring, Jr. 70 1994 Director
Pierson G. Mapes 59 1996 Director
William W. Mauritz 62 1992 Director
J. Michael Sills* 58 1971 Director
Joseph T. Kingsley 51 --- Senior Vice President,
Finance and Operations,
Chief Financial Officer
and Treasurer
Robert G. Cunningham 54 --- Senior Vice President,
Sales and Marketing
Robert J. Greiner, Jr. 51 --- Senior Vice President,
CATV Sales
Norman F. Reinhardt 43 --- Vice President,Technology
and Product Development
- -----------------------------
* Messrs. Knapp and Sills are not standing for reelection to the Board of
Directors.
Certain Biographical and Other Information Regarding the Company's Directors and
Officers
Everett T. Keech has been the Chief Executive Officer of the Company
since October 1992. Mr. Keech has also been a director and Chairman of the Board
of the Company since February 1991. Prior to that, Mr. Keech was a partner in
several investment firms and was Chairman of Quaker Securities, Inc. from 1990
to 1994. Mr. Keech served as Vice Dean of the Wharton School of the University
of Pennsylvania from 1978 to 1985. Before that, Mr. Keech served in a number of
positions in Washington and was both Assistant Secretary and Acting Under
Secretary of the Air Force.
Charles G. Emley, Jr. has been a director of the Company since November
1993. Mr. Emley has been Dean of the Peter F. Drucker Graduate Management Center
of the Claremont Graduate School since early 1996. Prior to that, Mr. Emley had
been Managing Principal, World Wide Information Services of Unisys Corporation
from November 1993 to December 1995. Prior to that Mr. Emley was a Vice
President of IBM Consulting Group from November 1992 through October 1993, and a
management consulting partner with Deloitte & Touche LLP from 1977 until
November 1992.
-6-
<PAGE>
David A. Heenan has been a director of the Company since September
1995. Since January 1995, Mr. Heenan has been a trustee of the Estate of James
Campbell. From May 1982 to December 1994, Mr. Heenan served as Chairman and
Chief Executive Officer of Theo. H. Davies & Co., Ltd., where he was responsible
for the North American operations of Jardine Matheson & Co. From April 1975 to
April 1982, Mr. Heenan was Vice President for Academic Affairs of the University
of Hawaii. Mr. Heenan currently serves on the Board of Directors of Aloha
Airgroup Inc., Bancorp Hawaii Inc., and C. Brewer Homes Inc. Mr. Heenan received
a Ph.D. from the Wharton School of the University of Pennsylvania.
George M. Knapp has been a director of the Company since 1979. Mr.
Knapp was the President of the Company from October 1982 to February 1991. In
February 1991, Mr. Knapp was appointed to the position of President of Pico
Macom, Inc., a subsidiary of the Company. In July 1991, Mr. Knapp was appointed
as a Senior Vice President of the Company. Due to health reasons, Mr. Knapp
resigned from the positions of Senior Vice President of the Company and
President of Pico Macom, Inc., in December 1995.
E.B. Leisenring, Jr. has been a director of the Company since November
1994. Mr. Leisenring served as Chairman of the Executive Committee of
Westmoreland Coal Company from January 1992 to May 1995. Prior to that, Mr.
Leisenring was Chairman of the Board and Chief Executive Officer of both
Westmoreland Coal Company and Penn Virginia Corporation, serving as Chairman of
the Board since 1978. Mr. Leisenring is also a director of Norfolk Southern
Corporation and Chairman of the Philadelphia Contributionship
Insurance Company.
Pierson G. Mapes has been a director of the Company since June 1996.
Mr. Mapes was President of the NBC Television Network ("NBC-TV") from 1982 until
his retirement in 1994. In that role, he was responsible for NBC-TV's affiliate
relations, advertising and sales. Prior to that, he was Vice President, Network
Planning for NBC-TV. Mr. Mapes is a member of the International Radio and
Television Society and a member of the board of directors of the Broadcast
Pioneers and the Broadcast Pioneers Library. He is a director of the Network
Television Association and the Advertising Council. Mr. Mapes is also a Trustee
of Norwich University and a director of Builders Transport Incorporated.
William W. Mauritz has been a director of the Company since June 1992.
Mr. Mauritz has been a partner with DeSilva & Partners, Inc. since June 1995.
Mr. Mauritz was Managing Director of William W. Mauritz & Associates, a
management consulting firm, from September 1990 to June 1995. From 1989 to
September 1990 he served as Executive Vice President-Human Resources for the
Bank of New England. From 1984 to 1989 he was Senior Vice President, Human
Resources for McGraw-Hill, Inc.
J. Michael Sills has been a director of the Company since 1971. Mr.
Sills has been President of Foresite Real Estate, Inc. since July 1995. From
September 1990 through June 1995 Mr. Sills was an independent real estate broker
with Condor Brokerage Inc.
