SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant | |
Check the appropriate box:
| | Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
FERROFLUIDICS CORPORATION
(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:
(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>
FERROFLUIDICS CORPORATION
40 Simon Street
Nashua, New Hampshire 03061
(603) 883-9800
----------------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on December 17, 1998
----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Ferrofluidics Corporation (the "Company") will be held on Thursday, December 17,
1998, at 10:00 a.m., local time, at the Crowne Plaza, Nashua, New Hampshire (the
"Annual Meeting"), for the purpose of considering and voting upon:
1. The election of two Class III Directors of the Company, each for a
three-year term;
2. The three stockholder proposals which are set forth and described in
the attached Proxy Statement; and
3. Such other business as may properly come before the meeting and any
adjournments or postponements thereof.
Under the provisions of the Company's By-Laws, the Board of Directors has
fixed the close of business on October 20, 1998 as the record date for the
determination of stockholders entitled to notice of and vote at the Annual
Meeting and any adjournments or postponements thereof. Only holders of common
stock of record at the close of business on that date will be entitled to notice
of and vote at the Annual Meeting and any adjournments or postponements thereof.
In the event there are not sufficient votes with respect to the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit further solicitation of proxies.
By Order of the Board of Directors,
Stuart M. Cable, Clerk
November 25, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
FERROFLUIDICS CORPORATION
40 Simon Street
Nashua, New Hampshire 03061
(603) 883-9800
-----------------------------
PROXY STATEMENT
-----------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, DECEMBER 17, 1998
This Proxy Statement and the enclosed Proxy Card are being furnished in
connection with the solicitation of proxies by the Board of Directors of
Ferrofluidics Corporation (the "Company") for use at the Annual Meeting of
Stockholders of the Company to be held on Thursday, December 17, 1998, at 10:00
a.m., local time, at the Crowne Plaza, Nashua, New Hampshire, and any
adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following matters:
1. The election of two Class III Directors of the Company, each for a
three-year term;
2. The three stockholder proposals which are set forth and described in
the attached Proxy Statement; and
3. Such other business as may properly come before the meeting and any
adjournments or postponements thereof.
The Notice of Annual Meeting, Proxy Statement and Proxy Card are first
being mailed to stockholders of the Company on or about November 25, 1998 in
connection with the solicitation of proxies for the Annual Meeting. The Board of
Directors has fixed the close of business on October 20, 1998 as the record date
for the determination of stockholders entitled to notice of and vote at the
Annual Meeting and any adjournments or postponements thereof (the "Record
Date"). Only holders of common stock of record at the close of business on the
Record Date will be entitled to notice of and vote at the Annual Meeting. As of
the Record Date, there were 6,226,301 shares of the Company's common stock, par
value $.004 per share ("Common Stock"), outstanding and entitled to vote at the
Annual Meeting and 2,512 stockholders of record. Each share of Common Stock
outstanding as of the close of business on the Record Date entitles the holder
thereof to one vote on each matter properly submitted at the Annual Meeting.
Proxies; Revocation of Proxies
Stockholders of the Company are requested to complete, date, sign and
return the accompanying Proxy Card in the enclosed envelope. Common Stock
represented by properly executed proxies received by the Company and not revoked
will be voted at the Annual Meeting in accordance with the instructions
contained therein. If instructions are not given therein, properly executed
proxies will be voted "FOR" the election of the two nominees for Director and
"AGAINST" each of the three stockholder proposals. The Company is not aware of
any other matters to be presented at the Annual Meeting and it is not
anticipated that any matters other than those set forth in this Proxy Statement
will be presented at the
<PAGE>
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the discretion of the proxy holders.
Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Clerk of the
Company, or by signing and duly delivering a proxy bearing a later date, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy.
Expenses of Solicitation
All expenses of this solicitation will be borne by the Company. Brokerage
firms, nominees, fiduciaries and other custodians have been requested to forward
proxy solicitation materials to the beneficial owners of shares of Common Stock
held of record by such persons, and the Company will reimburse such brokerage
firms, nominees, fiduciaries and other custodians for reasonable out-of-pocket
expenses incurred by them in connection therewith. In addition to solicitation
of proxies by mail, directors, officers and employees of the Company, without
receiving additional compensation therefor, may solicit proxies from
stockholders of the Company by telephone, telefax, letter, in person or by other
means. The Company also has engaged D.F. King & Co., Inc., a professional
soliciting organization, to aid in the solicitation of proxies. D.F. King & Co.,
Inc. will receive reasonable and customary compensation for such services, plus
reimbursement for certain out-of-pocket expenses.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
Nominees
The Board of Directors of the Company consists of six members and is
divided into three classes, with two directors in Class I, two directors in
Class II and two directors in Class III. Directors serve for three-year terms
with one class of Directors being elected by the Company's stockholders at each
annual meeting.
At the Annual Meeting, two Class III Directors will be elected to serve
until the 2001 annual meeting of stockholders and until their successors are
duly elected and qualified. The Board of Directors has nominated Dean Kamen and
Paul F. Avery, Jr. for election as Class III Directors. Certain information with
respect to the persons nominated by the Board of Directors for election as
Directors is shown below under "Information Regarding Directors." Unless
otherwise specified in the proxy, it is the intention of the persons named in
the proxy to vote the shares represented by each properly executed proxy for the
election as Directors of each of the nominees. Each of the nominees has agreed
to stand for election and to serve if elected as a Director. If any of the
persons nominated by the Board of Directors fails to stand for election or is
unable to accept election, however, proxies not marked to the contrary will be
voted in favor of the election of such other person as the Board of Directors
may recommend.
Recommendation of the Board of Directors
The Board of Directors of the Company recommends that the Company's
stockholders vote "FOR" the election of the two nominees of the Board of
Directors as Directors of the Company.
2
<PAGE>
INFORMATION REGARDING DIRECTORS
Meetings of Board of Directors and Committees
During the fiscal year ended June 27, 1998 ("fiscal 1998"), the Board of
Directors of the Company held seven meetings. Each Director who was a Director
during fiscal 1998 attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors and meetings held by all committees of the
Board of Directors on which such Director served, with the exception of Mr.
Kamen.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The members of the Audit Committee are Messrs. Nichols
and Stone. The Audit Committee reviews the financial statements of the Company
and the scope of the annual audit, monitors the Company's internal financial and
accounting controls and recommends to the Board of Directors the appointment of
independent certified public accountants. The Audit Committee met three times
during fiscal 1998. The members of the Compensation Committee are Messrs.
Rittereiser and Hazard. The Compensation Committee recommends the compensation
levels of executive officers of the Company to the Board of Directors. The
Compensation Committee met one time during fiscal 1998. The Board of Directors
does not have a nominating committee.
Compensation of Directors
Directors who are officers or employees of the Company receive no
compensation for their service as Directors. Directors who are not officers or
employees of the Company receive such compensation for their services as the
Board of Directors may from time to time determine. Non-employee Directors each
receive an annual retainer of $16,000, payable quarterly. In addition,
non-employee Directors receive $1,000 for each Board of Directors meeting or
committee meeting attended or $600 for attending each committee meeting that is
held on the same day as a Board of Directors meeting or meeting of another
committee on which such Director serves.
Pursuant to the Ferrofluidics Corporation Amended and Restated 1995 Stock
Option and Incentive Plan (the "1995 Incentive Plan"), eligible non-employee
Directors are entitled to receive options to purchase shares of Common Stock in
accordance with the formula provisions thereof. Under the 1995 Incentive Plan,
eligible non-employee Directors automatically receive an option to purchase
3,000 shares of Common Stock on the fifth business day after each annual meeting
of stockholders of the Company, commencing with the 1995 Annual Meeting.
Accordingly, on November 25, 1997, each of Messrs. Hazard, Stone, Nichols,
Rittereiser and Kamen was granted an option to purchase 3,000 shares of Common
Stock at an exercise price of $6.125. All such options vested and became
immediately exercisable upon grant and have an exercise price equal to 100% of
the fair market value of a share of Common Stock on the grant date.
Set forth below is certain information regarding the Directors of the
Company, including the two Class III Directors who have been nominated for
election at the Annual Meeting, based on information furnished by them to the
Company.
<TABLE>
<CAPTION>
Director
Name Age Since
- ---- --- --------
<S> <C> <C>
Class I
Stephen B. Hazard................................. 53 1994
Dennis R. Stone................................... 51 1994
Class II
Howard F. Nichols................................. 70 1979
Robert P. Rittereiser............................. 60 1989
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Class III
<S> <C> <C>
Dean Kamen*....................................... 47 1989
Paul F. Avery, Jr.*............................... 69 1998
</TABLE>
- -----------------
* Nominee for election.
Mr. Avery has been the President, Chief Executive Officer and Chairman of
the Board of Directors of the Company since June 3, 1998. He also served as the
Chief Executive Officer of the Company from October 1, 1993 until June 25, 1996,
President of the Company from October 1, 1993 until January 1, 1995 and Chairman
of the Board and Treasurer of the Company from October 1, 1993 until May 1,
1997. He is also President of P.F. Avery Corporation, a management consulting
firm, a position he has held since 1983. From 1967 to 1983 he was President and
Treasurer of C.E. Avery, a wholly-owned subsidiary of Combustion Engineering,
Inc., and President and Chief Executive Officer of CE-KSB Pump Company, Inc.
