<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:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.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| 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 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, and "FOR" the ratification of the
appointment 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,
/s/ Everett T. Keech
--------------------------
Everett T. Keech
Chairman and Chief
Executive Officer
<PAGE>
PICO PRODUCTS, INC.
12500 Foothill Boulevard
Lakeview Terrace, California 91342
--------------------------------------------
NOTICE OF 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 ratify the appointment by the
Board of Directors of Deloitte & Touche LLP as the independent public
accountants for the Company for the fiscal year ending July 31, 1997.
4. 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,
/s/ Spencer W. Franck, Jr.
-------------------------------------
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"), 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 share of Common
Stock on each matter submitted to the shareholders at 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 (iii) a majority of the votes cast at the
Meeting will be required for the ratification of the appointment 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,
abstentions and broker non-votes will have the same effect as a "no" vote.
With respect to the ratification of the
<PAGE>
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.
Shares of
Common Stock
Beneficially Owned Percent of
as of Class
Name and Address September 30, 1996 (Approx.)(1)
- ------------------------------------- ------------------ ------------
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
E.B. Leisenring, Jr. (8) 25,667 *
One Tower Bridge, Suite 501
West Conshohocken, Pennsylvania 19428
2
<PAGE>
Shares of
Common Stock
Beneficially Owned Percent of
as of Class
Name and Address September 30, 1996 (Approx.)(1)
- ------------------------------------- ------------------ ------------
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
Bermuda Trust (Jersey) Limited (12) 350,000 8.4%
P.O. Box 284
Commercial House, Commercial Street
St. Helier, Jersey, Channel Islands
All directors and officers as a group
(12 individuals) 795,504 18.2%
- ------
* 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.
(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.
3
<PAGE>
(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 spouse 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.
(12) Bermuda Trust (Jersey) Limited ("Bermuda Trust") 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"). Bermuda Trust 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.
Bermuda Trust 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. Bermuda Trust 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.
4
<PAGE>
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 5 was filed late by Mr. Knapp; (iv) with respect to
certain initial holdings beneficially owned by Mr. Leisenring's spouse, a
Form 3 was amended and filed after its due date 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 of Shareholders 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
<TABLE>
<CAPTION>
Name Age Director Since Position
---------------------- ----- -------------- -----------------------------------
<S> <C> <C> <C>
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
</TABLE>
- ------
* 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. Before 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.
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.
6
<PAGE>
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. From October 1995 to June 1996, Mr.
Cunningham was National Sales Manager for the Communications and Network
Products Division of Amphenol Corporation. 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. From 1964 to 1974, Mr. Greiner was Product
Manager, Passive Systems for Magnavox CATV Systems.
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
7
<PAGE>
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 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 to the
Company 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
shares of 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. Greiner is indebted to the Company pursuant to a note payable to the
Company in the amount of approximately $36,609, which was delivered to the
Company as consideration for the exercise of options to purchase 30,000
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
shares of Common Stock so acquired 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.
Mr. Mauritz is an officer of DeSilva & Partners, Inc., a management
consulting firm specializing in executive recruitment. 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, 1995 92,917 10,454 -- 7,500 --
Technology and 1994 43,269 23,568 -- 5,000 --
Product Development
</TABLE>
- ------
* 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."
(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 1994.
(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>
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 notes 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.
* Pico Products, Inc. # Peer Group Index & Amex Market Index
$400|------------------------------------------------------------------|
| # |
| # |
$350|------------------------------------------------------------------|
| |
| |
$300|------------------------------------------------------------------|
| # |
D | |
O $250|------------------------------------------------------------------|
L | # |
L | * |
A $200|------------------------------------------------------------------|
R | * * |
S | |
$150|------------------------------------------------&-------------&---|
| # & & |
| & * |
$100|---*#&---------*--------------------------------------------------|
| |
| |
$50|------------------------------------------------------------------|
| |
| |
$0|----|----------|---------|-----------|-----------|-----------|----|
1991 1992 1993 1994 1995 1996
<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.
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 as of 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 of the Board of Directors
receive an additional $6,000 and $3,000 per year, respectively, (payable
monthly) for their services in these positions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Messrs. Mauritz, Emley and
Leisenring for the first four months of fiscal 1996. 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 Secur-
ities 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. 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 reserves 195,000 shares for issuance. As of
September 30, 1996, the market value of the securities reserved for issuance
under the 1996 Plan was approximately $414,000.