Joseph T. Kingsley has been Senior Vice President, Finance and
Operations, Chief Financial Officer and Treasurer of the Company, and Senior
Vice President, Finance of Pico Macom, Inc., since November 1994. From 1988 to
1994, Mr. Kingsley was Vice President, Business Administration for Kaiser
Marquardt, Inc. and Ferranti Defense & Space/The Marquardt Company. From 1985 to
1988, Mr. Kingsley was Vice President and Chief Financial Officer for Management
Analysis Company. From 1980 to 1985, Mr. Kingsley was Vice President and Chief
Financial Officer for Ultrasystems, Inc. and Science Application International
Corporation.
Robert G. Cunningham has been Senior Vice President, Sales and
Marketing of the Company since June 1996. Prior to that, Mr. Cunningham was
National Sales Manager for the Communications and Network Products Division of
Amphenol Corporation, from October 1995 to June 1996. Before that Mr. Cunningham
was Senior Vice President, National Accounts for Antec Corporation, from 1993 to
1995, and Vice President, Sales for the Cable Products Division of Zenith
Electronics Corporation, from 1983 to 1993. Prior to that, Mr. Cunningham was
Western Regional Manager for Oak Communications, from 1980 to 1983, and was with
Motorola Communications, from 1976 to 1980, and Xerox Corporation, from 1965 to
1976.
Robert J. Greiner, Jr. has been Senior Vice President, CATV Sales of
the Company since July 1991. Prior to joining the Company, Mr. Greiner was
President of Comaxx Network Service, a telecommunications systems integrator,
from 1989 to June 1991. Mr. Greiner also owned and operated three local cable
systems in the State of New York from 1984 to 1989. Prior to that Mr. Greiner
was President of RJG Enterprises, a sales representative organization, from 1974
to 1984. Prior to that, Mr. Greiner was Product Manager, Passive Systems for
Magnavox CATV Systems, from 1964 to 1974.
-7-
<PAGE>
Norman F. Reinhardt has been Vice President, Technology and Product
Development of the Company and Pico Macom, Inc., a subsidiary of the Company,
since March 1995. From January 1994 to March 1995, Mr. Reinhardt was Vice
President, Engineering of the Company and Pico Macom, Inc. Prior to joining the
Company, Mr. Reinhardt was Vice President, Business Development for News
Datacom, Inc., a subsidiary of News Corp., from 1992 to 1994, and Director,
Commercial Product Management, of VideoCipher Division of General Instrument,
from 1985 to 1992.
There are no family relationships between any director, executive
officer or person nominated or chosen by the Company to become a director or
executive officer.
General Information About the Board of Directors
During the fiscal year ended July 31, 1996, the Board of Directors held
a total of four meetings. Each of the directors attended at least 75% of the
aggregate number of meetings of the Board and meetings of any committee of which
he is a member which were held during the time in which he was a director or a
committee member, as applicable.
The Board of Directors has an Audit Committee to discuss and review
with the Company's independent public accountants and management the scope of
the Company's annual audit examination, audit budget, proposed work schedule and
internal control policies. The current members of the Audit Committee are E.B.
Leisenring, Jr., Chairman, Charles G. Emley, Jr. and William W. Mauritz. The
Audit Committee held two meetings during the fiscal year ended July 31, 1996.
The Board of Directors has a Compensation Committee to review
compensation of officers of the Company and Pico Macom, Inc., a subsidiary of
the Company, and to administer the Company's incentive stock option plans. The
current members of the Compensation Committee are William W. Mauritz, Chairman,
David A. Heenan, and E.B. Leisenring, Jr. The Compensation Committee held five
meetings during the fiscal year ended July 31, 1996.
At the June 14, 1996 meeting of the Board of Directors, a Nominating
Committee was appointed for the purpose of recommending candidates for
nomination to the Board of Directors for election at the Meeting. William W.
Mauritz and E.B. Leisenring, Jr. served as members of this Nominating Committee.
CERTAIN TRANSACTIONS
Mr. Keech is indebted to the Company pursuant to a note payable to the
Company in the amount of approximately $125,061, which was delivered as
consideration for the exercise of options to purchase 125,000 shares of Common
Stock (see also "Executive Compensation-Exercise of Options"). The note is
payable in full in five years and may be prepaid at any time without penalty.
Interest on the note is payable quarterly. The Common Stock so acquired remain
unissued and Mr. Keech is not entitled to exercise the rights of a stockholder
with respect to such shares (including, but not limited to, the right to vote or
the right to receive dividends) until payment in full of the note.
Mr. Mauritz is an officer of DeSilva & Partners, Inc., a management
consulting firm specializing in executive recruitment which commenced operations
in 1995. During fiscal 1996, DeSilva & Partners, Inc. was retained by the
Company to recruit a Senior Vice President for the Company's marketing and sales
functions. As a result of the successful completion of its services, DeSilva &
Partners, Inc. was paid a $45,000 fee by the Company.