Both companies were involved in the design and fabrication of pumps and reactor
internals for the utility industry. Mr. Avery is also general partner of a 3MW
hydro-electric facility in Nashua, New Hampshire, and serves as a director of
several privately held companies.
Mr. Hazard is founder and managing partner of the law firm of Pepe &
Hazard, Hartford, Connecticut. He is a director of First New England Capital,
L.P., a closely-held small business investment company. He is also a trustee and
a member of the executive committee of the Kingswood-Oxford School.
Mr. Kamen is the founder and Chairman and Chief Executive Officer of DEKA
Research and Development Corporation, which develops highly specialized medical
equipment. Mr. Kamen is the founder and, from 1976 to 1982, was the Chief
Executive Officer of Auto-Syringe, Inc., a manufacturer of medical devices that
was acquired by Baxter Healthcare Corporation. He is a member of the Board of
Directors of Sander's Prototype, Inc. and Zero Emissions Technology. He also
serves as a director of several privately-held companies.
Mr. Nichols is a consultant. Until July 1989, he was a Vice President of
The First National Bank of Boston, Trust Department. He is also a member of the
Board of Directors of Doble Engineering Co., Bemis Associates, Inc., Weymouth
Art Leather Co., McCrillis & Eldredge Insurance, Inc. and Seamans Supply Co.,
all of which are privately-held companies.
Mr. Rittereiser has been the Chairman of the Board of Directors and Chief
Executive Officer of Gruntal Financial, L.L.C., an investment services firm
based in New York City, and its wholly-owned subsidiary, Gruntal & Co., L.L.C.,
since 1995. He has also been the Chairman of the Board of Directors of Yorkville
Associates Corp., a private investment and financial concern, since its
formation in 1989. He served as a Trustee of the DBL Liquidating Trust from
April 1992 to April 1996. He served as Director in 1990, as Chairman in November
1992, and as President and Chief Executive Officer from March 1993 until
February 1995 of Nationar, a banking services corporation. He is also a member
of the Board of Directors of Cendant Corporation and Interchange Financial
Services Corp.
Mr. Stone is a stockholder and director of the accounting firm of Nathan
Wechsler & Company, Professional Association, Portsmouth, New Hampshire. From
1989 to 1997, he was a principal in the firm of Dennis R. Stone, CPA,
Portsmouth, New Hampshire. From 1989 to 1991 he also served as Executive Vice
President and Chief Financial Officer of The Blake Insurance Group, Inc.,
Portsmouth, New Hampshire. Mr. Stone also serves as an investigative auditor for
the New Hampshire Supreme Court Professional Conduct Committee. He is a member
of the Board of Directors of Odyssey House, Inc.
4
<PAGE>
INFORMATION REGARDING EXECUTIVE OFFICERS
The names and ages of all executive officers of the Company and
principal occupation and business experience during at least the last five years
for each are set forth below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Paul F. Avery, Jr. 69 President, Chief Executive Officer and Chairman of the
Board
Alvan F. Chorney 53 Vice President and General Manager--Components
Division
William B. Ford 58 Vice President and Chief Financial Officer and Treasurer
Thomas J. Uhlig 48 Vice President and General Manager--Systems Division
</TABLE>
Mr. Avery has held the positions of President, Chief Executive Officer and
Chairman of the Board of the Company since June 3, 1998. Mr. Avery also served
as Chief Executive Officer of the Company from October 1, 1993 until June 25,
1996, President of the Company from October 1, 1993 until January 1, 1995 and
Chairman of the Board and Treasurer of the Company from October 1, 1993 until
May 1, 1997. See "Information Regarding Directors" above.
Mr. Chorney has held the position of Vice President and General
Manager--Components Division since April 19, 1996. Prior to that, Mr. Chorney
served as Senior Vice President of the Company from November 1991 to April 19,
1996. Mr. Chorney was also a Director of the Company from 1986 to April 1994.
Mr. Ford has held the position of Treasurer of the Company since May 19,
1997 and the position of Vice President and Chief Financial Officer of the
Company since September 23, 1996. From November 1993 until April 1995, Mr. Ford
was Vice President and Chief Financial Officer of Versyss Incorporated, a
software developer and distributor of integrated hardware and software systems
for medical practice management and other small business applications. From 1987
to November 1993, he was a Director in the Financial Advisory Services
consulting practice of Coopers & Lybrand L.L.P.
Mr. Uhlig held the position of Vice President and General Manager--Systems
Division from April 22, 1996 until April 30, 1998, at which time Mr. Uhlig
resigned from said position. Before then, he served as President of Johnstown
America Corporation, a manufacturer of railroad freight cars and components,
from 1993 until April 1996. From 1992 to 1993, he was Director of Manufacturing
of The Timken Company, a manufacturer of tapered roller bearings, and before
that he was President of MPB Corporation, a subsidiary of The Timken Company and
a manufacturer of precision ball and roller bearings.
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three years to the Company's Chief
Executive Officer and the four most highly compensated executive officers who
earned in excess of $100,000 during fiscal 1998.
Summary Compensation Table
The following table shows for the fiscal years ended June 30, 1996, June
28, 1997 and June 27, 1998, the annual compensation paid by the Company to the
Chief Executive Officer and the four most highly compensated executive officers
who earned in excess of $100,000 during fiscal 1998.
5
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
----------------------------------------------- ------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Fiscal Compensation Stock Award(s) Warrants/ Payouts Compensation
Principal Position Year Salary($)(3) Bonus($) ($) ($) Options(#) ($) ($)
- ------------------ ------ ------------ -------- ------------ -------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul F. Avery, Jr. 1998 19,230(4) -- 1,111(5) -- 75,000(8) -- 120,450(9)
President, Chief Executive 1997 183,814(4) -- 3,615(5) -- -- -- 19,350(10)
Officer and Chairman of 1996 223,931- 8,774(5) -- 65,000(8) -- 16,400(11)
the Board (1)
Salvatore J. Vinciguerra 1998 230,520 -- 2,750(5) -- -- -- 45,564(12)
Chief Executive Officer (2) 1997 255,961 -- 5,043(5) -- -- -- --
1996 202,938 -- 6,839(5) -- 50,000(8) -- --
Alvan F. Chorney 1998 183,974 1,720 1,000(6) -- -- -- --
Vice President and 1997 170,223 5,156 1,000(6) -- -- -- 2,099(13)
General Manager-- 1996 164,097 5,152 1,000(6) -- -- -- --
Components Division
William B. Ford 1998 150,365 -- -- -- -- -- 5,832(13)
Vice President, 1997 112,223(4) -- -- -- 30,000(8) -- --
Chief Financial Officer 1996 -- -- -- -- -- -- --
and Treasurer
Thomas J. Uhlig 1998 139,839(4) 1,650 -- -- -- -- --
Vice President and 1997 160,154 4,688 2,308(5) -- -- -- --
General Manager-- 1996 28,846(4) -- 962(5) 125,000(7) 15,000(8) -- --
Systems Division
</TABLE>
- -------------------
(1) Mr. Avery became the President, Chief Executive Officer and Chairman of the
Board of the Company on June 3, 1998.
(2) Mr. Vinciguerra was the Chief Executive Officer of the Company from June
26, 1996 until June 1, 1998.
(3) Includes all voluntary pre-tax contributions to the Ferrofluidics
Corporation Tax Savings and Deposit and Investment Plan.
(4) This amount represents less than a full year's salary.
(5) This amount represents an automobile allowance.
(6) This amount represents an allowance for medical and health expenses
incurred by Mr. Chorney in excess of amounts covered by the Company's group
health plan.
(7) Represents 10,000 shares of restricted stock which had a market value as of
the date of grant of $125,000. Seventy-five percent (75%) of the shares
vested on April 22, 1998. In connection with Mr. Uhlig's resignation from
the position of Vice President and General Manager--Systems Division on
April 30, 1998, and pursuant to the provisions of the Company's 1994
Restricted Stock Plan, the remaining 2,500 restricted shares held by Mr.
Uhlig were forfeited.
(8) Represents stock options.
(9) This amount includes the full dollar value of insurance premiums paid by
the Company on behalf of Mr. Avery with respect to term life insurance in
the amount of $10,450 and payments made to Mr. Avery pursuant to a
consulting agreement with the Company in the amount of $110,000. See
"Employment Agreements" below.
6
<PAGE>
(10) This amount includes the full dollar value of insurance premiums paid by
the Company on behalf of Mr. Avery with respect to term life insurance in
the amount of $9,350 and payments made to Mr. Avery pursuant to a
consulting agreement with the Company in the amount of $10,000. See
"Employment Agreements" below.
(11) This amount represents the full dollar value of insurance premiums paid by
the Company on behalf of Mr. Avery with respect to term life insurance.
(12) This amount represents payments made by the Company to Mr. Vinciguerra
pursuant to an agreement between the Company and Mr. Vinciguerra in
connection with Mr. Vinciguerra's departure from the Company on June 1,
1998. See "Employment Agreements" below.
(13) This amount represents reimbursement by the Company to Mr. Chorney and Mr.
Ford, respectively, of expenses incurred in connection with their
relocation to New Hampshire.