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 either deliver
stock appreciation rights, if any, or pay to the Company the full purchase
price of the shares 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. Stock appreciation rights may be exercised only in
conjunction with the surrender of options granted by the Company, whether
pursuant to the 1996 Plan or otherwise. The exercise of a stock appreciation
right entitles the holder to receive from the Company an amount equal to the
excess of the fair market value of the shares to which the surrendered
options pertain over the aggregate exercise price of such options. 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
14
<PAGE>
or stock appreciation right 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.
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.
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 is satisfied, 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. 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
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.
15
<PAGE>
If a participant pays the option price of a NQSO by surrendering Common
Stock held by the participant, 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 or during the period that the unexercised right
remains outstanding. Upon the exercise of a stock appreciation right, 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 to a participant pursuant
to a stock award, the participant will generally recognize ordinary
compensation income in an amount equal to the fair market value of such stock
on the date of issuance, and the Company will be entitled to a corresponding
deduction. If the sale of the stock awarded to a participant could subject
such participant to liability under Section 16(b) of the Exchange Act, unless
the participant makes a timely election under Section 83(b) of the Internal
Revenue Code, the recognition of ordinary compensation income (and the
Company's corresponding deduction) will be deferred until the time such sale
would no longer subject the participant to suit under Section 16(b) and the
amount of income will be based upon the fair market value of the Common Stock
at such later time.
OPTIONS GRANTED UNDER THE 1996 PLAN
On June 14, 1996, the Compensation Committee of the Board of Directors
granted the following options under the 1996 Plan subject to approval of the
1996 Plan by the shareholders (the "Contingent Options"):
<TABLE>
<CAPTION>
Options Potential
Name and Position Granted (1) Realizable Value of Options (2)
----------------------------- ----------- -------------------------------
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>
- ------
(1) The options disclosed in this table vest over the respective three year
period immediately following the date of grant.
16
<PAGE>
(2) The Contingent Options have 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 twenty
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 approval of the 1996 Plan will also be a vote in favor
of approval of the Contingent Options. Shareholders not wishing to approve
the Contingent Options should vote against approval of the 1996 Plan.
The affirmative vote of a majority of the outstanding shares eligible to
vote is required for the adoption of the 1996 Plan. The Board of Directors
recommends a vote FOR the approval of the 1996 Plan and the Contingent
Options granted thereunder.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, and its predecessor, Touche Ross & Co., has been
the independent public accountants for the Company since January 1, 1982.
Deloitte & Touche LLP has been appointed by the Company's Board of Directors
as the Company's independent public accountants 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 appointment of this firm, the appointment 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
appointment 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, and the ratification of the appointment of the Company's
independent public accountants.
17
<PAGE>
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 shareholders' proposals, in
order to be considered for inclusion in the Company's Proxy Statement and
form of proxy card relating to that meeting.
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. The Company has
engaged ChaseMellon Shareholder Services ("CMSS") to assist in the
solicitation of proxies from shareholders. The Company has entered into an
agreement with CMSS pursuant to which the Company will pay CMSS a fee of
$5,500, plus reimbursement of reasonable out-of-pocket expenses, for such
solicitation services.
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,
/s/ Spencer W. Franck, Jr.
------------------------------------
Spencer W. Franck, Jr.
Secretary
18
<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 of
this proxy card, 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, 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 of this proxy
card. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED on the reverse
side, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2, AND 3.
<PAGE>
Please mark
your votes
like this /X/
1. ELECTION OF DIRECTORS (Term to expire at next Annual Meeting).
/ / / / INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
For all WITHHOLD INDIVIDUAL NOMINEE, STRIKE A
nominees AUTHORITY to LINE THROUGH THE NOMINEE'S
listed to the right vote for all NAME IN THE LIST BELOW
(except as nominees
marked listed to Charles G. Emley, Jr., David A.
to the the right Heenan, Everett T. Keech, E.B.
contrary Leisenring, Jr., Pierson G. Mapes,
at right) and William W. Mauritz
FOR AGAINST ABSTAIN
2. PROPOSAL TO ADOPT THE 1996
INCENTIVE STOCK PLAN / / / / / /
3. PROPOSAL TO RATIFY THE APPOINTMENT
OF DELOITTE & TOUCHE LLP as the
independent public accountants of
the Company for the year ending
July 31, 1997. / / / / / /
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof
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 CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
* FOLD AND DETACH HERE *