-8-
<PAGE>
EXECUTIVE COMPENSATION
Summary of Compensation
The following table sets forth a summary of all compensation paid or
accrued by the Company for services rendered during the last three fiscal years,
to the Chief Executive Officer of the Company and to each of the Company's four
most highly compensated individuals who were serving as executive officers on
July 31, 1996, or who had served as executive officers during the fiscal year
ended July 31, 1996 (the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------- ------------
Name and Other Annual Stock Option All Other
Principal Position Fiscal Year Salary Bonus Compensation(1) Grants* Compensation
------------------ ----------- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Everett T. Keech, 1996 $189,422 $ --- $51,251 (2) --- ---
Chairman and Chief 1995 160,416 40,000 32,546 (2) 25,000 ---
Executive Officer 1994 140,000 70,350 --- 25,000 ---
Joseph T. Kingsley, (3) 1996 $113,654 $ --- $11,636 (4) 5,750 ---
Senior Vice President, 1995 74,375 10,000 --- 10,000 ---
Finance and Operations, 1994 --- --- --- --- ---
Chief Financial Officer
and Treasurer
Robert J. Greiner, Jr., 1996 $116,000 $ --- $13,283 (5) --- ---
Senior Vice President, 1995 111,769 8,075 12,939 (5) 5,000 ---
CATV Sales 1994 96,000 14,472 --- 5,000 ---
George M. Knapp, (6) 1996 $108,131 $ --- --- --- ---
Director and Former 1995 135,000 7,500 --- 10,000 ---
Senior Vice President 1994 135,000 54,270 --- --- ---
Norman F. Reinhardt, (7) 1996 $105,769 $ --- --- 3,250 ---
Vice President, Technology 1995 92,917 10,454 --- 7,500 ---
and Product Development 1994 43,269 23,568 --- 5,000 ---
</TABLE>
- -----------
* Does not include options granted under the proposed 1996 Incentive
Stock Plan which is subject to shareholder approval. See "Adopton of
the 1996 Incentive Stock Plan."
(1) Does not include amounts for perquisites and other personal benefits,
securities or property paid to any of the named executive officers,
which arose primarily as a result of Company cars, car allowances and
the use of memberships in private clubs, the value of which does not
exceed the lesser of $50,000 or ten percent of the total of annual
salary and bonus reported for such person.
(2) Includes: $33,702 and $21,202 for premiums on life insurance and $9,600
and $8,088 car allowance for the 1996 and 1995 fiscal years,
respectively.
(3) Mr. Kingsley became an officer of the Company in November 1995.
(4) Includes: $4,800 car allowance and $1,600 medical benefits.
(5) Includes: $5,998 and $5,998 car allowance and $6,101 and $6,133 medical
benefits for the 1996 and 1995 fiscal years, respectively.
(6) Mr. Knapp resigned as an officer of the Company in December 1995. Mr.
Knapp received salary payments through March 1996 under the provisions
of his employment contract with the Company.
(7) Mr. Reinhardt became an officer of the Company in January 1994.
-9-
<PAGE>
Stock Options
The following table sets forth grants of stock options made during the
Company's fiscal year ended July 31, 1996, to each of the named executive
officers of the Company:
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
Of Stock Price Appreciation
Individual Grants For Option Term
--------------------------------------------------------------------- ---------------------------
Number of % of Total Options
Options Granted to Employees Exercise Market Price on Expiration
Name Granted (2) in Fiscal Year Price Date of Grant Date 5% 10%
- ---- -------------------------------------------------------------------------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph T. Kingsley 3,250 13.5% $1.81 $1.81 4/11/2001 $1,625 $3,591
Joseph T. Kingsley 2,500 10.4% $2.38 $2.38 9/12/2000 $1,644 $3,633
Norman F. Reinhardt 3,250 13.5% $1.81 $1.81 4/11/2001 $1,625 $3,591
</TABLE>
- ------------------------------------
(1) Does not include options granted under the proposed 1996 Incentive
Stock Plan which is subject to shareholder approval. See "Adoption of
the 1996 Incentive Stock Plan."
(2) The grant of options disclosed in this table vest over the respective
three year period immediately following the date of grant.
Exercise of Options
The following table sets forth information regarding the exercise of
stock options and the value of any unexercised stock options of each of the
named executive officers of the Company during the fiscal year ended July 31,
1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year End Fiscal Year End
Shares Acquired Value -------------------------- ---------------------------
Name on Exercise Realized Vested Unvested Vested Unvested
- ---- ----------- -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Everett T. Keech 125,000* $151,563 50,000 25,000 $35,834 $6,166
Joseph T. Kingsley -- -- 3,333 12,417 -- $423
Robert J. Greiner, Jr. 30,000* $34,125 5,001 4,999 $2,467 $1,333
George M. Knapp 75,000 $99,923 3,333 6,667 -- --
Norman F. Reinhardt -- -- 5,884 9,866 -- $423
</TABLE>
- ----------------------------
* These shares remain unissued until payment in full of the note payable
to the Company delivered to the Company by each of Mr. Keech and Mr.
Greiner as consideration for the exercise of their respective options.
-10-
<PAGE>
Stock Performance Graph
The following graph illustrates a five year comparison of cumulative
shareholder return for each of the fiscal years ended July 31, 1992, 1993, 1994,
1995 and 1996, among the Company, the American Stock Exchange Market Index and a
peer group index. The peer group index consists of comparable companies which
manufacture and distribute products for the cable television industry.