Option Grants in Last Fiscal Year
The following table sets forth each grant of stock options during fiscal
1998 to the Chief Executive Officer and each other executive officer named in
the Summary Compensation Table. No stock appreciation rights ("SARs") have been
granted.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(5)
--------------------------------------------------------------- -----------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities
Underlying
Options % of Total Options/SARs Exercise or
Granted Granted to Employees in Base Price Expiration
Name (#)(3) Fiscal Year (4) ($/Sh) Date 5%($) 10%($)
- ---- --------- ----------------------- ---------- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Paul F. Avery, Jr. (1)..... 75,000(6) 78.95% $4.09 6/3/2008 192,913 488,880
Salvatore J. Vinciguerra (2) -- -- -- -- -- --
Alvan F. Chorney........... -- -- -- -- -- --
William B. Ford............ -- -- -- -- -- --
Thomas J. Uhlig............ -- -- -- -- -- --
</TABLE>
- ------------------
(1) Mr. Avery became the President, Chief Executive Officer and Chairman of the
Board of the Company on June 3, 1998.
(2) Mr. Vinciguerra was the Chief Executive Officer of the Company from June
26, 1996 until June 1, 1998.
(3) All options were granted pursuant to the 1995 Incentive Plan.
(4) Percentages are based on a total of 95,000 shares of Common Stock
underlying all options granted to employees of the Company in fiscal 1998.
(5) Represents the value of the options granted at the end of the option terms
if the price of the Company's Common Stock were to appreciate annually by
5% and 10% respectively. There is no assurance that the stock price will
appreciate at the rates shown in the table. If the stock price appreciates,
the value of stock held by all shareholders will increase.
(6) Such option became fully vested and immediately exercisable on the date of
grant, June 3, 1998.
7
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values
The following table sets forth the shares acquired and the value
realized upon exercise of stock options during fiscal 1998 by the Chief
Executive Officer and each other executive officer named in the Summary
Compensation Table and certain information concerning the number and value of
unexercised stock options. There are currently no outstanding SARs.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/Warrants at FY-End(#) Warrants at FY-End(#)(3)
Shares Acquired on Value ----------------------------- -------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------------ ---------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul F. Avery, Jr. (1) -- -- 205,000 -- -- --
Salvatore J. Vinciguerra (2) -- -- 50,000 50,000 -- --
Alvan F. Chorney -- -- 18,750 6,250 -- --
William B. Ford -- -- 7,500 22,500 -- --
Thomas J. Uhlig -- -- -- -- -- --
</TABLE>
- ------------------
(1) Mr. Avery became the President, Chief Executive Officer and Chairman of the
Board of the Company on June 3, 1998.
(2) Mr. Vinciguerra was the Chief Executive Officer of the Company from June
26, 1996 until June 1, 1998.
(3) Equal to the market value of shares covered by in-the-money options on June
27, 1998, less the aggregate options exercise price. Options are
in-the-money if the market value of the shares covered thereby is greater
than the exercise price of the options.
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
The members of the Compensation Committee of the Board of Directors of the
Company, whose names are set forth below, have prepared the following report on
the Company's executive compensation policies and philosophy for fiscal 1998.
General
The Compensation Committee consists of Mr. Rittereiser and Mr. Hazard, both
of whom are non-employee Directors. The Compensation Committee is generally
responsible for developing the Company's executive and management compensation
policies, including awards of equity-based compensation. The Company's executive
compensation program is designed to provide competitive levels of compensation,
reward above-average individual performance and assist the Company in attracting
and retaining qualified management. Where applicable, the Compensation Committee
takes into account employment agreements between an executive officer and the
Company. See "Employment Agreements" below. Mr. Vinciguerra, the Chief Executive
Officer of the Company from June 26, 1996 until June 1, 1998 made, and Mr.
Avery, the Chief Executive Officer of the Company since June 3, 1998 makes,
general recommendations to and reviews with the Compensation Committee salary
increases and bonus compensation of executive officers and employees other than
himself.
Compensation Policy Review
During the fiscal year ended June 30, 1995, the Compensation Committee,
together with certain members of management and the Board of Directors,
completed a review of the Company's policies regarding executive compensation.
The Compensation Committee's primary objectives in evaluating the Company's
executive compensation philosophy were to (i) review base salaries, cash bonuses
and short-term and long-term incentives
8
<PAGE>
for executive officers based upon a survey of compensation for executive
officers in a group of comparable high-technology companies, and (ii) to develop
an appropriate methodology for structuring long-term incentive awards to ensure
that such awards more closely align the interests of the executive officers with
those of the Company's stockholders.
To accomplish the aforementioned objectives and goals, the Compensation
Committee retained an independent compensation consulting firm (the
"Consultant") which conducted a survey of executive compensation levels and
practices of companies within a proxy peer group (the "Peer Group") of companies
of similar size to the Company. The Peer Group consisted of seven companies in
the specialty machinery industry having annual revenues of $30 million to $50
million. Based upon the results of the Consultant's survey, the Compensation
Committee made certain adjustments to the Company's compensation policies during
fiscal 1998 which are discussed below.
Compensation Policies for Executive Officers
Base Salary. The annual base salary and base salary adjustments for
executive officers are determined by the Compensation Committee in its
discretion and are targeted according to the salaries of executives holding
similar offices and having similar responsibilities within the Company's
industry segment. The Compensation Committee also considers factors such as
industry experience and executive retention. Annual salary adjustments for
executive officers are determined by evaluating the competitive marketplace, the
performance of the Company, the performance of the executive officer and any
change in the responsibilities assumed by the executive officer. Salary
adjustments are normally determined and made on an annual basis. The base
salaries of Salvatore J. Vinciguerra, the Chief Executive Officer of the Company
from June 26, 1996 until June 1, 1998, and Paul F. Avery, Jr., the current Chief
Executive Officer of the Company, were established pursuant to employment
agreements with the Company, which are described below in "Employment
Agreements," and were based on the foregoing criteria.
Cash Bonuses. As a result of the Compensation Committee's review of
executive compensation policies, the Compensation Committee recommended that the
Company adopt a cash incentive program (the "Cash Incentive Plan") to better
align the Company's total cash compensation for its executives with the median
of the Consultant's survey of the Peer Group. The Cash Incentive Plan, which
became effective on July 1, 1995, is intended to encourage, recognize and reward
performance by executives by providing cash compensation based upon the
achievement of a pre-determined annual operating budget and a combination of
quantitative and qualitative measures (the relative weights of which are
determined in the sole discretion of the Compensation Committee when it performs
its performance review), including orders received (for marketing managers),
percent defect rate (for production managers), timeliness and quality of monthly
reporting (for accounting managers) and effectiveness of improvement projects
(for all managers). The annual operating budget is determined by the
Compensation Committee and the Board of Directors prior to the beginning of the
fiscal year and the total pool from which cash incentives may be awarded under
the plan is formed based upon the achievement of the operating profits contained
in the annual operating budget. The Chief Executive Officer is eligible to
receive up to 35% of his respective base salary depending upon the extent to
which the operating profits contained in the annual operating budget are
achieved, while executive officers other than the Chief Executive Officer are
eligible to receive up to either 20% or 25% of their respective base salaries
depending upon the extent to which the operating profits contained in the annual
operating budget are achieved.
Based upon the foregoing criteria, no executive officers of the Company
received a cash bonus under the Cash Incentive Plan for fiscal 1998 performance.
Although cash bonuses generally are awarded pursuant to the Cash Incentive Plan,
the Compensation Committee, in its discretion, may award a cash bonus to an
executive officer for outstanding performance based upon individual performance
reviews (which may or may not take into account specific performance measures
relative to that executive officer), retention considerations and general
industry practice. During fiscal 1998, the Compensation Committee exercised its
discretion and awarded cash bonuses outside of the Cash Incentive Plan in the
amount of $1,720 to Mr. Chorney and $2,170 to Mr. Uhlig in view of their
individual performances in fiscal 1998.
9
<PAGE>
Equity and Equity-Based Incentives. Equity and equity-based incentive
awards are designed to attract and retain executives who can make significant
contributions to the Company's success, reward executives for such significant
contributions and give executives a longer-term incentive to increase
shareholder value. The size and frequency of equity and equity-based incentive
awards are determined by the Compensation Committee in its discretion, taking
into account individual performance and responsibilities, but without any
specific performance measures. The Compensation Committee also may grant stock
options for executive retention purposes, taking into account, among other
things, general industry practice. To ensure that high levels of performance
occur over the long-term, stock options granted to executives typically vest
over a period of time. All outstanding options have been granted with an
exercise price equal to 100% of the fair market value of the Company's Common
Stock on the grant date.
The 1995 Incentive Plan is the principal vehicle by which the Company
intends to achieve the executive compensation policy objective of providing
long-term incentives to executive officers that will more closely align the
interests of such executives with those of the Company's stockholders. Pursuant
to the 1995 Incentive Plan, the Compensation Committee may grant a variety of
long-term incentive awards based on the Common Stock of the Company, including
stock options (both incentive options and non-qualified options), SARs,
restricted stock, unrestricted stock, performance shares and dividend equivalent
rights. In fiscal 1998, Paul F. Avery, Jr., was granted an option to purchase
75,000 shares of Common Stock. This option became fully vested and immediately
exercisable on the date of grant, June 3, 1998. The Compensation Committee
granted this award to Mr. Avery in connection with his election to the positions
of President, Chief Executive Officer and Chairman of the Board of the Company.
At its discretion, under the Ferrofluidics Corporation Amended and Restated
1994 Restricted Stock Plan (the "1994 Restricted Stock Plan"), the Compensation
Committee may also award restricted stock bonuses to executive officers and
other key employees. Shares of restricted stock granted to executive officers
under the 1994 Restricted Stock Plan vest over a period of time and are subject
to forfeiture in the event an officer's employment with the Company terminates
prior to vesting. Shares of restricted stock are not transferable prior to
vesting. During fiscal 1998, no executive officers of the Company received an
award of restricted stock.
Any value received by an executive officer from a stock option grant and
any increase in the value of stock received as a bonus depends entirely on
increases in the price of the Company's Common Stock.
Other Compensation. The Company provides executive officers and management
with health, retirement and other benefits under plans that are generally
available to the Company's employees.
Compensation of the Chief Executive Officer
Mr. Salvatore J. Vinciguerra, former Chief Executive Officer. Mr.
Vinciguerra, who was Chief Executive Officer of the Company from June 26, 1996
until June 1, 1998, had an employment agreement with the Company, the terms of
which are described below under "Employment Agreements." Mr. Vinciguerra's base
salary was established pursuant to the criteria described above in "Base
Salary."
Mr. Paul F. Avery, Jr., current Chief Executive Officer. Mr. Avery, who
became the Chief Executive Officer of the Company on June 3, 1998, has an
employment agreement with the Company, the terms of which are described below
under "Employment Agreements." Mr. Avery's base salary was established pursuant
to the criteria described above in "Base Salary." In connection with his
election to the position of Chief Executive Officer, President and Chairman of
the Board of the Company, the Compensation Committee awarded Mr. Avery an option
to purchase 75,000 shares of Common Stock which became fully vested and
immediately exercisable on the date of grant, June 3, 1998.
Federal Tax Regulations Applicable to Executive Compensation
As a result of Section 162(m) of the Internal Revenue Code (the "Code"),
the Company's deduction of executive compensation may be limited to the extent
that a "covered employee" (i.e., the chief executive officer
10
<PAGE>
or one of the four highest compensated officers who is employed on the last day
of the Company's taxable year and whose compensation is reported in the summary
compensation table) receives compensation in excess of $1,000,000 in such
taxable year of the Company (other than performance-based compensation that
otherwise meets the requirements of Section 162(m) of the Code). The Company
intends to take appropriate action to comply with such regulations, if
applicable, in the future.
Robert P. Rittereiser, Chairman Stephen B. Hazard
Compensation Committee Interlocks and Insider Participation
Mr. Vinciguerra, the Chief Executive Officer and President of the Company
from June 26, 1996 until June 1, 1998 made, and Mr. Avery, the Chief Executive
Officer of the Company since June 3, 1998 makes, general recommendations to and
reviews with the Compensation Committee the salary increases and bonus
compensation of executives and management other than himself.
Employment Agreements
Avery Employment Agreement
--------------------------
On June 3, 1998, the Company and Mr. Avery entered into an employment
agreement (the "Avery Employment Agreement") that provided for Mr. Avery's
employment as President, Chief Executive Officer and Chairman of the Board of
the Company for one year (the "Initial Term") at a salary of $250,000 per year
subject to (a) a one-year extension upon the written consent of Mr. Avery and
the Company (the "Subsequent Term") and (b) earlier termination for death,
disability, cause, upon 60 days' written notice by either Mr. Avery or the
Company. Pursuant to the Avery Employment Agreement, the Company is required to,
among other things, (i) reimburse Mr. Avery for all reasonable business expenses
incurred by Mr. Avery in the performance of his duties, (ii) provide Mr. Avery
with an automobile for business and personal use and pay or reimburse Mr. Avery
for all expenses associated therewith, and (iii) maintain insurance on Mr.
Avery's life in the amount of $1,000,000, payable as directed by Mr. Avery,
until the expiration of the Initial Term or the Subsequent Term, as applicable,
unless Mr. Avery is terminated by the Company for cause. Pursuant to the Avery
Employment Agreement, Mr. Avery received an option to purchase 75,000 shares,
which option became fully vested and immediately exercisable on the date of
grant, June 3, 1998. In addition, Mr. Avery is entitled to participate in the
health, welfare, retirement and other fringe benefit plans which the Company
makes available to management from time to time.
Pursuant to the Avery Employment Agreement, Mr. Avery may terminate his
employment at any time upon 60 days' written notice to the Company and the
Company may terminate Mr. Avery's employment other than for cause (as defined in
the Avery Employment Agreement) at any time upon 60 days' written notice to Mr.
Avery. If Mr. Avery is terminated for cause, he is entitled to any earned but
unpaid salary at the date of termination and the contribution by the Company to
the cost of Mr. Avery's participation in the Company's group medical and dental
insurance plans as permissible under applicable law and plan terms. If the
Company undergoes a change in control (as defined in the Avery Employment
Agreement), and Mr. Avery is terminated, voluntarily or involuntarily, other
than for cause after the date such change in control occurs, Mr. Avery is
entitled to receive an amount equal to the aggregate base salary which Mr. Avery
would have received had he been employed by the Company through (a) the last day
of the Initial Term if such termination occurs during the Initial Term or (b)
the last day of the Subsequent Term if such termination occurs during the
Subsequent Term (the "General Severance Benefits"). If Mr. Avery's employment is
terminated for reasons other than for cause, a change in control of the Company
or voluntary termination by Mr. Avery, Mr. Avery is entitled to receive the
General Severance Benefits as described above. If Mr. Avery dies or becomes
disabled during the term of the Avery Employment Agreement, Mr. Avery's
employment immediately terminates and he is entitled to any earned but unpaid
salary.
Under the terms of the Avery Employment Agreement, upon the termination of
Mr. Avery's employment by the Company other than for cause or the expiration of
the Initial Term or the Subsequent Term, as
11
<PAGE>
applicable, the Company and Mr. Avery shall immediately enter into an agreement
pursuant to which Mr. Avery shall be engaged as a consultant to the Company.
Upon the engagement of Mr. Avery as a consultant as provided by the foregoing,
the Company may also request that Mr. Avery continue to serve as Chairman of the
Board. If the Company so requests, and if Avery agrees to so serve, the Company
shall pay Avery an annual retainer of $50,000 for such service for so long as
Avery serves in such position. Such retainer shall be in addition to any and all
payments to be made to Avery with respect to his consultancy. The terms and
conditions of such consultancy shall be identical to those set forth in the
Consulting Agreement dated May 1, 1997 between the Company and Avery (the "Avery
Consulting Agreement"), which terminated upon Mr. Avery's engagement by the
Company as President, Chief Executive Officer and Chairman of the Board of
Directors on June 3, 1998. The relevant provisions of the Avery Consulting
Agreement are described below.
On May 1, 1997, the Company and Mr. Avery entered into the Avery Consulting
Agreement, pursuant to which Mr. Avery performed such consulting, advisory and
related services for the Company as were reasonably requested by the Company
from time to time for a consulting fee of $10,000 per month for a term of three
years, which term could be extended upon mutual written agreement. Pursuant to
the Avery Consulting Agreement, all shares of restricted stock granted to Mr.
Avery became fully vested as of the date of the Avery Consulting Agreement, and
all options to purchase stock of the Company granted to Mr. Avery and held by
Mr. Avery as of the date of the Avery Consulting Agreement became fully vested
and exercisable until the expiration of such options. Pursuant to the Avery
Consulting Agreement, the Company was required to reimburse Mr. Avery for all
reasonable business expenses incurred by Mr. Avery in the performance of his
duties. Mr. Avery was entitled to participate in and enjoy the benefit of the
Company's retirement plans, but was not entitled to participate in the health,
welfare, retirement and other fringe benefit plans, which the Company made
available to management from time to time, except at his own expense.
Pursuant to the Avery Consulting Agreement, Mr. Avery could terminate his
consultancy at any time upon 60 days written notice to the Company and the
Company could terminate Mr. Avery's consultancy other than for cause (as defined
in the Avery Consulting Agreement) at any time upon 60 days written notice to
Mr. Avery. If Mr. Avery was terminated for cause, he would have been entitled to
any earned but unpaid consulting fees at the date of termination. If Mr. Avery
died or became disabled during the term of the Avery Consulting Agreement, Mr.
Avery's consultancy would have immediately terminated. If Mr. Avery's employment
was terminated for reasons other than for cause or due to death or disability,
the Company would have continued to pay Mr. Avery his consulting fees for the
duration of the term of the Avery Consulting Agreement.
Vinciguerra Employment Agreements
---------------------------------
On April 1, 1995, the Company and Mr. Vinciguerra, who became President and
Chief Operating Officer of the Company on January 1, 1995, entered into an
employment agreement (the "Vinciguerra Employment Agreement") that provides for
Mr. Vinciguerra's employment as President and Chief Operating Officer of the
Company at a salary of $185,000 per year, subject to an increase to $200,000 per
year upon six (6) months of satisfactory performance, as determined by the Chief
Executive Officer. Pursuant to the Vinciguerra Employment Agreement, Mr.
Vinciguerra received 75,000 shares of restricted stock on January 1, 1995, which
vest ratably over three years beginning January 1, 1996. Pursuant to the
Vinciguerra Employment Agreement, the Company is required to reimburse Mr.
Vinciguerra for all reasonable business expenses incurred by Mr. Vinciguerra in
the performance of his duties. In addition, Mr. Vinciguerra is entitled to
participate in the health, welfare, retirement and other fringe benefit plans
which the Company makes available to management from time to time.