$400|----------------------------------------------------------------|
| & |
| |
$350|----------------------------------------------------------------|
| &
| |
$300|----------------------------------------------------------------|
| & |
D | |
O $250|----------------------------------------------------------------|
L | & |
L | * |
A $200|----------------------------------------------------------------|
R | * *
S | |
$150|--------------------------------------------------#-------------#
| & # |
* # # |
$100&------------*------------*--------------------------------------|
# |
| |
$50|----------------------------------------------------------------|
| |
| |
$0|------------|------------|------------|------------|------------|
1991 1992 1993 1994 1995 1996
*=Pico Products Inc. &=Peer Group Index #=Amex Market Index
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pico Products, Inc. 100 100.00 105.56 222.22 177.78 172.22
- -------------------------------------------------------------------------------------------------------------------------------
Peer Group Index 100 131.65 241.14 285.95 372.38 341.37
- -------------------------------------------------------------------------------------------------------------------------------
Amex Market Index 100 107.85 117.77 120.70 146.38 149.82
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Assumes $100 invested on August 1, 1991 in the Company's Common Stock and
in each of the foregoing indices and assumes dividends reinvested.
The peer group index consists of Augat Inc., C-Cor Electronics Inc., California
Amplifier Inc., Microwave Filter Inc., Oak Industries, Pico Products, Inc., TSX
Corp. and Wegener Corp.
-11-
<PAGE>
Report of the Compensation Committee
To: The Board of Directors
It is the responsibility of the Company's Compensation Committee to
exercise the power and authority of the Board of Directors with respect to the
compensation of employees, the administration of the Company's stock option
plans, the review of compensation levels of members of management and the
evaluation of the performance of management.
In evaluating the reasonableness of compensation paid to the Company's
executive officers, the Committee takes into account how compensation compares
to compensation paid by competing companies as well as the Company's
performance. In making these determinations, the Committee has relied on
independent surveys of compensation of management of companies engaged in the
manufacture and distribution of electrical equipment, electronic components and
accessories.
It is the Company's policy that the compensation of executive officers
be based, in substantial part, on the Company's performance, as well as
individual contribution of each executive officer. As a result, much of an
executive officer's compensation is "at risk" in the form of stock option
compensation and incentive bonuses with target levels established by the
Committee for each position relative to position level. The Company's
performance for purpose of compensation decisions is measured against goals
established at the beginning of the fiscal year by the Compensation Committee
based on the fiscal year's budget approved by the Board of Directors. In
addition to financial performance, the Committee also weighs individual
performance so that in each case any discretionary annual bonuses reflect
individual achievements during the year. Also, no bonuses may be paid if the
Company fails to reach a stated earnings target.
During 1996, the Compensation Committee granted stock options awards to
some of the Company's executive officers under a new stock option plan adopted
by the Board of Directors in June, subject to approval by the shareholders of
the Company at the next annual meeting. The key factors considered by the
Committee in determining the awards to these executives were: their past
performance; their existing stock and stock option positions; their level of
responsibilities; their relative position in the Company; and the extent to
which their actions can affect the Company's future financial performance. In
addition, in order to tie the potential rewards from such grants to performance
by the Company, the 1996 awards contain vesting provisions which condition
exercise of the options on the Company's stock reaching a level of $8.00 per
share over a period of twenty consecutive trading days.
In September 1995, Everett T. Keech, the Company's Chairman and Chief
Executive Officer, entered into an employment agreement with the Company,
pursuant to which Mr. Keech's base salary level was set at $175,000, which
represented a continuation of the level set as of January 1, 1995. Pursuant to
the Employment Agreement, the base level is subject to increase in the
discretion of the Committee. Mr. Keech's salary was increased to $200,000,
effective January 1, 1996. Determination of Mr. Keech's salary level was based
on independent salary survey information and an evaluation of Mr. Keech's
individual performance.
Because stated earnings targets were not reached during fiscal year
1996, no bonuses were paid to senior executive management under the 1996
Management Incentive Plan.
Compensation Committee:
William W. Mauritz, Chairman
David A. Heenan
E.B. Leisenring, Jr.
-12-
<PAGE>
Employment Agreements
Everett T. Keech and the Company are parties to a three-year employment
agreement, dated September 22, 1995. Terms of this agreement include a minimum
base salary, a car allowance, participation in the Company's incentive
compensation plans and certain special life insurance plans, and other standard
benefits. For the 1996 calendar year, Mr. Keech's base salary is $200,000 per
year. In the event of a change of control, Mr. Keech would receive a payment
from the Company equal to 2.99 times his annual base compensation, as well as
continued payment by the Company of all of his health, dental, hospitalization
and disability benefits and car allowance for a period of two years. If the
Company terminates the employment agreement, other than for cause or due to Mr.
Keech's death or disability, the Company would be obligated to pay Mr. Keech a
sum equal to twice his annual base compensation plus his target bonus for the
year of termination and continuation of benefits for a period of one year.