Pursuant to the Vinciguerra Employment Agreement, Mr. Vinciguerra may
terminate his employment upon 60 days written notice to the Company and the
Company may terminate Mr. Vinciguerra's employment at any time other than for
cause (as defined in the Vinciguerra Employment Agreement) upon notice to Mr.
Vinciguerra. If the Company terminates Mr. Vinciguerra's employment other than
for cause, he is entitled to a severance payment of six months' salary if he was
employed for less than six months and twelve months' salary if he was employed
for more than six months and the Company will continue pay Mr. Vinciguerra the
salary and other benefits under the Vinciguerra Employment Agreement to the end
of its term. If Mr.
12
<PAGE>
Vinciguerra dies or becomes disabled during the term of the Vinciguerra
Employment Agreement, Mr. Vinciguerra's employment immediately terminates and he
is entitled to any earned but unpaid salary. If the Company undergoes a change
in control (as defined in the Vinciguerra Employment Agreement) and Mr.
Vinciguerra (i) is terminated by the Company or its successor for any reason
other than death, disability or cause, or (ii) resigns because (A) there occurs
a significant change in the nature or scope of Mr. Vinciguerra's
responsibilities, authorities, powers, functions or duties as compared to the
responsibilities, authorities, powers, functions or duties exercised by Mr.
Vinciguerra prior to the change in control, (B) Mr. Vinciguerra is required to
relocate outside of his current county of residence in order to maintain his
employment after the change in control or (C) there is a decrease in the total
annual compensation payable to Mr. Vinciguerra after the change in control, then
Mr. Vinciguerra is entitled to an amount equal to eighteen months' base salary
at the rate then in effect under the Vinciguerra Employment Agreement. If Mr.
Vinciguerra is terminated for cause, he is entitled to any earned but unpaid
salary at the date of termination and the contribution by the Company to the
cost of Mr. Vinciguerra's participation in the Company's group medical and
dental insurance plans as permissible under applicable law and plan terms.
On May 17, 1996, the Company and Mr. Vinciguerra entered into an Amended
and Restated Employment Agreement (the "Amended and Restated Vinciguerra
Employment Agreement") which amended and restated the Vinciguerra Employment
Agreement. Pursuant to the Amended and Restated Vinciguerra Employment
Agreement, Mr. Vinciguerra was named as the Chief Executive Officer of the
Company, but is no longer the Chief Operating Officer of the Company. In
addition, pursuant to the Amended and Restated Vinciguerra Employment Agreement,
Mr. Vinciguerra received an option to purchase 50,000 shares of the Company's
Common Stock at an exercise price of $13.00, which option vests and becomes
exercisable ratably over four years beginning on May 17, 1998. If Mr.
Vinciguerra's employment is terminated by reason of death or by the Company for
any reason other than for cause (as defined in the Company's 1994 Restricted
Stock Plan or 1995 Stock Option and Incentive Plan, as appropriate), any
restricted stock held by Mr. Vinciguerra shall become fully vested and any
option held by Mr. Vinciguerra shall become fully vested and exercisable and may
thereafter be exercised by Mr. Vinciguerra or Mr. Vinciguerra's legal
representative or legatee until the expiration date of such option. If Mr.
Vinciguerra's employment is terminated by the Company for cause, any shares of
restricted stock that shall have not vested as of the date of such termination
shall either be repurchased by the Company or forfeited by Mr. Vinciguerra, and
any such option held by Mr. Vinciguerra shall immediately terminate and be of no
further force and effect. If Mr. Vinciguerra terminates his employment for any
reason other than death, any shares of restricted stock that shall have not
vested as of the date of such termination shall either be repurchased by the
Company or forfeited by Mr. Vinciguerra and any such option held by Mr.
Vinciguerra may thereafter be exercised, to the extent it was exercisable on the
date of such termination, for a period of three months or until the expiration
date of such option, whichever is longer. All other provisions of the
Vinciguerra Employment Agreement remain in effect.
On June 1, 1998, Mr. Vinciguerra resigned as President and Chief Executive
Officer of the Company. Accordingly, the Amended and Restated Vinciguerra
Employment Agreement was terminated on that day. Upon his resignation, the
Company and Mr. Vinciguerra entered into an agreement pursuant to which: (i) the
Company agreed to pay Mr. Vinciguerra an aggregate of twelve months' salary,
payable over a twelve month period in accordance with the customary payroll
practices under which Mr. Vinciguerra was previously receiving his salary; (ii)
Mr. Vinciguerra's options became immediately vested and exercisable through the
original expiration date thereof; (iii) Mr. Vinciguerra was entitled to his
office computer and printer; (iv) the Company agreed to pay for Mr.
Vinciguerra's health and medical benefits for a twelve month period on the same
terms as Mr. Vinciguerra's previous coverage; and (v) the Company agreed to pay
for up to $25,000 of outplacement services for Mr. Vinciguerra.
Ford Employment Agreement
-------------------------
On September 23, 1996, the Company and Mr. Ford entered into an
employment agreement (the "Ford Employment Agreement") that provides for Mr.
Ford's employment as Vice President and Chief Financial Officer of the Company
at a salary of $140,000 per year, subject to annual salary reviews by the
Compensation Committee or the President of the Company, as appropriate. Pursuant
to the Ford Employment Agreement, Mr. Ford received an option to purchase 30,000
shares of the Company's common stock at an exercise price of $9.38, which option
vests and becomes exercisable ratably over four years beginning on September 23,
1997. Pursuant to the Ford Employment Agreement, the Company reimbursed Mr. Ford
for all reasonable moving expenses in connection with Mr. Ford's relocation to
New Hampshire and is required to reimburse Mr. Ford for all reasonable business
expenses incurred by Mr. Ford in the performance of his duties. In addition, Mr.
Ford is entitled to participate in the health, welfare, retirement and other
fringe benefit plans which the Company makes available to management from time
to time.
13
<PAGE>
Pursuant to the Ford Employment Agreement, the Company or Mr. Ford may
terminate Mr. Ford's employment at will upon six months written notice if such
notice is given within one year of Mr. Ford's employment or upon one year's
written notice if such notice is given after the first year of Mr. Ford's
employment. If the Company undergoes a change of control (as defined in the Ford
Employment Agreement) and Mr. Ford is terminated by the Company other than for
cause within 12 months after such change of control occurs, Mr. Ford shall be
entitled to receive an amount equal to six months' salary at the rate then in
effect if such termination occurs within the first year of Mr. Ford's
employment, and an amount equal to 12 months' salary at the rate then in effect
if such termination occurs after the first year of Mr. Ford's employment. If Mr.
Ford dies or becomes disabled during the term of the Ford Employment Agreement,
Mr. Ford's employment automatically terminates and he is entitled to any earned
but unpaid salary. If Mr. Ford is terminated for cause (as defined in the Ford
Employment Agreement), he is entitled to any earned but unpaid salary at the
date of termination and the contribution by the Company to the cost of Mr.
Ford's participation in the Company's group medical and dental insurance plans
as permissible under applicable law and plan terms.
Chorney Severance Agreement
---------------------------
The Company has an agreement with Mr. Chorney, dated October 1, 1993, that
provides Mr. Chorney with certain severance benefits in the event that his
employment is terminated by the Company other than by reason of death,
disability or cause. Pursuant to this agreement, if Mr. Chorney's employment is
terminated other than for any of the aforementioned reasons, he is entitled to
receive for a period of eighteen months an aggregate amount equal to the greater
of (i) $225,000 and (ii) the annual base salary which he would have received
over an eighteen-month period commencing on the date of such termination.
Stockholder Return Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock, based on
the market price of the Company's Common Stock and assuming reinvestment of
dividends, with the cumulative total return of companies within the Nasdaq Stock
Market and the companies within the Dow Jones Industrial Technology Index. The
calculation of total cumulative return assumes a $100 investment in the
Company's Common Stock, the Nasdaq Stock Market and the Dow Jones Industrial
Technology Index on July 1, 1993. The comparisons in this table are historical
and are not intended to forecast or be indicative of possible future performance
of the Common Stock of the Company.
Stockholder Return Performance Graph
<TABLE>
<CAPTION>
June 30, '93 June 30, '94 June 30, '95 June 30, '96 June 28, '97
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
DJIA 100 108.41 154.42 152.71 164.1
NASDAQ 100 100.96 134.77 173.03 210.38
FERRO 100 38.89 71.3 100 62.04
</TABLE>
14
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Company's
Common Stock as of October 1, 1998 by (i) each person known by the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each
of the Company's Directors and nominees, (iii) each of the named executive
officers in the Summary Compensation Table and (iv) all of the Company's
executive officers and Directors as a group.
<TABLE>
<CAPTION>
Shares
Directors, Executive Officers Beneficially Percent of
and 5% Stockholders Owned(1) Class(2)
- ----------------------------- ------------ ----------
<S> <C> <C>
Pioneering Management Corporation...................................... 401,000(3) 6.45%
60 State Street
Boston, MA 02114
Paul F. Avery, Jr...................................................... 248,900(4) 4.00%
Salvatore J. Vinciguerra............................................... 145,000 5) 2.33%
Alvan F. Chorney....................................................... 18,750(6) *
William B. Ford........................................................ 22,000(7) *
Thomas J. Uhlig........................................................ 6,609 *
Howard F. Nichols...................................................... 22,725(8) *
Dean Kamen............................................................. 15,850(9) *
Robert P. Rittereiser.................................................. 15,850(10) *
Stephen B. Hazard...................................................... 12,000(11) *
Dennis R. Stone........................................................ 14,100(12) *
All directors and executive officers
as a group (10 persons).............................................. 521,784(13) 8.39%
</TABLE>
- --------------------------
* Less than 1%.