Joseph T. Kingsley and the Company are parties to an employment
agreement, dated as of January 1, 1995. The agreement provides for successive
one year terms of employment unless the agreement is terminated for cause or
otherwise. Terms of the agreement include a minimum base salary, special life
insurance coverage and other standard benefits. For the 1996 calendar year, Mr.
Kingsley's base salary is $120,000. In the event of a change in control, Mr.
Kingsley will receive a payment from the Company equal to his annual base
compensation, as well as the continued payment by the Company of all of his
health, dental, hospitalization and disability benefits for a period of one
year. If the Company terminates the employment agreement with Mr. Kingsley,
other than for cause or due to Mr. Kingsley's death or disability, the Company
will be obligated to pay Mr. Kingsley a sum equal to his annual base
compensation and continuation of benefits for a period of one year.
Robert J. Greiner, Jr. and the Company are parties to an employment
agreement, dated as of December 26, 1994. The agreement provides for successive
one year terms of employment unless the agreement is terminated for cause or
otherwise. Terms of the agreement include a minimum base salary, special life
insurance coverage and other standard benefits. For the 1996 calendar year, Mr.
Greiner's base salary is $116,000. In the event of a change in control, Mr.
Greiner will receive a payment from the Company equal to his annual base
compensation, as well as the continued payment by the Company of all of his
health, dental, hospitalization and disability benefits for a period of one
year. If the Company terminates the employment agreement with Mr. Greiner, other
than for cause or due to Mr. Greiner's death or disability, the Company will be
obligated to pay Mr. Greiner a sum equal to his annual base compensation and
continuation of benefits for a period of one year.
Norman F. Reinhardt and the Company are parties to an employment
agreement, dated as of March 22, 1995. The agreement provides for successive one
year terms of employment unless the agreement is terminated for cause or
otherwise. Terms of the agreement include a minimum base salary and other
standard benefits. For the 1996 calendar year, Mr. Reinhardt's base salary is
$115,000. In the event of a change in control, Mr. Reinhardt will receive a
payment from the Company equal to his annual base compensation, as well as the
continued payment by the Company of all of his health, dental, hospitalization
and disability benefits for a period of one year. If the Company terminates the
employment agreement with Mr. Reinhardt, other than for cause or due to Mr.
Reinhardt's death or disability, the Company will be obligated to pay Mr.
Reinhardt a sum equal to his annual base compensation and continuation of
benefits for a period of one year.
Compensation of Directors
For the year ended July 31, 1996, outside directors received a fee of
$12,000 per year (payable monthly) and an annual grant of options for 2,000
shares of Common Stock for their services as directors. Additionally, the
chairmen of the compensation and audit committees, respectively, of the Board of
Directors receive an additional $6,000 and $3,000 per year (payable monthly) for
their services in these positions.
Compensation Committee Interlocks and Insider Participation
During the Company's fiscal year ended July 31, 1996, the Compensation
Committee consisted of Messrs. Mauritz, Emley, and Leisenring. Commencing with
the December 1995 meeting, the Committee consisted of Messrs. Mauritz, Heenan,
and Leisenring. Mr. Mauritz is an officer of DeSilva & Partners, Inc, a
management consulting firm specializing in executive recruitment which rendered
services to the Company for a $45,000 fee. See "Certain Transactions."
-13-
<PAGE>
ADOPTION OF THE 1996 INCENTIVE STOCK PLAN
On June 14, 1996, the Board of Directors unanimously approved a
proposal to adopt the Pico Products, Inc. 1996 Incentive Stock Plan (the "1996
Plan") and directed that the 1996 Plan be submitted to the shareholders for
adoption. (Certain technical amendments to the 1996 Plan were adopted by the
Board of Directors as of October 8, 1996, to conform the 1996 Plan to recently
adopted amendments to applicable rules and regulations of the Securities and
Exchange Commission. The following description of the 1996 Plan refers to the
1996 Plan as so amended.)
Description of the 1996 Plan
The purpose of the 1996 Plan is to promote the interests of the Company
by attracting and retaining outstanding individuals as directors, officers and
other key employees and consultants, by encouraging and enabling such persons to
acquire financial interests in the Company through the acquisition of the
Company's Common Stock and by providing performance incentives to such persons.
Under the 1996 Plan, the Company may grant incentive stock options
("ISOs"), non-qualified stock options ("NQSOs"), stock appreciation rights and
stock awards. The 1996 Plan reserves 195,000 shares for issuance. Any options or
stock appreciation rights which are canceled or are not exercised within the
exercise period may again be granted under the 1996 Plan. Shares issued pursuant
to a stock award under the 1996 Plan that are subsequently reacquired by the
Company will become available for future grants.
The 1996 Plan will be administered by a committee of two or more
members of the Board of Directors (the "Committee"). The Committee will have
sole authority as to decisions regarding the 1996 Plan. The Committee will
determine to whom (within the class of eligible persons) the options, stock
appreciation rights and stock awards will be granted, the number of shares to be
subject to each option or stock award, the duration of each option or stock
appreciation right, the time during which an option or stock appreciation right
may be exercised and, for the most part, other terms and conditions of the
options, stock appreciation rights and stock awards. The Committee is not
required to formulate similar terms and conditions of options, stock
appreciation rights, and stock awards for all recipients. The Committee may
establish any rules and regulations it deems necessary to administer the 1996
Plan. All determinations and actions by the Committee will be final and
conclusive for all purposes.