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended. Accordingly, a beneficial
owner of a security includes any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares the power to vote such security or the power to dispose of
such security. The amounts set forth above as beneficially owned include
shares of Common Stock owned, if any, by spouses and relatives living in
the same home as to which beneficial ownership may be disclaimed. The
amounts set forth above as beneficially owned also include shares of Common
Stock which such persons had the right to acquire within 60 days of October
1, 1998 pursuant to stock options.
(2) Percentages are calculated on the basis of 6,218,207 shares of Common Stock
outstanding as of October 1, 1998, together with applicable stock options
for each stockholder.
(3) Based on Amendment No. 4 to Schedule 13G filed with the SEC on January 6,
1998 and other information available to the Company. Pioneering Management
Corporation has sole voting power with respect to all 401,000 shares.
15
<PAGE>
(4) Includes 205,000 shares of Common Stock which Mr. Avery may acquire upon
the exercise of stock options, within 60 days of October 1, 1998.
(5) Includes 50,000 shares of Common Stock which Mr. Vinciguerra may acquire
upon the exercise of stock options, within 60 days of October 1, 1998.
(6) Includes 18,750 shares of Common Stock which Mr. Chorney may acquire upon
the exercise of stock options, within 60 days of October 1, 1998.
(7) Includes 15,000 shares of Common Stock which Mr. Ford may acquire upon the
exercise of Stock Options, within 60 days of October 1, 1998.
(8) Includes 17,350 shares of Common Stock which Mr. Nichols may acquire upon
the exercise of stock options, within 60 days of October 1, 1998.
(9) Includes 15,100 shares of Common Stock which Mr. Kamen may acquire upon the
exercise of stock options, within 60 days of October 1, 1998.
(10) Includes 15,100 shares of Common Stock which Mr. Rittereiser may acquire
upon the exercise of stock options, within 60 days of October 1, 1998.
(11) Includes 9,000 shares of Common Stock which Mr. Hazard may acquire upon the
exercise of stock options within 60 days of October 1, 1998.
(12) Includes 9,000 shares of Common Stock which Mr. Stone may acquire upon the
exercise of stock options within 60 days of October 1, 1998.
(13) Includes 354,300 shares of Common Stock which may be acquired by such
persons upon the exercise of stock options, within 60 days of October 1,
1998.
PROPOSAL NUMBER 2
STOCKHOLDER PROPOSAL CONCERNING
THE DECLASSIFICATION OF THE BOARD OF DIRECTORS
The following proposal (the "Taglich Declassification Proposal") was
submitted for consideration at the Annual Meeting by Robert Taglich. The address
and stock ownership of Robert Taglich will be furnished to any person, orally or
in writing as requested, promptly upon the receipt by the Company of any oral or
written request therefor. The text of the Taglich Declassification Proposal, the
statement submitted by Robert Taglich in support thereof, the Recommendation of
the Board of Directors and the Statement of the Board of Directors in opposition
to the Taglich Declassification Proposal are set forth below.
Proposal
"RESOLVED, that the stockholders of the Company assembled in annual meeting
in person and by proxy, hereby urge that the Board of Directors take the
necessary steps to provide that at future elections of directors, new directors
be elected annually and not by classes, as is now provided, and that on
expiration of present terms of directors their subsequent election shall also be
on an annual basis."
Statement of Proposing Stockholder
Staggered board terms don't serve the best interests of the Company and its
stockholders.
16
<PAGE>
The Board of the Company is divided into three classes serving staggered
three-year terms. This means that it would take three years and three separate
votes for stockholders to replace the whole Board.
Staggered board terms are often justified as a means to provide continuity
and prevent manipulative takeovers. Unfortunately, staggered boards often mean
that stockholders can't hold directors accountable for their actions and
decisions by holding annual elections.
As a stockholder, the proponent has a material interest in realizing the
full benefit of his holding. The proponent has no interest adverse to the
Company or its stockholders.
Recommendation of the Board of Directors
The Board of Directors opposes the Taglich Declassification Proposal and
unanimously recommends that the stockholders vote "AGAINST" such proposal. Your
executed proxy will be so voted unless you specify otherwise.
Statement of the Board of Directors in Opposition to the Taglich
Declassification Proposal
The Board of Directors of the Company is classified into three classes,
each to serve for a term of three years, with one class being elected each year.
The Board of Directors believes there is no reason to change the current
procedure of electing a classified Board of Directors. The Company's directors,
elected by the stockholders, are fully accountable to serve the stockholders'
interests throughout their term of office, whether the term is three years or
one year.
A classified Board helps to ensure that a majority of the Board at any
given time has prior experience serving as Directors of the Company. This
enhances the likelihood of stability and continuity in the leadership and
policies of the Company while preserving the ability of the Company's
stockholders to make changes in the Board's membership. The Board also believes
that the existence of minimum three-year, as opposed to one-year, terms for
Directors assists the Company in attracting Director candidates who are willing
to make longer-term commitments to serving the Company, which in turn increases
the overall knowledge and experience of the Board with respect to the Company's
operations.
Board classification is also intended to encourage any person seeking to
acquire control of the Company to initiate such an action through arm's length
negotiations with management and the Board of Directors, who are in a position
to negotiate a transaction which is fair to all stockholders of the Company. In
addition, if the Board were not to be classified, the threat of the removal or
replacement of the Company's Board under such circumstances could severely
curtail its ability to negotiate effectively with a potential purchaser. The
Board could be deprived of the time and information necessary to evaluate a
takeover proposal, to study alternative proposals and to help maximize the price
obtained in any transaction.
A large number of major U.S. companies have classified boards of directors.
Surveys compiled by certain organizations independent of the Company show that
stockholders of public companies have continued to support the use of classified
boards, as indicated by the fact that a substantial majority of all stockholder
proposals aimed at eliminating classified boards that were voted upon during the
last three years that were tracked in such surveys have not passed.
For the reasons stated above, the Board of Directors believes that the
Taglich Declassification Proposal is not in the best interests of the Company
and its stockholders. Accordingly, the Board of Directors recommends a vote
"AGAINST" the Taglich Declassification Proposal.
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Vote Required
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to approve the Taglich Declassification Proposal. If approved, the
Taglich Declassification Proposal would serve as a recommendation to the Board
of Directors to take the necessary steps to eliminate the classified Board; the
proposal does not itself effect a repeal of the classified Board.
PROPOSAL NUMBER 3
STOCKHOLDER PROPOSAL CONCERNING
STOCKHOLDER SPECIAL MEETINGS
The following proposal (the "Klein Special Meeting Proposal") was submitted
for consideration at the Annual Meeting by Mitchell Klein. The address and stock
ownership of Mitchell Klein will be furnished to any person, orally or in
writing as requested, promptly upon the receipt by the Company of any oral or
written request therefor. The text of the Klein Special Meeting Proposal, the
statement submitted by Mitchell Klein in support thereof, the Recommendation of
the Board of Directors and the Statement of the Board of Directors in opposition
to the Klein Special Meeting Proposal are set forth below.
Proposal
"RESOLVED, that Article I, Section 3 of the By-Laws of the Company be
amended as follows: (a) in the second sentence of the first paragraph, delete
the balance of the paragraph after the word `least' and substitute the following
`5% in interest of the capital stock of the Corporation'; (b) in the second
paragraph delete the balance of the paragraph after the word `least' and
substitute the following `5% in interest of the capital stock of the
Corporation'; and (c) in the first sentence of the third paragraph after the
number `3' add the words `but not later than forty-five (45) days after the date
such application is received by the Corporation.'"
Statement of Proposing Stockholder
The reason for conducting the business set forth in this proposal at the
annual meeting is that proponent believes that inasmuch as the stockholders are
the owners of the Company, the Board of Directors should be responsive to their
requests for special meetings of stockholders to give timely consideration to
matters which they deem important to their interests and not be required to wait
until the next annual meeting. A request by stockholders owning at least 5% of
the outstanding voting stock should not be ignored.
As a stockholder, the proponent has a material interest in realizing the
full benefit of his holding. The proponent has no interest adverse to the
Company or its stockholders.
The proponent recommends that the stockholders vote "FOR" the proposal.
Recommendation of the Board of Directors
The Board of Directors opposes the Klein Special Meeting Proposal and
unanimously recommends that the stockholders vote "AGAINST" such proposal. Your
executed proxy will be so voted unless you specify otherwise.
Statement of the Board of Directors in Opposition to the Klein Special Meeting
Proposal
In 1994, the Board of Directors adopted an amendment to the By-laws of the
Company to provide, among other things, that (i) special meetings of the
stockholders shall only be called by the Clerk of the Company (or in the case of
the death, absence, incapacity or refusal of the Clerk, by any other officer)
upon written application of one or more stockholders who holds at least 66 2/3%
in interest of the capital stock of the
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Company entitled to vote at the meeting, (ii) in case none of the officers is
able and willing to call a special meeting, the supreme judicial or superior
court, upon application of one or more stockholders who holds at least 66 2/3%
in interest of the capital stock of the Company entitled to vote at the meeting,
shall have jurisdiction to authorize one or more of such stockholders to call a
special meeting (together with clause (i) above, the "66 2/3% Threshold"), and
(iii) if such a special meeting of stockholders is called by the Clerk upon the
written application of one or more stockholders as provided above, the Board of
Directors shall determine the hour, date and place of any special meeting and
the record date for such meeting.
The Board of Directors believes there is no reason to amend the By-laws to
lower the 66 2/3% Threshold to 5%. The 66 2/3% Threshold prevents persons
acquiring a small minority of the outstanding capital stock of the Company from
calling a special meeting for the purpose of removing directors or making other
proposals that could disrupt the continuity and stability of the Board and its
policies. In addition, the 66 2/3% Threshold encourages a stockholder seeking to
acquire control of the Company to consult with the Company's Board of Directors
and negotiate the terms of any proposed transaction under circumstances allowing
sufficient time to evaluate the transaction or the ability to structure possible
alternatives.
The Board of Directors also believes that placing a requirement that the
Board determine the hour, date and place of any special meeting within
forty-five (45) days after receiving an application from one or more
stockholders holding the requisite interest of the capital stock of the Company
would not provide the Company with adequate time to prepare appropriate proxy
materials relating to any proposals set forth in the stockholder's notice, file
such materials with the SEC, and then conduct a mailing to all stockholders of
the Company.
The Board of Directors believes that the 66 2/3% Threshold provides both an
effective threshold and adequate means for stockholders who share the best
interests of the Company and the stockholders as a whole to ensure proper and
timely consideration of matters deemed to be important to their interests. In
addition, under Article I, Section 2 of the Company's By-laws and under the
Federal securities laws, every stockholder that meets certain eligibility and
notice requirements has the ability and right to present proposals for action at
the annual meeting of stockholders, and to have such proposals included in the
proxy materials distributed by the Company. As evidenced by the three
stockholder proposals discussed in this Proxy Statement, all stockholders of the
Company have the ability to present matters for consideration at the annual
meeting of stockholders.
For the reasons stated above, the Board of Directors believes that the
Klein Special Meeting Proposal is not in the best interests of the Company and
its stockholders. Accordingly, the Board of Directors recommends a vote
"AGAINST" the Klein Special Meeting Proposal.
Vote Required
The affirmative vote of at least 66 2/3% of the outstanding shares of
Common Stock entitled to vote at the Annual Meeting is required to approve the
Klein Special Meeting Proposal.
PROPOSAL NUMBER 4
STOCKHOLDER PROPOSAL CONCERNING ENGAGEMENT
OF INVESTMENT BANKING FIRM TO ASSIST
BOARD OF DIRECTORS IN SELLING THE COMPANY OR ITS DIVISIONS
The following proposal (the "Taglich Sale Proposal") was submitted for
consideration at the Annual Meeting by Michael Taglich. The address and stock
ownership of Michael Taglich will be furnished to any person, orally or in
writing as requested, promptly upon the receipt by the Company of any oral or
written request therefor. The text of the Taglich Sale Proposal, the statement
submitted by Michael Taglich in support thereof, the Recommendation of the Board
of Directors and the Statement of the Board of Directors in opposition to the
Taglich Sale Proposal are set forth below.
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Proposal
"RESOLVED, that it is the sense of the Company's stockholders, expressed at
its annual meeting held on December 17, 1998, that the Company and/or its
businesses be sold so as to maximize the return to stockholders and that the
same be done as expeditiously as is consistent therewith, and to that end, the
Board of Directors is requested to cause the Company to engage an independent
nationally recognized investment banking firm to assist the Board of Directors
in seeking to obtain a purchaser or purchasers on terms and conditions that the
Board of Directors deems expedient and in the best interests of the Company and
to submit the same to stockholders for their authorization."
Statement of Proposing Stockholder
The proponent believes, and desires to express to the other stockholders,
that the sale of the Company and/or its businesses would result in a greater
return to stockholders than would result from their holding or selling their
stock. Thus, the Company should proceed promptly to hire an independent
nationally recognized investment banking firm and cooperate to achieve that
result.
Early in 1998, the proponent contacted the Company to express his concern
that the "value of the Component and Thin film business segment is weighed down
by the erratic performance of [Systems]" and to suggest alternatives to enhance
overall stockholder value. The proponent's suggestions were rejected. On April
6, 1998, the Company announced that it would take an estimated $3.5 million
charge against earnings associated with downsizing its Systems Division, after
previously announcing that it would lay off more than half of its Systems
Division workforce.
The Company's stock price has not benefitted from the substantial increase
that has occurred in the market price of other listed securities. According to
the Company's fiscal year 1997 Form 10-K, the Company's stock price decreased
from a closing price high and low of $18-7/8 and $9-3/4 respectively during the
second quarter of 1996 to $8-3/4 and $5-3/4 respectively, during the same period
in 1997. The Company's stock price at June 18, 1998 was $3.625.
As a stockholder, the proponent has a material interest in realizing the
full benefit of his holding. The proponent has no interest adverse to the
Company or its stockholders.
The proponent recommends that the stockholders vote "FOR" the proposal.
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Recommendation of the Board of Directors
The Board of Directors opposes the Taglich Sale Proposal and unanimously
recommends that the stockholders vote "AGAINST" such proposal. Your executed
proxy will be so voted unless you specify otherwise.
Statement of the Board of Directors in Opposition to the Taglich Sale Proposal
The Board of Directors is firmly committed to increasing stockholder value
and regularly considers what actions can be taken to maximize value for all of
the Company's stockholders. At this time and for the reasons explained below,
the Board believes that stockholder value can be best enhanced by continuing to
pursue the Company's long-term strategic plan.
History of the Proponent's Contacts with the Company. The Company from time
to time has participated in discussions with Michael Taglich at his request
concerning the Company's strategies for its future growth. Based on
conversations between the Company and Mr. Taglich, on February 10, 1998, the
Company received a letter (the "February 1998 Letter") from Mr. Taglich in which
he expressed the opinions of Taglich Brothers, D'Amadeo, Wagner & Company,
Incorporated ("Taglich Brothers"), a brokerage and investment banking firm,
concerning strategies that Taglich Brothers believed would increase the stock
price of the Common Stock. In the February 1998 Letter, Taglich Brothers stated
that "[i]t is our opinion that, as currently structured, the value of the
Component and Thin Film business segment (Components) is weighed down by the
erratic performance of the Crystal Growing Systems (Systems)." In the February
1998 Letter, Taglich Brothers further stated its opinion that the only
alternatives available to the Company were to either sell the Systems business
or spin-off the Systems business, the latter of which Taglich Brothers believed
was the appropriate course of action. Taglich Brothers went on to state in the
February 1998 Letter that it "would be pleased to be retained by Ferrofluidics
to prepare a more detailed analysis of a possible spin-off and to manage the
process of securing SEC and shareholder approval of the transaction."
In a letter dated March 2, 1998 (the "March 1998 Letter"), Taglich Brothers
again sought to persuade the Board of Directors of the Company to spin-off the
Systems business and to engage Taglich Brothers to assist the Company in that
process. Taglich Brothers also stated in the March 1998 Letter that, in view of
the need for additional capital to support the stand-alone operation of the
Systems business, Taglich Brothers would be in a position to assist the Company
in raising such capital. In this regard, Taglich Brothers set forth a detailed
schedule of fees for its advisory services, which included a retainer fee, a
success fee, a due diligence fee, a commission fee and warrants to purchase
shares of Common Stock.
Subsequent to March 2, 1998, the Company informed Taglich Brothers that the
Company appreciated hearing the views expressed by Taglich Brothers and that the
Company would consider those views together with the views of other stockholders
and the Company's legal and financial advisors in determining the best course of
action for the Company. The Company also informed Taglich Brothers that the
Company had previously engaged Gruntal & Co., L.L.C. ("Gruntal") to assist the
Company in exploring its strategic alternatives with respect to the Systems
business and that the Company did not have a need to engage another financial
advisor and did not want to incur the additional expense that would result from
such an engagement.
On June 19, 1998, the Company received the Taglich Sale Proposal and a
request by Michael Taglich that such proposal be included in this Proxy
Statement.
The Company's Response. As noted above, the Board of Directors of the
Company is firmly committed to increasing stockholder value and regularly
considers what actions can be taken to maximize value for all of the Company's
stockholders. As part of this process, the Board of Directors welcomes the
opinions of the stockholders of the Company. However, after careful
consideration of the Taglich Sale Proposal, the Board of Directors believes that
such proposal is not in the best interests of the Company and all of its
stockholders and that stockholder value can best be enhanced by continuing to
pursue the Company's long-term strategic plan. In view of the recent sale of the
principal assets of the Systems business, the Company also believes that the
concerns raised by Michael Taglich and Taglich Brothers have largely been
rendered moot. In reaching its conclusions, the Company also considered the
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experience of Taglich Brothers in the investment banking industry, which the
Company believed was substantially less than other investment banking firms with
which the Company and the Board of Directors were familiar, including Gruntal.