Participation in the 1996 Plan is limited to directors, officers,
employees and consultants of the Company and its affiliates. As of September 30,
1996, approximately 8 directors, 4 officers, 115 employees, who were not also
officers, and several consultants were eligible to participate in the 1996 Plan.
The exercise price of ISOs granted under the 1996 Plan will be 100% of
the fair market value of the Common Stock on the date of the grant of such ISOs.
The aggregate fair market value of the ISOs first exercisable by a recipient in
any calendar year may not exceed $100,000. With respect to NQSOs granted under
the 1996 Plan, the Committee will determine the exercise price at its
discretion. Common Stock delivered to a recipient upon the exercise of a stock
appreciation right will be valued at its fair market value on the date the right
is exercised.
At the time of exercise of an option, the recipient must pay to the
Company the full purchase price of the shares either in cash or, upon prior
approval by the Committee, by delivery to the Company of shares owned by the
recipient, the fair market value of which equals the purchase price of the
shares pursuant to the option being exercised. Unless otherwise determined by
the Committee, neither options nor rights under the 1996 Plan will be
transferable otherwise than by will or the laws of descent and distribution.
Options granted under the 1996 Plan may not have exercise periods
exceeding ten years from the date of grant. A stock appreciation right may be
exercised only as long as the option to which it relates is exercisable. Any
option granted under the 1996 Plan to a recipient subject to Section 16 of the
Exchange Act may be exercised only after six months from the date of its grant.
Similarly, Common Stock covered by a stock award granted to a recipient who is
subject to the reporting requirements of Section 16 of the Exchange Act may be
sold or otherwise disposed of only after six months from the date of grant of
the stock award. There is no equivalent restriction for stock appreciation
rights.
-14-
<PAGE>
The 1996 Plan will terminate on June 13, 2006. After termination of
the 1996 Plan, no grants may be effected; however, previously made grants will
remain outstanding in accordance with their terms and conditions and the terms
and conditions of the 1996 Plan.
The 1996 Plan may be amended by the Board of Directors of the Company
or the Committee without the approval of the shareholders, provided that no
action will be taken without the approval of the shareholders to increase the
aggregate number of shares of Common Stock subject to the 1996 Plan, materially
increase the benefits accruing to the recipients under the 1996 Plan or
materially modify the requirements as to eligibility for participation in the
1996 Plan. Notwithstanding the foregoing, the Committee may make any other
amendments, and may, at any time and in its sole discretion, declare any or all
options and rights outstanding under the 1996 Plan to be exercisable and any or
all stock awards outstanding under the 1996 Plan to be vested.
The affirmative vote of a majority of the outstanding shares eligible
to vote is required for the adoption of the 1996 Plan.
Federal Income Tax Consequences Under the 1996 Plan
The following is a brief description of the federal income tax
consequences of stock options, stock appreciation rights and stock awards which
may be granted under the 1996 Plan under present tax laws.
Incentive Stock Options. There will be no federal income tax
consequences to either the participant or the Company upon the grant of an ISO.
The participant will not have to recognize any income upon the exercise of an
ISO, and the Company will not be allowed any deduction, as long as the
participant does not dispose of the shares within two years from the date the
ISO was granted or within one year from the date the shares were transferred to
the participant (the "holding period requirement"). Upon a sale of the shares
after the holding period requirement, the participant will recognize a long-term
capital gain (or loss) measured by the excess (or deficit) of the amount
realized from such sale over the option price of such shares, but no deduction
will be allowed to the Company. If a participant disposes of shares before the
holding period requirement is satisfied, the participant will recognize ordinary
income in the year of disposition, and the Company will be entitled to a
corresponding deduction, in an amount equal to the lesser of (a) the excess of
the fair market value of the shares on the date of exercise over the option
price of the shares or (b) the excess of the amount realized from such
disposition over the option price of the shares. Where shares are sold before
the holding period requirement is satisfied, the participant will also recognize
a capital gain to the extent that the amount realized from the disposition of
the shares exceeded the fair market value of the shares on the date of exercise.
A participant may under certain circumstances be permitted to pay all
or a portion of the option price of an ISO by delivering Common Stock of the
Company held for more than one year. If the Common Stock delivered by a
participant as payment of the option price was acquired through a prior exercise
of an ISO or an option granted under an employee stock purchase plan, and if the
holding period requirement applicable to such Common Stock has not yet been met,
the delivery of such Common Stock to the Company could be treated as a taxable
sale or disposition of such stock. In general, where a participant pays the
option price of an ISO by delivering Common Stock of the Company, the
participant will have a zero tax basis in the shares received that are in excess
of the number of shares of Common Stock delivered in payment of the option
price.