In response to lower demand for crystal growing systems resulting from the
softening of the semiconductor markets in the Far East, the Board of Directors
concluded in early 1998 that stockholder value would best be maximized by
focusing the Company's resources on growing the components and fluids businesses
and selling or otherwise restructuring the Systems business. The Company
considered various alternatives in order to limit its exposure to the cyclical
and unpredictable nature of the semiconductor industry, including the sale,
spin-off or downsizing of the Systems business. After a detailed analysis of
strategic alternatives and after receiving advice from its legal and financial
advisors, the Company concluded that a downsizing or a sale of the Systems
business were the only viable alternatives for accomplishing the Company's
objectives. The Board of Directors concluded that a spin-off of the Systems
business was not a viable alternative because the Systems business would not
likely survive as a stand-alone business, even with an initial infusion of
capital. Thus, in March 1998 the Company announced a downsizing of the Systems
business and an intention to find a buyer for the Systems business. In June
1998, Paul Avery became the President and Chief Executive Officer of the Company
and assumed responsibility for implementing the Company's plan to focus the
Company's resources on growing the components and fluids businesses and to
downsize and sell the Systems business. The Company's efforts to downsize and
locate a buyer for the Systems business culminated on September 23, 1998 with
the sale of the intellectual property and certain other of the assets of the
Systems business to General Signal Technology Corporation for $10,800,000 in
cash. Accordingly, the Company believes that the concerns raised by Taglich
Brothers in its February 1998 Letter and in Michael Taglich's statement
supporting the Taglich Sale Proposal -- that the Systems business be separated
from the Company's core businesses -- have been addressed by the Board of
Directors in a manner more beneficial to all of the Company's stockholders than
any of the other alternatives considered by the Company. As such, the Company
believes that the Taglich Sale Proposal has largely been rendered moot.
For the reasons stated above, the Board of Directors believes that the
Taglich Sale Proposal is not in the best interests of the Company and its
stockholders. Accordingly, the Board of Directors recommends a vote "AGAINST"
the Taglich Sale Proposal.
Vote Required
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to approve the Taglich Sale Proposal. If approved, the Taglich Sale
Proposal would serve as a recommendation to the Board of Directors to take the
necessary steps to sell the Company and/or its businesses; the proposal does not
itself require the Board to take such steps.
VOTING
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock of the Company is necessary to provide a
quorum for the transaction of business at the Annual Meeting. Each share of
Common Stock of the Company outstanding on the Record Date is entitled to one
vote. An automated system administered by the Company's transfer agent tabulates
the votes. Shares that reflect abstentions or "broker non-votes" (i.e., shares
represented at the Annual Meeting held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and the broker or nominee does not have
discretionary voting power to vote such shares) will be counted for purposes of
determining whether a quorum is present for the transaction of business at the
Annual Meeting. The affirmative vote of a plurality of the votes cast at the
Annual Meeting is required to elect Directors. The affirmative vote of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting is required to approve the Klein
Special Meeting Proposal. The affirmative vote of a majority of the votes cast
at the Annual Meeting is required to approve each of the Taglich
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Declassification Proposal and the Taglich Sale Proposal. With respect to the
election of Directors, votes may be cast in favor of or withheld from each
nominee; votes that are withheld will be excluded entirely from the vote and
will have no effect on the outcome of such election. Broker non-votes also will
have no effect on the outcome of the election of Directors. With respect to the
Klein Special Meeting Proposal, broker non-votes and abstentions will have the
same effect as votes against such proposal. With respect to each of the Taglich
Declassification Proposal and the Taglich Sale Proposal, broker non-votes and
abstentions will have no effect on the outcome of the vote on such proposals.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert Rittereiser, a Director of the Company, is the Chairman of the Board
of Directors and Chief Executive Officer of Gruntal & Co, L.L.C. In connection
with the Sale, Gruntal & Co., L.L.C. billed the Company approximately $280,600
for its services as investment banker to the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's Directors, executive officers and beneficial owners of more
than 10% of its Common Stock are required under Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to file reports of
ownership and changes in ownership with the SEC. Copies of those reports must
also be furnished to the Company. Based solely on a review of the copies of
reports furnished to the Company and written representations that no other
reports were required, the Company believes that during fiscal 1998 no person
who was a Director, executive officer or greater than 10% beneficial owner of
the Company's Common Stock failed to file on a timely basis all reports required
by Section 16(a).
MARKET VALUE
On October 30, 1998, the closing sale price of a share of the Company's
Common Stock on the Nasdaq National Market was $3.44.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Stockholder proposals intended to be presented at the next annual meeting
of stockholders must be received by the Company on or before June 24, 1999 in
order to be considered for inclusion in the Company's proxy statement. Such a
proposal must also comply with the requirements as to form and substance
established by the SEC in order to be included in the proxy statement and should
be directed to: Clerk, Ferrofluidics Corporation, 40 Simon Street, Nashua, New
Hampshire 03061.
Stockholder proposals to be presented at the next annual meeting of
stockholders, other than proposals to be considered for inclusion in the
Company's proxy statement described above, must comply with the requirements set
forth in the Company's By-laws. The Company's By-laws provide that any
stockholder of record wishing to have such a stockholder proposal considered at
an annual meeting must provide written notice of such proposal and appropriate
supporting documentation, as set forth in the By-laws, to the Company at its
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding annual meeting (the
"Anniversary Date"); provided, however, that in the event the annual meeting is
scheduled to be held on a date more than 30 days before or more than 60 days
after the Anniversary Date, notice must be so delivered not later than the close
of business on the later of (i) the 75th day prior to the scheduled date of such
annual meeting or (ii) the 15th day after public disclosure of the date of such
meeting. Proxies solicited by the Board of Directors may, under certain
circumstances prescribed in Rule 14a-4 of the Exchange Act, be voted in
accordance with the discretion of the proxy holders with respect to stockholder
proposals presented at the next annual meeting of stockholders (other than
proposals included in the Company's proxy statement).
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INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP,
independent auditors, as the auditors of the financial statements of the Company
and its subsidiaries for its current fiscal year ending July 3, 1999. A member
of Ernst & Young LLP will be present at the Annual Meeting and will be given the
opportunity to make a statement and to answer any questions any stockholder may
have with respect to the financial statements of the Company for the fiscal year
ended June 27, 1998.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement that will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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PROXY CARD
FERROFLUIDICS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1998
The undersigned hereby constitute(s) and appoint(s) Paul F. Avery, Jr. and
William B. Ford, and each of them, as Proxies of the undersigned, with full
power to appoint his substitute, and authorize(s) each of them to represent and
to vote all shares of Common Stock of Ferrofluidics Corporation (the "Company")
held of record by the undersigned as of the close of business on October 20,
1998 at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at
the Crowne Plaza, Nashua, New Hampshire, at 10:00 a.m. Eastern Time, on
Thursday, December 17, 1998, and at any adjournments or postponements thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is given, this proxy will be
voted FOR the two nominees of the Board of Directors listed in Proposal 1 and
AGAINST Proposal 2, Proposal 3 and Proposal 4. In their discretion, the Proxies
are each authorized to vote upon such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof. A stockholder
wishing to vote in accordance with the Board of Directors' recommendations need
only sign and date this proxy and return it in the enclosed envelope.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's 1998 Annual Report to Stockholders and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at
any time before it is exercised.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FERROFLUIDICS CORPORATION
Please vote and sign on other side and return promptly in enclosed envelope.
Please sign name exactly as shown. Where there is more than one holder, each
should sign. When signing as an attorney, administrator, executor, guardian or
trustee, please add your title as such. If executed by a corporation or
partnership, the proxy should be signed by a duly authorized person, stating his
or her title or authority.
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PLEASE MARK VOTES AS IN
THIS EXAMPLE [X]
Proposal 1. Election of Class III Directors for a three-year term.
Nominees: Paul F. Avery, Jr. and Dean Kamen
FOR |----| AGAINST |----|
| | | |
| | | |
|----| |----|
If you do not wish your shares voted FOR a particular nominee, mark
the FOR box and strike a line through that nominee's name. Your
shares will be voted for the remaining nominee(s).
Proposal 2. Stockholder proposal urging that the Board of Directors take
the necessary steps to provide that at future elections of
directors, new directors be elected annually and not by classes.
FOR |----| AGAINST |----| ABSTAIN |----|
| | | | | |
| | | | | |
|----| |----| |----|
Proposal 3. Stockholder proposal to amend the Bylaws of the Company to provide
that (i) a special meeting of stockholders shall be called upon
written application of one or more stockholders who holds at least
five percent (5%) in interest of the capital stock of the Company
entitled to vote at the meeting, and (ii) the Board of Directors
must determine the hour, date and place of any special meeting
within forty-five (45) days after receiving an application
from one or more stockholders holding the requisite interest of the
capital stock of the Company.
FOR |----| AGAINST |----| ABSTAIN |----|
| | | | | |
| | | | | |
|----| |----| |----|
Proposal 4. Stockholder proposal to request that the Company and/or its
businesses be sold and that the Board of Directors engage an
investment banking firm to assist the Board in seeking to obtain
a purchaser or purchasers.
FOR |----| AGAINST |----| ABSTAIN |----|
| | | | | |
| | | | | |
|----| |----| |----|
In their discretion, the Proxies are each authorized to vote upon such other
business as may properly come before the Annual Meeting and any adjournments or
postponements thereof.
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Please be sure to sign and date this Proxy.
Date:________________________
Shareholder(s) signature(s): ________________________________
________________________________
HAS YOUR ADDRESS CHANGED?
______________________________
______________________________
______________________________
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