For alternative minimum tax purposes, regardless of whether the
participant satisfies the holding period requirement, the excess of the fair
market value of the shares on the exercise date over the option price will be
treated as a positive adjustment to the participant's alternative minimum
taxable income for the year the ISO is exercised. If the shares are disposed of
in the year the ISO was exercised, however, the positive adjustment taken
-15-
<PAGE>
into account for alternative minimum tax purposes will not exceed the gain
realized on such sale. Exercise of an ISO may thus result in liability for
alternative minimum tax.
Non-qualified Stock Options. There will be no federal income tax
consequences to either the participant or the Company upon the grant of a NQSO.
Upon the exercise of an NQSO, the participant will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
each share on the date of exercise over the option price, and the Company will
be entitled to a federal income tax deduction of the same amount.
If a participant pays the option price of a NQSO by surrendering Common
Stock held by the participant for at least one year then, to the extent the
shares received upon exercise of the option do not exceed the number of shares
delivered, the participant will be treated as making a tax-free exchange of
stock and the new shares received will have the same tax basis and holding
period requirement as the shares given up. In such case, the participant will
recognize ordinary compensation income in an amount equal to the fair market
value of the shares received in excess of the shares delivered in payment of the
option price. The basis of such additional shares will equal their fair market
value on the date the option was exercised.
Stock Appreciation Rights. There will be no federal income tax
consequences to either the participant or the Company upon the grant of a stock
appreciation right ("SAR") or during the period that the unexercised right
remains outstanding. Upon the exercise of a SAR, the fair market value of the
shares issued or transferred and the amount of cash paid, if any, by the Company
to the participant will be taxable to the participant as ordinary income, and
the Company will be entitled to a corresponding deduction.
Stock Awards. Upon the issuance of Common Stock, the fair market value
of the Common Stock issued will be taxable to the participant as ordinary
income, and the Company will be entitled to a corresponding deduction.
As of September 30, 1996, the market value of the securities reserved
for issuance under the 1996 Plan was approximately $414,000.
-16-
<PAGE>
Options and Rights Granted Under the 1996 Plan
On June 14, 1996, the Compensation Committee of the Board of Directors
granted the following options to the following persons under the 1996 Plan
subject to approval of the 1996 Plan by the shareholders:
<TABLE>
<CAPTION>
Potential
Name and Position NQSOs Granted Realizable Value of Options
- ----------------- ------------- ---------------------------
5% 10%
-- ---
<S> <C> <C> <C>
Everett T. Keech, 50,000 $0* $0*
Chairman and Chief
Executive Officer
Joseph T. Kingsley, 25,000 0* 0*
Senior Vice President,
Finance and Operations,
Chief Financial Officer and Treasurer
Robert G. Cunningham, 10,000 0* 0*
Senior Vice President, Sales and
Marketing
Robert J. Greiner, Jr., 10,000 0* 0*
Senior Vice President, CATV Sales
Norman F. Reinhardt, 25,000 0* 0*
Vice President, Technology
and Product Development
</TABLE>
- ----------------------
* Each option has an exercise price equal to 100% of the June 14, 1996 closing
price of the Company's Common Stock which was $2.375, but the exercise of these
options is conditioned upon the price of the Company's Common Stock reaching
$8.00 per share over a period of 20 consecutive trading days. The potential
realizable value of the options at the assumed 5% and 10% rates of increase in
the price of the Common Stock compounded annually for the ten year term of the
options is zero because at such assumed rates, the per share price of the Common
Stock would not reach $8.00 within the ten year term of the options.
A vote in favor of ratification of the 1996 Plan will also be a vote in
favor of ratification of the granted options. Shareholders not wishing to
approve the grant of these options should vote against ratification of the 1996
Plan.
The Board of Directors recommends a vote FOR the approval of the 1996
Plan and the options granted thereunder.
ADOPTION OF AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION
For the reasons hereinafter set forth, the Board of Directors of the
Company has authorized an amendment to the Company's certificate of
incorporation which would change the Company's name to "Pico Telecommunications,
Inc." The amendment is subject to approval by the Company's shareholders.
-17-
<PAGE>
The Board of Directors believes that the name "Pico Telecommunications,
Inc." better reflects the Company's existing businesses, which are principally
in the telecommunications industry. The Board believes that the change of name
will increase awareness of the Company's identity and its products and services.
The cost of the name change is not expected to be significant.
Shareholders will not be required to exchange outstanding stock certificates.
The name change will however require various filings in those states where the
Company owns or leases property, as well as notification to the Company's
suppliers, creditors, banks and business associates.
Approval of the amendment requires an affirmative vote of a majority
of the outstanding shares of Common Stock. The Board of Directors recommends a
vote FOR the approval of the amendment to the Company's certificate of
incorporation.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, and its predecessor, Touche Ross & Co., has been
the independent public accountant for the Company since January 1, 1982.
Deloitte & Touche LLP has been selected by the Company's Board of Directors as
the Company's independent public accountant for the current fiscal year. This
appointment will be submitted to the shareholders for ratification at the
Meeting.
A representative of Deloitte & Touche LLP is expected to be present at
the Meeting. He will be afforded an opportunity to make a statement if he
desires and will be available to respond to questions by shareholders. If the
shareholders do not ratify the selection of this firm, the selection of another
firm of independent public accountants will be considered by the Board of
Directors.
The Board of Directors may, in its discretion, direct appointment of a
new independent accounting firm at any time during the year if the Board
believes that such a change would be in the best interest of the Company and its
shareholders. No such change is anticipated.
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of Deloitte & Touche LLP as the Company's independent public
accountants.
EXPECTED VOTE OF DIRECTORS AND OFFICERS
The Company expects that the directors and officers of the Company, who
are the beneficial owners of approximately 11.9% of the outstanding Common Stock
of the Company, will vote, or direct that their shares be voted, in favor of the
election of the directors nominated herein, the adoption of the 1996 Plan, the
adoption of the name change, and the ratification of the selection of the
Company's independent public accountants.
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matters appropriate
for shareholder action consistent with regulations of the Securities and
Exchange Commission. Should a shareholder intend to present a proposal at the
annual meeting for the fiscal year ending July 31, 1997, it must be received by
the Secretary of the Company (at 12500 Foothill Boulevard, Lakeview Terrace,
California 91342) not later than July 18, 1997, and meet certain other
requirements of the rules of the SEC relating to stockholders' proposals, in
order to be considered for inclusion in the Company's proxy statement and form
of proxy card relating to that meeting.
-18-
<PAGE>
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
July 31, 1996, accompanies this Proxy Statement. The Annual Report to
Shareholders does not constitute a part of the proxy solicitation materials.
MISCELLANEOUS
This solicitation is made on behalf of the Board of Directors of the
Company, and its cost (including preparing and mailing of the notice, this proxy
statement and the form of proxy card) will be paid by the Company. The Company
will also make arrangements with brokerage houses and other custodians, nominees
and fiduciaries to send the proxy materials to their principals and will
reimburse them for their reasonable expenses in so doing. To the extent
necessary in order to assure sufficient representation at the Meeting, officers
and regular employees of the Company may solicit the return of proxies by mail,
telephone, telegram and personal interview. No compensation in addition to
regular salary and benefits will be paid to any such officer or regular employee
for such solicitation. Although the Company has no present plans to employ
solicitors in connection with the Meeting, if in Management's judgment
additional solicitations are necessary to secure a quorum, solicitors may be
hired at the Company's expense.
Where information contained in this Proxy Statement rests peculiarly
within the knowledge of a person other than the Company, the Company has relied
upon information furnished by such person.
By Order of the Board of Directors,
Spencer W. Franck, Jr.
Secretary
19
<PAGE>
PROXY PROXY
PICO PRODUCTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
December 12, 1996
THIS PROXY IS SOLICITED ON BEHALF OF
THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints Everett T. Keech and William W.
Mauritz, and each of them jointly and severally, Proxies, with full power of
substitution, to vote, as designated on the reverse side, all shares of Common
Stock of Pico Products, Inc. held of record by the undersigned on November 8,
1996, at the Annual Meeting of Shareholders to be held on December 12, 1996, or
any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE SIX
NOMINEES TO SERVE AS DIRECTORS, "FOR" THE ADOPTION OF THE COMPANY'S 1996
INCENTIVE STOCK PLAN, "FOR" THE PROPOSAL TO CHANGE THE NAME OF THE COMPANY TO
"PICO TELECOMMUNICATIONS, INC.", AND "FOR" THE RATIFICATION OF THE APPOINTMENT
OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. The
shares represented by this Proxy will be voted as specified on the reverse side.
IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED on the reverse side, THIS PROXY
WILL BE VOTED "FOR" ITEMS 1, 2, 3, AND 4.
<PAGE>
[REVERSE SIDE OF CARD]
1. ELECTION OF DIRECTORS (Term to expire at next Annual Meeting).
For all nominees WITHHOLD INSTRUCTION: TO WITHHOLD AUTHORITY
listed to the right AUTHORITY to vote TO VOTE FOR ANY INDIVIDUAL NOMINEE,
(except as marked for all nominees STRIKE A LINE THROUGH THE NOMINEE'S
to the contrary at listed to the right NAME IN THE LIST BELOW
right)
Charles G. Emley, Jr., David A.
Heenan, Everett T. Keech, E.B.
Leisenring, Jr., Pierson G. Mapes,
and William W. Mauritz
2. PROPOSAL TO ADOPT THE 1996 INCENTIVE STOCK PLAN.
FOR AGAINST ABSTAIN
3. PROPOSAL TO CHANGE THE NAME OF THE COMPANY TO "PICO TELECOMMUNICATIONS, INC."
FOR AGAINST ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP as the
independent public accountants of the Company for the year ending July 31,
1997.
FOR AGAINST ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof and
matters incident to the conduct of the meeting.
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 and affix
corporate seal. If a partnership, please sign in partnership name by general
partner.
Date: 1996
-----------------------------------
- ---------------------------------------------
Signature
- ---------------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR
VOTES.
